EXHIBIT 10.10
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CONSENT,
FIFTH AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
(Convertible Debt)
and
FIRST AMENDMENT
TO
FLOATING-RATE CONVERTIBLE DEBENTURE
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CONSENT, FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (Convertible Debt) AND
FIRST AMENDMENT TO FLOATING-RATE CONVERTIBLE DEBENTURE (this "Amendment") dated
as of September 16, 2002, among ACCREDITED HOME LENDERS, INC., a California
corporation ("Borrower"), ACCREDITED HOME LENDERS HOLDING CO., a Delaware
corporation ("Parent"), and RESIDENTIAL FUNDING CORPORATION, a Delaware
corporation ("Lender").
A. Borrower and Lender are parties to a Loan and Security Agreement (Convertible
Debt) dated as of March 17, 1999, as amended by a First Amendment to Loan and
Security Agreement (Convertible Debt) dated as of July 12, 2000, a Second
Amendment to Loan and Security Agreement (Convertible Debt) dated as of
January 31, 2001, a Third Amendment to Loan and Security Agreement
(Convertible Debt) dated as of December 28, 2001, and a Fourth Amendment to
Loan and Security Agreement (Convertible Debt) dated as of March 12, 2002 (as
amended, the "Agreement").
B. In connection with the initial execution and delivery of the Agreement,
Borrower issued a Floating-Rate Convertible Debenture dated March 17, 1999 to
Lender (the "Debenture").
C. Borrower has notified Lender that (a) Parent proposes to amend and restate
its Certificate of Incorporation as set forth in Exhibit A to this Amendment
(the "Certificate Amendment"), (b) Borrower proposes to engage in a corporate
reorganization in which AHL Merger Sub, a California corporation and a wholly
owned subsidiary of Parent, will merge with and into Borrower, with Borrower
as the surviving corporation (the "Merger"), as the result of which (i)
Borrower will become a wholly owned subsidiary of Parent, (ii) each holder of
Borrower's stock will become a holder of a like number of shares of capital
stock of Parent of a series having the same terms and conditions as the
shares of Borrower's stock held prior to the Merger and (iii) the Debenture
will become convertible, by its terms, into shares of stock of Parent and (c)
following consummation of the Merger, Parent proposes to make an initial
public offering ("IPO" and, together with the Certificate Amendment and the
Merger, the "Proposed Transactions") of shares of Parent's common stock.
D. Under Sections 7.3, 7.5 and 7.6 of the Agreement, the Proposed Transactions
are subject to the prior approval of Lender and, in the absence of a consent
or waiver by Lender, consummation of the Proposed Transactions would result
in one or more Events of Default under the Agreement.
E. Borrower has requested that Lender consent to the Proposed Transactions and,
in connection with such consent, to amend certain terms of the Agreement and
the Debenture, all as more fully set out in, and subject to the terms and
conditions of, this Amendment.
NOW, THEREFORE, the parties to this Amendment agree as follows:
Accredited (5/th/ Amendment)
1. Lender consents to the Certificate Amendment and the Merger, subject to:
a. Satisfactory completion of a fairness hearing pursuant to Section
25142 of the California Corporate Securities Law of 1968, as amended
(the "Hearing"), by the California Commissioner of Corporations (the
"Commissioner");
b. The issuance of a permit by the Commissioner (the "Permit") that
states that Parent is qualified to offer, sell and issue the
securities described in the application for the Permit (the
"Application") and the issuance by the Commissioner of a Certificate
of Issuance of Permit (the "Certificate") that states that the terms
and conditions of the proposed offer and sale of securities as
described in the Application are fair and are approved;
c. Lender's receipt of a copy of the Permit and the Certificate;
d. Lender's receipt of a copy of Parent's amended and restated
Certificate of Incorporation, certified by the Delaware Secretary of
State;
e. Lender's receipt of documentation evidencing the fact that the
amendment and restatement of Parent's Certificate of Incorporation and
the Merger have been approved by Parent's and Borrower's respective
Boards of Directors and shareholders;
f. Lender's receipt of four executed originals of this Amendment;
g. Lender's receipt of four executed originals of a Twelfth Amendment to
Warehousing Credit, Term Loan and Security Agreement; and
h. Lender's receipt of four executed originals of the Parent Guaranty (as
defined below).
2. Effective simultaneously with the consummation of the Merger:
a. The definition of "Convertible Debt Documents" set forth in Section
1.1. of the Agreement shall be amended to read in its entirety as
follows:
"Convertible Debt Documents" means this Agreement, the Debenture,
the Investors' Rights Agreement, the Co-Sale Agreement, any agreement
of the Borrower relating to Subordinated Debt, the Parent Guaranty,
and each other document, instrument, or agreement executed by the
Borrower in connection herewith or therewith, as any of the same may
from time to time be amended, supplemented, restated, renewed, or
otherwise modified or replaced, or, if terminated, then as in effect
immediately preceding such termination.
b. The definition of "Debenture" set forth in Section 1.1. of the
Agreement shall be amended to read in its entirety as follows:
"Debenture" means the Debenture referenced in Section 2.3 hereof,
as the same may from time to time be amended, supplemented, restated,
renewed, or otherwise modified or replaced.
c. Section 1.1 of the Agreement shall be amended to add, in appropriate
alphabetical order, definitions of "Parent" and "Parent Guaranty" to
read in their entireties as follows:
"Parent" means Accredited Home Lenders Holding Co., a Delaware
corporation.
"Parent Guaranty" means the Guaranty of Parent dated September 16,
2002, as the same may be amended, restated, renewed or replaced from
time to time, pursuant to
Accredited (5/th/ Amendment) -2-
which Parent guarantees the payment and performance of Borrower's
Obligations under this Agreement, the Debenture, the Warehouse Credit
and Term Loan Agreement, and the other Transaction Documents.
d. All references in the Agreement and the Debenture to Capital Stock,
Common Stock, Series A Common Stock, Series A Preferred Stock and
Series B Common Stock shall be references to the appropriate class or
series of the capital stock of Parent.
e. Section 4(c)(iii) of the Debenture and the phrase "and, if applicable,
the payment of the Additional Principal Amount" in the second sentence
of Section 4(c) of the Debenture shall be deleted in their entirety
and the parties agree that Lender's conversion of the Debenture shall
occur solely in exchange for surrender of the Debenture without the
payment by Lender of any additional consideration in connection
therewith.
3. Borrower and Parent acknowledge that, from and after the consummation of
the Merger, the Debenture will be convertible into shares of capital stock
of Parent by reason of Section 5(a)(ii) of the Debenture and Section 8 of
the form of Agreement and Plan of Merger by and among Borrower, Parent and
Merger Sub submitted in connection with the Application.
4. In the event that Lender, in its sole discretion, executes and delivers an
underwriting agreement with respect to the IPO and the terms and conditions
of Lender's participation therein (the "Underwriting Agreement"), then,
simultaneously with the closing of the IPO on the terms and conditions
specified in the Underwriting Agreement (but not otherwise):
a. Lender shall be deemed to have consented to the consummation of the
IPO;
b. The Debenture shall be converted into the Initial Number of Conversion
Shares and the Conversion Shares shall be converted into shares of
Class A Common Stock. To facilitate conversion, Lender agrees to
surrender the Debenture to a custodian under a custody agreement with
terms and conditions acceptable to Lender in its sole discretion to be
executed simultaneously with the Underwriting Agreement;
c. Parent shall issue the number of shares of Class A Common Stock
issuable upon conversion of the Initial Number of Conversion Shares.
Such shares shall, upon delivery, be duly authorized, validly issued,
fully paid and nonassessable;
d. Lender shall not be deemed to have any rights pursuant to Section 3.2
as the result of the transactions contemplated by this Section 4;
e. Section 3.2 of the Agreement shall be deleted in its entirety; and
f. The covenants in Articles VI and VII of the Agreement shall be of no
further force and effect.
The parties agree that the transactions described in this Section 4 shall be
consummated upon satisfaction of the conditions specified in this Section 4
without regard to, or any need for any party to comply with, the provisions of
Sections 4(b) and 4(c) of the Debenture. The parties further acknowledge and
agree that Lender's right to payment of accrued interest due under the Debenture
shall survive the conversion provided for in this Section 4 as provided in
Section 4(d) of the Debenture.
5. Each of Borrower and Parent represents, warrants and agrees that:
a. There does not exist as of the date of this Amendment, and there will
not exist as of the consummation of the Merger, any Default or Event
of Default under the Transaction Documents;
Accredited (5/th/ Amendment)
-3-
b. The Transaction Documents continue as of the date of this Amendment,
and will continue as of the consummation of the Merger, to be the
legal, valid and binding agreements and obligations of Borrower,
enforceable in accordance with their terms, as modified by this
Amendment;
c. Borrower is not as of the date of this Amendment, and will not be as
of the consummation of the Merger, in default under any of the
Transaction Documents and Borrower has as of the date of this
Amendment, and will have as of the consummation of the Merger, no
offset or defense to its performance or obligations under any of the
Transaction Documents;
d. Except for changes permitted by the terms of the Agreement, Borrower's
representations and warranties contained in the Transaction Documents
are as of the date of this Amendment, and will as of the consummation
of the Merger be, true, accurate and complete in all respects; and
e. There has been as of the date of this Amendment, and will have been as
of the consummation of the Merger, no material adverse change in
Borrower's financial condition from the date of the Agreement.
6. The parties agree that Lender's execution and delivery of this Amendment is
not and shall not be deemed to be a reaffirmation as of the date of this
Amendment or any other date of the representations and warranties contained
in Section 3.4 of the Agreement.
7. Unless otherwise defined in this Amendment, all capitalized terms have the
meanings given to those terms in the Agreement or the Debenture, as the
case may be. Defined terms may be used in the singular or the plural, as
the context requires. The words "include," "includes" and "including" are
deemed to be followed by the phrase "without limitation." Unless the
context in which it is used otherwise clearly requires, the word "or" has
the inclusive meaning represented by the phrase "and/or." References to
Sections and Exhibits are to Sections and Exhibits of this Amendment unless
otherwise expressly provided.
8. Except as expressly modified by this Amendment, the Agreement and the
Debenture are unchanged and remain in full force and effect, and each of
Borrower and Parent ratifies and reaffirms all of its obligations under the
Agreement, the Debenture and the other Transaction Documents.
9. Except as specifically set forth in this Amendment, Lender's consent to any
of the Proposed Transactions shall not be deemed a consent to the breach by
Borrower or Parent of any other covenants or agreements contained in the
Agreement or any other Convertible Debt Document or Transaction Document
with respect to any of the Proposed Transactions or any other transaction
or matter. Borrower and Parent further agree that the consents set forth in
this Amendment are limited to the precise meaning of the words as written
and shall not be deemed (i) to be a consent or consents to any waiver or
modification of any other term or condition of the Agreement, the Debenture
or any other Convertible Debt Document or Transaction Document or (ii) to
prejudice any right or remedy that Lender may now have or may in the future
have under or in connection with the Agreement, the Debenture or any other
Convertible Debt Document or Transaction Document other than with respect
to the matters for which the consents in this Amendment have been provided.
Except as expressly set forth in this Amendment, the consents described
herein do not alter, affect, release or prejudice in any way any of
Borrower's or Parent's obligations under the Agreement, the Debenture and
the other Convertible Debt Documents and Transaction Documents.
10. This Amendment may be executed in any number of counterparts, each of which
will be deemed an original, but all of which together constitute but one
and the same instrument.
Accredited (5/th/ Amendment)
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IN WITNESS WHEREOF, Borrower, Parent and Lender have caused this Amendment to be
duly executed on their behalf by their duly authorized officers as of the day
and year specified above.
ACCREDITED HOME LENDERS, INC.,
a California corporation
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇
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Its: Executive Vice President
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ACCREDITED HOME LENDERS HOLDING CO.,
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Its: Chief Executive Officer
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RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Managing Director
Accredited (5/th/ Amendment)
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GMAC Residential Funding
March 8, 2002
BY OVERNIGHT COURIER
Accredited Home Lenders, Inc.
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▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Ray WI. ▇▇▇▇▇▇▇
Executive Vice President
Re: Loan and Security Agreement (Convertible Debt) dated March 17, 1999 by
and between ACCREDITED HOME LENDERS, INC., a California corporation
and RESIDENTIAL FUNDING CORPORATION, a Delaware corporation (as
amended and restated, the "Agreement")
Ladies and Gentlemen:
All capitalized terms used in this Notice without further definition have the
meanings given to such terms in the Agreement.
Pursuant to the authority set forth in the Agreement, Lender has, in its sole
discretion, extended the date in clause (a)(i) of the definition of Maturity
Date from March 18, 2002 to March 18, 2003.
Please call me if you have any questions concerning this change.
Very truly yours,
RESIDENTIAL FUNDING CORPORATION
By: [ILLEGIBLE]
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Its: Director
cc.▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
FOURTH AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
(Convertible Debt)
THIS FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (Convertible Debt)
(this "Amendment") is entered into as of this 12th day of March 2002, by and
between ACCREDITED HOME LENDERS, INC., a California corporation ("Borrower") and
RESIDENTIAL FUNDING CORPORATION, a Delaware corporation ("Lender").
WHEREAS, Borrower and Lender are parties to a Loan and Security
Agreement (Convertible Debt), dated July 12, 2000 (the "Agreement"), as amended
by that certain Third Amendment to Agreement, dated as of December 28, 2001, and
by that certain Second Amendment to Agreement, dated as of January 31, 2001, and
by that certain First Amendment to Agreement, dated as July 12, 2000; and
WHEREAS, Borrower has asked that Lender amend certain terms of the
Agreement, and Lender has agreed to such amendment, subject to the terms and
conditions of this Amendment.
NOW, THEREFORE, for and in consideration of the foregoing and of the
mutual covenants, agreements and conditions hereinafter set forth and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
All capitalized terms used herein and not otherwise defined shall have
their respective meanings set forth in the Agreement.
1. Upon satisfaction of the conditions set forth in Section 3 of this
Amendment, the "Effective Date" of this Amendment shall be March 18, 2002,
except for Section 2 of this Amendment, the Effective Date of which shall
be December 31, 2001.
2. Section 7.8 of the Agreement is deleted in its entirety and the following
is substituted in lieu thereof:
7.8 Transactions with Affiliates. Directly or indirectly (a)
make any loan, advance, extension of credit or capital contribution to
any of its Affiliates, other than (i) investments by Borrower in
Accredited Home Capital, Inc. ("AHC"), (ii) loans and advances between
Borrower and AHC, and (iii) investments by Borrower totaling not more
than $350,000, in the aggregate, in Vicon Financial Services, Inc.,
and in one or more Vicon Affiliates, (b) transfer, sell, pledge,
assign or otherwise dispose of any of its assets to or on behalf of
such Affiliates, except for sales of Mortgage Loans in the ordinary
course of business from Borrower to AHC, (c) merge or consolidate with
or purchase or acquire assets from such Affiliates, except for
purchases of Mortgage Loans in the ordinary course of business by
Borrower (i) from one or more Vicon Affiliates and (ii) from AHC, or
(d) transfer, pledge or assign or otherwise pay management fees to or
on behalf of such Affiliates other than the payment of management
fees by AHC to Borrower as long as the services to be provided by
Borrower and the management fees to be paid by AHC for them are no
less favorable to Borrower than those that AHC would have obtained in
a comparable transaction with an unrelated Person.
3. Borrower must deliver to Lender four executed originals of this Amendment.
4. Borrower represents, warrants, and agrees that (a) the execution, delivery,
and performance by Borrower of this Amendment have been duly authorized by
all necessary corporate action on the part of Borrower and do not require
any approval or consent of, or any registration, qualification, or filing
with, any governmental agency or authority or any approval or consent of
any other person or entity,
1
do not and will not conflict with, result in any violation of, or
constitute any default under, any provision of the Certificate of
Incorporation or Bylaws of Borrower, any agreement binding on or applicable
to Borrower or any of its properties, or any law or governmental regulation
or court decree or order binding upon or applicable to Borrower or any of
its properties, and will not result in the creation or imposition of any
lien or encumbrance in or on any of its properties pursuant to the
provisions of any agreement applicable to Borrower or any of its property;
(b) this Amendment, the Loan and Security Agreement, the other Convertible
Debt Documents, and the other Transaction Documents are the legal, valid,
and binding obligations of Borrower, enforceable against Borrower in
accordance with their terms as amended or modified herein or therein,
except as enforcement may be limited by applicable bankruptcy, insolvency,
moratorium, and other laws applicable to creditors' rights generally and by
general principles of equity; (c) there exists no Default or Event of
Default; (d) the representations and warranties contained in the
Convertible Debt Documents and the Transaction Documents remain true and
accurate in all respects; and (e) there has been no material adverse change
in the financial condition of Borrower from the date of the Loan and
Security Agreement to the date of this Amendment.
5. Lender and Borrower each acknowledge and affirm that the Loan and Security
Agreement, as hereby amended, is hereby ratified and confirmed in all
respects and all terms, conditions, and provisions of the Loan and Security
Agreement, except as amended by this Amendment, shall remain unmodified and
in full force and effect. All references in any document or instrument to
the Loan and Security Agreement are hereby amended and shall refer to the
Loan and Security Agreement as amended by this Amendment. Borrower confirms
to Lender that the Obligations are and continue to be secured by the
security interest granted by Borrower in favor of Lender under Article IX
of the Loan and Security Agreement, and all of the terms, conditions,
provisions, agreements, requirements, promises, obligations, duties,
covenants and representations of Borrower under any and all other documents
and agreements entered into with respect to the obligations under the Loan
and Security Agreement, the other Convertible Debt Documents, and the other
Transaction Documents are incorporated herein by reference and are hereby
ratified and affirmed in all respects by Borrower.
6. This Amendment, from and after the date hereof, embodies the entire
agreement and understanding between the parties hereto and supersedes and
has merged into this Amendment all prior oral and written agreements on the
same subjects by and between the parties hereto with the effect that this
Amendment shall control with respect to the specific subjects hereof and
thereof.
7. Whenever possible, each provision of this Amendment and any other
agreement, document, statement, instrument, or transaction contemplated
hereby or relating hereto (collectively, the "Amendment Documents") shall
be interpreted in such manner as to be effective, valid, and enforceable
under the applicable law of any jurisdiction, but, if any provision of the
Amendment Documents shall be held to be prohibited, invalid, or
enforceable under the applicable law, such provision shall be ineffective
in such jurisdiction only to the extent of such prohibition, invalidity, or
unenforceability, without invalidating or rendering unenforceable the
remainder of such provision or the remaining provisions of the Amendment
Documents in such jurisdiction, or affecting the effectiveness, validity,
or enforceability of such provision in any other jurisdiction.
8. This Amendment and the other Amendment Documents shall be binding upon
Borrower and Lender and their respective successors and assigns, and shall
inure to the benefit of Borrower and Lender and the successors and assigns
of Lender.
9. THIS AMENDMENT AND THE OTHER AMENDMENT DOCUMENTS SHALL BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT
OF LAW PRINCIPLES THEREOF.
10. This Amendment may be executed in any number of counterparts and by the
different parties hereto and thereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
-2-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
ACCREDITED HOME LENDERS, INC.,
a California corporation
By: [ILLEGIBLE]
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Its: Executive Vice President
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RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Director
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3
CONSENT OF GUARANTORS
The undersigned, being the Guarantor under the Guaranty dated as of
December 28, 2001, hereby consents to the foregoing Amendment and the
transactions contemplated thereby and hereby ratifies and reaffirms its
obligations under its Guaranty so as to include within the term "Guaranteed
Debt" the indebtedness, obligations and liabilities of Borrower under this
Amendment and the Note. The Guarantor hereby reaffirms that its obligations
under its Guaranty are separate and distinct from Borrower's obligations to
Lender, and that its obligations under the Guaranty are in full force and
effect, and hereby waives and agrees not to assert any anti-deficiency
protections or other rights as a defense to its obligations under the Guaranty,
all as more fully set forth in the Guaranty, the terms of which are incorporated
herein as if fully set forth herein.
Dated: March 18, 2002
ACCREDITED HOME CAPITAL, INC.,
a Delaware Corporation
By: [ILLEGIBLE]
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Its: Ass't VP and Ass't Sec'y
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4
THIRD AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
(Convertible Debt)
THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (Convertible
Debt), dated as of December 28, 2001, is by and between ACCREDITED HOME LENDERS,
INC., a California corporation (the "Borrower"), and RESIDENTIAL FUNDING
CORPORATION, a Delaware corporation (the "Lender").
WHEREAS, the Borrower and the Lender are parties to a Loan and
Security Agreement (Convertible Debt), dated as of March 17, 1999, as amended by
that certain First Amendment to Loan and Security Agreement (Convertible Debt)
dated as of July 12, 2000 and by that certain Second Amendment to Loan and
Security Agreement (Convertible Debt) dated as of January 31, 200l (as amended
hereby and as the same may hereafter be amended, supplemented, or otherwise
modified from time to time, the "Loan and Security Agreement"), pursuant to
which the Lender has agreed to make Debenture Advances to the Borrower; and
WHEREAS, the Borrower has asked the Lender to amend the terms of the
Agreement, and the Lender has agreed to such amendment subject to the terms and
conditions of this Amendment.
NOW, THEREFORE, for and in consideration of the foregoing and of the
mutual covenants, agreements, and conditions hereinafter set forth and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. Capitalized Terms. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to them in the Loan
and Security Agreement, unless the context shall otherwise require.
Section 2. Amendments. Section 7.8 of the Loan and Security Agreement
is amended to read in its entirety as follows:
Section 7.8 Transactions with Affiliates. Directly or indirectly (a)
make any loan, advance, extension of credit or capital contribution to any
of its Affiliates, other than (i) investments by AHL in AHC and (ii)
investments by AHL totaling not more than Three Hundred Fifty Thousand
Dollars ($350,000), in the aggregate, in Vicon Financial Services, Inc.,
and in one or more Vicon Affiliates, (b) transfer, sell, pledge, assign or
otherwise dispose of any of its assets to or on behalf of such Affiliates,
except for sales of Mortgage Loans in the ordinary course of business from
AHL to AHC, (c) merge or consolidate with or purchase or acquire assets
from such Affiliates, except for purchases of Mortgage Loans in the
ordinary course of business by AHL (i) from one or more Vicon Affiliates
and (ii) from AHC, or (d) transfer, pledge or assign or otherwise pay
management fees to or on behalf of such Affiliates other than the payment
of management fees by AHC to AHL as long as the services to be provided by
AHL and the
management fees to be paid by AHC for them are no less favorable to
AHL than those that AHC would have obtained in a comparable
transaction with an unrelated Person.
Section 3. Consents and Waivers. Subject to the Borrower's
satisfaction of the requirements of Section 4 of this Amendment, the Lender (i)
consents to the amendment and restatement of AHC's articles of incorporation and
bylaws in the form presented to the Lender, and (ii) waives any Default or Event
that would otherwise have arisen under the terms of the Agreement, including,
without limitation, under Section 7.5 of the Agreement, in the absence of such
consent. Subject to the Borrower's satisfaction of the requirements of Section 4
of this Amendment, the Lender (i) consents to the transfer by AHL to AHC on
December 28, 200l of beneficial title to all Pledged Loans subject to the
Agreement on that date, (ii) agrees that upon the consummation of such transfer
AHC will be deemed to be the "Borrower" with respect to such Pledged Loans, and
(iii) waives any Default or Event that would otherwise have arisen under the
terms of the Agreement, including, without limitation, under Section 7.3 of the
Agreement, in the absence of such consent. In addition, the Lender acknowledges
that all additional Mortgage Loans to be financed by AHC with the Lender will be
simultaneously purchased by AHC from AHL, and consents to such procedure
notwithstanding anything to the contrary in the Agreement.
Section 4. Effectiveness of Amendments. The effective date
("Effective Date") of this Amendment shall be the date on which there shall have
been satisfied, in the sole discretion of the Lender, the following conditions
precedent:
(a) Agreements and Documents. This Amendment, duly executed
by the Borrower and the Lender shall have been delivered to the
Lender.
(b) Other Matters. All organizational and legal proceedings
relating to the Borrower and all instruments and agreements in
connection with the transactions contemplated by this Amendment shall
be satisfactory in scope, form, and substance to the Lender and its
counsel, and the Lender shall have received all information and
copies of all documents, including records of corporate proceedings,
that it may reasonably have requested in connection therewith, such
documents where appropriate to be certified by proper Borrower or
governmental authorities.
Section 5. Representations and Warranties. The Borrower
represents, warrants, and agrees that (a) the execution, delivery, and
performance by the Borrower of this Amendment have been duly authorized by all
necessary corporate action on the part of the Borrower and do not require any
approval or consent of, or any registration, qualification, or filing with, any
governmental agency or authority or any approval or consent of any other person
or entity, do not and will not conflict with, result in any violation of, or
constitute any default under, any provision of the Certificate of Incorporation
or Bylaws of the Borrower, any agreement binding on or applicable to the
Borrower or any of its properties, or any law or governmental regulation or
court decree or order binding upon or applicable to the Borrower or any of its
properties, and will not result in the creation or imposition of any lien or
encumbrance in or on any of its properties pursuant to the provisions of any
agreement applicable to the Borrower or any of its property; (b) this Amendment,
the Loan and Security Agreement, the other Convertible Debt
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Documents, and the other Transaction Documents are the legal, valid, and binding
obligations of the Borrower, enforceable against the Borrower in accordance with
their terms as amended or modified herein or therein, except as enforcement may
be limited by applicable bankruptcy, insolvency, moratorium, and other laws
applicable to creditors' rights generally and by general principles of equity;
(c) there exists no Default or Event of Default; (d) the representations and
warranties contained in the Convertible Debt Documents and the Transaction
Documents remain true and accurate in all respects; and (e) there has been no
material adverse change in the financial condition of the Borrower from the date
of the Loan and Security Agreement to the date of this Amendment.
Section 6. Affirmation of Loan and Security Agreement.
Further References, Affirmation of Security Interest. The Lender and the
Borrower each acknowledge and affirm that the Loan and Security Agreement, as
hereby amended, is hereby ratified and confirmed in all respects and all terms,
conditions, and provisions of the Loan and Security Agreement, except as amended
by this Amendment, shall remain unmodified and in full force and effect. All
references in any document or instrument to the Loan and Security Agreement are
hereby amended and shall refer to the Loan and Security Agreement as amended by
this Amendment. The Borrower confirms to the Lender that the Obligations are and
continue to be secured by the security interest granted by the Borrower in favor
of the Lender under Article IX of the Loan and Security Agreement, and all of
the terms, conditions, provisions, agreements, requirements, promises,
obligations, duties, covenants and representations of the Borrower under any and
all other documents and agreements entered into with respect to the obligations
under the Loan and Security Agreement, the other Convertible Debt Documents, and
the other Transaction Documents are incorporated herein by reference and are
hereby ratified and affirmed in all respects by the Borrower.
Section 7. Merger and Integration, Superseding Effect. This
Amendment, from and after the date hereof, embodies the entire agreement and
understanding between the parties hereto and supersedes and has merged into this
Amendment all prior oral and written agreements on the same subjects by and
between the parties hereto with the effect that this Amendment shall control
with respect to the specific subjects hereof and thereof.
Section 8. Severability. Whenever possible, each provision
of this Amendment and any other agreement, document, statement, instrument, or
transaction contemplated hereby or relating hereto (collectively, the "Amendment
Documents") shall be interpreted in such manner as to be effective, valid, and
enforceable under the applicable law of any jurisdiction, but, if any provision
of the Amendment Documents shall be held to be prohibited, invalid, or
unenforceable under the applicable law, such provision shall be ineffective in
such jurisdiction only to the extent of such prohibition, invalidity, or
unenforceability, without invalidating or rendering unenforceable the remainder
of such provision or the remaining provisions of the Amendment Documents in such
jurisdiction, or affecting the effectiveness, validity, or enforceability of
such provision in any other jurisdiction.
Section 9. Successors. This Amendment and the other
Amendment Documents shall be binding upon the Borrower and the Lender and their
respective successors and assigns,
-3-
and shall inure to the benefit of the Borrower and the Lender and the successors
and assigns of the Lender.
Section 10. Governing Law. THIS AMENDMENT AND THE OTHER AMENDMENT DOCUMENTS
SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING
EFFECT TO CONFLICT OF LAW PRINCIPLES THEREOF.
Section 11. Counterparts. This Amendment may be executed in any number of
counterparts and by the different parties hereto and thereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument.
Section 12. Headings. The captions and headings herein are for convenience
only and in no way define, limit, or describe the scope or intent of any
provision of this Amendment.
[Remainder of this page left blank intentionally]
-4-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
ACCREDITED HOME LENDERS, INC.,
a California corporation
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Executive Vice President
RESIDENTIAL FUNDING
CORPORATION,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Title: Director
--------------------------
SECOND AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
(Convertible Debt)
THE SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (Convertible
Debt), dated as of January 31, 2001, is by and between ACCREDITED HOME LENDERS,
INC., a California corporation (the "Borrower"), and RESIDENTIAL FUNDING
CORPORATION, a Delaware corporation (the "Lender").
WHEREAS, the Borrower and the Lender are parties to a Loan and
Security Agreement (Convertible Debt), dated as of March 17, 1999, as amended by
that certain First Amendment to Loan and Security Agreement (Convertible Debt)
dated as of July 12, 2000 (as amended hereby and as the same may hereafter be
amended, supplemented, or otherwise modified from time to time, the "Loan and
Security Agreement"), pursuant to which the Lender has agreed to make Debenture
Advances to the Borrower; and
WHEREAS, the Borrower has asked the Lender to amend the terms of the
Agreement, and the Lender has agreed to such amendment subject to the terms and
conditions of this Amendment.
NOW, THEREFORE, for and in consideration of the foregoing and of the
mutual covenants, agreements, and conditions hereinafter set forth and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. Capitalized Terms. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to them in the Loan
and Security Agreement, unless the context shall otherwise require.
Section 2. Amendments. Section 7.9 of the Loan and Security Agreement
is amended to read in its entirety as follows:
Section 7.9 Compensation, Severance, Bonuses. Directly or indirectly
(a) adopt any severance benefit plan, grant any severance or termination
pay to, or enter into any agreement providing for any severance payment,
change of control payment, retention bonus payment, or similar payment
arrangement with any officer, director, employee, or principal shareholder
of the Borrower or any of its Subsidiaries in an amount in excess of Fifty
Thousand Dollars ($50,000) for any individual officer, director, employee,
or principal shareholder or in an aggregate amount (in any fiscal year) in
excess of Two Hundred Fifty Thousand Dollars ($250,000) for all officers,
directors, employees, and principal shareholders, (b) enter into any
employment or consulting agreement or otherwise agree to provide total
compensation (including base salary, bonus, and all discretionary expense
items) with or to any officer, director, employee, or principal shareholder
of the Borrower or any of its Subsidiaries, or with or to any other
individual, (i) having a term in excess of one (1) year or (ii) providing
for annual compensation (after
excluding performance-based commissions or the equivalent) to any such
officer, director, employee, principal shareholder, or other individual in
excess of Two Hundred Fifty Thousand Dollars ($250,000), (c) pay any
bonuses to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇ ▇. ▇▇▇▇▇▇▇, or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ other than
bonuses specifically authorized by the Senior Management Incentive Plan,
(d) establish, adopt, or enter into any bonus, profit sharing, thrift,
compensation, pension, retirement, deferred compensation, or other plan,
trust, or fund for the benefit of any director, officer, or class of
employees of the Borrower or any of its Subsidiaries, or amend, restate,
supplement, replace, or otherwise modify any such plan, trust, or fund,
including, without limitation, the Existing Employee Stock Options/Plans,
except that the Borrower may amend or otherwise modify the
performance-based commissions payable under any compensation plan in effect
on the Closing Date provided that such amendments or modifications do not,
individually or in the aggregate, represent a material increase in the
commissions payable under such compensation plan on the Closing Date, (e)
increase by more than ten percent (10.00%) annually the current
compensation levels (including base salary and any discretionary expense
items) of (i) any Senior Manager or (ii) any employee of the Borrower or
any of its Subsidiaries whose annual base salary exceeds One Hundred
Thousand Dollars ($100,000), (f) adopt any Senior Management Incentive Plan
or amend, restate, supplement, replace, or otherwise modify any Senior
Management Incentive Plan that has been previously reviewed and approved in
writing by the Lender, or (g) adopt any bonus plan other than the Senior
Management Incentive Plan with respect to senior executives of the
Borrower, including, without limitation, the Senior Managers.
Section 3. Effectiveness of Amendments. The effective date ("Effective
Date") of this Amendment shall be the date on which there shall have been
satisfied, in the sole discretion of the Lender, the following conditions
precedent:
(a) Agreements and Documents. This Amendment, duly executed by the
Borrower and the Lender shall have been delivered to the Lender.
(b) Other Matters. All organizational and legal proceedings relating
to the Borrower and all instruments and agreements in connection with the
transactions contemplated by this Amendment shall be satisfactory in scope,
form, and substance to the Lender and its counsel, and the Lender shall
have received all information and copies of all documents, including
records of corporate proceedings, that it may reasonably have requested in
connection therewith, such documents where appropriate to be certified by
proper Borrower or governmental authorities.
Section 4. Representations and Warranties. The Borrower represents,
warrants, and agrees that (a) the execution, delivery, and performance by the
Borrower of this Amendment have been duly authorized by all necessary corporate
action on the part of the Borrower and do not require any approval or consent
of, or any registration, qualification, or filing with, any governmental agency
or authority or any approval or consent of any other person or entity, do not
and will not conflict with, result in any violation of, or constitute any
default under, any provision of the Certificate of Incorporation or Bylaws of
the Borrower, any agreement binding on or applicable to the Borrower or any of
its properties, or any law or governmental regulation
-2-
or court decree or order binding upon or applicable to the Borrower or any of
its properties, and will not result in the creation or imposition of any lien or
encumbrance in or on any of its properties pursuant to the provisions of any
agreement applicable to the Borrower or any of its property; (b) this
Amendment, the Loan and Security Agreement, the other Convertible Debt
Documents, and the other Transaction Documents are the legal, valid, and binding
obligations of the Borrower, enforceable against the Borrower in accordance with
their terms as amended or modified herein or therein, except as enforcement may
be limited by applicable bankruptcy, insolvency, moratorium, and other laws
applicable to creditors' rights generally and by general principles of equity;
(c) there exists no Default or Event of Default; (d) the representations and
warranties contained in the Convertible Debt Documents and the Transaction
Documents remain true and accurate in all respects; and (e) there has been no
material adverse change in the financial condition of the Borrower from the date
of the Loan and Security Agreement to the date of this Amendment.
Section 5. Affirmation of Loan and Security Agreement, Further
References, Affirmation of Security Interest. The Lender and the Borrower each
acknowledge and af3it-m that the Loan and Security Agreement, as hereby amended,
is hereby ratified and confirmed in all respects and all terms, conditions, and
provisions of the Loan and Security Agreement, except as amended by this
Amendment, shall remain unmodified and in 111 force and effect. All references
in any document or instrument to the Loan and Security Agreement are hereby
amended and shall refer to the Loan and Security Agreement as amended by this
Amendment. The Borrower confirms to the Lender that the Obligations are and
continue to be secured by the security interest granted by the Borrower in favor
of the Lender under Article IX of the Loan and Security Agreement, and all of
the terms, conditions, provisions, agreements, requirements, promises,
obligations, duties, covenants and representations of the Borrower under any and
all other documents and agreements entered into with respect to the obligations
under the Loan and Security Agreement, the other Convertible Debt Documents, and
the other Transaction Documents are incorporated herein by reference and are
hereby ratified and affirmed in all respects by the Borrower.
Section 6. Merger and Integration, Superseding Effect. This
Amendment, from and after the date hereof, embodies the entire agreement and
understanding between the parties hereto and supersedes and has merged into this
Amendment all prior total and written agreements on the same subjects by and
between the parties hereto with the effect that this Amendment shall control
with respect to the specific subjects hereof and thereof.
Section 7. Severability. Whenever possible, each provision of this
Amendment and any other agreement, document, statement, instrument, or
transaction contemplated hereby or relating hereto (collectively, the "Amendment
Documents") shall be interpreted in such manner as to be effective, valid, and
enforceable under the applicable law of any jurisdiction, but, if any provision
of the Amendment Documents shall be held to be prohibited, invalid, or
unenforceable under the applicable law, such provision shall be ineffective in
such jurisdiction only to the extent of such prohibition, invalidity, or
unenforceability, without invalidating or rendering unenforceable the remainder
of such provision or the remaining provisions of the Amendment Documents in such
jurisdiction, or affecting the effectiveness, validity, or enforceability of
such provision in any other jurisdiction.
-3-
Section 8. Successors. This Amendment and the other Amendment
Documents shall be binding upon the Borrower and the Lender and their respective
successors and assigns, and shall inure to the benefit of the Borrower and the
Lender and the successors and assigns of the Lender.
Section 9. Governing Law. THIS AMENDMENT AND THE OFFICER AMENDMENT
DOCUMENTS SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA,
WITHOUT GIVING EFFECT TO CONFLICT OF LAW PRINCIPLES THEREOF.
Section 10. Counterparts. This Amendment may be executed in any number
of counterparts and by the different parties hereto and thereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument.
Section 11. Headings. The captions and headings herein are for
convenience only and in no way define, limit, or describe the scope or intent
of any provision of this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
ACCREDITED HOME LENDERS, INC., a
California corporation
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Title: Executive Vice President
-----------------------------
RESIDENTIAL FUNDING
CORPORATION, a Delaware corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇
------------------------------
Title: Director
-----------------------------
-4-
FIRST AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
(Convertible Debt)
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (Convertible
Debt), dated as of July 12, 2000, is by and between ACCREDITED HOME LENDERS,
INC., a California corporation (the "Borrower"), and RESIDENTIAL FUNDING
CORPORATION, a Delaware corporation (the "Lender").
WHEREAS, the Borrower and the Lender are parties to a Loan and
Security Agreement (Convertible Debt), dated as of March 17, 1999 (as amended
hereby and as the same may hereafter be amended, supplemented, or otherwise
modified from time to time, the "Loan and Security Agreement"), pursuant to
which the Lender has agreed to make Debenture Advances to the Borrower; and
WHEREAS, the Borrower and the Lender desire to amend the Loan and
Security Agreement to eliminate three blank dates in it; and
WHEREAS, the Borrower has requested that the Lender consent to certain
actions that otherwise would be prohibited by the terms of the Loan and Security
Agreement;
NOW, THEREFORE, for and in consideration of the foregoing and of the
mutual covenants, agreements, and conditions hereinafter set forth and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. Capitalized Terms. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to them in the Loan
and Security Agreement, unless the context shall otherwise require.
Section 2. Amendments. The definitions of "Closing Date" and "Maturity
Date" contained in Section 1.1 of the Loan and Security Agreement are amended to
read in their entireties as follows:
"Closing Date" means March 18, 1999.
"Maturity Date" means the earliest of: (a) the later of (i) the
close of business on March 18, 2002, as such date may be extended from
time to time in writing by the Lender, in its sole discretion, but in
no event beyond ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇) the date twelve (12) months after
the outstanding principal balance of all Term Loan Advances, together
with any and all accrued interest thereon, has been paid in full by
the Borrower, or (iii) the date twenty-four (24) months after
the maturity of the Term Loan Advances; and (b) the date the
Obligations become due and payable pursuant to Section 8.2 hereof.
Section 3. Consent to Amendments to Existing Stock Options/Plans. The
Borrower has advised the Lender that the Borrower has taken the following
actions with respect to the Existing Stock Options/Plans:
. Amended the Borrower's 1995 Executive Stock Option Plan (the
"Executive Plan") to increase the number of shares of Common
Stock for which options may be issued thereunder by 13,500
shares.
. Amended the Borrower's 1998 Employee Stock Option (the "Employee
Plan") to increase the number of shares of Common Stock for which
options may be issued thereunder by 486,500 shares.
This request was made by letter dated April 18, 2000 to the Lender from ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ and by e-mail dated the same date to the Lender's counsel from ▇▇.
▇▇▇▇▇▇▇ (collectively, the "Approval Request"). The Approval Request was
accompanied by certain background documents and information, including a chart
that indicates that the Borrower currently has 14,587,377 Common Stock
Equivalents Outstanding, which would increase to 15,067,377 Common Stock
Equivalents Outstanding as a result of these proposed amendments to the
Executive Plan and the Employee Plan.
Under Section 7.9(d) of the Loan and Security Agreement, these
proposed amendments to the Executive Plan and the Employee Plan are subject to
the prior approval of the Lender. In the absence of a consent or waiver by the
Lender, implementation of the foregoing actions would result in one or more
Events of Default under the Loan and Security Agreement. In compliance with this
requirement, approval of the foregoing actions by the Borrower's Board of
Directors and shareholders were expressly subject to approval thereof by the
Lender.
The Lender hereby consents to the proposed amendments to the Executive
Plan and the Employee Plan, subject to: (a) the Lender's receipt of
documentation (collectively, the "Stock Option Approval Documents") evidencing
the fact that the foregoing transactions have been approved by (i) the
Borrower's Board of Directors and shareholders; and (b) Borrower's
representation and warranty, by its execution and delivery of a copy of this
Amendment, that the information set forth in and accompanying the Approval
Request is true and correct in all respects and accurately reflects the Common
Stock Equivalents Outstanding before and after the proposed amendments to the
Executive Plan and the Employee Plan.
Section 4. Effectiveness of Amendments. The effective date ("Effective
Date") of this Amendment shall be the date on which there shall have been
satisfied, in the sole discretion of the Lender, the following conditions
precedent:
-2-
(a) Agreements and Documents. This Amendment, duly executed by the
Borrower and the Lender shall have been delivered to the Lender.
(b) Stock Option Approval Documents. The Stock Option Approval
Documents shall have been delivered to the Lender.
(c) Other Matters. All organizational and legal proceedings relating
to the Borrower and all instruments and agreements in connection with the
transactions contemplated by this Amendment shall be satisfactory in scope,
form, and substance to the Lender and its counsel, and the Lender shall
have received all information and copies of all documents, including
records of corporate proceedings, that it may reasonably have requested in
connection therewith, such documents where appropriate to be certified by
proper Borrower or governmental authorities.
Section 5. Representations and Warranties. The Borrower represents,
warrants, and agrees that (a) the execution, delivery, and performance by the
Borrower of this Amendment have been duly authorized by all necessary corporate
action on the part of the Borrower and do not require any approval or consent
of, or any registration, qualification, or filing with, any governmental agency
or authority or any approval or consent of any other person or entity, do not
and will not conflict with, result in any violation of, or constitute any
default under, any provision of the Certificate of Incorporation or Bylaws of
the Borrower, any agreement binding on or applicable to the Borrower or any of
its properties, or any law or governmental regulation or court decree or order
binding upon or applicable to the Borrower or any of its properties, and will
not result in the creation or imposition of any lien or encumbrance in or on any
of its properties pursuant to the provisions of any agreement applicable to the
Borrower or any of its property; (b) this Amendment, the Loan and Security
Agreement, the other Convertible Debt Documents, and the other Transaction
Documents are the legal, valid, and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their terms as amended or
modified herein or therein, except as enforcement may be limited by applicable
bankruptcy, insolvency, moratorium, and other laws applicable to creditors'
rights generally and by general principles of equity; (c) there exists no
Default or Event of Default; (d) the representations and warranties contained in
the Convertible Debt Documents and the Transaction Documents remain true and
accurate in all respects; and (e) there has been no material adverse change in
the financial condition of the Borrower from the date of the Loan and Security
Agreement to the date of this Amendment.
Section 6. Affirmation of Loan and Security Agreement, Further
References, Affirmation of Security Interest. The Lender and the Borrower each
acknowledge and affirm that the Loan and Security Agreement, as hereby amended,
is hereby ratified and confirmed in all respects and all terms, conditions, and
provisions of the Loan and Security Agreement, except as amended by this
Amendment, shall remain unmodified and in full force and effect. All references
in any document or instrument to the Loan and Security Agreement are hereby
amended and shall refer to the Loan and Security Agreement as amended by this
Amendment. The Borrower confirms to the Lender that the Obligations are and
continue to be secured by the security interest granted by the Borrower in favor
of the Lender under Article IX of the Loan and Security Agreement, and all of
the terms, conditions, provisions, agreements, requirements,
-3-
promises, obligations, duties, covenants and representations of the Borrower
under any and all other documents and agreements entered into with respect to
the obligations under the Loan and Security Agreement, the other Convertible
Debt Documents, and the other Transaction Documents are incorporated herein by
reference and are hereby ratified and affirmed in all respects by the Borrower.
Section 7. Merger and Integration, Superseding Effect. This Amendment,
from and after the date hereof, embodies the entire agreement and understanding
between the parties hereto and supersedes and has merged into this Amendment all
prior oral and written agreements on the same subjects by and between the
parties hereto with the effect that this Amendment shall control with respect to
the specific subjects hereof and thereof.
Section 8. Severability. Whenever possible, each provision of this
Amendment and any other agreement, document, statement, instrument, or
transaction contemplated hereby or relating hereto (collectively, the "Amendment
Documents") shall be interpreted in such manner as to be effective, valid, and
enforceable under the applicable law of any jurisdiction, but, if any provision
of the Amendment Documents shall be held to be prohibited, invalid, or
unenforceable under the applicable law, such provision shall be ineffective in
such jurisdiction only to the extent of such prohibition, invalidity, or
unenforceability, without invalidating or rendering unenforceable the remainder
of such provision or the remaining provisions of the Amendment Documents in such
jurisdiction, or affecting the effectiveness, validity, or enforceability of
such provision in any other jurisdiction.
Section 9. Successors. This Amendment and the other Amendment
Documents shall be binding upon the Borrower and the Lender and their respective
successors and assigns, and shall inure to the benefit of the Borrower and the
Lender and the successors and assigns of the Lender.
Section 10. Governing Law. THIS AMENDMENT AND THE OTHER AMENDMENT
DOCUMENTS SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA,
WITHOUT GIVING EFFECT TO CONFLICT OF LAW PRINCIPLES THEREOF.
Section 11. Counterparts. This Amendment may be executed in any number
of counterparts and by the different parties hereto and thereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument.
Section 12. Headings. The captions and headings herein are for
convenience only and in no way define, limit, or describe the scope or intent of
any provision of this Amendment.
-4-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
ACCREDITED HOME LENDERS, INC., a
California corporation
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Title: Executive Vice President
--------------------------
RESIDENTIAL FUNDING
CORPORATION, a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------
Title: Managing Director
--------------------------
-5-
================================================================================
LOAN AND SECURITY AGREEMENT
(Convertible Debt)
BETWEEN
ACCREDITED HOME LENDERS, INC.,
a California corporation
AND
RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation
--------------------
Dated as of March 17, 1999
================================================================================
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS ..................... 1
Section 1.1 Defined Terms ........................................ 1
Section 1.2 Other Definitional Provisions ........................ 6
ARTICLE II TERMS OF LENDING ..................................... 6
Section 2.1 The Commitment ....................................... 6
Section 2.2 Procedures for Obtaining Debenture Advances .......... 7
Section 2.3 The Debenture ........................................ 7
Section 2.4 Interest ............................................. 8
Section 2.5 Repayment and Prepayment ............................. 8
Section 2.6 Amortization Event ................................... 8
Section 2.7 Use of Proceeds ...................................... 10
Section 2.8 Interest Limitation .................................. 10
ARTICLE III CONVERSION; REGISTRATION RIGHTS ...................... 10
Section 3.1 Conversion Rights .................................... 10
Section 3.2 Board of Directors ................................... 11
Section 3.3 Registration Rights .................................. 12
Section 3.4 Representations and Warranties of the Lender ......... 12
Section 3.5 Agreements of the Lender ............................. 12
Section 3.6 Specific Performnance ................................ 13
i
ARTICLE IV CONDITIONS PRECEDENT ................................................... 13
Section 4.1 Conditions of the Loan ................................................. 13
Section 4.2 Each Advance ........................................................... 14
ARTICLE V REPRESENTATIONS AND WARRANTIES ......................................... 15
Section 5.1 Incorporation by Reference of Representations and Warranties ........... 15
Section 5.2 Authorization and Enforceability ....................................... 15
Section 5.3 Approvals .............................................................. 16
Section 5.4 Capital Stock and Related Matters ...................................... 16
Section 5.5 Additional Representations and Warranties .............................. 17
ARTICLE VI AFFIRMATIVE COVENANTS .................................................. 17
Section 6.1 Payment of Debenture ................................................... 17
Section 6.2 Financial Statements and Other Reports ................................. 17
Section 6.3 Incorporation by Reference of Affirmative Covenants .................... 17
Section 6.4 Use of Proceeds of Debenture Advances .................................. 17
Section 6.5 Insurance .............................................................. 17
Section 6.6 Notification of Certain Matters ........................................ 17
Section 6.7 Conduct of Business .................................................... 18
ARTICLE VII NEGATIVE COVENANTS ..................................................... 18
Section 7.1 Incorporation by Reference of Negative Covenants ....................... 18
Section 7.2 Conduct of Business .................................................... 18
Section 7.3 Sale/Merger Transaction ................................................ 18
Section 7.4 Acquisitions ........................................................... 18
Section 7.5 Articles and Bylaws .................................................... 18
ii
Section 7.6 Capital Stock ........................................................ 18
Section 7.7 Dividends ............................................................ 19
Section 7.8 Transactions with Affiliates ......................................... 19
Section 7.9 Compensation, Severance, Bonuses ..................................... 19
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES ....................................... 20
Section 8.1 Events of Default .................................................... 20
Section 8.2 Remedies ............................................................. 22
Section 8.3 Offset ............................................................... 22
Section 8.4 No Limitation ........................................................ 22
ARTICLE IX SECURITY INTEREST .................................................... 23
Section 9.1 Grant of Security Interest ........................................... 23
Section 9.2 Incorporation By Reference of Provisions Regarding the Collateral .... 23
ARTICLE X MISCELLANEOUS ........................................................ 23
Section 10.1 Modifications ........................................................ 23
Section 10.2 Reimbursements ....................................................... 23
Section 10.3 Indemnity ............................................................ 23
Section 10.4 Waivers, Etc ......................................................... 24
Section 10.5 Notices .............................................................. 24
Section 10.6 Successors and Assigns; Disposition of the Loan ...................... 24
Section 10.7 Confidentiality ...................................................... 25
Section 10.8 Governing Law and Construction ....................................... 25
Section 10.9 Consent to Jurisdiction .............................................. 26
Section 10.10 Waiver of Jury Trial ................................................. 26
iii
Section 10.11 Captions ........................................ 26
Section 10.12 Entire Agreement ................................ 26
Section 10.13 Counterparts .................................... 27
iv
EXHIBITS
Exhibit A Floating-Rate Convertible Debenture
Exhibit B Milestone Compliance Certificate
Exhibit C Capital Stock
Exhibit D Additional Representations and Warranties
Exhibit E Disclosure Schedule
Exhibit F Existing Stock Options/Plans
Exhibit G Debenture Advance Request
v
LOAN AND SECURITY AGREEMENT
(Convertible Debt)
THIS LOAN AND SECURITY AGREEMENT, dated as of March 17, 1999, is by and
between ACCREDITED HOME LENDERS, INC., a California corporation (the
"Borrower"), and RESIDENTIAL FUNDING CORPORATION, a Delaware corporation (the
"Lender").
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 Defined Terms. Capitalized terms used but not otherwise defined
in this Agreement have the meanings given them in the Warehouse Credit and Term
Loan Agreement (hereinafter defined). In addition, the following terms used in
this Agreement shall have the following respective meanings:
"Agreement" means this Loan and Security Agreement (Convertible Debt),
as the same may from time to time be amended, supplemented, restated,
renewed, or otherwise modified or replaced, or, if terminated, then as in
effect immediately preceding such termination.
"Articles of Incorporation" means the Third Amended and Restated
Articles of Incorporation of the Borrower, as filed with the California
Secretary of State on March 8, 1999.
"Bylaws" means the "Bylaws of Accredited Home Lenders, Inc." adopted
by the Borrower's Board of Directors on December 15, 1994, as amended by
the Borrower's Board of Directors on December 28, 1994, as certified to the
Lender as of the date of this Agreement by the Secretary of the Borrower.
"Capital Stock" means any capital stock of any class of the Borrower
now or hereafter authorized or any right to purchase, or security
convertible into, any such capital stock of any class, including, without
limitation, Common Stock and Series A Preferred Stock.
"Cargill" means Cargill Financial Services Corporation.
"Cargill Facility Agreement" means that certain Amended and Restated
Facility Agreement dated as of October 1, 1997 among Cargill, the Borrower,
Accredited Home Capital, Inc., and Bankers Trust Company of California,
N.A., as amended by that certain Amendment No. 1 to Amended and Restated
Facility Agreement dated as of January 30, 1998 among Cargill, the
Borrower, Accredited Home Capital, Inc., and Bankers Trust Company of
California, N.A. and that certain Amendment No. 2 to Amended and Restated
Facility Agreement dated as of March 15, 1999 among Cargill, the Borrower,
Accredited Home Capital, Inc., and Bankers Trust Company of California,
N.A.
"Closing Date" means March __, 1999.
"Common Stock" means the Borrower's Series A Common Stock, Series B
Common Stock, and any Capital Stock of any class of the Borrower hereafter
authorized that is not limited to a fixed sum or percentage of par or
stated value in respect of the rights of the holders thereof to participate
in dividends or in the distribution of assets upon any liquidation,
dissolution, or winding up of the Borrower.
"Common Stock Equivalents Outstanding" means, as of any date of
determination, the number of shares of Common Stock equal to the sum of (i)
all shares of Common Stock issued and outstanding on such date, (ii) all
shares of Common Stock issuable upon conversion of all Convertible
Securities outstanding on such date, (iii) all shares of Common Stock
issuable upon the exercise of all Options outstanding on such date, and
(iv) all shares of Common Stock for which Options may be issued after such
date pursuant to Employee Stock Options/Plans.
"Conversion Exercise Period" has the meaning set forth in Section 3.1
hereof.
"Conversion Shares" means the shares of Series B Common Stock issuable
upon conversion of the Debenture; provided, that if under the terms hereof
and under the Debenture there shall be a change such that the securities
issuable under the Debenture shall be issued by a Person other than the
Borrower or there shall be a change in the type or class of securities
issuable under the Debenture, then the term shall mean the securities
issuable upon conversion of the Debenture and the exercise of the rights
granted hereunder and thereunder.
"Convertible Debt Documents" means this Agreement, the Debenture, the
Investors' Rights Agreement, the Co-Sale Agreement, any agreement of the
Borrower relating to Subordinated Debt, and each other document,
instrument, or agreement executed by the Borrower in connection herewith or
therewith, as any of the same may from time to time be amended,
supplemented, restated, renewed, or otherwise modified or replaced, or, if
terminated, then as in effect immediately preceding such termination.
"Convertible Securities" means evidences of indebtedness, shares of
stock, or other securities that are convertible into or exchangeable for,
with or without payment of additional consideration, shares of Common
Stock, either immediately or upon the arrival of a specified date or the
happening of a specified event or both, including, without limitation, the
Debenture and the Series A Preferred Stock.
"Co-Sale Agreement" means that certain Second Amended and Restated
Co-Sale and First Refusal Agreement dated as of the date of this Agreement
by and among the Borrower, the Lender, the Existing Investors, and ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ and ▇▇▇ ▇. ▇▇▇▇▇▇▇, as the same may from time to time be amended,
supplemented, restated, renewed, or otherwise modified or replaced, or, if
terminated, then as in effect immediately preceding such termination.
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"Covenant Termination Date" means the date the Borrower's obligations
to comply with the covenants set forth in Articles VI and VII hereof
terminate (as provided in the introductory paragraph of such Articles).
"Debenture" has the meaning set forth in Section 2.3 hereof.
"Debenture Advance" means each disbursement by the Lender of the Loan
under Section 2.2 hereof.
"Debenture Advance Request" has the meaning set forth in Section 2.2
hereof.
"Debenture Rate" means a floating rate of interest equal to five
percent (5.00%) per annum over LIBOR. The Debenture Rate shall be adjusted
on and as of the effective date of each weekly change in LIBOR. The
Lender's determination of the Debenture Rate as of any date of
determination shall be conclusive and binding, absent manifest error.
"Default" means any event which, with the giving of notice (whether
such notice is required under Section 8.1, or under some other provision of
this Agreement, or otherwise) or lapse of time, or both, would constitute
an Event of Default.
"Disclosure Schedule" means (a) as of the Closing Date, the initial
Disclosure Schedule attached hereto as Exhibit E, and (b) as of any
subsequent date, such initial Disclosure Schedule, as modified by the
Borrower by written notice to the Lender from time to time, and as required
by Section 5.5 hereof or the Debenture.
"Employee Stock Options/Plans" means, collectively, the Existing Stock
Options/Plans, any New Employee Stock Options/Plans, and any New Employment
Agreements.
"Escrow Account" means the sinking fund escrow account to be
established under Section 2.6(b) hereof.
"Event of Default" has the meaning set forth in Section 8.1 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
"Existing Investors" means, collectively, Cargill, Crosspoint Venture
Partners 1993, Crosspoint 1993 Entrepreneurs Fund, Enterprise Partners III,
L.P., Enterprise Partners III Associates, L.P., ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.,
▇▇▇▇▇▇ Commercial Paper Inc., ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, and Ocean Park Ventures.
"Existing Stock Options/Plans" means, collectively, the employee stock
options, employee incentive stock option plans, and other benefit plans
described on Exhibit F
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hereto pursuant to which the Borrower may issue shares of Capital Stock
from time to time.
"Indemnified Liabilities" means any liabilities, obligations, losses,
damages, penalties, judgments, suits, costs, expenses, and disbursements
imposed or incurred by or asserted against an Indemnitee with respect to
matters described in Sections 10.3(b) and 10.3(c) hereof.
"Indemnitees" has the meaning set forth in Section 10.3(b) hereof.
"Investment Property" means cash (including, without limitation, cash
held in money market funds or otherwise), securities, instruments, and
other investment property (including, without limitation, investment
property constituting general intangibles).
"Investors' Rights Agreement" means that certain Second Amended and
Restated Investors' Rights Agreement dated as of the date of this Agreement
by and among the Borrower, the Lender, the Existing Investors, and ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ and ▇▇▇ ▇. ▇▇▇▇▇▇▇, as the same may from time to time be amended,
supplemented, restated, renewed, or otherwise modified or replaced, or, if
terminated, then as in effect immediately preceding such termination.
"Liability Termination Date" means (a) with respect to any claim
arising under Sections 10.3(a), 10.3(b), or 10.3(c)(iii) hereof, the
expiration of the applicable statute of limitations, and (b) with respect
to any other claim arising under Section 10.3(c), the date three (3) years
after the Covenant Termination Date.
"Loan" means the Loan made by the Lender to the Borrower pursuant to
Section 2.1 hereof.
"Loan Amount" means up to Three Million Dollars ($3,000,000).
"Maturity Date" means the earliest of: (a) the later of (i) the close
of business on March __, 2002, as such date may be extended from time to
time in writing by the Lender, in its sole discretion, but in no event
beyond March __, 2007, (ii) the date twelve (12) months after the
outstanding principal balance of all Term Loan Advances, together with any
and all accrued interest thereon, has been paid in full by the Borrower, or
(iii) the date twenty-four (24) months after the maturity of the Term Loan
Advances; and (b) the date the Obligations become due and payable pursuant
to Section 8.2 hereof.
"Milestones" has the meaning set forth in Section 2.6(a) hereof.
"Milestone Compliance Certificate" has the meaning set forth in
Section 2.6(d) hereof.
"New Employee Stock Options/Plans" means any employee stock options,
employee incentive stock option plans, executive compensation plans, or
other employee
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benefit plans adopted by the Borrower after the Closing Date with the
prior written approval of the Lender, pursuant to which the Borrower may
from time to time issue shares of Capital Stock.
"New Employment Agreements" means any employment contracts or
agreements executed by the Borrower after the Closing Date with the prior
written approval of the Lender, pursuant to which the Borrower may from
time to time issue shares of Capital Stock.
"Obligations" means any and all indebtedness, obligations, and
liabilities of the Borrower to the Lender (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 this Agreement, the Debenture, or any other Convertible Debt
Document.
"Options" means any right, warrant, or option to subscribe for or
purchase shares of Capital Stock.
"Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing a registration statement or similar
document in compliance with the Securities Act, and the declaration or
ordering of the effectiveness of such registration statement.
"SEC" means the Securities and Exchange Commission or any successor
thereto or to the function thereof.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and any successor statute.
"Senior Management Incentive Plan" means the annual bonus plan for
certain senior executives of the Borrower, including, without limitation,
the Senior Managers, as determined and approved on an annual basis by the
Borrower's Board of Directors or the Compensation Committee thereof with
the prior written approval of the Lender. The Senior Management Incentive
Plan for calendar year 1998 was adopted by the Compensation Committee of
the Borrower's Board of Directors on February 18, 1998, effective January
1, 1998.
"Senior Managers" means ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chairman and Chief Executive
Officer; ▇▇▇ ▇. ▇▇▇▇▇▇▇, Executive Vice President; and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
President.
"Series A Common Stock" means the Borrowers common stock, par value
$.00l per share, designated as such and entitled to the rights,
preferences, privileges, and restrictions set forth in the Borrower's
Articles of Incorporation.
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"Series A Preferred Stock" means the Borrower's preferred stock, par
value $.001 per share, designated as such and entitled to the rights,
preferences, privileges, and restrictions set forth in the Borrower's
Articles of Incorporation.
"Series B Common Stock" means the Borrowers common stock, par value
$.001 per share, designated as such and entitled to the rights,
preferences, privileges, and restrictions set forth in the Borrower's
Articles of Incorporation.
"Vicon Affiliates" means one or more limited liability companies
established by the Borrower and Vicon Financial Services, Inc. pursuant to
Section 2 of that certain Agreement dated as of October 16, 1998 by and
between Vicon Financial Services, Inc. and the Borrower, as the same may
from time to time be amended, supplemented, restated, renewed, or otherwise
modified or replaced, or, if terminated, then as in effect immediately
preceding such termination.
"Warehouse Credit and Term Loan Agreement" means the Warehousing
Credit, Term Loan, and Security Agreement dated as of the date of this
Agreement by and between the Borrower and the Lender, as the same may from
time to time be amended, supplemented, restated, renewed, or otherwise
modified or replaced, or, if terminated, then as in effect immediately
preceding such termination.
Section 1.2 Other Definitional Provisions.
(a) Accounting terms not otherwise defined herein shall have the
meanings given the terms under GAAP.
(b) Defined terms may be used in the singular or the plural, as the
context requires.
(c) All references to time of day shall mean the then applicable time
in Chicago, Illinois, unless expressly provided to the contrary.
ARTICLE II
TERMS OF LENDING
Section 2.1 The Commitment.
(a) On the terms and subject to the conditions of this Agreement, and
provided that (i) no Default or Event of Default has occurred and is
continuing and (ii) the Lender has not elected pursuant to Section 2.6(a)
hereof to cause the Debenture to be amortized, the Lender agrees to make a
Loan to the Borrower in the aggregate principal amount of up to Three
Million Dollars ($3,000,000), by disbursing the proceeds thereof as
Debenture Advances from the Closing Date to but not including the Maturity
Date.
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(b) All Debenture Advances under this Agreement shall constitute
the Loan, and all Collateral shall be security for the Loan and
Debenture and for the performance of all of the Obligations, subject to
the priority of payment set forth in Section 8.3 of the Warehouse
Credit and Term Loan Agreement, which Section is hereby incorporated by
reference.
(c) The following limitations on Debenture Advances shall be
applicable:
(i) No Debenture Advance shall be made if, after giving
effect thereto, the outstanding aggregate principal balance of
all Debenture Advances would exceed the Loan Amount.
(ii) Each Debenture Advance (other than the initial Debenture
Advance, which shall be made on the Closing Date) shall be made
only on the first Business Day of a month, in an amount not less
than $100,000, and in an amount not more than the amount which
would cause the outstanding aggregate amount of all Debenture
Advances on the date of such Debenture Advance to exceed the
maximum amount set forth below:
Maximum Principal
Amount of Debenture
Period (Dates Inclusive) Advances Outstanding
------------------------ --------------------
Closing Date to April 30, 1999 $1,500,000
May 1, 1999 to Business Day
immediately preceding Maturity Date $3,000,000
Section 2.2 Procedures for Obtaining Debenture Advances. The Borrower
may obtain a Debenture Advance hereunder, subject to the satisfaction of the
conditions set forth in Sections 2.1(c), 4.1, and 4.2 hereof, upon compliance
with the procedures set forth in this Section 2.2. A request for a Debenture
Advance shall be initiated by the Borrower by delivering to the Lender, not
later than five (5) Business Days prior to the Business Day on which the
Borrower desires to borrow hereunder (which, for Debenture Advances other than
the initial Debenture Advance to be made on the Closing Date, shall be the first
Business Day of a month), a completed and signed request for a Debenture Advance
(a "Debenture Advance Request") in the form of Exhibit G hereto. The Lender
shall have three (3) Business Days to examine the Debenture Advance Request. If
the Lender approves the Debenture Advance Request, the Lender shall disburse the
amount thereof in accordance with a letter of direction delivered by the
Borrower to the Lender.
Section 2.3 The Debenture. The Loan shall be evidenced by the
Borrower's Floating-Rate Convertible Debenture, substantially in the form of
Exhibit A hereto (the "Debenture"), in the amount of Three Million Dollars
($3,000,000). The Lender shall enter in its ledgers and records the amount of
the Loan and the payments made thereon, and the Lender is authorized by the
Borrower to enter on Schedule A attached to the Debenture a record of the Loan,
Debenture Advances, and payments.
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Section 2.4 Interest.
(a) Except as otherwise provided in Section 2.4(c) hereof, the unpaid
amount of the Loan shall bear interest, from the date of each Debenture Advance
until paid in full, at the Debenture Rate. Interest shall be payable (i) monthly
in arrears, on the first day of each month, commencing with the first month
following the date of the initial Debenture Advance, (ii) on the date on which
the Escrow Account is established, (iii) within ten (10) Business Days after the
date of conversion of the Debenture, and (iv) on the Maturity Date.
(b) Interest shall be computed on the basis of a 360-day year and
applied to the actual number of days elapsed in each interest calculation
period.
(c) Upon the occurrence and during the continuation of an Event of
Default hereunder, the unpaid amount of the Obligations shall bear interest,
until paid in full, at a rate of interest equal to four percent (4%) per annum
over the Debenture Rate.
Section 2.5 Repayment and Prepayment.
(a) Principal of the Debenture shall be payable in full on the Maturity
Date.
(b) The Borrower may not prepay the Debenture, in whole or in part,
prior to the Maturity Date; provided, however, that the Borrower shall prepay
the Debenture at the option of the Lender in accordance with Section 2.6 hereof.
Section 2.6 Amortization Event.
(a) Early Amortization. In the event the Borrower does not achieve one
or more of the milestones (the "Milestones") set forth below in clause (c) of
this Section 2.6 related to sales of "Eligible Subject Loans" to the Lender
pursuant to "Shared Execution Forward Commitments" (as such terms are defined in
the Loan Sale Commitment), then the Lender may elect in a written notice
provided to the Borrower, within forty-five (45) days of its receipt of a
Milestone Compliance Certificate, to require the outstanding principal amount of
the Debenture be amortized in monthly payments equal to the outstanding
principal amount of the Debenture at the time of such notice divided by twelve
(12), such payments commencing on the first Business Day of the next succeeding
month and ending on the earlier of (i) the first Business Day of the twelfth
month thereafter or (ii) the Maturity Date (on which date the outstanding
principal balance of the Debenture, if any, shall be due and payable pursuant to
Section 2.5(a) hereof).
(b) Escrow Account. Upon the Lender making such election, the Borrower
shall deposit the monthly payments in an escrow account (the "Escrow Account")
with a national bank having combined capital, surplus, and undivided profits of
at least $100,000,000 selected by the Lender until the amount on deposit in the
Escrow Account equals the outstanding principal balance of the Debenture. The
Escrow Account will be established on terms to be agreed upon by the Borrower
and the Lender. The Borrower
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hereby grants to the Lender a security interest in the Escrow Account and all
Investment Property therein to secure its Obligations hereunder and under the
Debenture, and the Borrower will execute such documents, including a security
agreement, control agreement, and financing statements, as the Lender may
request in order to perfect its security interest in the Escrow Account and all
Investment Property therein. Interest on the amounts held in the Escrow Account
will be paid to the Lender on a monthly basis in lieu of the interest payments
due under the Debenture with respect to the principal amount held in the Escrow
Account. All amounts deposited shall be retained in the Escrow Account until
either payment in full of the Debenture or conversion of the Debenture. Interest
on the remaining outstanding principal amount of the Debenture will continue to
accrue and be paid in accordance with the terms of this Agreement and the
Debenture. If the Lender exercises its rights hereunder to escrow principal
payments, the Lender shall retain its right to convert the Debenture under
Section 3.1 hereof and the terms of the Debenture, but upon such conversion, all
amounts on deposit and Investment Property in the Escrow Account shall be
released to the Borrower.
(c) Milestones. Each of the following is a Milestone hereunder with
respect to the sale of Eligible Subject Loans to the Lender pursuant to Shared
Execution Forward Commitments:
(i) The Borrower must fulfill the "Commitment Amount" within the
"Commitment Term" (as such terms are defined in each Shared Execution
Forward Commitment).
(ii) During each "Commitment Year" for which the "Annual
Commitment Amount" (as such terms are defined in the Loan Sale
Commitment) is greater than or equal to One Hundred Fifty Million
Dollars ($150,000,000), the Borrower must sell to the Lender Eligible
Subject Loans pursuant to Shared Execution Forward Commitments with an
outstanding principal balance as of the Funding Date (as such term is
defined in the GMA/RFC Consumer Finance Acquisitions Guide) at least
equal to One Hundred Fifty Million Dollars ($150,000,000).
(iii) The Borrower must not cease to originate or acquire through
mortgage brokers Eligible Subject Loans.
(iv) Each Eligible Subject Loan delivered by the Borrower to the
Lender to satisfy the foregoing requirements must satisfy the Loan Sale
Commitment and the "Contract" (as such term is defined in the Loan Sale
Commitment).
(d) Milestone Compliance Certificates. Within thirty (30) days after
(i) the end of each Commitment Year and (ii) the Maturity Date, the Borrower
shall deliver to the Lender a certificate in the form of Exhibit B attached
hereto signed by the Chief Financial Officer of the Borrower certifying
compliance or noncompliance with each of the Milestones (the "Milestone
Compliance Certificate").
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Section 2.7 Use of Proceeds. The proceeds of the Loan shall be used by
the Borrower for the following purposes:
(a) to expand the Borrower's wholesale origination network,
whereby the Borrower acquires or originates mortgage loans through
mortgage brokers;
(b) to expand the Borrower's direct retail origination
operation; and
(c) to provide working capital to finance the retention of the
Aggregate Payment Obligation(s) resulting from Shared Execution Forward
Commitments or residual interests resulting from Eligible
Securitization Transaction(s).
The proceeds of the Loan shall not be used to pay bonuses to the Borrower's
senior management.
Section 2.8 Interest Limitation. All agreements between the Borrower
and the Lender are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of maturity of this Agreement or
the Debenture, the Lender's conversion of the Debenture, or otherwise, shall the
amount paid or agreed to be paid to the Lender for the use, forbearance,
lending, or retention of the Debenture Advances exceed the maximum permissible
under applicable law. If from any circumstances whatsoever, fulfillment of any
provisions hereof or of the Debenture or any other Convertible Debt Document at
any time given shall involve transcending the limit of validity prescribed by
law, then, the obligation to be fulfilled shall automatically be reduced to the
limit of such validity, and if from any circumstances the Lender should ever
receive as interest an amount that would exceed the highest lawful rate of
interest, such amount that would be in excess of interest shall be applied to
the reduction of the principal balance of the Debenture and not to the payment
of interest thereunder. This provision shall control every other provision of
all agreements between the Borrower and Lender and shall also be binding upon
and available to any subsequent holder of the Debenture.
ARTICLE III
CONVERSION; REGISTRATION RIGHTS
Section 3.1 Conversion Rights.
(a) Series B Common Stock. The Debenture shall be convertible
into the Conversion Shares, which shall consist of fully paid and
nonassessable shares of Series B Common Stock of the Borrower, at the
option of Lender, upon the terms set forth herein and in the Debenture,
at any time within the period (the "Conversion Exercise Period")
commencing on the Closing Date and terminating on the Maturity Date (as
the same may be extended by the Lender pursuant to the terms hereof).
The issuance of the Conversion Shares upon conversion of the Debenture
shall be made without charge to Lender for any issuance tax in respect
thereof or other cost incurred by the Borrower in connection with such
conversion and the related issuance of shares of Series B Common Stock.
Upon conversion, the Borrower will take all such actions as are
necessary in order to insure that the Series B Common Stock issued as a
result of such conversion is validly issued, fully
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paid, and nonassessable. The Borrower will not close its books with respect
to the transfer of Series B Common Stock issued or issuable upon conversion
of the Debenture in any manner that interferes with the timely conversion
of the Debenture. The Borrower shall at all times reserve for issuance a
number of shares of Series B Common Stock equal to the maximum number of
shares issuable upon conversion of the Debenture.
(b) Series A Common Stock. The Series B Common Stock shall be
convertible into fully paid and nonassessable shares of Series A Common
Stock pursuant to the terms of the Borrower's Articles of Incorporation.
The issuance of shares of Series A Common Stock upon conversion of shares
of Series B Common Stock shall be made without charge to Lender for any
issuance tax in respect thereof or other cost incurred by the Borrower in
connection with such conversion and the related issuance of shares of
Series A Common Stock. Upon conversion, the Borrower will take all such
actions as are necessary in order to insure that the Series A Common Stock
issued as a result of such conversion is validly issued, fully paid, and
nonassessable. The Borrower will not close its books with respect to the
transfer of Series A Common Stock issued or issuable upon conversion of the
Series B Common Stock in any manner that interferes with the timely
conversion of such Series B Common Stock. The Borrower shall at all times
reserve for issuance a number of shares of Series A Common Stock equal to
the maximum number of shares issuable upon conversion of the Series B
Common Stock.
Section 3.2 Board of Directors.
(a) At any time that the Lender or an Affiliate of the Lender holds
Series B Common Stock, the Lender shall receive notice of all meetings and
copies of all documents sent to or given to members of the Board of
Directors of the Borrower in their capacity as such, and shall have the
right to send a representative to attend all meetings of the Borrower's
Board of Directors, and any committees thereof, as an observer.
(b) At any time that the shares of Series B Common Stock held by
the Lender or an Affiliate of the Lender, together with shares of Series B
Common Stock that the Lender has a right to acquire upon conversion of the
Debenture, is greater than or equal to five percent (5.00%) of the Common
Stock Equivalents Outstanding:
(i) The Lender shall have the right to designate one (1)
voting member (not an "advisory" member) of the Borrower's Board of
Directors and of any executive or similar committee thereof;
(ii) The Lender's designee to the Borrower's Board of
Directors pursuant to this Section 3.2 shall not be removed without
the Lender's prior written consent; and
(iii) The Borrower's Board of Directors shall not exceed seven
(7) members.
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Section 3.3 Registration Rights. In order to induce the Lender to
enter into this Agreement, the Borrower, each of the Existing Investors, and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇ ▇. ▇▇▇▇▇▇▇, have duly executed and delivered the
Investors' Rights Agreement to the Lender, and the Borrower hereby agrees that
the Lender shall be entitled to the registration rights provided by the
Investors' Rights Agreement.
Section 3.4 Representations and Warranties of the Lender. The Lender
hereby represents and warrants to the Borrower as follows, understanding that
the Borrower is relying upon such representations and warranties in executing
and delivering this Agreement, in issuing the Debenture, and in issuing any
Conversion Shares as contemplated hereby or thereby:
(a) The Lender is a corporation that was not formed for the
specific purpose of acquiring the securities offered and has total
assets in excess of $5,000,000. The Lender has such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of the Debenture and the Conversion
Shares, and is able to bear the economic risk of the Debenture and the
Conversion Shares.
(b) The Lender is acquiring the Debenture for its own account
and not with a view to the resale or distribution of the Debenture or
the Conversion Shares in whole or in part in violation of the
Securities Act or applicable state law.
(c) The Lender acknowledges that it has not received nor is it
aware of any general solicitation or general advertising of the
Debenture or the Conversion Shares, including without limitation, (i)
any communication published in any newspaper or magazine or broadcast
over television or radio, or (ii) any seminar or meeting to which
people were invited by means of a general solicitation or general
advertising.
(d) The Lender has the corporate power and authority to enter
into this Agreement and to purchase the Debenture. This Agreement has
been duly and validly authorized, executed, and delivered by the
Lender and constitutes the legal, valid, and binding obligation of the
Lender, enforceable against the Lender in accordance with its terms.
(e) The Lender has had access prior to its receipt of the
Debenture to such information relating to the Borrower as the Lender
has desired, and has been given the opportunity to (i) ask questions
of and receive answers from the Borrower and its representatives
concerning the Borrower and the terms and conditions of the Debenture,
and (ii) obtain any additional information that the Borrower possesses
or can obtain, without unreasonable effort or expense, that is
necessary to verify the accuracy of the information furnished by the
Borrower in connection herewith.
Section 3.5 Agreements of the Lender. The Lender understands that the
Debenture has not been and the Conversion Shares may not have been registered
under the Securities Act or registered or qualified under state securities laws
and regulations. The Lender understands and agrees that the Debenture will, and
the certificates representing the Conversion Shares will until registered, bear
the following legend:
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"THIS [DEBENTURE] [CERTIFICATE] AND THE SECURITIES REPRESENTED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") AND MAY NOT BE OFFERED OR SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED, OR OTHERWISE DISPOSED OF EXCEPT IN A TRANSACTION
THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND FROM THE REGISTRATION AND QUALIFICATION REQUIREMENTS OF APPLICABLE
STATE SECURITIES LAWS, OR IN A TRANSACTION EFFECTED PURSUANT TO SUCH
REGISTRATION AND QUALIFICATION."
The Lender agrees that it will not transfer any portion of the Debenture or the
Conversion Shares evidenced by a certificate bearing such legend except in
compliance with such legend. The Borrower agrees that it will, at the earliest
available opportunity under applicable law, cause such legend to be removed from
the Debenture and from the certificates representing the Conversion Shares.
Section 3.6 Specific Performance. The Borrower hereby agrees that
irreparable damage would occur in the event that any provision of this Article
III is not performed by the Borrower in accordance with the terms hereof and
that the Lender shall be entitled to specific performance of the terms of this
Article III in addition to any other remedy at law or equity.
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.1 Conditions of the Loan. The obligation of the Lender to
make the Loan hereunder shall be subject to the prior or simultaneous
fulfillment of each of the following conditions:
(a) Closing Schedule. The requirements set forth in the
Closing Schedule shall have been satisfied.
(b) Warehouse Credit and Term Loan Agreement. All conditions
to the making of the initial Warehousing Advance and the initial Term
Loan Advance set forth in the Warehouse Credit and Term Loan Agreement
shall have been satisfied.
(c) Subordination of Debt. All directors, officers, and
shareholders of the Borrower, all Affiliates of the Borrower or of any
Subsidiary of the Borrower, to whom or to any of whom the Borrower or
any Subsidiary shall be indebted as of the date of this Agreement,
which indebtedness has a term of more than one (1) year or is in excess
of Twenty-Five Thousand Dollars ($25,000), shall have subordinated such
indebtedness to the Obligations to the extent and in a form
satisfactory to the Lender in its sole discretion, including, without
limitation, by executing, if requested by the Lender, a Subordination
of Debt Agreement in the form of Exhibit F to the Warehouse Credit and
Term Loan Agreement; and the Lender shall have received evidence of
such subordination, satisfactory to the Lender in its sole discretion,
including, without limitation, by delivery
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of an executed copy of any such Subordination of Debt Agreement,
certified by the corporate secretary of the Borrower to be true and
complete and in full force and effect as of the date of the initial
Debenture Advance.
(d) Other Matters. All organizational and legal proceedings
relating to the Borrower and all instruments and agreements in
connection with the transactions contemplated by this Agreement shall
be satisfactory in scope, form, and substance to the Lender and its
counsel, and the Lender shall have received all information and copies
of all documents, including records of corporate proceedings, that it
may reasonably have requested in connection therewith, such documents
where appropriate to be certified by proper Borrower or governmental
authorities.
(e) Fees and Expenses. The Lender shall have received all fees
and other amounts due and payable by the Borrower on or prior to the
Closing Date.
Section 4.2 Each Advance. The obligation of the Lender to make the
initial Debenture Advance and each subsequent Debenture Advance under this
Agreement is subject to the satisfaction, in the sole discretion of the Lender,
as of the date of each such Debenture Advance, of the following conditions
precedent:
(a) The Borrower shall have delivered to the Lender the
Debenture Advance Request, any Milestone Compliance Certificate
required by Section 2.6(d) hereof, and shall have satisfied the
procedures set forth in Section 2.2 hereof. All items delivered to the
Lender shall be satisfactory to the Lender in form and content, and the
Lender may reject such of them as do not meet the requirements of this
Agreement.
(b) The Lender shall have received evidence satisfactory to it
as to the making and/or continuation of any book entry or the due
filing and recording in all appropriate offices of all financing
statements as may be necessary to perfect the security interest in the
Collateral under the Uniform Commercial Code or other applicable law.
(c) No amortization event under Section 2.6 hereof shall have
occurred.
(d) The representations and warranties of the Borrower
contained in Article V hereof shall be accurate and complete in all
material respects as if made on and as of the date of the initial
Debenture Advance, and the representations and warranties of the
Borrower contained in Article V hereof (other than Section 5.5 thereof)
shall be accurate and complete in all material respects as if made on
and as of the date of each subsequent Debenture Advance.
(e) The Borrower shall have performed all agreements to be
performed by it hereunder, under the Debenture, and under the other
Convertible Debt Documents and, after giving effect to the requested
Debenture Advance, there shall exist no Default or Event of Default
hereunder.
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(f) The Borrower shall have not incurred any material
liabilities, direct or contingent, other than in the ordinary course of
its business, since the Statement Date.
(g) The Lender shall have received from counsel to the
Borrower, if requested by the Lender in its sole discretion, an updated
opinion in form and content satisfactory to the Lender, addressed to
the Lender and dated as of the date of the Debenture Advance, covering
such matters as the Lender may reasonably request.
(h) For Debenture Advances other than the initial Debenture
Advance to be made on the Closing Date, the Lender shall have received
evidence satisfactory to it that the Borrower had positive cumulative
net income, determined on a consolidated basis in accordance with GAAP,
for the six most recently completed months; provided, however, that for
Debenture Advance Requests submitted prior to July 1, 1999, the Lender
shall have received evidence satisfactory to it that the Borrower had
positive cumulative net income, determined on a consolidated basis in
accordance with GAAP, for the period from January 1, 1999 through the
last day of the most recently completed month.
Delivery of a Debenture Advance Request by the Borrower shall be deemed a
representation by the Borrower that all conditions set forth in this Section 4.2
shall have been satisfied as of the date of such Debenture Advance.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Except as set forth on the Disclosure Schedule, the Borrower hereby
represents and warrants to the Lender, as of the date of this Agreement, the
date of each Debenture Advance Request, the making of each Debenture Advance,
and any conversion of the Debenture into the Conversion Shares, that:
Section 5.1 Incorporation by Reference of Representations and
Warranties. Each of the representations and warranties contained in Article 5 of
the Warehouse Credit and Term Loan Agreement is true and correct, which
representations and warranties are incorporated herein by reference as if fully
set forth herein.
Section 5.2 Authorization and Enforceability. The Borrower has the
power and authority to execute, deliver, and perform this Agreement, the
Debenture, and all other Convertible Debt Documents to which the Borrower is a
party, to make the borrowings hereunder, and to issue the Conversion Shares
issuable upon conversion of the Debenture. The execution, delivery, and
performance by the Borrower of this Agreement, the Debenture, and all other
Convertible Debt Documents to which the Borrower is a party and the making of
the borrowings hereunder and thereunder, have been duly and validly authorized
by all necessary corporate action on the part of the Borrower (none of which
actions has been modified or rescinded, and all of which actions are in full
force and effect) and do not and will not conflict with or violate any provision
of law, of any judgments binding upon the Borrower, or of the Articles of
Incorporation or Bylaws of the Borrower, conflict with or result in a breach of
or
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constitute a default or require any consent under, or result in the creation
of any Lien upon any property or assets of the Borrower or any Subsidiary of the
Borrower other than the Lien on the Collateral granted hereunder, or result in
or require the acceleration of any indebtedness of the Borrower or any
Subsidiary of the Borrower pursuant to any agreement, instrument, or indenture
to which the Borrower or any Subsidiary of the Borrower is a party or by which
the Borrower or any Subsidiary of the Borrower or any of their property may be
bound or affected. This Agreement, the Debenture, and all other Convertible Debt
Documents contemplated hereby or thereby constitute legal, valid, and binding
obligations of the Borrower, enforceable in accordance with their respective
terms, except as limited by bankruptcy, insolvency, or other such laws affecting
the enforcement of creditors' rights.
Section 5.3 Approvals. The execution and delivery of this Agreement,
the Debenture, and all other Convertible Debt Documents to which the Borrower is
a party and the performance of the Borrower's obligations hereunder and
thereunder, including, without limitation, the issuance of the Conversion
Shares, and the validity and enforceability hereof and thereof do not require
any license, consent, approval, or other action of any state or federal agency
or governmental or regulatory authority other than those that have been
obtained, remain in full force and effect, and have been previously disclosed in
writing to the Lender.
Section 5.4 Capital Stock and Related Matters.
(a) As of the Closing Date, the authorized Capital Stock of the
the Borrower consists of the classes and numbers of shares set forth on
Exhibit C attached hereto, of which the number of shares that are
issued and outstanding and owned by the shareholders as of the Closing
Date are listed on Exhibit C. As of the Closing Date, neither the
Borrower nor any of its Subsidiaries has outstanding any stock or
securities convertible or exchangeable for any shares of its Capital
Stock or containing any profit participation features, nor any rights
or options to subscribe for or to purchase its capital stock or any
stock or securities convertible into or exchangeable for their capital
stock or any stock appreciation rights or phantom stock plans, except
for the Debenture and except as set forth on Exhibit C. Exhibit C
accurately sets forth the following with respect to all outstanding
options and rights to acquire the Borrower's Capital Stock and each
Subsidiary's capital stock: the holder, the number of shares covered,
the exercise price, and the expiration date. As of the Closing Date,
neither the Borrower nor any of its Subsidiaries shall be subject to
any obligation (contingent or otherwise) to repurchase or otherwise
acquire or redeem any shares of its capital stock or any warrants,
options, or other rights to acquire its capital stock, except as
provided hereby or as set forth on Exhibit C. As of the Closing Date,
all of the outstanding shares of the capital stock of the Borrower and
each Subsidiary of the Borrower, including, without limitation, the
Capital Stock, shall be validly issued, fully paid, and nonassessable.
(b) Except as set forth on Exhibit C, there are no statutory or
contractual shareholders' preemptive rights or rights of refusal with
respect to the issuance of the Series B Common Stock upon conversion of
the Debenture. The Borrower has not violated any applicable federal or
state securities laws in connection with the offer, sale, or issuance
of any of its Capital Stock, and the offer, sale, and issuance of the
Conversion
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Shares hereunder upon conversion of the Debenture do not require
registration under the Securities Act or any applicable state
securities laws. Except as set forth on Exhibit C, there is no
agreement among any shareholders of the Borrower with respect to the
voting or transfer of the Borrower's Capital Stock.
Section 5.5 Additional Representations and Warranties. As of the date
of this Agreement and as of the date the Borrower provides the Lender with an
update to the Disclosure Schedule after receipt of a Conversion Notice (as such
term is defined in the Debenture), each of the representations and warranties
set forth on Exhibit D attached hereto and made a part hereof is true and
correct.
ARTICLE VI
AFFIRMATIVE COVENANTS
The Borrower hereby covenants and agrees that so long as the Debenture
is outstanding or there remain any Obligations to be paid or performed under
this Agreement, the Debenture, or any other Convertible Debt Document, and
thereafter, with respect to the obligations set forth in Sections 6.6 and 6.8
hereof, if the Lender holds any Conversion Shares, until all of the Conversion
Shares have been registered under the Securities Act and applicable state
securities laws and regulations, the Borrower shall:
Section 6.1 Payment of Debenture. Punctually pay or cause to be paid
all Obligations payable hereunder, under the Debenture, and under the other
Convertible Debt Documents in accordance with the terms hereof and thereof.
Section 6.2 Financial Statements and Other Reports. Deliver to the
Lender, all financial statements and other reports required under the Warehouse
Credit and Term Loan Agreement.
Section 6.3 Incorporation by Reference of Affirmative Covenants.
Comply with each of the affirmative covenants contained in Article 6 of the
Warehouse Credit and Term Loan Agreement, which covenants are incorporated
herein by reference as if fully set forth herein.
Section 6.4 Use of Proceeds of Debenture Advances. Use the proceeds of
each Debenture Advance solely for the purposes set forth in Section 2.7 hereof.
Section 6.5 Insurance. In addition to the insurance required to be
maintained pursuant to Section 6.8 of the Warehouse Credit and Term Loan
Agreement, maintain key person life insurance in the amount of $1,500,000 on
each of the Senior Managers.
Section 6.6 Notification of Certain Matters. Give prompt notice to the
Lender of (a) the occurrence, or non-occurrence, of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate as of any of the dates
specified in Article V hereof; and (b) any failure of the Borrower to comply
with or satisfy any covenant, condition, or agreement to be complied with or
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satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 6.6 shall not limit or otherwise affect the remedies
available to the Lender under this Agreement.
Section 6.7 Conduct of Business. Preserve and maintain its corporate
existence in good standing and all of its rights, privileges, licenses, and
franchises necessary or desirable in the normal conduct of its business; conduct
its business in an orderly and efficient manner; and make no change in the
nature or character of its business or engage in any business in which it was
not engaged on the date of this Agreement.
ARTICLE VII
NEGATIVE COVENANTS
The Borrower hereby covenants and agrees that so long as the Debenture
is outstanding or there remain any Obligations to be paid or performed under
this Agreement or under any other Convertible Debt Document, the Borrower shall
not, either directly or indirectly, without the prior written consent of the
Lender:
Section 7.1 Incorporation by Reference of Negative Covenants. Violate
any of the negative covenants contained in Article 7 of the Warehouse Credit and
Term Loan Agreement, each of which is incorporated herein by reference as if
fully set forth herein.
Section 7.2 Conduct of Business. Change the basic nature or purpose of
its business, make a material change in any of the accounting methods,
principles, or practices that are used in the preparation of the Borrower's and
its Subsidiaries' financial statements, other than in accordance with GAAP, or
settle or compromise any pending or threatened litigation that relates to the
transactions contemplated hereby or that would have a material adverse effect on
the businesses of the Borrower and its Subsidiaries, taken as a whole.
Section 7.3 Sale/Merger Transaction. Sell, assign, transfer, or
dispose of, or authorize the sale, assignment, transfer, or disposition of, any
substantial part of the assets of the Borrower or engage in any liquidation,
dissolution, recapitalization, merger, consolidation, or other similar
transaction or business combination involving the Borrower, except for sales of
assets in the ordinary course of business and the disposition of obsolete or
unnecessary tangible assets in a commercially reasonable manner.
Section 7.4 Acquisitions. Acquire (including, without limitation, by
merger, consolidation, acquisition of stock or assets, or otherwise) any
interest in any Person.
Section 7.5 Articles and Bylaws. Amend, restate, supplement, replace,
or otherwise modify the Articles of Incorporation or Bylaws of the Borrower or
any of its Subsidiaries.
Section 7.6 Capital Stock. Issue, sell, grant, or authorize the
issuance, sale, or grant of any shares of Capital Stock of the Borrower of any
class, or any options, warrants, convertible securities, or other rights of any
kind to acquire any shares of the Capital Stock of the Borrower,
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or any other ownership interest of the Borrower other than pursuant to Employee
Stock Options/Plans.
Section 7.7 Dividends. Declare or pay dividends or make any other
distribution to any of its shareholders in their capacities as such, other than
distributions required by Section C.3 of Article III of the Borrower's Articles
of Incorporation in connection with mandatory redemptions of shares of Series A
Preferred Stock.
Section 7.8 Transactions with Affiliates. Directly or indirectly (a)
make any loan, advance, extension of credit, or capital contribution to any of
its Affiliates, other than (i) investments in Accredited Home Capital, Inc. to
the extent required to comply with Section 7.1(a) of the Cargill Facility
Agreement and (ii) investments totaling not more than Three Hundred Fifty
Thousand Dollars ($350,000), in the aggregate, in Vicon Financial Services, Inc.
and in one or more Vicon Affiliates, (b) transfer, sell, pledge, assign, or
otherwise dispose of any of its assets to or on behalf of such Affiliates, (c)
merge or consolidate with or purchase or acquire assets from such Affiliates
other than purchases of mortgage loans in the ordinary course of business from
Vicon Affiliates, or (d) transfer, pledge, or assign or otherwise pay management
fees or other amounts to or on behalf of such Affiliates.
Section 7.9 Compensation, Severance, Bonuses. Directly or indirectly (a)
adopt any severance benefit plan, grant any severance or termination pay to, or
enter into any agreement providing for any severance payment, change of control
payment, retention bonus payment, or similar payment arrangement with any
officer, director, employee, or principal shareholder of the Borrower or any of
its Subsidiaries in an amount in excess of Fifty Thousand Dollars ($50,000) for
any individual officer, director, employee, or principal shareholder or in an
aggregate amount (in any fiscal year) in excess of Two Hundred Fifty Thousand
Dollars ($250,000) for all officers, directors, employees, and principal
shareholders, (b) enter into any employment or consulting agreement or otherwise
agree to provide total compensation (including base salary, bonus, and all
discretionary expense items) with or to any officer, director, employee, or
principal shareholder of the Borrower or any of its Subsidiaries, or with or to
any other individual, (i) having a term in excess of one (1) year or (ii)
providing for annual compensation (after excluding performance-based commissions
or the equivalent) to any such officer, director, employee, principal
shareholder, or other individual in excess of Two Hundred Fifty Thousand Dollars
($250,000), (c) pay bonuses in any calendar year, including, without limitation,
bonuses that might otherwise be authorized by the Senior Management Incentive
Plan, (i) to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ or ▇▇▇ ▇. ▇▇▇▇▇▇▇ in excess of fifty percent
(50.00%) of their then current respective base salaries or (ii) to ▇▇▇▇▇▇ ▇.
▇▇▇▇▇ in excess of one hundred percent (100.00%) of his then current base
salary, (d) establish, adopt, or enter into any bonus, profit sharing, thrift,
compensation, pension, retirement, deferred compensation, or other plan, trust,
or fund for the benefit of any director, officer, or class of employees of the
Borrower or any of its Subsidiaries, or amend, restate, supplement, replace, or
otherwise modify any such plan, trust, or fund, including, without limitation,
the Existing Employee Stock Options/Plans, except that the Borrower may amend or
otherwise modify the performance-based commissions payable under any
compensation plan in effect on the Closing Date provided that such amendments or
modifications do not, individually or in the aggregate, represent a material
increase in the commissions payable under such compensation plan on the Closing
Date, (e) increase by more than ten percent (10.00%) annually
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the current compensation levels (including base salary and any discretionary
expense items) of (i) any Senior Manager or (ii) any employee of the Borrower or
any of its Subsidiaries whose annual base salary exceeds One Hundred Thousand
Dollars ($100,000), (f) adopt any Senior Management Incentive Plan or amend,
restate, supplement, replace, or otherwise modify any Senior Management
Incentive Plan that has been previously reviewed and approved in writing by the
Lender, or (g) adopt any bonus plan other than the Senior Management Incentive
Plan with respect to senior executives of the Borrower, including, without
limitation, the Senior Managers.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
Section 8.1 Events of Default. The occurrence of any of the following
conditions or events shall be an event of default ("Event of Default"):
(a) Failure of the Borrower to pay the principal of the Loan when
due, whether at stated maturity, by acceleration, or otherwise; or
failure to pay any installment of interest on the Loan or any other
amount due under this Agreement within ten (10) days after the due date;
or failure to pay, within any applicable grace period, the principal or
interest on any other indebtedness of the Borrower due the Lender,
including, without limitation, indebtedness to the Lender under the
Warehouse Credit and Term Loan Agreement; or
(b) Failure of the Borrower or any of its Subsidiaries to pay, or
any default in the payment of any principal or interest on, any other
indebtedness or in the payment of any contingent obligation within any
period of grace provided; or breach or default with respect to any other
material term of any other indebtedness or of any loan agreement,
mortgage, indenture, or other agreement relating thereto, if the effect
of such failure, default, or breach is to cause, or to permit the holder
or holders thereof (or a trustee on behalf of such holder or holders) to
cause, indebtedness of the Borrower or its Subsidiaries in the aggregate
amount of Seventy-Five Thousand Dollars ($75,000) or more to become or be
declared due prior to its stated maturity (upon the giving or receiving
of notice, lapse of time, both, or otherwise); or
(c) Failure of the Borrower to perform or comply with any term or
condition applicable to them contained in Sections 6.3 or 6.12 or Article
7 of the Warehouse Credit and Term Loan Agreement (which are incorporated
herein by reference) or in any Section of Article VII of this Agreement;
or
(d) Any of the Borrower's representations or warranties made or
deemed made herein or in any other Convertible Debt Document or
Transaction Document, or in any statement or certificate at any time
given by the Borrower in writing pursuant hereto or thereto shall be
inaccurate or incomplete in any material respect on the date as of which
made or deemed made; or
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(e) The Borrower shall default in the performance of or compliance with
any term contained in this Agreement or any other Convertible Debt Document or
Transaction Document other than those referred to above in Sections 8.1(a),
8.1(c), or 8.1(d) hereof, and such default shall not have been remedied or
waived within thirty (30) days after the earliest of: (i) receipt by the
Borrower of notice from the Lender of such default; (ii) receipt by the Lender
of notice from the Borrower of such default; or (iii) the date the Borrower
should have notified the Lender of such default pursuant to Section 6.6 of this
Agreement or Section 6.6(c) of the Warehouse Credit and Term Loan Agreement (as
incorporated herein); or
(f) (i) A court having jurisdiction shall enter a decree or order for
relief in respect of the Borrower or any Subsidiary of the Borrower in an
involuntary case under any applicable bankruptcy, insolvency, or other similar
law in respect of the Borrower or any Subsidiary of the Borrower now or
hereafter in effect, which decree or order is not stayed; or a filing of a
voluntary case under any applicable bankruptcy, insolvency, or other similar law
in respect of the Borrower or any Subsidiary of the Borrower has occurred; or
any other similar relief shall be granted under any applicable federal or state
law; or (ii) the filing of an involuntary case in respect of the Borrower or any
Subsidiary of the Borrower under any applicable bankruptcy, insolvency, or other
similar law; a decree or order of a court having jurisdiction for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian, or
other officer having similar powers over the Borrower or any Subsidiary of the
Borrower, or over all or a substantial part of their respective property, shall
have been entered; or the involuntary appointment of an interim receiver,
trustee, or other custodian of the Borrower or any Subsidiary of the Borrower
for all or a substantial part of their respective property; or the issuance of a
warrant of attachment, execution, or similar process against any substantial
part of the property of the Borrower or any Subsidiary of the Borrower, and the
continuance of any such events in this Subsection (ii) for sixty (60) days
unless dismissed, bonded off, or discharged; or
(g) The Borrower or any Subsidiary of the Borrower shall have an order
for relief entered with respect to it or commence a voluntary case under any
applicable bankruptcy, insolvency, or other similar law now or hereafter in
effect, or shall consent to the entry of an order for relief in an involuntary
case under any such law, or shall consent to the appointment of or taking
possession by a receiver, trustee, or other custodian for all or a substantial
part of its property; the making by the Borrower or any Subsidiary of the
Borrower of any assignment for the benefit of creditors; or the inability or
failure of the Borrower or any Subsidiary of the Borrower, or the admission by
the Borrower or any Subsidiary of the Borrower in writing of its inability, to
pay its debts as such debts become due; or
(h) One or more money judgments, writs, or warrants of attachment, or
similar process, involving an amount in excess of Seventy-Five Thousand Dollars
($75,000) shall be entered or filed against the Borrower or any of its
Subsidiaries or any of their respective assets and shall remain undischarged,
unvacated, unbonded, or unstayed for a period of thirty (30) days or in any
event later than five (5) days prior to the date of any proposed sale
thereunder; or
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(i) Any order, judgment, or decree shall be entered against the
Borrower or any of its Subsidiaries decreeing the dissolution or split up
of the Borrower or such Subsidiary and such order shall remain
undischarged or unstayed for a period in excess of twenty (20) days; or
(j) The Borrower shall purport to disavow its obligations
hereunder or under any other Transaction Document, or shall contest the
validity or enforceability hereof or thereof; or
(k) Prior to the conversion of the Debenture, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
shall cease to be the Chairman and Chief Executive Officer, or ▇▇▇ ▇.
▇▇▇▇▇▇▇ shall cease to be the Executive Vice President, or ▇▇▇▇▇▇ ▇.
▇▇▇▇▇ shall cease to be the President, in each case of the Borrower; or
(1) An "Event of Default" under the Warehouse Credit and Term Loan
Agreement or any other Transaction Document shall occur; or
(m) There shall be a material adverse change in the financial
condition, business, or operations of the Borrower or any Subsidiary of
the Borrower.
Section 8.2 Remedies. If (a) any Event of Default described in Sections
8.1(f) or (g) hereof shall occur with respect to the Borrower, the Debenture
and all other Obligations of the Borrower to the Lender under this Agreement
shall automatically become immediately due and payable, or (b) any other Event
of Default shall occur and be continuing, then the Lender may declare the
Debenture and all other Obligations of the Borrower to the Lender under this
Agreement to be forthwith due and payable, whereupon the same shall immediately
become due and payable, in each case without presentment, demand, protest, or
other notice of any kind, all of which are hereby expressly waived, anything in
this Agreement or in the Debenture to the contrary notwithstanding. Upon the
occurrence of any of the events described in clauses (a) or (b) of the preceding
sentence, the Lender may exercise all rights and remedies under this Agreement,
the Debenture, and any related agreements and under any applicable law, and may
exercise the remedies set forth in Sections 8.2(c) through 8.2(j) of the
Warehouse Credit and Term Loan Agreement, which Sections are hereby incorporated
by this reference as if fully set forth herein. Upon the occurrence of any Event
of Default other than those described in Sections 8.1(f) or (g) hereof, the
Lender may, by notice to the Borrower, terminate its commitment to make further
Debenture Advances.
Section 8.3 Offset. In addition to the remedies set forth in Section 8.2
hereof, the Borrower hereby irrevocably authorizes the Lender to set off all
sums due by the Borrower to the Lender against all deposits and credits of the
Borrower with, and any and all claims of the Borrower against, the Lender.
Section 8.4 No Limitation. The remedies set forth in Sections 8.2 and 8.3
hereof shall not be construed as exclusive, and the Lender shall have, in
addition to such remedies, the other rights and remedies provided in this
Agreement, the other Convertible Debt Documents, the other Transaction
Documents, and under applicable law.
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ARTICLE IX
SECURITY INTEREST
Section 9.1 Grant of Security Interest. As security for the payment of
the Loan and the Debenture and for the performance of all of the Borrower's
Obligations, the Borrower hereby assigns and transfers to the Lender all right,
title, and interest in and to, and grants a security interest to the Lender in,
the Collateral, the Escrow Account, and all Investment Property held therein.
Section 9.2 Incorporation By Reference of Provisions Regarding the
Collateral. The provisions of Sections 3.2 through 3.6 of the Warehouse Credit
and Term Loan Agreement are hereby incorporated by reference as if fully set
forth herein.
ARTICLE X
MISCELLANEOUS
Section 10.1 Modifications. No amendment, modification, or waiver of
any provision of this Agreement or consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Lender, and then such amendment, modification, waiver, or
consent shall be effective only in the specific instance and for the purpose for
which given.
Section 10.2 Reimbursements. The Borrower shall pay all out-of-pocket
costs and expenses of the Lender, including, without limitation, reasonable fees
and disbursements of counsel (including allocated costs of internal counsel), in
connection with the due diligence investigation, approval, negotiation,
preparation, execution, delivery, amendment, enforcement, and administration of
this Agreement, the Debenture, and the other Convertible Debt Documents, the
making and repayment of the Debenture Advances, and the payment of interest
thereon, the conversion of the Debenture as provided for in Section 3.1 hereof
and in the Debenture, and the exercise by the Lender of its rights with respect
to the Conversion Shares provided for herein or in any other Convertible Debt
Document.
Section 10.3 Indemnity. The Borrower shall (a) indemnify, pay, and hold
harmless the Lender and any holder of the Debenture from and against any and all
present and future stamp, documentary, and other similar taxes with respect to
the foregoing matters and save the Lender and the holder or holders of the
Debenture harmless from and against any and all liabilities with respect to or
resulting from any delay or omission to pay such taxes; (b) indemnify, pay, and
hold harmless the Lender and any of its officers, directors, employees, or
agents and any subsequent holder of the Debenture (collectively called the
"Indemnitees") from and against any and all Indemnified Liabilities of any kind
or nature whatsoever (including without limitation, the reasonable fees and
disbursements of counsel of the Indemnitees (including allocated costs of
internal counsel) in connection with any investigative, administrative, or
judicial proceeding, whether or not such Indemnitees shall be designated a party
thereto) that may be imposed upon, incurred by, or asserted against such
Indemnitees in any manner relating to or arising out of this
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Agreement, the Debenture, or any other Convertible Debt Document or any of the
transactions contemplated hereby or thereby; provided, however, that the
Borrower shall have no obligation hereunder with respect to Indemnified
Liabilities arising from the gross negligence or willful misconduct of any such
Indemnitee; and (c) indemnify, pay, and hold harmless the Indemnitees from and
against any and all Indemnified Liabilities suffered or incurred by an
Indemnitee, whether or not involving a third-party claim, arising out of or
resulting from (i) any untrue representation of, or breach of warranty by, the
Borrower in any part of this Agreement or any other Convertible Debt Document;
(ii) any breach or nonfulfillment of any covenant, agreement, or undertaking of
the Borrower in any part of this Agreement or any other Convertible Debt
Document; or (iii) the operation of the business of the Borrower and its
Subsidiaries prior to the Covenant Termination Date. Notice of any claim for
indemnity hereunder must be given prior to the Liability Termination Date. To
the extent that the undertaking to indemnify, pay, and hold harmless as set
forth in the second preceding sentence may be unenforceable because it is
violative of any law or public policy, the Borrower shall contribute the maximum
portion that it is permitted to pay and satisfy under applicable law, to the
payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnitees or any of them. The agreement of the Borrower contained in this
Section 10.3 shall survive the expiration or termination of this Agreement and
the payment in full of the other Obligations. Attorneys' fees and disbursements
incurred in enforcing, or on appeal from, a judgment pursuant hereto shall be
recoverable separately from and in addition to any other amount included in such
judgment, and this clause is intended to be severable from the other provisions
of this Agreement and to survive and not be merged into such judgment.
Section 10.4 Waivers, Etc. No failure on the part of the Lender or any
holder of the Debenture to exercise and no delay in exercising any power or
right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any power or right preclude any other or further exercise
thereof or the exercise of any other power or right. The rights and remedies of
the Lender hereunder are cumulative and not exclusive of any right or remedy the
Lender otherwise has.
Section 10.5 Notices. Except when telephonic notice is expressly
authorized by this Agreement or any other Convertible Debt Document, any notice
or other communication to any party in connection with this Agreement or any
other Convertible Debt Document shall be in writing and shall be sent by manual
delivery, telegram, telex, facsimile transmission, overnight courier, or United
States mail (postage prepaid) addressed to such party at the address specified
on the signature page hereof, or at such other address as such party shall have
specified to the other party hereto in writing. All periods of notice shall be
measured from the date of delivery thereof if manually delivered, from the date
of sending thereof if sent by telegram, telex, or facsimile transmission, from
the first Business Day after the date of sending if sent by overnight courier,
or from four days after the date of mailing if mailed; provided, however, that
any notice to the Lender under Article II hereof shall be deemed to have been
given only when received by the Lender.
Section 10.6 Successors and Assigns; Disposition of the Loan. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that neither the Lender nor
the Borrower may assign its rights or delegate its
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obligations hereunder without the prior written consent of the other party;
provided, however, that the Lender may at any time sell, assign, transfer, grant
participations in, or otherwise dispose of any portion of the Loan to one or
more Affiliates. The Lender may disclose any information regarding the Borrower
in the Lender's possession to its Affiliates and, with the prior written consent
of the Borrower, to any other prospective buyer or participant.
Section 10.7 Confidentiality. The Borrower hereby agrees that it will
not, without the prior written consent of the Lender:
(a) Public Announcements. Make any public announcement with
respect to the transactions contemplated by this Agreement, the
Debenture, or any other Convertible Debt Document or Transaction Document
without the prior written consent of the Lender; provided, however, that
the Borrower may at any time make any announcements that are required by
applicable law so long as the Borrower upon learning of such requirement,
notifies the Lender of such requirement and discusses with the Lender in
good faith the exact proposed wording of such required announcement.
(b) Other Information. Divulge to any Person any information
about the Lender and its operations and affairs, or about this Agreement,
the Debenture, or any other Convertible Debt Document or Transaction
Document and the transactions contemplated hereby and thereby, or about
any other relationship between the Lender and the Borrower, or refer to
or otherwise use in any manner the names (or any variant of such names)
"Residential Funding Corporation," "RFC," "General Motors Acceptance
Corporation," "General Motors Corporation," "GMAC," "GMAC/RFC," "GM," or
"GMAC Mortgage Group," including, without limitation, in any oral or
written communications with third parties, advertising, printed material,
electronic medium, or other medium, except: (i) to the Existing Investors
in order to obtain their consent to the transactions contemplated by this
Agreement, the Debenture, and the other Convertible Debt Documents and
Transaction Documents; (ii) to the Borrower's officers, directors,
employees, attorneys and accountants; (iii) in connection with the
enforcement of rights hereunder and under the other Convertible Debt
Documents and Transaction Documents or otherwise in connection with
applicable litigation; and (iv) where required, the size and maturity of
the warehouse credit facilities provided to the Borrower under the
Warehouse Credit and Term Loan Agreement and the identity of the Lender
as a provider of warehouse financing thereunder, may be disclosed (A) to
third parties on applications to be approved as a seller of whole loans
to such third parties and on reference checks related thereto and (B) to
any regulatory authority having jurisdiction over the Borrower under
applicable law, rule, regulation, or judicial process.
Section 10.8 Governing Law and Construction. THE VALIDITY, CONSTRUCTION,
AND ENFORCEABILITY OF THIS AGREEMENT, THE DEBENTURE, AND THE OTHER CONVERTIBLE
DEBT DOCUMENTS SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA,
WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF.
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Section 10.9 Consent to Jurisdiction. AT THE OPTION OF THE LENDER, THIS
AGREEMENT, THE DEBENTURE, AND THE OTHER CONVERTIBLE DEBT DOCUMENTS MAY BE
ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE COURT SITTING IN MINNEAPOLIS OR
ST. ▇▇▇▇, MINNESOTA; AND THE BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF
ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT
CONVENIENT. IN THE EVENT THE BORROWER COMMENCES ANY ACTION IN ANOTHER
JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR
INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT, THE LENDER AT ITS
OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE
JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
Section 10.10 Waiver of Jury Trial. THE BORROWER AND THE LENDER EACH
HEREBY (a) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE
TRIABLE OF RIGHT BY A JURY, AND (b) WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO
THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY THE
BORROWER AND THE LENDER, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY
EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT OF A JURY TRIAL WOULD
OTHERWISE ACCRUE. THE LENDER AND THE BORROWER ARE EACH HEREBY AUTHORIZED AND
REQUESTED TO SUBMIT THIS AGREEMENT, THE DEBENTURE, AND THE OTHER CONVERTIBLE
DEBT DOCUMENTS TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE
PARTIES HERETO, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF THE FOREGOING WAIVER OF
THE RIGHT TO JURY TRIAL. FURTHER, THE BORROWER AND THE LENDER EACH HEREBY
CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF THE OTHER PARTY, INCLUDING THE
OTHER PARTY'S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO ANY OF ITS
REPRESENTATIVES OR AGENTS THAT THE OTHER PARTY WILL NOT SEEK TO ENFORCE THIS
WAIVER OF RIGHT TO JURY TRIAL PROVISION.
Section 10.11 Captions. The captions or headings herein and any table of
contents hereto are for convenience only and in no way define, limit, or
describe the scope or intent of any provision of this Agreement.
Section 10.12 Entire Agreement. This Agreement embodies the entire
agreement and understanding between the Borrower and the Lender with respect to
the subject matter hereof. This Agreement supersedes all prior agreements and
understandings relating to the subject matter hereof.
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Section 10.13 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
[Remainder of page left blank intentionally]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
ACCREDITED HOME LENDERS, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Title: Executive Vice President
---------------------------------
Address:
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ #▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇▇
Executive Vice President
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With copies of all notices to:
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ #▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman and Chief
Executive Officer
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
And to:
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ #▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
General Counsel
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
RESIDENTIAL FUNDING CORPORATION
By: ____________________________________
Name: __________________________________
Title: _________________________________
Address:
10 ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Managing Director
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
ACCREDITED HOME LENDERS, INC.
By: ________________________________
Name: ______________________________
Title: _____________________________
Address:
15030 Avenue of Science #l00
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇▇
Executive Vice President
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With copies of all notices to:
15030 Avenue of Science #l00
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman and Chief
Executive Officer
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
And to:
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ #▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
General Counsel
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
RESIDENTIAL FUNDING CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------
Title: MANAGING DIRECTOR
-----------------------------
Address:
10 ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Managing Director
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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EXHIBIT A
TO LOAN AND SECURITY AGREEMENT
(Convertible Debt)
THIS DEBENTURE AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND MAY NOT
BE OFFERED OR SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED, OR OTHERWISE DISPOSED OF
EXCEPT IN A TRANSACTION THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND FROM THE REGISTRATION AND QUALIFICATION REQUIREMENTS OF
APPLICABLE STATE SECURITIES LAWS, OR IN A TRANSACTION EFFECTED PURSUANT TO SUCH
REGISTRATION AND QUALIFICATION.
Accredited Home Lenders, Inc.
Floating-Rate Convertible Debenture
$3,000,000 March 17, 1999
(Date of Issue)
FOR VALUE RECEIVED, ACCREDITED HOME LENDERS, INC., a
California corporation (the "Borrower"), promises to pay to RESIDENTIAL FUNDING
CORPORATION, a corporation organized under the laws of Delaware, or its
registered assigns (the "Holder"), at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place designated at any time by
the Holder hereof, in lawful money of the United States of America and in
immediately available funds, the principal amount of Three Million Dollars
($3,000,000) or, if less, the unpaid aggregate principal amount of the amounts
advanced hereunder, together with interest on the unpaid balance accruing at the
rate specified herein on the Maturity Date, unless this Debenture is earlier
converted into the Conversion Shares as provided herein, upon presentation and
surrender of this Debenture, as set forth herein. This Debenture is the
Debenture referred to in, and issued under, the Loan and Security Agreement
(Convertible Debt) of even date herewith by and between the Borrower and the
Holder (the "Loan Agreement"). Capitalized terms used herein and not otherwise
defined have the meanings given them in the Loan Agreement.
Section 1. Maturity. The outstanding principal and all accrued and
unpaid interest shall be due and payable on the Maturity Date, unless this
Debenture is converted, in whole or in part, in the sole discretion of the
Holder, into the Conversion Shares (as that term is defined in Section 7
hereof) as provided in the Loan Agreement and Section 4 hereof, provided,
however, that monthly payments into the Escrow Account in respect of principal
hereunder may be required by the Holder pursuant to Section 2.6 of the Loan
Agreement if the Borrower does not satisfy certain Milestones set forth
therein.
A-1
Section 2. Payment of Principal and Interest. Except as required
by Section 2.6 of the Loan Agreement, no principal payment shall be due until
the Maturity Date. Interest shall accrue and be payable on the principal
balance, or so much thereof as may be outstanding from time to time, at the
applicable rate and times set forth in Section 2.4 of the Loan Agreement, until
the principal and interest hereof has been paid in full or until conversion of
this Debenture, whichever occurs first. Interest shall be computed on the basis
of a 360-day year and applied to the actual number of days elapsed in each
interest calculation period. The Borrower may not prepay the Debenture, in whole
or in part, prior to the Maturity Date; provided, however, that the Borrower
shall prepay the Debenture at the option of the Lender in accordance with
Section 2.6 of the Loan Agreement.
Section 3. Security. This Debenture is secured by a security
interest in the Collateral, Escrow Account, and Investment Property granted
under the Loan Agreement.
Section 4. Conversion Rights. The outstanding principal amount of
this Debenture may be converted (the "Conversion Option") by the Holder, in
whole or in part, at any time after the date of issue until and including the
Maturity Date, upon the following terms:
(a) Conversion of Principal. The principal amount of this
Debenture subject to conversion (the "Principal Conversion
Amount"), as set forth in the Conversion Notice and the
Confirmation of Conversion Exercise (as those terms are
hereinafter defined), shall be converted into up to 2,095,625
Conversion Shares (the "Initial Number") at a rate of one share of
Series B Common Stock for each $1.43 of principal being converted
(the "Initial Conversion Price"). The Initial Number and the
Initial Conversion Price are subject to adjustment in certain
events, as more fully set forth in Section 5 of this Debenture.
(b) Method of Exercise. To exercise the Conversion Option,
in whole or in part, the Holder shall provide to the Borrower a
conversion notice substantially in the form attached hereto as
Schedule ▇-▇ (a "Conversion Notice"), at any time prior to the
expiration of the Conversion Exercise Period, followed by delivery
of a Confirmation of Conversion Exercise (as hereinafter defined)
in the form attached hereto as Schedule B-2, which Confirmation of
Conversion Exercise shall be irrevocable. Within thirty (30)
calendar days after receipt of the Conversion Notice, the Borrower
shall deliver to the Holder an updated schedule of exceptions to
the Borrower's representations and warranties under the Loan
Agreement dated the date of delivery thereof to the Holder (the
"Updated Disclosure Schedule"), which shall constitute the then
current update to disclosures related to such representations and
warranties as of such date. In the event that the Borrower does
not deliver an Updated Disclosure Schedule to the Holder within
thirty (30) calendar days following receipt of the Conversion
Notice, then the initial Disclosure Schedule (together with any
interim updates thereto) shall be deemed to be the Updated
Disclosure Schedule for all purposes hereof. If, after reviewing
the Updated Disclosure Schedule and otherwise completing its due
diligence review, the Holder still desires to exercise the
Conversion Option, the Holder shall deliver to the Borrower a
written confirmation of exercise (a "Confirmation of Conversion
Exercise") within thirty (30) calendar days
A-2
after receipt by the Holder of the Updated Disclosure Schedule. If the
Holder delivers the Conversion Notice during the Conversion Exercise
Period, neither the Confirmation of Conversion Exercise nor the
surrender and conversion of the Debenture need occur within the
Conversion Exercise Period, but the Confirmation of Conversion Exercise
must be delivered and the Debenture surrendered within the applicable
time periods specified above. The Holder shall have no obligation to
exercise its option to convert this Debenture, in whole or in part. If
the Holder does not deliver a Conversion Notice during the Conversion
Exercise Period, the Conversion Option shall terminate at the
expiration of the Conversion Exercise Period. In addition, if the
Holder delivers a Conversion Notice during the Conversion Exercise
Period but does not deliver a Confirmation of Conversion Exercise
within the applicable time period set forth above, after the Borrower
has delivered (or has failed to deliver) the Updated Disclosure
Schedule, then the Conversion Option shall terminate either immediately
or at the expiration of the Conversion Exercise Period, whichever
occurs later.
(c) Surrender of Debenture; Issuance of Conversion Shares. This
Debenture shall be converted only when:
(i) The Holder has delivered the Confirmation of Conversion
Exercise to the Borrower; and
(ii) The Holder has surrendered the Debenture, accompanied by
proper assignment thereof to the Borrower or in blank for
transfer; and
(iii) The Holder pays to the Borrower an amount equal to the
Principal Conversion Amount less the principal balance of
this Debenture outstanding on the Conversion Date (the
"Additional Principal Amount").
The Series B Common Stock issuable on conversion shall be issued in the
name of the Holder appearing in the books and records of the Borrower
and shall be issued and delivered within two (2) Business Days after
the date of delivery of the Confirmation of Conversion Exercise, the
surrender of this Debenture by the Holder, and, if applicable, the
payment of the Additional Principal Amount (the "Conversion Date").
Such conversion shall be deemed to have been effected immediately prior
to the close of business on the Conversion Date, and subject to the
payment of the accrued interest due hereunder, all rights of the Holder
as a holder of a Debenture, to the extent of such conversion, shall
cease at such time and the Holder shall be treated for all purposes as
having become the holder of record from such time of the Conversion
Shares issued to the Holder in such conversion. Upon delivery of such
Conversion Shares, this Debenture, or the portion hereof so converted,
shall be deemed to have been satisfied and discharged, and the
Conversion Shares into which this Debenture shall be so converted shall
be fully paid and nonassessable. In the event this Debenture has not
been converted in full, the Borrower shall issue and deliver to the
A-3
Holder a new Debenture identical to the one surrendered, except that it shall
be in the correct principal amount after the partial conversion.
(d) Accrued Interest. Accrued but unpaid interest to the date of
conversion on the Principal Conversion Amount shall not be converted but shall
be paid in full in cash to the Holder within ten (10) Business Days of the
Conversion Date.
(e) Reservation of Common Stock. The Borrower covenants that it will at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock such number of shares of Series B Common Stock as are necessary
to satisfy the conversion of this Debenture into the Conversion Shares and such
number of shares of Series A Common Stock as are necessary to satisfy the
conversion of the Series B Common Stock into shares of Series A Common Stock.
(f) Fractional Shares. No fractional shares of Series B Common Stock
shall be issued upon conversion of this Debenture. The Borrower shall pay to the
Holder the principal amount representing such fractional interest, at the
Conversion Date and following surrender of this Debenture.
Section 5. Anti-Dilution Provisions.
(a) Reorganization. Reclassification or Recapitalization of the
Company. In case of (i) a capital reorganization, reclassification, or
recapitalization of the Borrower's Capital Stock (other than in the cases
referred to in Section 5(c) hereof), (ii) the Borrower's consolidation or
merger with or into another corporation in which the Borrower is not the
surviving entity, or a reverse triangular merger in which the Borrower is the
surviving entity but the shares of the Borrower's Capital Stock outstanding
immediately prior to the merger are converted, by virtue of the merger, into
other property, whether in the form of securities, cash, or otherwise, or (iii)
the sale or transfer of the Borrower's property as an entirety or substantially
as an entirety, then, as part of such reorganization, reclassification,
recapitalization, merger, consolidation, sale, or transfer, appropriate
provision (in form and substance satisfactory to the Holder) shall be made so
that there shall thereafter be deliverable upon the conversion of this
Debenture or any portion thereof (in lieu of or in addition to the number of
shares of Series B Common Stock theretofore deliverable, as appropriate), and
without payment of any additional consideration, the number of shares of stock
or other securities or property to which the holder of the number of shares of
Series B Common Stock which would otherwise have been deliverable upon the
conversion of this Debenture or any portion thereof at the time of such
reorganization, reclassification, recapitalization, consolidation, merger,
sale, or transfer would have been entitled to receive in such reorganization,
reclassification, recapitalization, consolidation, merger, sale or transfer.
This Section 5(a) shall apply to successive reorganizations, reclassifications,
recapitalizations, consolidations, mergers, sales, and transfers and to the
stock or securities of any other corporation that are at the time receivable
upon the conversion of this Debenture.
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(b) Splits and Combinations. If the Borrower at any time subdivides any of
its outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision shall be
proportionately reduced and, conversely, if the outstanding shares of Common
Stock are combined into a smaller number of shares, the Conversion Price in
effect immediately prior to such combination shall be proportionately increased.
(c) Reclassifications. If the Borrower changes any of the securities as to
which conversion rights under this Debenture exist into the same or a different
number of securities of any other class or classes, this Debenture shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the conversion rights under this Debenture
immediately prior to such reclassification or other change and the Conversion
Price therefor shall be appropriately adjusted.
(d) Dividends and Distributions. If the Borrower declares a dividend or
other distribution on the Common Stock or if a dividend or other distribution on
the Common Stock occurs pursuant to the Articles of Incorporation (other than a
cash dividend or distribution), then, as part of such dividend or distribution,
appropriate provision shall be made so that there shall thereafter be
deliverable upon the conversion of this Debenture or any portion thereof, in
addition to the number of shares of Series B Common Stock receivable thereupon
and without payment of any additional consideration, the amount of the dividend
or other distribution to which the Holder would have been entitled to receive
had the conversion occurred immediately prior to the record date for such
dividend or distribution.
(e) Liquidation; Dissolution. If the Borrower shall dissolve, liquidate, or
wind up its affairs, the Holder shall have the right, but not the obligation, to
convert this Debenture in whole or in part effective as of the date of such
dissolution, liquidation, or winding up. If any such dissolution, liquidation,
or winding up results in any cash distribution to the Holder in excess of any
Additional Principal Amount payable hereunder, then the Holder may, at its
option, convert this Debenture without making payment of such Additional
Principal Amount and, in such case, the Borrower shall, upon distribution to the
Holder, consider such Additional Principal Amount to have been paid in full, and
in making such settlement to the Holder, shall deduct an amount equal to such
Additional Principal Amount from the amount payable to the Holder.
(f) Adjustment of Conversion Price Upon Issuance of Additional Stock. The
Conversion Price shall be subject to adjustment from time to time as follows:
(i) Upon each issuance by the Borrower of any Additional Stock (as
such term is defined in Section 7 hereof) after the Closing Date,
without consideration or for a consideration per share less than the
Conversion Price in effect immediately prior to the issuance of such
Additional Stock, the Conversion Price in effect immediately prior to
each such
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issuance shall forthwith (except as otherwise provided in this
Section 5) be adjusted to a price determined by multiplying the
Conversion Price by a fraction, the numerator of which shall be
the number of shares of Common Stock Equivalents Outstanding
immediately prior to such issuance plus the number of shares of
Series B Common Stock which the aggregate consideration received
by the Borrower for the Additional Stock so issued would
purchase at such Conversion Price and the denominator of which
shall be the number of shares of Common Stock Equivalents
Outstanding immediately prior to such issuance plus the number
of shares of such Additional Stock issued in such issuance.
(ii) No adjustment of the Conversion Price shall be made in an amount
less than one cent ($0.01) per share, provided that any
adjustments that are not required to be made by reason of this
sentence shall be carried forward and shall be either taken into
account in any subsequent adjustment made prior to three (3)
years from the date of the event giving rise to the adjustment
being carried forward, or shall be made at the end of three (3)
years from the date of the event giving rise to the adjustment
being carried forward. Except to the limited extent provided for
in Sections 5(f)(vi)(C) and (D) hereof, no adjustment of the
Conversion Price pursuant to this Section 5(f) shall have the
effect of increasing the Conversion Price above the Conversion
Price in effect immediately prior to such adjustment.
(iii) In the case of issuance by the Borrower of Additional Stock for
cash, the consideration shall be deemed to be the net amount
received by the Borrower therefor.
(iv) In the case of issuance by the Borrower of Additional Stock for
a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
value of such consideration, except where such consideration
consists of securities, in which case the amount of
consideration received by the Borrower shall be the market price
thereof as of the date of receipt. The fair value of any
consideration other than cash or securities shall be determined
by the Board of Directors of the Borrower in good faith, and
notice thereof shall be promptly provided to the Holder. If the
Holder is dissatisfied with such valuation, such fair value
shall be determined by an appraiser jointly selected by the
Borrower and the Holder. The determination of such appraiser
shall be final and binding on the Borrower and the Holder, and
the fees and expenses of such appraiser shall be paid by the
Borrower.
(v) In case any Options are issued in connection with the issue or
sale of other securities of the Borrower, together comprising
one integrated transaction in which no specific consideration is
allocated to such
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Options by the parties thereto, the Options shall be deemed to
have been issued without consideration.
(vi) In the case of the issuance (whether before, on, or after the
Closing Date) of Options or Convertible Securities, the following
provisions shall apply for all purposes of this Section 5(f):
(A) The aggregate maximum number of shares of Additional Stock
deliverable upon exercise of such Options shall be deemed to
have been issued at the time such Options were issued and for
a consideration equal to the consideration (determined in the
manner provided in Sections 5(f)(iii), (iv), and (v) hereof),
if any, received by the Borrower upon issuance of such
Options plus the minimum exercise price provided in such
Options (without taking into account potential anti-dilution
adjustments) for the Additional Stock covered thereby.
(B) The aggregate maximum number of shares of Additional Stock
deliverable upon conversion of Convertible Securities shall
be deemed to have been issued at the time such Convertible
Securities were issued and for a consideration equal to the
consideration, if any, received by the Borrower for any such
Convertible Securities (excluding any cash received on
account of accrued interest or accrued dividends), plus the
minimum additional consideration, if any, to be received by
the Borrower (without taking into account potential
anti-dilution adjustments) upon the conversion of such
Convertible Securities (the consideration in each case to be
determined in the manner provided in Sections 5(f)(iii),
(iv), and (v) hereof).
(C) In the event of any change in the number of shares of
Additional Stock deliverable upon exercise or conversion as
applicable or in the consideration payable to the Borrower
upon exercise of such Options or upon conversion of such
Convertible Securities, including, without limitation, a
change resulting from anti-dilution provisions thereof, the
Conversion Price, to the extent in any way affected by or
computed using such Options or Convertible Securities, shall
be recomputed to reflect such change, but no further
adjustment shall be made in conjunction with the actual
issuance of Additional Stock or any payment of such
consideration upon the exercise of any such Options or the
conversion of such Convertible Securities.
(D) Upon the expiration or termination of any such Options or the
expiration or termination of any conversion rights related to
such Convertible Securities, the Conversion Price, to the
extent in any
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way affected by or computed using such Options or Convertible
Securities, shall be recomputed to reflect the issuance of only
the number of shares of Additional Stock (and Convertible
Securities which remain in effect) actually issued upon the
exercise of such Options or upon the conversion of such
Convertible Securities.
(E) The number of shares of Additional Stock deemed issued and
the consideration deemed paid therefor pursuant to Sections
5(f)(vi)(A) and (B) hereof shall be appropriately adjusted to
reflect any change, termination or expiration of the type
described in either Sections 5(f)(vi)(C) or (D) hereof.
(g) Adjustment of Initial Number of Conversion Shares. Upon each
adjustment of the Conversion Price pursuant to Section 5(f) hereof, the Initial
Number of shares of Series B Common Stock issuable upon conversion hereof shall
equal the number of shares determined by dividing (i) the aggregate Conversion
Price for all Conversion Shares issuable upon conversion of this Debenture
immediately prior to such adjustment by (ii) the Conversion Price per share in
effect immediately after such adjustment.
(h) Dilutive Events. Notwithstanding anything else contained herein to
the contrary, if any event occurs as to which more than one anti-dilution
provision of this Section 5 would apply, then the parties agree that the
operation of the provisions of this Section 5 shall be limited to the
preservation, without dilution, of the purchase rights represented by this
Debenture prior to such dilutive event and in no event shall the Holder be put
in a more advantageous position as a result of the operation of the provisions
of this Section 5 than the Holder's position prior to any such dilutive event.
(i) No Impairment. The Borrower shall not, by amendment of the Articles
of Incorporation or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issue, or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder or under the Loan
Agreement by the Borrower, but shall at all times in good faith assist in the
carrying out of all the provisions of this Section 5 and in the taking of all
such action as may be necessary or appropriate in order to protect the rights
of the Holder against impairment.
(j) Application. Except as otherwise provided herein, all sections of
this Section 5 are intended to operate independently of one another. If an
event occurs that requires the application of more than one section, all
applicable sections shall be given independent effect.
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Section 6. Certificates and Notices.
(a) Adjustment Certificates. Upon any adjustment of the Conversion
Price and/or the number of shares of Series B Common Stock issuable upon
conversion of this Debenture, a certificate, signed by (i) the Borrower's
Chief Executive Officer, President, Executive Vice President, or Chief
Financial Officer, or (ii) any independent firm of certified public
accountants of recognized national standing the Borrower selects at its
own expense, setting forth in reasonable detail the events requiring the
adjustment and the method by which such adjustment was calculated, shall
be mailed to the Holder and shall specify the adjusted Conversion Price
and the number of shares of Series B Common Stock issuable upon
conversion of the Debenture after giving effect to the adjustment.
(b) Extraordinary Corporate Events. If the Borrower, after the
date hereof, proposes to effect (i) any transaction described in Section
5(a) or (c) hereof, (ii) a liquidation, dissolution or winding up of the
Borrower described in Section 5(e) hereof, or (iii) any payment of a
dividend, distribution, split, or combination with respect to Common
Stock, then, in each such case, the Borrower shall mail to the Holder a
notice describing such proposed action and specifying the date on which
the Borrower's books shall close, or a record shall be taken, for
determining the holders of Common Stock entitled to participate in such
action, or the date on which such reorganization, reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution, or
winding up shall take place or commence, as the case may be, and the date
as of which it is expected that holders of Common Stock of record shall
be entitled to receive securities and/or other property deliverable upon
such action, if any such date is to be fixed. Such notice shall be mailed
to the Holder at least thirty (30) days prior to the record date for such
action in the case of any action described in clause (i) or clause (iii)
above, and in the case of any action described in clause (ii) above, at
least thirty (30) days prior to the date on which the action described is
to take place and at least thirty (30) days prior to the record date for
determining holders of Common Stock entitled to receive securities and/or
other property in connection with such action.
Section 7. Additional Definitions. For purposes of this Debenture, the
following terms shall have the following respective meanings:
"Additional Stock" shall mean any shares of Common Stock issued
(or deemed to have been issued pursuant to Section 5(f) hereof) by the
Borrower after the Closing Date other than (i) shares of Common Stock
issuable or issued pursuant to the conversion of shares of the Series A
Preferred Stock outstanding as of the Closing Date, (ii) shares of Common
Stock issuable or issued pursuant to the ▇▇▇▇▇▇ Warrant or the Cargill
Warrant (as those terms are defined in this Section 7), (iii) shares of
Common Stock or Options to acquire shares of Common Stock, issued or
issuable to officers, employees, consultants, or directors of the
Borrower pursuant to Existing Stock Option/Plans, but excluding any such
shares or Options issued or issuable to
A-9
the Senior Managers or to the directors elected by the holders of the Borrower's
outstanding shares of Series A Preferred Stock, if any.
"Cargill Warrant" means that certain Amended and Restated Cargill Warrant
Agreement dated as of January 30, 1998, issued by the Borrower to Cargill,
exercisable for up to One Hundred Fifty Thousand (150,000) shares of Common
Stock, subject to adjustment in accordance with the terms of such agreement.
"Conversion Price" means the Initial Conversion Price per share of Series
B Common Stock, as such price may be adjusted pursuant to pursuant to the terms
of Section 5(f) hereof.
"Conversion Shares" means the Initial Number of shares of Series B Common
Stock issuable upon conversion of this Debenture, as such number may be adjusted
pursuant to the terms of Section 5(g) hereof; provided, that if under the terms
hereof there shall be a change such that the securities issuable under the
Debenture shall be issued by a Person other than the Borrower or there shall be
a change in the type or class of securities issuable under the Debenture, then
the term shall mean the securities issuable upon conversion of the Debenture and
the exercise of the rights granted hereunder.
"Fair Market Value" means:
(i) If shares of Common Stock are being sold pursuant to a
Registration and Fair Market Value is being determined as of the closing
of the public offering, the "price to public" specified for such shares
in the final prospectus for such public offering;
(ii) If (i) is not applicable and if shares of Common Stock are
then listed or admitted to trading on any national securities exchange or
traded on any national market system, the average of the daily closing
prices for the thirty (30) trading days before such date, excluding any
trades that are not bona fide, arm's length transactions. The closing
price for each day shall be the last sale price on such date or, if no
such sale takes place on such date, the average of the closing bid and
asked prices on such date, in each case as officially reported on the
principal national securities exchange or national market system on which
such shares are then listed, admitted to trading, or traded. If both (i)
and (ii) are applicable, "Fair Market Value" shall be the higher of that
determined by (ii) and (i);
(iii) If neither (i) nor (ii) is applicable, the average of the
reported closing bid and asked prices thereof for the thirty (30) trading
days before such date in the over-the-counter market as shown by the
National Association of Securities Dealers automated quotation system or,
if such shares are not then quoted in such system, as published by the
National Quotation Bureau, Incorporated or any similar successor
organization, and in either case as reported by any member firm of the
New York Stock Exchange selected by
A-10
the Holder (provided, however, that the selected member firm may
not be an affiliate of the Holder). If both (i) and (iii) are
applicable, "Fair Market Value" shall be the higher of that
determined by (i) and (iii); or
(iv) If no shares of Common Stock are then listed or
admitted to trading on any national exchange or traded on any
national market system, if no closing bid and asked prices thereof
are then so quoted or published in the over-the-counter market and
if no such shares are being offered to the public pursuant to a
Registration, the Fair Market Value of a share of Common Stock
shall be determined as follows:
(A) The Borrower and the Holder shall each appoint a
representative and such representatives shall use their
best efforts to agree on the Fair Market Value within ten
(10) Business Days.
(B) If such representatives are unable to agree on
the Fair Market Value within ten (10) Business Days, the
Borrower and the Holder shall, on the last day of such ten
(10) Business Day period, appoint a qualified appraiser
experienced in appraising businesses similar to the
business of the Borrower. If the Borrower and Holder do not
agree on an appraiser, each of them shall instruct their
respective appraiser to mutually select a third appraiser
experienced in appraising businesses similar to the
business of the Borrower. This third appraiser shall be
jointly engaged by the Borrower, on the one hand, and the
Holder, on the other hand, to appraise the fair value of
the Borrower on a controlling interest basis, and shall be
instructed to complete its appraisal within thirty (30)
days after its appointment. In such case, the fair value
estimate of such appraiser shall be the Fair Market Value.
Once the Fair Market Value has been determined, such
appraiser shall deliver the results to the Borrower and the
Holder.
(D) The appraisal shall be conducted in accordance
with the Uniform Standards of Professional Appraisal
Practice in effect as of the effective date of the
appraisal as promulgated by the Appraisal Standards Board
of the Appraisal Foundation.
(E) The standard of value shall be the fair value of
the Borrower as a going concern.
(F) The Borrower shall make available all relevant
information that may be reasonably requested by the
appraiser, including, without limitation, any and all
forecasts, other appraisals, valuation analyses, market
analyses, and other information that may reflect
expectations regarding the future earnings of the Borrower.
The Holder shall make available all relevant information it
possesses as such information relates specifically to the
Borrower.
A-11
(G) The appraiser shall consider all
appropriate valuation methods and procedures,
including, without limitation, the following three
approaches to value:
(1) The income approach based on the
estimated future earnings of the Borrower;
(2) The market approach based on market
transactions involving public or private
guideline companies engaged in businesses in
which the Borrower may be engaged as of the
effective date of the appraisal; and
(3) The asset based "cost approach"
based on the replacement cost of the
Borrower's assets less its liabilities valued
at market, including the consideration of
tangible and intangible assets such as
goodwill.
(H) The appraiser shall consider and reconcile
the indications of value resulting from the various
approaches to arrive at the Fair Market Value.
"▇▇▇▇▇▇ Warrant" means that certain Common Stock Purchase Warrant
dated October 1, 1997, issued by the Borrower to ▇▇▇▇▇▇, exercisable for
Three Hundred Sixty-Three Thousand Eight Hundred Nineteen (363,819)
shares of Common Stock, subject to adjustment in accordance with the
terms of such agreement.
Section 8. Purchase Rights. If at any time the Borrower grants, issues,
or sells any Options, Convertible Securities, or rights to purchase stock,
warrants, securities, or other property pro rata to the record holders of any
class of Common Stock (the "Purchase Rights"), the Holder shall be entitled in
each case to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights that the Holder could have acquired if the Holder had
held the number of shares of Series B Common Stock acquirable upon the complete
conversion of this Debenture immediately before the date on which a record is
taken for the grant, issuance, or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue, or sale of such Purchase Rights.
Section 9. Restrictions on Transferability. This Debenture and the
Conversion Shares (unless registered) shall be "restricted securities" as
defined in Rule 144(a)(3) of the Securities Act. This Debenture and the
Conversion Shares (unless registered) may be transferred only in accordance with
(a) applicable law, and only on the same basis as a restricted security would be
transferable thereunder, (b) any transfer restrictions applicable to shares of
the Capital Stock generally, (c) the conditions set forth in this Section 9, and
(d) with respect to any transfer of the Debenture, the conditions and
limitations set forth in Section 12(c). The Holder, by acceptance hereof, agrees
to give written notice to the Borrower at least ten (10) days before
transferring this Debenture or the Conversion Shares (unless registered), of the
Holder's intent to do so, describing briefly the manner of the proposed
transfer. Promptly upon receiving such written notice, the Borrower shall
present copies thereof to counsel for the Borrower. If, in the
A-12
opinion of counsel satisfactory in form and substance to the Borrower, the
proposed transfer or conversion may be effected without violation of the
applicable federal and state securities laws, the Holder shall be entitled to
transfer this Debenture or the Conversion Shares (unless registered) in the
manner contemplated in the above-referenced notice to the Borrower; provided,
that an appropriate legend may be endorsed on this Debenture or the Conversion
Shares (unless registered) respecting restrictions on transfer thereof necessary
or advisable in the opinion of counsel and satisfactory in form and substance to
the Borrower to prevent further transfers that would be in violation of the
securities laws or adversely affect the exemptions relied upon by the Borrower.
Upon transfer of this Debenture, the transferee, by acceptance of this
Debenture, agrees to be bound by the provisions, terms, conditions, and
limitations of this Debenture and the Loan Agreement. If (a) no opinion of
counsel referred to in this Section 9 has been provided to the Borrower, or (b)
in the opinion of such counsel the proposed transfer, conversion, or disposition
of this Debenture or the Conversion Shares (unless registered) described in the
Holder's written notice given pursuant to this Section 9 may not be effected
without registration or without adversely affecting the exemptions relied upon
by the Borrower or without violating the terms of this Section 9, the Holder
will restrict the transfer, conversion, or disposition of this Debenture or the
Conversion Shares (unless registered) accordingly.
Section 10. Replacement of Debenture. Upon receipt of evidence
satisfactory to the Borrower of the loss, theft, destruction, or mutilation of
this Debenture and in the case of any such loss, theft, or destruction, upon
delivery of an undertaking of indemnity satisfactory to the Borrower, if
requested by the Borrower, or in the case of any such mutilation, upon surrender
and cancellation of such Debenture, the Borrower shall issue a new Debenture
identical in form to the lost, stolen, destroyed, or mutilated Debenture.
Section 11. Remedies on Default. Upon the occurrence of an Event
of Default and so long as any Event of Default is continuing, the Holder shall
have the option to declare the entire principal amount hereof and all accrued
but unpaid interest thereon to be immediately due and payable by written notice
to the Borrower. The Holder shall have all other remedies at law and in equity
afforded to holders of debt or otherwise provided for by this Debenture, the
Loan Agreement, and the other Convertible Debt Documents.
Section 12. General Provisions.
(a) Modification and Waiver. No amendment, modification,
or waiver of any provision hereof shall be binding upon the
Borrower or the Holder unless set forth in a written document
signed, in the case of amendments or modifications, by the
Borrower and the Holder or, in the case of waivers, by the party
granting the waiver. Any waiver shall be limited to the provision
hereof in the circumstances or events specifically made subject
thereto, and shall not be deemed a waiver of any other term hereof
or of the same circumstance or event upon any reoccurrence
thereof.
(b) Notices. Except when telephonic notice is expressly
authorized by this Debenture or the Loan Agreement, any notice or
other communication to any party in connection with this Debenture
shall be in writing and shall be sent by manual delivery,
telegram, telex, facsimile transmission, overnight courier, or
United States
A-13
mail (postage prepaid) addressed to such party at the address
specified on the signature page of the Loan Agreement, or at such
other address as such party shall have specified to the other
party hereto in writing. All periods of notice shall be measured
from the date of delivery thereof if manually delivered, from the
date of sending thereof if sent by telegram, telex, or facsimile
transmission, from the first Business Day after the date of
sending if sent by overnight courier, or from four days after the
date of mailing if mailed.
(c) Successors and Assigns. All the terms and provisions
of this Debenture shall be binding upon and inure to the benefit
of and be enforceable by the respective successors and assigns of
the Borrower and the Holder, whether or not so expressed, except
that neither the Borrower nor the Holder may assign its rights or
delegate its obligations hereunder without the prior written
consent of the other party; provided, however, that the Holder may
at any time sell, assign, transfer, grant participations in, or
otherwise dispose of any portion of the Loan and its rights under
this Debenture to one or more Affiliates.
(d) Governing Law and Construction. THE VALIDITY,
CONSTRUCTION, AND ENFORCEABILITY OF THIS DEBENTURE SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT
GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF.
(e) Waiver of Demand, Presentment, and Notice of Dishonor.
The Borrower hereby waives demand, notice, protest, presentment,
and notice of dishonor, and all other notices, filing of suit, and
diligence in collecting amounts due hereunder.
(f) Attorneys' Fees. In the event of an occurrence of an
Event of Default, whether or not collection is initiated by the
prosecution of any suit or by judicial proceeding, the Borrower
shall pay, in addition to all other amounts due hereunder, all
court costs and reasonable attorneys' fees and expenses incurred
by the Holder in connection therewith.
(g) Severability. Should any one or more of the provisions
of this Debenture be determined to be invalid, illegal, or
unenforceable, all other provisions hereof will be given effect
separately from the provision or provisions determined to be
invalid, illegal, or unenforceable and will not be affected
thereby.
IN WITNESS WHEREOF, the Borrower has caused this Debenture to be
executed by its duly authorized officer as of the Date of Issue specified above.
ACCREDITED HOME LENDERS, INC.
By __________________________
Its __________________________
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SCHEDULE A
REGISTER OF DEBENTURE ADVANCES
===========================================================================================
Date of
Advance, Advance, Payment, or Aggregate Outstanding
Payment, or Conversion Amount Principal Balance Notation Made By:
Conversion
===========================================================================================
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-------------------------------------------------------------------------------------------
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===========================================================================================
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SCHEDULE ▇-▇
FORM OF CONVERSION NOTICE
To be signed upon exercise of right of conversion.
1. The undersigned, the Holder of the $3,000,000 Accredited Home Lenders, Inc.
Floating-Rate Convertible Debenture, issued on March __, 1999 (the
"Debenture"), hereby conditionally elects to exercise the conversion right
under Section 4 of the Debenture and Section 3.1 of the Loan Agreement to
convert [the entire outstanding principal amount] [up to $_________] of the
Debenture into shares of Series B Common Stock of the Borrower
(collectively, the "Shares"). The undersigned requests that the Borrower
deliver to the undersigned at the address set forth below, documentation
setting forth in reasonable detail calculations setting forth the current
Conversion Price, the number of Shares calculated using such Conversion
Price, the maximum number of Conversion Shares into which the Debenture may
be converted, and an Updated Disclosure Schedule. In the event the
undersigned desires to exercise its option to convert the Debenture into
the Shares after its receipt and review of the Updated Disclosure Schedule
and completion of its due diligence, the undersigned shall deliver to you a
written confirmation of exercise within thirty (30) calendar days of its
receipt of the Updated Disclosure Schedule. Capitalized terms used herein
without definition have the meanings specified in the Debenture.
2. The undersigned hereby further acknowledges, represents, warrants, and
agrees that:
a) the Shares have not been registered under the Securities Act of 1933, as
amended (the "Act") or applicable state securities laws and are being
issued by the Borrower pursuant to exemptions from such registration
requirements and are subject to restrictions on transferability and
resale and may not be transferred or resold except as permitted under
the Act and applicable state securities laws, or pursuant to
registration or exemption therefrom;
b) in the event the Borrower is conducting an initial public offering
("IPO") at or about the time of the conversion of the Debenture and the
Shares of the Holder are not included in such registration, the Holder
has agreed not to sell, pledge, transfer, or otherwise dispose of,
directly or indirectly, any of the Shares for a period which shall be
the shorter of (i) one hundred eighty (180) days commencing on the
effective date of IPO, or (ii) the period for which the executive
officers of the Borrower lock-up their shares of Capital Stock, unless
the managing underwriter of the IPO agrees, in its sole discretion, to
shorten or waive such lock-up period;
c) in the event the Borrower is conducting a secondary offering at or about
the time of the conversion of the Debenture and the Shares of the Holder
are not included in such registration, the Holder has agreed not to
sell, pledge, transfer, or otherwise dispose of, directly or indirectly,
any of the Shares for a period which shall be the shorter of (i) ninety
(90) days commencing on the effective date of secondary offering, or
(ii) the period for which the executive officers of the Borrower lock-up
their shares of Capital
B-1-1
Stock, unless the managing underwriter of the secondary offering
agrees, in its sole discretion, to shorten or waive such lock-up
period; and
d) accrued but unpaid interest to the date of conversion shall not be
converted but shall be paid in full in cash to the Holder not later
than ten (10) Business Days following the date of conversion.
3. The conversion represented by this notice shall be deemed to have been
effected immediately prior to the close of business on the date the
Confirmation of Conversion Exercise (as such term is defined in the
Debenture) is delivered, the Debenture is surrendered, and, if applicable,
the Additional Principal Amount paid (the "Conversion Date"), and subject
to the payment of any accrued and unpaid interest due hereunder, all
rights of the Holder as a holder of a Debenture, to the extent of such
conversion, shall cease at such time and the Holder shall be treated for
all purposes as having become the holder of record of the shares
represented by the conversion thereby at such time. Upon delivery of such
shares, this Debenture, or the portion hereof so converted, shall be
deemed to have been satisfied and discharged, and the shares into which
this Debenture shall be so converted shall be fully paid and
nonassessable. In the event this Debenture has not been converted in full,
the Borrower shall issue and deliver to the Holder a new Debenture
identical to the one surrendered, except that it shall be in the correct
principal amount after the partial conversion.
Dated:
__________________________________
(Signature)
Address:
__________________________________
__________________________________
__________________________________
▇-▇-▇
▇▇▇▇▇▇▇▇ ▇-▇
FORM OF CONFIRMATION OF CONVERSION EXERCISE
The undersigned, the Holder of the attached Debenture, hereby
irrevocably confirms its election to exercise the conversion right under Section
4 of the Debenture and Section 3.1 of the Loan Agreement to convert [the entire
outstanding principal amount] [$________ ] of the Debenture into shares of
Series B Common Stock of the Borrower. Capitalized terms used herein without
definition have the meanings specified in the Debenture.
Enclosed with this notice is the original Debenture, accompanied by
proper Assignments thereof to the Borrower or in blank for transfer. The
undersigned requests that a certificate representing the Conversion Shares (as
defined in the Conversion Notice heretofore delivered) be delivered to the
undersigned at the address set forth below and, in the event of a partial
conversion, a new Debenture identical to the one surrendered, except that it
shall be in the correct principal amount after such partial conversion.
Dated:
__________________________________
(Signature)
Address:
__________________________________
__________________________________
__________________________________
B-2-1
EXHIBIT B TO
LOAN AND SECURITY AGREEMENT
(Convertible Debt)
MILESTONE COMPLIANCE CERTIFICATE
TO: RESIDENTIAL FUNDING CORPORATION
THE UNDERSIGNED HEREBY CERTIFIES THAT:
(1) I am the duly elected Chief Financial Officer of
ACCREDITED HOME LENDERS, INC. (the "Borrower");
(2) I have reviewed the terms of the Loan and Security
Agreement (Convertible Debt) dated as of March 17, 1999, between the
Borrower and Residential Funding Corporation (the "Convertible Debt
Agreement"), and I have made, or have caused to be made under my
supervision, a detailed review of the transactions and conditions of
the Borrower during the periods covered by the Attachment hereto;
(3) The examination described in paragraph (2) disclosed
compliance with each of the following "Milestones" described in the
following subsections of Section 2.6(c) of the Convertible Debt
Agreement during or at the end of the period covered by the Attachment
hereto: _____________ [specify (i), (ii), (iii), or (iv), as the case
may be], and/or noncompliance with each of the following "Milestones"
described in the following subsections of Section 2.6(c) of the
Convertible Debt Agreement during or at the end of the period covered
by the Attachment hereto: ______________ [specify (i), (ii), (iii), or
(iv), as the case may be].
The foregoing certification, together with the computations in
the Attachment hereto in support hereof, are made and delivered this _____day of
________, [1999 or 200 ___] pursuant to Section 2.6(d) of the Convertible Debt
Agreement.
ACCREDITED HOME LENDERS, INC.
By: _____________________________
Title: Chief Financial Officer
B-1
ATTACHMENT TO MILESTONE COMPLIANCE CERTIFICATE
DATED __________ ____, [1999 or 200_]
Company Name: ACCREDITED HOME LENDERS, INC.
Statement Period: ____________ ____, [1999 or 200_] to
____________ ____, [1999 or 200_]
All information set forth in this Attachment is for the Statement
Period set forth above, and all capitalized terms used in this Attachment
without further definition have the meanings assigned to such terms in the
Convertible Debt Agreement:
I. TOTAL MORTGAGE LOAN PRODUCTION
BY THE BORROWER Outstanding
Principal Balance
-----------------
(a) Eligible Subject Loans originated
by the Borrower during the
Statement Period $____________
plus
----
(b) Other mortgage loans (not qualifying
as Eligible Subject Loans) originated
by the Borrower during the Statement
Period $____________
equals
------
(c) Total mortgage loans originated
by the Borrower during the
Statement Period $____________
II. FULFILLMENT OF SHARED EXECUTION
FORWARD COMMITMENTS EXPIRING
DURING STATEMENT PERIOD
(Section 2.6(c)(i))
(a) Shared Execution Forward Commitment(s)
whose "Commitment Term" (as defined
therein) expired during the Statement Period
and the "Commitment Amount" (as defined
therein) thereof-
Date of Shared Execution Commitment
Forward Commitment Amount
------------------------ ------
[Date] $_________ million + _____%
B-2
(b) Eligible Subject Loans sold to the Lender
pursuant to the foregoing Shared Execution
Forward Commitments-
Eligible Subject Loans
Date of Shared Execution Sold to the Lender During
Forward Commitment Commitment Term
------------------ ---------------
[Date] $________
Milestone Satisfied: ______ Milestone Not Satisfied: ______
III. ELIGIBLE SUBJECT LOANS SOLD
TO THE LENDER (Section 2.6(c)(ii)) Outstanding
Principal Balance
-----------------
(a) Total Eligible Subject Loans sold to the
Lender pursuant to Shared Execution
Forward Commitment(s) during
the Statement Period $_________
(b) Applicable Milestone for Sale of Eligible
Subject Loans sold to the Lender during
the Statement Period [Maximum Limit
of $150,000,000] $_________
Milestone Satisfied: _____ Milestone Not Satisfied: _____
IV. THE BORROWER [DID] [DID NOT] CEASE TO
ORIGINATE OR ACQUIRE ELIGIBLE SUBJECT
LOANS DURING THE STATEMENT PERIOD.
(Section 2.6(c)(iii))
Milestone Satisfied: _____ Milestone Not Satisfied: _____
V. ALL ELIGIBLE SUBJECT LOANS DELIVERED
TO THE LENDER DURING THE STATEMENT
PERIOD [DID] [DID NOT] SATISFY THE LOAN
SALE COMMITMENT AND THE "CONTRACT"
AS DEFINED IN THE LOAN SALE COMMITMENT
(Section 2.6(c)(iv))
Milestone Satisfied: _____ Milestone Not Satisfied: _____
B-3
EXHIBIT C TO
LOAN AND SECURITY AGREEMENT
(Convertible Debt)
Authorized and Outstanding Capital Stock of the Borrower
Common Stock: 20,000,000 shares authorized
4,364,758 shares issued and outstanding
Series A Preferred Stock: 5,113,334 shares authorized
5,113,334 issued and outstanding
Warrants and Options to Acquire Common Stock
Pursuant to the Amended and Restated Cargill Warrant Agreement dated January 30,
1998 between ▇▇▇▇▇▇▇ Financial Services Corporation ("Cargill") and the Borrower
(the "Cargill Warrant"), Cargill has the right to acquire 148,750 shares of
Common Stock at an exercise/conversion price of $1.00 per share, subject to
adjustment in accordance with the anti-dilution provisions of the Cargill
Warrant. The exercise period for the Cargill Warrant expires December 31, 2002,
provided, that, if not exercised by such date, the Cargill Warrant automatically
converts into Common Stock in accordance with the conversion provisions of the
Cargill Warrant.
Pursuant to the Common Stock Purchase Warrant dated October 1, 1997 between
▇▇▇▇▇▇ Commercial Paper Inc. ("▇▇▇▇▇▇") and the Borrower (the "▇▇▇▇▇▇ Warrant"),
as adjusted based upon the issuance of the Convertible Debenture, ▇▇▇▇▇▇ has the
right to acquire 374,457 shares of Common Stock at an exercise/conversion price
of $1.71 per share, subject to further adjustment in accordance with the
anti-dilution provisions of the ▇▇▇▇▇▇ Warrant. The exercise period for the
▇▇▇▇▇▇ Warrant expires October 31, 2004, provided, that, if not exercised by
such date, the ▇▇▇▇▇▇ Warrant automatically converts into Common Stock in
accordance with the conversion provisions of the ▇▇▇▇▇▇ Warrant.
See Stock Option Schedule attached hereto as Exhibit C-l.
Redemption Obligations
At any time after January 1, 2000, the holders of not less than two-thirds of
the then outstanding Series A Preferred Stock have the right to require the
Borrower to redeem up to one-third of the then outstanding Series A Preferred
Stock in each of the years 2000, 2001 and 2002 specified in a written request
from such holders by paying in cash therefor a sum per share equal to $1.00 (as
adjusted for any stock dividends, combinations or splits with respect to such
shares in accordance with the Borrower's Articles of Incorporation) plus all
declared but unpaid dividends on such shares.
C-1
Pursuant to that certain Stock Redemption Agreement dated as of June 1, 1998
between the Borrower and Messrs. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇ ▇. ▇▇▇▇▇▇▇, at such
time as ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ exercises options to acquire Common Stock pursuant
to the Incentive Stock Option Agreement dated as of June 1, 1998 between the
Borrower and ▇▇. ▇▇▇▇▇, the Borrower is obligated to redeem from Messrs. ▇▇▇▇▇▇▇
and ▇▇▇▇▇▇▇, pro rata and at the exercise price for the options exercised by ▇▇.
▇▇▇▇▇, a number of shares equal to the number of shares for which ▇▇. ▇▇▇▇▇
exercises options, up to an aggregate of 50,000 shares.
Shareholder Agreements re Voting or Transfer of Capital Stock
Amended and Restated Voting Agreement dated as of March 3, 1995, as amended by
Amendment No. 1 to Amended and Restated Voting Agreement dated as of November
18, 1996, among the Borrower, Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, and all holders of
Series A Preferred Stock.
Co-Sale Agreement
C-2
EXHIBIT C-1 TO
LOAN AND SECURITY AGREEMENT
(Convertible Debt)
Outstanding Stock Option Grants
-------------------------------
(All Grants Expire Ten Years Following Grant Date)
1995 EXECUTIVE STOCK OPTION PLAN
---------------------------------------------------------------------------
Name Grant Date Price Outstanding
---------------------------------------------------------------------------
Directors
---------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇.* 3/1/96 $0.10 57,000
---------------------------------------------------------------------------
2/1/99 $1.50 5,000
---------------------------------------------------------------------------
Consultants
---------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.* 3/1/96 $0.10 57,000
---------------------------------------------------------------------------
2/1/99 $1.50 5,000
---------------------------------------------------------------------------
Senior Management
---------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇ ▇. 2/1/95 $0.06 2,917
---------------------------------------------------------------------------
2/1/97 $0.25 1,333
---------------------------------------------------------------------------
3/1/98 $1.50 1,000
---------------------------------------------------------------------------
2/1/99 $1.50 2,000
---------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 1/1/96 $0.10 30,000
---------------------------------------------------------------------------
2/1/97 $0.25 6,500
---------------------------------------------------------------------------
3/1/98 $1.50 5,000
---------------------------------------------------------------------------
2/1/99 $1.50 3,000
---------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 2/1/97 $0.25 200,000
---------------------------------------------------------------------------
6/1/98 $1.50 150,000
---------------------------------------------------------------------------
2/1/99 $1.50 100,000
---------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇ ▇. 2/1/95 $0.06 265,958
---------------------------------------------------------------------------
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ 2/1/95 $0.06 159,575
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Total 1,051,783
---------------------------------------------------------------------------
---------------------------------------------------------------------------
*Nonqualified stock option grantees
---------------------------------------------------------------------------
1995 & 1998 STOCK OPTION PLANS
---------------------------------------------------------------------------
Name Grant Date Price Outstanding
---------------------------------------------------------------------------
Senior Management
---------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 5/1/97 $0.50 35,000
---------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇ ▇. 1/1/96 $0.10 10,000
---------------------------------------------------------------------------
2/1/97 $0.25 4,000
---------------------------------------------------------------------------
3/1/98 $1.50 11,000
---------------------------------------------------------------------------
8/1/98 $1.50 3,750
---------------------------------------------------------------------------
2/1/99 $1.50 6,000
---------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 2/1/99 $1.50 42,500
---------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. 5/1/97 $0.50 25,000
---------------------------------------------------------------------------
3/1/98 $1.50 10,000
---------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 1/1/96 $0.10 20,000
---------------------------------------------------------------------------
5/1/98 $0.10 15,000
---------------------------------------------------------------------------
2/1/97 $0.25 6,500
---------------------------------------------------------------------------
3/1/98 $1.50 2,000
---------------------------------------------------------------------------
2/1/99 $1.50 4,500
---------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 6/1/98 $1.50 35,000
---------------------------------------------------------------------------
2/1/99 $1.50 3,000
---------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 11/1/98 $1.50 35,000
---------------------------------------------------------------------------
C-1-1
-----------------------------------------------------------------------------
Name Grant Date Price Outstanding
-----------------------------------------------------------------------------
Regional Managers
-----------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 11/1/98 $ 1.50 20,000
-----------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 3/1/98 $ 1.50 20,000
-----------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 2/1/99 $ 1.50 10,000
-----------------------------------------------------------------------------
▇▇▇▇▇, Jr., ▇▇▇▇▇ ▇. 2/1/99 $ 1.50 10,000
-----------------------------------------------------------------------------
Ellis, Williams, G. 2/1/99 $ 1.50 10,000
-----------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 11/1/98 $ 1.50 1,000
-----------------------------------------------------------------------------
2/1/99 $ 1.50 2,500
-----------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇ ▇. 5/1/97 $ 0.50 25,000
-----------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 8/1/97 $ 1.50 1,000
-----------------------------------------------------------------------------
11/1/97 $ 1.50 1,000
-----------------------------------------------------------------------------
3/1/98 $ 1.50 18,000
-----------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 3/1/98 $ 1.50 20,000
-----------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 5/1/97 $ 0.50 20,000
-----------------------------------------------------------------------------
▇▇▇▇, ▇▇▇▇ ▇. 6/1/98 $ 1.50 20,000
-----------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 6/1/98 $ 1.50 20,000
-----------------------------------------------------------------------------
Sovereign, ▇▇▇▇▇▇▇ 11/1/98 $ 1.50 10,000
-----------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 11/1/98 $ 1.50 10,000
-----------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 11/1/98 $ 1.50 10,000
-----------------------------------------------------------------------------
Supervisors/Managers
-----------------------------------------------------------------------------
▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 8/1/97 $ 1.50 2,500
-----------------------------------------------------------------------------
8/1/98 $ 1.50 7,500
-----------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇ 8/1/97 $ 1.50 500
-----------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 2/1/99 $ 1.50 1,000
-----------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. 11/1/97 $ 1.50 1,000
-----------------------------------------------------------------------------
2/1/99 $ 1.50 2,500
-----------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 5/1/95 $ 0.08 2,000
-----------------------------------------------------------------------------
8/1/96 $ 0.10 500
-----------------------------------------------------------------------------
11/1/97 $ 1.50 500
-----------------------------------------------------------------------------
2/1/99 $ 1.50 500
-----------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 8/1/98 $ 1.50 20,000
-----------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇ ▇. 6/1/98 $ 1.50 2,000
-----------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇ ▇. 8/1/96 $ 0.10 2,000
-----------------------------------------------------------------------------
11/1/97 $ 1.50 500
-----------------------------------------------------------------------------
2/1/99 $ 1.50 500
-----------------------------------------------------------------------------
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇. 8/1/98 $ 1.50 15,000
-----------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 8/1/96 $ 0.10 2,000
-----------------------------------------------------------------------------
2/1/97 $ 0.25 1,000
-----------------------------------------------------------------------------
3/1/98 $ 1.50 500
-----------------------------------------------------------------------------
▇▇▇▇▇▇ (Bouet), ▇▇▇▇▇ ▇. 5/1/95 $ 0.08 4,000
-----------------------------------------------------------------------------
1/1/96 $ 0.10 6,000
-----------------------------------------------------------------------------
2/1/99 $ 1.50 500
-----------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 2/1/99 $ 1.50 2,500
-----------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇ ▇. 8/1/96 $ 0.10 1,000
-----------------------------------------------------------------------------
11/1/96 $ 0.18 500
-----------------------------------------------------------------------------
11/1/97 $ 1.50 250
-----------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 8/1/96 $ 0.10 3,000
-----------------------------------------------------------------------------
2/1/97 $ 0.25 3,000
-----------------------------------------------------------------------------
11/1/97 $ 1.50 250
-----------------------------------------------------------------------------
2/1/99 $ 1.50 500
-----------------------------------------------------------------------------
C-1-2
------------------------------------------------------------------------
Name Grant Date Price Outstanding
------------------------------------------------------------------------
Operations Mangagers
------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. 8/1/98 $1.50 1,000
------------------------------------------------------------------------
▇▇▇▇, ▇▇▇▇▇ ▇. 8/1/97 $1.50 1,000
------------------------------------------------------------------------
8/1/98 $1.50 250
------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇ ▇. 11/1/98 $1.50 1,000
------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 3/1/98 $1.50 2,500
------------------------------------------------------------------------
2/1/99 $1.50 500
------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 11/1/97 $1.50 1,000
------------------------------------------------------------------------
2/1/99 $1.50 1,000
------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 2/1/99 $1.50 1,000
------------------------------------------------------------------------
▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 2/1/99 $1.50 1,000
------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 11/1/98 $1.50 1,000
------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 2/1/97 $0.25 500
------------------------------------------------------------------------
3/1/98 $1.50 250
------------------------------------------------------------------------
2/1/99 $1.50 250
------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ 11/1/97 $1.50 500
------------------------------------------------------------------------
2/1/99 $1.50 500
------------------------------------------------------------------------
Puma, ▇▇▇▇ ▇. 8/1/96 $0.10 1,500
------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇ ▇. 2/1/99 $1.50 1,000
------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 2/1/97 $0.25 500
------------------------------------------------------------------------
11/1/97 $1.50 500
------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. 11/1/96 $0.18 1,000
------------------------------------------------------------------------
11/1/97 $1.50 250
------------------------------------------------------------------------
2/1/99 $1.50 250
------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 11/1/96 $0.18 1,500
------------------------------------------------------------------------
11/1/97 $1.50 500
------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. 3/1/98 $1.50 2,500
------------------------------------------------------------------------
2/1/99 $1.50 250
------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 11/1/97 $1.50 1,000
------------------------------------------------------------------------
2/1/99 $1.50 500
------------------------------------------------------------------------
Account Executives
------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 3/1/98 $1.50 1,000
------------------------------------------------------------------------
6/1/98 $1.50 500
------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇ ▇. 11/1/97 $1.50 500
------------------------------------------------------------------------
2/1/99 $1.50 500
------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 2/1/99 $1.50 1,000
------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇ ▇. 3/1/98 $1.50 1,000
------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 6/1/98 $1.50 1,000
------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 8/1/98 $1.50 500
------------------------------------------------------------------------
2/1/99 $1.50 500
------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 11/1/98 $1.50 500
------------------------------------------------------------------------
2/1/99 $1.50 250
------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 6/1/98 $1.50 1,000
------------------------------------------------------------------------
Cappizzi, ▇▇▇▇▇▇▇▇▇▇ ▇. 6/1/98 $1.50 500
------------------------------------------------------------------------
2/1/99 $1.50 250
------------------------------------------------------------------------
▇▇▇▇, ▇▇▇▇ ▇. 2/1/99 $1.50 500
------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ 6/1/98 $1.50 500
------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇ ▇. 2/1/99 $1.50 500
------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 8/1/97 $1.50 1,000
------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ 2/1/99 $1.50 1,000
------------------------------------------------------------------------
C-1-3
--------------------------------------------------------------------------------
Name Grant Date Price Outstanding
--------------------------------------------------------------------------------
Account Executives (cont.)
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇. 8/1/98 $ 1.50 500
--------------------------------------------------------------------------------
2/1/99 $ 1.50 250
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 8/1/96 $ 0.10 1,000
--------------------------------------------------------------------------------
11/1/97 $ 1.50 500
--------------------------------------------------------------------------------
2/1/99 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 3/1/98 $ 1.50 1,000
--------------------------------------------------------------------------------
2/1/99 $ 1.50 250
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇ ▇. 3/1/98 $ 1.50 1,000
--------------------------------------------------------------------------------
8/1/98 $ 1.50 250
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, Jr., ▇▇▇▇ ▇. 11/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ 11/1/97 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 2/1/99 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇ ▇. 11/1/98 $ 1.50 500
--------------------------------------------------------------------------------
2/1/99 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇ ▇. 8/1/98 $ 1.50 500
--------------------------------------------------------------------------------
2/1/99 $ 1.50 250
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. 2/1/99 $ 1.50 1,000
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇ II, ▇▇▇▇▇ ▇. 11/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 3/1/98 $ 1.50 1,000
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. 2/1/99 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇, ▇▇▇▇ ▇. 8/1/98 $ 1.50 1,500
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇ ▇. 6/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇ ▇. 6/1/98 $ 1.50 500
--------------------------------------------------------------------------------
Light, ▇▇▇▇ ▇. 3/1/98 $ 1.50 1,000
--------------------------------------------------------------------------------
2/1/99 $ 1.50 250
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇. 3/1/98 $ 1.50 1,000
--------------------------------------------------------------------------------
2/1/99 $ 1.50 250
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 3/1/98 $ 1.50 1,000
--------------------------------------------------------------------------------
2/1/99 $ 1.50 250
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ 11/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇ ▇. 11/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇ ▇. 8/1/96 $ 0.10 1,000
--------------------------------------------------------------------------------
11/1/97 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇, Solinh 8/1/98 $ 1.50 500
--------------------------------------------------------------------------------
Reading, ▇▇▇▇▇ ▇. 6/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇ ▇. 8/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 11/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 8/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇, ▇▇▇▇ 6/1/98 $ 1.50 500
--------------------------------------------------------------------------------
2/1/99 $ 1.50 250
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 6/1/98 $ 1.50 1,000
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 8/1/97 $ 1.50 1,000
--------------------------------------------------------------------------------
2/1/99 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ 2/1/99 $ 1.50 500
--------------------------------------------------------------------------------
C-1-4
--------------------------------------------------------------------------------
Name Grant Date Price Outstanding
--------------------------------------------------------------------------------
Account Executive (cont.)
--------------------------------------------------------------------------------
Slaikjer, ▇▇▇▇▇ ▇. 8/1/97 $ 1.50 1,000
--------------------------------------------------------------------------------
8/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ 2/1/99 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. 6/1/98 $ 1.50 500
--------------------------------------------------------------------------------
2/1/99 $ 1.50 250
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 6/1/98 $ 1.50 1,000
--------------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇ ▇. 8/1/97 $ 1.50 500
--------------------------------------------------------------------------------
2/1/99 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 2/1/99 $ 1.50 500
--------------------------------------------------------------------------------
Appraisers
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇ Jr., ▇▇▇▇▇▇▇ ▇. 2/1/99 $ 1.50 1,000
--------------------------------------------------------------------------------
Masters, ▇▇▇▇▇▇▇ ▇. 11/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 5/1/97 $ 0.50 1,000
--------------------------------------------------------------------------------
Broker Control
--------------------------------------------------------------------------------
▇▇▇▇, ▇▇▇ ▇. 11/1/98 $ 1.50 350
--------------------------------------------------------------------------------
Capital Markets
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 11/1/98 $ 1.50 1,000
--------------------------------------------------------------------------------
Collections
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ 2/1/99 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇, ▇▇▇▇▇ ▇. 2/1/99 $ 1.50 250
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇ ▇. 2/1/99 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. 2/1/99 $ 1.50 500
--------------------------------------------------------------------------------
Docs/Funding
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇. 2/1/99 $ 1.50 350
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇ ▇. 2/1/99 $ 1.50 400
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. 2/1/97 $ 0.25 400
--------------------------------------------------------------------------------
3/1/98 $ 1.50 150
--------------------------------------------------------------------------------
2/1/99 $ 1.50 150
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇. 5/1/95 $ 0.08 1,500
--------------------------------------------------------------------------------
2/1/99 $ 1.50 150
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 8/1/96 $ 0.10 1,000
--------------------------------------------------------------------------------
11/1/97 $ 1.50 250
--------------------------------------------------------------------------------
2/1/99 $ 1.50 150
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, (▇▇▇▇▇▇▇▇▇▇), ▇▇▇▇▇▇ ▇. 5/1/97 $ 0.50 250
--------------------------------------------------------------------------------
2/1/99 $ 1.50 150
--------------------------------------------------------------------------------
Finance & Admin.
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇. 3/1/98 $ 1.50 500
--------------------------------------------------------------------------------
2/1/99 $ 1.50 150
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 6/1/98 $ 1.50 250
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇ (Fitz), ▇▇▇▇▇▇▇ ▇. 8/1/97 $ 1.50 400
--------------------------------------------------------------------------------
2/1/99 $ 1.50 150
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ 5/1/97 $ 0.50 400
--------------------------------------------------------------------------------
2/1/99 $ 1.50 150
--------------------------------------------------------------------------------
Domshy, ▇▇▇▇▇▇▇▇ ▇. 5/1/97 $ 0.50 500
--------------------------------------------------------------------------------
2/1/99 $ 1.50 150
--------------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. 3/1/98 $ 1.50 250
--------------------------------------------------------------------------------
2/1/99 $ 1.50 150
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 2/1/97 $ 0.25 250
--------------------------------------------------------------------------------
2/1/99 $ 1.50 150
--------------------------------------------------------------------------------
C-1-5
--------------------------------------------------------------------------------
Name Grant Date Price Outstanding
--------------------------------------------------------------------------------
Finance & Admin. (cont.)
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. 3/1/98 $ 1.50 350
--------------------------------------------------------------------------------
2/1/99 $ 1.50 150
--------------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇ ▇. 2/1/99 $ 1.50 250
--------------------------------------------------------------------------------
▇▇▇▇▇-▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 2/1/97 $ 0.25 250
--------------------------------------------------------------------------------
3/1/98 $ 1.50 150
--------------------------------------------------------------------------------
2/1/99 $ 1.50 150
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 2/1/99 $ 1.50 400
--------------------------------------------------------------------------------
▇▇▇▇, ▇▇▇▇▇▇ ▇. 3/1/98 $ 1.50 400
--------------------------------------------------------------------------------
Rose, ▇▇▇▇▇▇▇▇ ▇. 8/1/96 $ 0.10 1,000
--------------------------------------------------------------------------------
11/1/97 $ 1.50 250
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. 2/1/99 $ 1.50 500
--------------------------------------------------------------------------------
Information Technology
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 11/1/97 $ 1.50 3,000
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. 2/1/99 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 5/1/97 $ 0.50 4,000
--------------------------------------------------------------------------------
3/1/98 $ 1.50 1,000
--------------------------------------------------------------------------------
8/1/98 $ 1.50 750
--------------------------------------------------------------------------------
2/1/99 $ 1.50 1,000
--------------------------------------------------------------------------------
Madrid, ▇▇▇▇ ▇. 6/1/98 $ 1.50 3,000
--------------------------------------------------------------------------------
2/1/99 $ 1.50 3,000
--------------------------------------------------------------------------------
Meisland, ▇▇▇▇▇ ▇. 2/1/97 $ 0.25 400
--------------------------------------------------------------------------------
3/1/98 $ 1.50 600
--------------------------------------------------------------------------------
2/1/99 $ 1.50 250
--------------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇ ▇. 5/1/97 $ 0.50 5,000
--------------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇ ▇. 2/1/99 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇, Brain K. 3/1/98 $ 1.50 1,000
--------------------------------------------------------------------------------
2/1/99 $ 1.50 150
--------------------------------------------------------------------------------
Won, ▇▇▇ ▇▇▇▇▇▇ 3/1/98 $ 1.50 3,000
--------------------------------------------------------------------------------
8/1/98 $ 1.50 875
--------------------------------------------------------------------------------
2/1/99 $ 1.50 1,500
--------------------------------------------------------------------------------
Legal
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 2/1/97 $ 0.25 350
--------------------------------------------------------------------------------
11/1/98 $ 1.50 150
--------------------------------------------------------------------------------
Loan Specialists
--------------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇ ▇. 6/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 2/1/99 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 3/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇, ▇▇▇▇▇ ▇. 11/1/97 $ 1.50 500
--------------------------------------------------------------------------------
2/1/99 $ 1.50 150
--------------------------------------------------------------------------------
▇▇▇▇▇▇ (▇▇▇▇▇▇), ▇▇▇▇▇▇▇ 8/1/96 $ 0.10 1,000
--------------------------------------------------------------------------------
11/1/97 $ 1.50 250
--------------------------------------------------------------------------------
2/1/99 $ 1.50 150
--------------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. 2/1/99 $ 1.50 400
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 8/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 2/1/97 $ 0.25 350
--------------------------------------------------------------------------------
3/1/98 $ 1.50 250
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 6/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 8/1/98 $ 1.50 250
--------------------------------------------------------------------------------
▇▇▇▇-▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 8/1/97 $ 1.50 400
--------------------------------------------------------------------------------
8/1/98 $ 1.50 200
--------------------------------------------------------------------------------
Deroses, ▇▇▇▇▇ ▇. 6/1/98 $ 1.50 400
--------------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 2/1/99 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 11/1/97 $ 1.50 500
--------------------------------------------------------------------------------
C-1-6
--------------------------------------------------------------------------------
Name Grant Date Price Outstanding
--------------------------------------------------------------------------------
Loan Specialists (cont)
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 2/1/99 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 2/1/99 $ 1.50 350
--------------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 2/1/99 $ 1.50 400
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇ (▇▇▇▇), ▇▇▇▇▇▇▇ ▇. 2/1/97 $ 0.25 350
--------------------------------------------------------------------------------
3/1/98 $ 1.50 250
--------------------------------------------------------------------------------
2/1/99 $ 1.50 250
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 11/1/98 $ 1.50 350
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇ ▇. 2/1/99 $ 1.50 400
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 2/1/99 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇ ▇. 2/1/97 $ 0.25 250
--------------------------------------------------------------------------------
3/1/98 $ 1.50 250
--------------------------------------------------------------------------------
2/1/99 $ 1.50 150
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 2/1/99 $ 1.50 400
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. 11/1/97 $ 1.50 400
--------------------------------------------------------------------------------
2/1/99 $ 1.50 150
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 11/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 5/1/97 $ 0.50 400
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇ ▇. 3/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 3/1/98 $ 1.50 500
--------------------------------------------------------------------------------
2/1/99 $ 1.50 150
--------------------------------------------------------------------------------
Mayerchick, ▇▇▇▇▇▇▇▇▇ ▇. 11/1/97 $ 1.50 350
--------------------------------------------------------------------------------
2/1/99 $ 1.50 150
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 11/1/98 $ 1.50 400
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 3/1/98 $ 1.50 250
--------------------------------------------------------------------------------
2/1/99 $ 1.50 100
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 6/1/98 $ 1.50 400
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. 3/1/98 $ 1.50 400
--------------------------------------------------------------------------------
2/1/99 $ 1.50 150
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇ ▇. 2/1/99 $ 1.50 400
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 8/1/98 $ 1.50 1,000
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. 11/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇ 6/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇. 6/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇, ▇▇▇▇▇ ▇. 11/1/98 $ 1.50 400
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 2/1/99 $ 1.50 400
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 2/1/99 $ 1.50 250
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 2/1/97 $ 0.25 400
--------------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇. 2/1/97 $ 0.25 350
--------------------------------------------------------------------------------
3/1/98 $ 1.50 150
--------------------------------------------------------------------------------
2/1/99 $ 1.50 150
--------------------------------------------------------------------------------
▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇. 11/1/97 $ 1.50 400
--------------------------------------------------------------------------------
2/1/99 $ 1.50 150
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 8/1/96 $ 0.10 2,000
--------------------------------------------------------------------------------
Strong, ▇▇▇▇▇ ▇. 6/1/98 $ 1.50 400
--------------------------------------------------------------------------------
2/1/99 $ 1.50 250
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ 11/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇ 11/1/98 $ 1.50 350
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 2/1/99 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇ ▇. 8/1/97 $ 1.50 500
--------------------------------------------------------------------------------
8/1/98 $ 1.50 250
--------------------------------------------------------------------------------
C-1-7
--------------------------------------------------------------------------------
Name Grant Date Price Outstanding
--------------------------------------------------------------------------------
Marketing
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 11/1/98 $ 1.50 400
--------------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇ ▇. 2/1/99 $ 1.50 400
--------------------------------------------------------------------------------
Ireland, ▇▇▇▇▇▇ ▇. 11/1/98 $ 1.50 350
--------------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 3/1/98 $ 1.50 500
--------------------------------------------------------------------------------
2/1/99 $ 1.50 250
--------------------------------------------------------------------------------
Post-Closing
--------------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇ ▇. 6/1/98 $ 1.50 250
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, Jolie T. 11/1/98 $ 1.50 250
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ 8/1/98 $ 1.50 350
--------------------------------------------------------------------------------
8/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. 6/1/98 $ 1.50 350
--------------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇▇▇ T 8/1/98 $ 1.50 350
--------------------------------------------------------------------------------
Nebril, Jr., ▇▇▇ ▇. 3/1/98 $ 1.50 350
--------------------------------------------------------------------------------
2/1/99 $ 1.50 150
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 5/1/95 $ 0.08 1,000
--------------------------------------------------------------------------------
2/1/99 $ 1.50 150
--------------------------------------------------------------------------------
Processing
--------------------------------------------------------------------------------
▇▇▇▇, ▇▇▇▇▇▇ ▇. 5/1/97 $ 0.50 250
--------------------------------------------------------------------------------
8/1/98 $ 1.50 100
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 8/1/98 $ 1.50 250
--------------------------------------------------------------------------------
Quality Control
--------------------------------------------------------------------------------
▇▇▇, ▇▇▇▇▇▇ ▇. 11/1/98 $ 1.50 400
--------------------------------------------------------------------------------
Retail
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 2/1/99 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 8/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇ ▇. 8/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇ ▇. 3/1/98 $ 1.50 500
--------------------------------------------------------------------------------
2/1/99 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 8/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇ ▇. 11/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 8/1/98 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 2/1/99 $ 1.50 500
--------------------------------------------------------------------------------
Underwriters
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 5/1/95 $ 0.08 1,500
--------------------------------------------------------------------------------
8/1/96 $ 0.10 500
--------------------------------------------------------------------------------
11/1/97 $ 1.50 500
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 2/1/97 $ 0.25 500
--------------------------------------------------------------------------------
11/1/97 $ 1.50 250
--------------------------------------------------------------------------------
2/1/99 $ 1.50 150
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 2/1/99 $ 1.50 1,000
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. 5/1/95 $ 0.08 1,000
--------------------------------------------------------------------------------
11/1/96 $ 0.18 500
--------------------------------------------------------------------------------
11/1/97 $ 1.50 500
--------------------------------------------------------------------------------
2/1/99 $ 1.50 250
--------------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇ ▇. 3/1/98 $ 1.50 1,000
--------------------------------------------------------------------------------
White, ▇▇▇▇▇ ▇. 8/1/96 $ 0.10 1,500
--------------------------------------------------------------------------------
11/1/97 $ 1.50 250
--------------------------------------------------------------------------------
2/1/99 $ 1.50 250
--------------------------------------------------------------------------------
C-1-8
--------------------------------------------------------------------------------
Name Grant Date Price Outstanding
--------------------------------------------------------------------------------
Former Employees
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇ (▇▇▇▇▇▇▇▇▇), ▇▇▇▇▇ ▇. 2/1/97 $ 0.25 182
--------------------------------------------------------------------------------
8/1/97 $ 1.50 20
--------------------------------------------------------------------------------
3/1/98 $ 1.50 63
--------------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 11/1/97 $ 1.50 5,833
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ 2/1/97 $ 0.25 1,500
--------------------------------------------------------------------------------
11/1/97 $ 1.50 313
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. 8/1/97 $ 1.50 7,083
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. 5/1/97 $ 0.50 417
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 11/1/97 $ 1.50 156
--------------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇ ▇. 2/1/97 $ 0.25 479
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇. 3/1/98 $ 1.50 125
--------------------------------------------------------------------------------
Hui, ▇▇▇▇▇ ▇. 8/1/97 $ 1.50 150
--------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇ ▇. 11/1/97 $ 1.50 313
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇. 2/1/97 $ 0.25 168
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total 761,677
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL ALL PLANS 1,813,460
C-1-9
EXHIBIT D TO
LOAN AND SECURITY AGREEMENT
(Convertible Debt)
ADDITIONAL REPRESENTATIONS AND WARRANTIES
A. Compliance with Laws. Neither the Borrower nor any of its Subsidiaries is
in violation of any provision of any statute, treaty, law, judgment, writ,
injunction, decision, decree, order, regulation, or ordinance of any
foreign, federal, state, or local governmental or quasi-governmental
entity, including without limitation, the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), laws, regulations, and orders
relating to antitrust or trade regulation, employment practices and
procedures, the health and safety of employees, consumer credit, mortgage
lending, servicing or brokering, the pollution of the atmosphere, surface
water, ground water and noise, and the handling of toxic and hazardous
waste materials, or of any judgment, award, rule, regulation, order,
decree, writ, or injunction of any court or public regulatory body or
authority that might have a material adverse effect on the business,
operations, assets, or financial condition of the Borrower and its
Subsidiaries as a whole or that would affect the validity or enforceability
of this Agreement or any other Convertible Debt Document. In particular,
neither the Borrower nor any of its Subsidiaries has knowledge of any
non-compliance by the Borrower or any of its Subsidiaries with applicable
laws and regulations that would cause the cancellation or modification of
any of their respective mortgage servicing rights, insurance coverage
provided by any private mortgage insurance company, or any agreements or
relationships with any Investor or governmental agency.
B. Agreements. Neither the Borrower nor any of its Subsidiaries has received:
(a) any notice of default, breach, or violation by the Borrower or any of
its Subsidiaries from any governmental agency, Investor, or other
participant in any secondary mortgage market program in which the Borrower
or any of its Subsidiaries is involved (a "Secondary Market Program") or
(b) notice of, or is otherwise aware of facts or circumstances that would
indicate the existence of, any default, breach, or violation by the
Borrower or any of its Subsidiaries with respect to any agreement to which
either the Borrower or any of its Subsidiaries may be a party, and, to the
best of the Borrower's or any Subsidiary's knowledge, no other party
thereto is in default under such agreement. All reports required to be
filed by the Borrower or any of its Subsidiaries with any Investor or
governmental agency have been properly prepared and filed.
C. Employee Benefits.
(a) The Borrower and each of its Subsidiaries have furnished or made
available to the Lender true, correct, and complete copies of each of
the following: (i) any employee benefit plan maintained by the
Borrower or any of its Subsidiaries under Section 401(k) of the
Internal Revenue Code that provides benefits to employees (the "401(k)
Plan"), together with the related trust agreement providing the
funding medium for pension benefits thereunder; (ii) each "employee
welfare benefit plan" (within the meaning of Section 3(l) of ERISA) of
which the Borrower or any of its Subsidiaries
D-1
is the "plan sponsor" (within the meaning of Section 3(16)(A) of ERISA) and
that provides benefits to employees of the Borrower or any of its
Subsidiaries, together with any related trust agreement or insurance
contract providing the funding medium for benefits thereunder and any
related contracts thereunder, such plans being hereinafter referred to as
the "Welfare Plans"; (iii) the summary plan description for the 401(k) Plan
and each Welfare Plan; (iv) the most recent financial statement, if any,
including audit reports thereon, and Annual Report Form 5500; (v) any
investment management agreement that delegates authority for investment of
the assets of the 401(k) Plan or any such Welfare Plan; and (vi) the most
recent qualification letter from the Internal Revenue Service (the "IRS")
for the 401(k) Plan under Sections 401(a) and 401(k) of the Internal
Revenue Code and for any Welfare Plan funded through any tax-exempt trust
qualified under Section 501(c) of the Internal Revenue Code.
(b) With respect to the 401(k) Plan or any Welfare Plan (hereinafter, the
"Plans"),
(i) all Plans comply in all material respects with the applicable
requirements of ERISA and the Internal Revenue Code, and the 401(k)
Plan has been operated so as to comply with qualification
requirements under Section 401(a) and the requirements for tax-exempt
status under Section 501(a) of the Internal Revenue Code;
(ii) no material change in the assets or liabilities of any Plan has
occurred after the date of the financial statements relating thereto
(other than any change resulting from the accrual of benefits,
payment of benefits, or receipt of contributions);
(iii) all required contributions to the Plans have been timely made, and
all contributions to the Plans accrued by the Borrower or any of its
Subsidiaries with respect to employees or officers of the Borrower or
any of its Subsidiaries that remain unpaid shall be paid by the
Borrower and its Subsidiaries in a timely fashion as and when such
contributions become due and payable;
(iv) all reporting and disclosure obligations to any governmental agency
or entity and to any participant in or beneficiary of any Plan have
been satisfied;
(v) there have been no transactions between any Plan and any "party in
interest" or "disqualified person" (within the meaning of Section 3(
14) of ERISA or Section 4975(e)(2) of the Internal Revenue Code) that
might subject the Borrower or any of its Subsidiaries to any tax or
penalty on prohibited transactions imposed by Section 4975 of the
Internal Revenue Code or to a civil action under Section 502 of
ERISA;
(vi) no investigation or review by the IRS is pending or to the best
knowledge of the Borrower is contemplated in which the IRS has
asserted that the 401(k) Plan is not qualified under Section 401(a)
of the Internal Revenue Code or that any related trust or trust for a
Welfare Plan is not exempt from tax under Section 501 of the Internal
Revenue Code. No assessment of any federal
D-2
income taxes has been made or, to the best knowledge of the
Borrower and its Subsidiaries, is contemplated against
either the Borrower or any of its Subsidiaries or any
related trust of any Plan on the basis of failure of such
qualification or exemption, nor is there any basis for any
such investigation, review, assertion, or assessment; and
(vii) no pension plan subject to Title IV of ERISA is maintained
by the Borrower or any of its Subsidiaries or any other
trade or business, whether or not incorporated, that would
be treated as a "single employer" (within the meaning of
Section 4001 of ERISA) with the Borrower or any of its
Subsidiaries.
(c) Neither the Borrower nor any of its Subsidiaries is or has been a
contributing employer to any "multiemployer pension plan" (within
the meaning of Section 3(37) of ERISA); neither the Borrower nor
any of its Subsidiaries is under any obligation to make
contributions to any multiemployer pension plan; and neither the
Borrower nor any of its Subsidiaries has actual or potential
liability under Section 4201 of ERISA for any complete or partial
withdrawal from any multiemployer pension plan relating to
employees or officers of the Borrower or any of its Subsidiaries.
D. Mortgage Loan Oualifications. Each Mortgage Loan originated or acquired
by either the Borrower or any of its Subsidiaries complies, in all
material respects, with all requirements specified under the Lender's
applicable Selling Guide (as such may be amended by a Shared Execution
Forward Commitment between the Borrower and the Lender) or Servicing
Guide or, in the case of Mortgage Loans that will not be sold to the
Lender, is otherwise saleable in the ordinary course of business in the
secondary mortgage market. Without limiting the generality of the
foregoing, the representations and warranties made with respect to each
such Mortgage Loan by the originator thereof or the Borrower's
correspondent complies in all material respects with all requirements
specified under the Lender's applicable Selling Guide (as such may be
amended by a Shared Execution Forward Commitment between the Borrower and
the Lender) or Servicing Guide or, in the case of Mortgage Loans that
will not be sold to the Lender, with the usual requirements of purchasers
of similar Mortgage Loans in the secondary mortgage market.
E. Mortgage Loan Servicing. Each Mortgage Loan serviced or master serviced
by the Borrower or any of its Subsidiaries, and the servicing and master
servicing of each such Mortgage Loan, comply in all material respects
with all obligations under the applicable Servicing Contracts and the
applicable mortgage documents. The Disclosure Schedule sets forth a true
and complete list of the Borrower's and its Subsidiaries' Servicing
Portfolio. All of the Borrower's and its Subsidiaries' Servicing
Contracts are in full force and effect and, except as otherwise
indicated, are unencumbered by Liens. No default or event that, with
notice or lapse of time or both, would become a default, exists under any
such Servicing Contract.
F. Orgination Representations and Warranties; No Recourse. The selling and
origination representations and warranties made by the Borrower and its
Subsidiaries to Investors with respect to each Mortgage Loan sold by the
Borrower or its Subsidiaries were true and correct as and when made by
the Borrower and its Subsidiaries. No Mortgage Loan
D-3
previously sold by the Borrower or its Subsidiaries has been sold with
recourse, except (a) VA no-bids, (b) costs and expenses that are not
reimbursable to a servicer under the applicable requirements and
guidelines of GNMA, (c) recourse that is based on the failure of the
servicer to comply with the applicable requirements of the Investor, (d)
pursuant to Shared Execution Forward Commitments or in connection with an
Eligible Securitization Transaction, and (e) recourse that is based on
(i) first payment default under mortgage loans sold to an Investor, (ii)
a 12-month premium recapture agreement between the Borrower and the
purchaser of mortgage loans, or (iii) breaches and/or inaccuracies in
standard secondary mortgage market representations and warranties made by
the Borrower in connection with sales of mortgage loans to an Investor.
G. Articles of Incorporation and Bylaws. True and complete copies of: (a)
the Borrower's Articles of Incorporation, as amended to date; and (b) the
Borrower's Bylaws, as amended to date, have been delivered to the Lender.
H. Absence of Certain Changes or Events. Since the date of the most recent
audited financial statements of the Borrower, neither the Borrower nor
any of its Subsidiaries, directly or indirectly, has:
(a) suffered any damage, destruction, or casualty loss that,
individually or in the aggregate, has had or would reasonably be
expected to have a material adverse effect on the condition
(financial or otherwise), working capital, assets, properties,
liabilities, obligations, reserves, businesses, future prospects,
goodwill, or going concern value of the Borrower or any of its
Subsidiaries;
(b) experienced any changes, events, or conditions or failed to take
any action that, individually or in the aggregate, have resulted
or could reasonably be expected to result in a material adverse
effect on the business of the Borrower or any of its Subsidiaries.
(c) discharged or incurred any material obligation or liability with
respect to the business of the Borrower or any of its
Subsidiaries, except in the ordinary course of business;
(d) modified in any material respect or terminated, except in
accordance with its terms, any contractual obligation of either
the Borrower or any of its Subsidiaries or has received notice
from any person with respect to such a possible modification or
termination thereof;
(e) entered into any transaction not in the ordinary course of
business, except as permitted in or contemplated by other sections
of this Agreement and other Transaction Documents;
(f) suffered any loss of key employees, sales representatives,
distributors, customers, or suppliers or other favorable business
relationships;
(g) set aside or paid any dividend or other distribution (whether in
cash, stock, property, or any combination thereof) in respect of
its capital stock;
D-4
(h) redeemed or acquired any of its capital stock;
(i) increased or amended the rate or terms of compensation payable or to
become payable by the Borrower or any of its Subsidiaries to their
directors, officers, employees, or other Affiliates or of any bonus,
insurance, pension, or other employee benefit plan, payment, or
arrangement made to, for, or with any such directors, officers,
employees, or other Affiliates except increases occurring in the
ordinary course of business in accordance with the Borrower's and the
Subsidiaries' customary practices (which includes normal periodic
performance reviews and related compensation and benefit increases) or
(ii) paid, lent, or advanced any amount to, or sold, transferred, or
leased any properties or assets (real, personal, or mixed, tangible or
intangible) to, or entered into any agreement or arrangement with any
such directors, officers, employees, or other Affiliates other than
the regular payment of salaries, commissions, employee benefits, and
travel advances in the ordinary course of business and consistent with
past practice;
(j) sold or disposed of, or encumbered, any asset or property, except
sales and other dispositions in the ordinary course of business, and
in each case for a consideration at least equal to the fair value of
such asset or property;
(k) leased or licensed to others (including officers, directors, and other
Affiliates) any asset or property;
(l) sold or otherwise disposed of any line of products or services;
(m) discontinued any line of products or services, other than the
discontinuance of individual products and services in the ordinary
course of business where such individual products or services did not
represent, individually or in the aggregate, a material part of the
Borrower's business on the Closing Date;
(n) sold, assigned, transferred, or conveyed any Intellectual Property
Rights (as hereinafter defined);
(o) entered into any commitment for capital expenditures for additions to
plant, property, or equipment in excess of $100,000;
(p) incurred any indebtedness for borrowed money or other liabilities or
obligations in excess of $500,000, except as permitted in or
contemplated by the Transaction Documents or other credit agreements
with the Lender;
(q) made any change in accounting methods or principles used for financial
reporting purposes, except as required by a change in GAAP and
concurred with by the Borrower's independent public accountants;
(r) entered into any agreement or commitment, whether in writing or
otherwise, to take any action described in this Section H.
I. Insurance. The Disclosure Schedule contains an accurate and complete list
of all current
D-5
policies of fire and other casualty, general liability, theft, life,
workers' compensation, health, directors' and officers', business
interruption, and other forms of insurance owned or held by the Borrower
and each of its Subsidiaries, specifying the insurer, the policy number,
the term of the coverage, and, in the case of any "occurrence" coverage,
the same information as to predecessor policies since inception. Since the
Borrower's and the Subsidiaries' inception, the Borrower and its
Subsidiaries have maintained insurance coverages in such amount and scope
of coverage consistent with customary industry practices. All present
policies are in full force and effect and all premiums with respect thereto
have been paid. Neither the Borrower nor any of its Subsidiaries has been
denied any form of insurance and no policy of insurance has been revoked or
rescinded.
J. Intellectual Property Rights. The Borrower and each of its Subsidiaries own
or possess adequate licenses or other valid rights to use all patents,
patent rights, trademarks, service marks, trade names, copyrights,
applications therefor, trade secrets, know-how, and other intellectual
property ("Intellectual Property Rights") material to the conduct of their
businesses. To the best of the Borrower's and its Subsidiaries' knowledge,
the conduct of their businesses does not conflict with or infringe on any
valid Intellectual Property Rights of others in any way that materially and
adversely affects the condition (financial or otherwise), working capital,
assets, properties, liabilities, obligations, reserves, businesses,
prospects, goodwill, or going concern value of the Borrower or any of its
Subsidiaries. The Disclosure Schedule sets forth a list of all material
United States and foreign patents, trademarks, service marks, trade names
and registered copyrights, and applications therefor, used by the Borrower
or any of its Subsidiaries in the conduct of their businesses and all
licenses to or by the Borrower or any of its Subsidiaries of Intellectual
Property Rights which the Borrower or any of its Subsidiaries owns or uses
in the conduct of their businesses. To the best of the Borrower's and the
Subsidiaries' knowledge, there are no facts or alleged facts that would
reasonably serve as the basis of any claim that the Borrower or any of its
Subsidiaries does not have the unrestricted right to use its Intellectual
Property Rights.
K. Contracts.
(a) The Disclosure Schedule contains a full and complete list (subject, in
the case of clauses (i), (ii), (iii), (iv), (xi), and (xii) below, to
the dollar amount indicated therein) of each contract, commitment, or
agreement to which the Borrower or any of its Subsidiaries, or by
which the Borrower or any of its Subsidiaries or any of their
respective assets or the Mortgage Loans, is bound in any respect,
including without limitation, any and all:
(i) contracts or agreements for the disposition, by sale, lease, or
otherwise, of Mortgage Loans, mortgage servicing, equipment,
goods, materials, research and development, supplies, studies, or
capital assets, or for the performance of services (excluding
mortgage servicing), in any case involving more than $50,000;
(ii) contracts or agreements for the joint performance of work or
services, and all
D-6
other joint venture, partnership, or other similar agreements,
including, without limitation, any mortgage sub-servicing
contracts or mortgage origination, sale, or correspondent
agreements, in any case involving more than $50,000;
(iii) management or employment contracts (other than oral agreements
for employment at will), consulting contracts, collective
bargaining contracts, or other agreements with any labor union,
or termination and severance agreements, in any case involving
more than $50,000;
(iv) notes, mortgages, deeds of trust, loan agreements, security
agreements, guarantees, debentures, indentures, credit
agreements, warehousing agreements, repurchase agreements, and
other evidences of indebtedness with respect to which the
Borrower or any of its Subsidiaries is the obligor, maker, or
debtor other than agreements between the Borrower and the
Lender and endorsements for collection or deposit in the
ordinary course of business, in any case involving more than
$50,000; provided however, if the aggregate amount of all such
agreements or instruments exceeds $250,000, all such
information shall be included on the Disclosure Schedule;
(v) pension, retirement profit-sharing, deferred compensation,
bonus, incentive, life insurance, hospitalization, or other
employee benefit plans or arrangements (including, without
limitation, any contracts or agreements with trustees,
insurance companies, or others relating to any such employee
benefit plan or arrangement);
(vi) stock option, stock purchase, warrant, repurchase, or other
contract or agreement with any employee or officer of the
Borrower or any of its Subsidiaries relating to any shares of
capital stock of the Borrower or any of its Subsidiaries;
(vii) contracts or agreements with underwriters, agents, investment
bankers, brokers, or sales representatives;
(viii) contracts or agreements with any director or officer or
principal shareholder of the Borrower or any of its
Subsidiaries or, to the Borrower's or the Subsidiaries'
knowledge, with any person or entity affiliated or associated
with such a director or officer or principal shareholder (but
not including contracts or agreements with the Lender);
(ix) powers of attorney or similar authorizations granted to any
third party by the Borrower or any of its Subsidiaries except
those granted in the remedial sections of contracts entered
into in the ordinary course of business;
(x) licenses, sublicenses, royalty agreements, and any other
contract or agreement to which either the Borrower or any of
its Subsidiaries is a party, or otherwise subject, relating to
technical assistance, Intellectual Property Rights,
confidentiality, non-disclosure, no-use, or other similar
contracts or agreements;
D-7
(xi) leases, whether as lessor or lessee, with respect to (A)
individual items of personal property, which are not terminable
without penalty in thirty (30) days and with annual rental in
excess of $50,000; provided, however, that if the aggregate
annual rental exceeds $250,000, all such information shall be
included on the Disclosure Schedule; and (B) any real property;
(xii) contracts or agreements for the purchase of any Mortgage Loans,
mortgage servicing, equipment, capital assets, or services,
except individual service orders made in the ordinary course of
business involving less that $100,000; provided, however, that
if the aggregate of such individual service orders from one
party exceeds $250,000, all such information shall be included
on the Disclosure Schedule;
(xiii) contracts or agreements containing covenants limiting the
freedom of the Borrower or any of its Subsidiaries to compete
in any line of business or with respect to any particular
product or service or with any Person;
(xiv) requirements contracts or agreements in which the Borrower or
any of its Subsidiaries is the purchaser or the seller; or
(xv) any contract or agreement, not of the type covered by or
excluded from any of the other items of this Section K, which
by its terms is either not to be completely performed by the
Borrower or any of its Subsidiaries within thirty (30) days of
the date hereof or is not to terminate or is not terminable
without penalty to either the Borrower or any of its
Subsidiaries prior to thirty (30) days from the date hereof and
is material to the businesses of the Borrower and its
Subsidiaries as a whole.
(b) The Borrower has made available to the Lender, for its review and
examination, a true and complete description of all oral contracts and
agreements referred to in this Section K and a true and complete copy
of all written contracts and agreements referred to in this Section K.
As used in this Section K, the terms "contract" and "agreement" mean
and include every contract, agreement, commitment, understanding, and
promise, whether written or oral.
(c) Neither the Borrower nor any of its Subsidiaries, nor to the best of
the Borrower's or any Subsidiary's knowledge, any other party under
any of the contracts and agreements referred to in this Section K, is
in default thereunder, nor are there circumstances with which the
giving of notice or passing of time or both would constitute a default
thereunder by the Borrower or any of its Subsidiaries, or to the best
of the Borrower's or the Subsidiaries' knowledge, any other party
thereto, which could reasonably be expected to have, individually or
in the aggregate, a material adverse effect on the business or
condition (financial or otherwise) of the Borrower and its
Subsidiaries as a whole.
L. Bank Accounts. The Disclosure Schedule contains a full and complete list of
all the bank accounts, including escrow accounts, if any, of the Borrower
and its Subsidiaries, together
D-8
with the names of persons authorized to draw thereon. All cash in such
accounts is held in demand deposits and is not subject to any restriction
of limitation as to withdrawal. All of such accounts are reconciled on a
timely basis, are fully funded, and are free from material errors.
M. Guarantees. None of the obligations or liabilities of the Borrower or any
of its Subsidiaries is guaranteed by any Person. The Disclosure Schedule
contains a correct and complete list of all guarantees by, or other
contingent obligations of, the Borrower or any of its Subsidiaries showing
the parties and amounts involved and the expiration dates thereof.
N. Certain Advances. There are no receivables of the Borrower or any of its
Subsidiaries owing by directors, officers, employees, consultants, or
shareholders of the Borrower or any of its Subsidiaries, owing by any
Affiliate of any director or officer or shareholder of the Borrower or any
of its Subsidiaries, other than advances in the ordinary and usual course
of business to officers and employees for reimbursable business expenses.
0. Compensation. The Disclosure Schedule contains a full and complete list of
each director, officer, employee, or consultant of the Borrower and each of
its Subsidiaries whose total compensation for the most recently completed
fiscal year ended exceeded $100,000 and each person whose total
compensation for the current fiscal year is expected to exceed $100,000,
specifying their names and job descriptions, the total amount paid or
payable, the basis of such compensation, whether fixed or commission or a
combination thereof, and their current rate of pay.
P. Related Parties. No director or officer or principal shareholder of the
Borrower or any of its Subsidiaries, or any Affiliate of any such Person,
has or will have, either directly or indirectly, an interest in any Person
that furnishes or sells services or products that are similar to those
furnished or sold by the Borrower or any of its Subsidiaries, other than
ownership of less than 5% of the outstanding stock of any publicly-held
corporation; provided, however, that the foregoing representation and
warranty shall not apply to interests held by the Existing Investors and by
directors of the Borrower elected by or representing the Existing
Investors, except to the extent that the Borrower is aware of such
interests on the Closing Date. No director or officer or principal
shareholder of the Borrower or any of its Subsidiaries, or any Affiliate of
any such Person, has or will have, either directly or indirectly, a
beneficial interest, or alleges a claim of beneficial interest, in any
contract or agreement to which the Borrower or any of its Subsidiaries is a
party or by which any of them may be bound. The Disclosure Schedule
contains a true and complete list and description of all contractual
relationships between the Borrower, on the one hand, and any Affiliate of
the Borrower or any of its Subsidiaries or any director or officer or
principal shareholder of the Borrower or any of its Subsidiaries, on the
other hand.
Q. Environmental Matters.
(a) No Hazardous Materials have been used, stored, or otherwise handled in
any manner on, under, in, from, or affecting any real property owned
(currently or previously) or managed by either the Borrower or any of
its Subsidiaries or in which the Borrower or
D-9
any of its Subsidiaries has an interest (any such real property being
herein referred to as the "Property"), except for minor amounts of
household materials used, stored, and disposed of in compliance with
Environmental Laws (as defined below). No current owner or occupant,
and to the best knowledge of the Borrower or any of its Subsidiaries
no prior owner or occupant, of the Property has used Hazardous
Materials on, under, in, from, or affecting the Property.
(b) To the best knowledge of the Borrower and its Subsidiaries, no
Hazardous Materials have at any time been released into, stored, or
deposited over, upon, or below the Property, into any water systems on
or below the surface of the Property, or directly or indirectly onto
any property or water system adjoining, adjacent to, or abutting the
Property, or have been used in the construction of any improvements
located on or about the Property, except for minor amounts of
household materials used, stored, and disposed of in compliance with
Environmental Laws.
(c) To the best knowledge of the Borrower and its Subsidiaries, there are
no, and never have been, underground storage tanks located on or under
the Property.
(d) Neither the Borrower nor any of its Subsidiaries has received any
notice of any violations (nor are they aware of any existing
violations) of any applicable laws governing the use, storage,
treatment, transportation, manufacture, refinement, handling,
production, or disposal of Hazardous Materials on, under, in, from, or
affecting the Property and, to the best of the Borrower's and the
Subsidiaries' knowledge, there are no legal actions or proceedings
commenced or threatened by any person with respect to any such
violations.
(e) The Property is currently being, and, to the best of the Borrower's
and the Subsidiaries' knowledge has in the past been, operated in
accordance with, and in compliance with all applicable Environmental
Laws.
(f) "Environmental Laws" means any and all federal, state, local, or
municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees, and requirements of any governmental authority or
other requirements of law (including common law) regulating, relating
to, or imposing liability or standards of conduct concerning
protection of human health or the environment.
R. Labor Controversies. There are no labor controversies or other problems in
employee relations, including, without limitation, strikes, shutdowns,
slowdowns, work stoppages, or resignations of key employees, pending or, to
the best knowledge of the Borrower and the Subsidiaries, threatened against
the Borrower or any of its Subsidiaries that could reasonably be expected
to have, individually or in the aggregate, a material adverse effect on the
business or condition (financial or otherwise) of the Borrower and the
Subsidiaries as a whole.
S. Underlying Documents. All underlying documents listed or described in the
Disclosure Schedule have heretofore been furnished or made available to the
Lender. All such documents furnished or made available to the Lender are
true and complete copies, and
D-10
there are no amendments or modifications thereto, except as expressly noted
on the Disclosure Schedule. The minute books of the Borrower and each of
its Subsidiaries contain full, complete, and accurate records of all
required meetings and other material corporate actions taken by the
directors and shareholders of the Borrower and each of its Subsidiaries.
T. Business Generally. To the best of the knowledge of the Borrower and its
Subsidiaries, there has been no event, transaction, or information that has
come to their respective attention that, as it relates to the businesses of
the Borrower and its Subsidiaries, could individually or in the aggregate,
reasonably be expected to have a material adverse effect on their
businesses.
U. Licenses and Permits. The Borrower and its Subsidiaries have obtained, and
are in the compliance with, all necessary licenses, permits, consents,
approvals, orders, certificates, authorizations, declarations, and filings
required by all federal, state, local, and other governmental or regulatory
authorities and all courts and other tribunals for the conduct of the
businesses and operations of the Borrower and its Subsidiaries, and there
are no proceedings pending or threatened that may result in the revocation,
cancellation, or suspension, or any adverse modification, of any such
licenses, permits, etc., there are no disciplinary actions under any such
licenses, permits, etc., pending or threatened, no prior proceeding or
disciplinary action has resulted in adverse action against the Borrower or
any Subsidiary, nor are there any facts that may give rise to such
proceedings or disciplinary actions. The Disclosure Schedule contains a
correct and complete list of all such licenses, permits, etc.
V. Copies of Certain Documents. The Borrower has delivered to the Lender true
and complete copies of: (a) all agreements entered into by the Borrower or
any Subsidiary providing for the acquisition or disposition of businesses
or product or service lines; (b) all federal and other tax returns filed by
the Borrower or any Subsidiary; and (c) a complete list of all investments
of the Borrower or any Subsidiary in marketable or other securities
(whether debt or equity).
W. Accuracy of Information. No representation or warranty made by the Borrower
in this Agreement, the Disclosure Schedule, or in any of the other
Transaction Documents contains or will contain any untrue statement of
material fact or omits or will omit to state any material fact necessary in
order to make the statements herein or therein not misleading in light of
the circumstances in which they are made, and all of the foregoing
completely and correctly present the information required or purported to
be set forth herein or therein.
D-11
EXHIBIT E TO
LOAN AND SECURITY AGREEMENT
(Convertible Debt)
DISCLOSURE SCHEDULE
This Disclosure Schedule is delivered by Accredited Home Lenders, Inc.
("AHL") to Residential Funding Corporation ("RFC") as of the Closing Date
pursuant to Article V of the Loan and Security Agreement (Convertible Debt) of
even date herewith between Accredited and RFC (the "Agreement"). Initially
capitalized terms used herein and not otherwise defined have the same meanings
as in the Agreement.
---------------------------------------------------------------------------------------------
RE ARTICLE V
---------------------------------------------------------------------------------------------
Section Disclosure
------- ----------
---------------------------------------------------------------------------------------------
5.3 Approvals See Schedule 5.3, Licenses, Approvals and Qualifications, attached
---------
hereto for a listing of AHL's state and federal licenses, approvals
and/or qualifications.
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
RE EXHIBIT D
---------------------------------------------------------------------------------------------
Paragraph Disclosure
--------- ----------
---------------------------------------------------------------------------------------------
E. Mortgage Loan AHL's Servicing Portfolio consists of the Mortgage Loans
-------------
Servicing included in Accredited Mortgage Loan Trust 1996-1 established
---------
pursuant to the related Pooling and Servicing Agreement dated as
of September 1, 1996, as amended by Amendment No. 1 to
Pooling and Servicing Agreement dated as of July 1, 1998, each
between AHL and Bankers Trust Company.
---------------------------------------------------------------------------------------------
H(b) Events that could reasonably have been expected to result in a
material adverse effect on the business of AHL since 12-3l-97:
. Termination of the Amended and Restated Facility
Agreement dated as of October 1, 1997 among AHL,
Accredited Home Capital, Inc. ("AHC"), ▇▇▇▇▇▇▇ Financial
Services Corporation ("Cargill") and Bankers Trust Company
of California, N.A. ("BT"), as amended (the "Cargill Agreement").
. The subprime mortgage industry liquidity crisis beginning in
October 1998.
---------------------------------------------------------------------------------------------
E-1
RE EXHIBIT D
Paragraph Disclosure
H(d) Material modifications of contractual obligations since 12-3l-97:
. Amendment No. 1 to Amended and Restated Facility Agreement
dated as of January 30, 1998 among AHL, AHC, Cargill and
BT.
. Amendment No. 2 to Amended and Restated Facility Agreement
dated as of March 15, 1999 among AHL, AHC, Cargill and BT.
H(f) Losses of favorable business relationships since 12-3l-97:
. Termination of the Amended and Restated Facility Agreement
dated as of October 1, 1997 among AHL, Accredited Home
Capital, Inc. ("AHC"), Cargill and Bankers Trust Company of
California, N.A. ("BT").
. Loss of Investors in connection with the subprime mortgage
industry liquidity crisis beginning in October 1998.
H(i) Value given to employees outside of ordinary course of business
since 12-31-97:
. Loan to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ evidenced by Promissory Note dated
as of April 30, 1998 by ▇▇. ▇▇▇▇▇ in favor of AHL in the
principal amount of $30,000.
H(o) See Schedule H(o), Projected Capital Expenditures, attached hereto
for a list of currently identified capital expenditure needs, some
of which are subject to commitments and some of which are not.
H(p) Since 12-3l-97, AHL incurred indebtedness in excess of $500,000
pursuant to the:
. Master Repurchase Agreement Governing Purchases and Sales
of Mortgage Loans dated as of October 1, 1997 between AHL
and ▇▇▇▇▇▇ Commercial Paper Inc.
I. Insurance See Schedule I, Insurance, attached hereto for a list of insurance
policies.
E-2
RE EXHIBIT D
Paragraph Disclosure
J. Intellectual Restrictions on Intellectual Property Rights:
Property Rights
. AHL may not have unrestricted use of its name to the
extent Accredited Mortgage Services, Inc., a
mortgage broker operating in New Jersey and
Pennsylvania, commenced operations in regions of
such states prior to AHL.
. AHL has not been able to register the assumed name
under which it conducts retail mortgage loan
origination operations, "Axiom Financial Services",
in Arizona and Illinois due to the number of other
registered companies with names beginning with
"Axiom".
. AHL may not have unrestricted use of "Axiom
Financial Services" to the extent Axiom Financial,
Inc., a mortgage broker operating in Utah and Idaho,
commenced operations in regions of such states prior
to AHL.
K(a)(i) Contracts for sale of Mortgage Loans involving more than
$50,000:
. Two separate Mandatory Forward Commitment Letters,
each dated January 15, 1999 between AHL and
EquiCredit Corporation of America for $48,000,000
and $72,000,000, respectively.
. Mandatory Forward Commitment Letter dated February
11, 1999 between AHL and EquiCredit Corporation of
America for $30,000,000.
. Memo dated March 11, 1999 from ICG/The Money Store
agreeing to pricing for $5,000,000 per month of
specified product, subject to change upon 30 days
notice.
. See Schedule K(a)(i), Mortgage Loan Sale and
Purchase Agreements, attached hereto for a listing
of agreements pursuant to which Mortgage Loans have
been sold in the past and/or may be sold in the
future.
E-3
--------------------------------------------------------------------------------
RE EXHIBIT D
--------------------------------------------------------------------------------
Paragraph Disclosure
--------- ----------
--------------------------------------------------------------------------------
K(a)(ii) Contracts for the joint performance of work or services,
including mortgage subservicing contracts involving more
than $50,000:
. Agreement dated as of October 16, 1998 between AHL and
Vicon Financial Services, Inc. ("Vicon").
. Amended and Restated Subservicing Agreement (▇▇▇▇▇▇)
dated as of August 3, 1998 between AHL and Advanta
Mortgage Corp. USA ("Advanta").
. Amended and Restated Subservicing Agreement (Trust
96-l) dated as of August 3, 1998 between AHL and
Advanta.
. Servicing Agreement (RFC - Warehouse) dated as of March
17, 1999 between AHL and Advanta.
. Subservicing Agreement (RFC - Shared Execution) dated
as of March 17, 1999 between AHL and Advanta.
--------------------------------------------------------------------------------
K(a)(iv) Evidences of indebtedness involving more than $50,000:
. The Cargill Agreement and the Amended and Restated
Secured Note dated as of October 1, 1997 by AHC in
favor of Cargill.
. Master Repurchase Agreement Governing Purchases and
Sales of Mortgage Loans dated as of October 1, 1997
between AHL and ▇▇▇▇▇▇ Commercial Paper Inc.
. Secured Promissory Note and Stock Pledge Agreement
dated as of October 16, 1998 by AHL in favor of Vicon
in the principal amount of $100,000.
--------------------------------------------------------------------------------
K(a)(v) Employee benefit plans:
. The Existing Stock Options/Plans.
. The Senior Management Incentive Plan.
See also Schedule K(a)(v), Employee Benefit Plans, attached
----------------------
hereto.
--------------------------------------------------------------------------------
K(a)(vi) Agreements with employees relating to capital stock:
. The Incentive Stock Option Agreements evidencing the
stock option grants listed in Exhibit C to the
---------
Agreement. See also the other agreements listed in said
Exhibit C.
---------
--------------------------------------------------------------------------------
E-4
--------------------------------------------------------------------------------
RE EXHIBIT D
--------------------------------------------------------------------------------
Paragraph Disclosure
--------- ----------
--------------------------------------------------------------------------------
K(a)(vii) Contracts with underwriters, agents, investment bankers,
brokers or sales representatives:
. Underwriting Agreement dated as of September 23, 1996
between AHL and ▇▇▇▇▇▇ Brothers Inc. ("▇▇▇▇▇▇").
. Indemnification Agreement dated as of September 27,
1996 among AHL, ▇▇▇▇▇▇ and Financial Security Assurance
Inc. ("FSA").
. The Mortgage Loan Origination Agreements between AHL
and its mortgage brokers.
. Mortgage Loan Managing Producer Agreement dated as of
September 1, 1998 between AHL dba Accolade Mortgage
Company and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇.
. The oral, at will employment agreements between AHL and
its Account Executives.
--------------------------------------------------------------------------------
E-5
--------------------------------------------------------------------------------
RE EXHIBIT D
--------------------------------------------------------------------------------
Paragraph Disclosure
--------- ----------
--------------------------------------------------------------------------------
K(a)(viii) Contracts with directors, officers or principal
shareholders:
. Series A Preferred Stock Purchase Agreement dated
December 28, 1994 among AHL, Crosspoint Venture
Partners ("CVP") and Crosspoint 1993 Entrepreneurs Fund
("CEF").
. Founder's Agreements dated December 28, 1994 between
AHL and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
. Founder's Agreements dated December 28, 1994 between
AHL and ▇▇▇ ▇. ▇▇▇▇▇▇▇.
. Modification to Series A Preferred Stock Purchase
Agreement dated as of March 3, 1995 among AHL,
Enterprise Partners III, L.P., Enterprise Partners III
Associates, L.P., and Ocean Park Ventures ("OPV").
. Series A Preferred Disposition Agreement dated as of
March 3, 1995 among AHL, CVP, CEF and OPV.
. Series A Preferred Stock Purchase Agreement dated
November 18, 1996 among AHL, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇
▇. ▇▇▇▇▇▇▇, ▇▇.
. Indemnity Agreements dated as of October 18, 1996
between AHL and each of its directors.
. Indemnity Agreements dated as of October 18, 1996
between AHC and each of its directors.
. Amended and Restated Voting Agreement dated as of March
3, 1995, as amended by Amendment No. 1 to Amended and
Restated Voting Agreement dated as of November 18,
1996, among AHL, Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, and all
holders of Series A Preferred Stock.
. Stock Redemption Agreement dated as of June 1, 1998
between AHL and Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇.
--------------------------------------------------------------------------------
K(a)(ix) Powers of attorney:
. Limited Powers of Attorney given to Advanta Mortgage
Corp. USA in connection with servicing
responsibilities.
--------------------------------------------------------------------------------
K(a)(x) Contracts related to Intellectual Property Rights
. See Schedule K(a)(x), Intellectual Property Contracts,
-------------------------------
attached hereto.
--------------------------------------------------------------------------------
E-6
--------------------------------------------------------------------------------
RE EXHIBIT D
--------------------------------------------------------------------------------
Paragraph Disclosure
--------- ----------
--------------------------------------------------------------------------------
K(a)(xi) Personal and real property leases:
. See Schedule K(a)(xi), Equipment and Office Leases,
---------------------------
attached hereto.
--------------------------------------------------------------------------------
K(a)(xii) Contracts for purchase of Mortgage Loans involving more than
$100,000:
. Master mortgage loan sale and purchase agreements
pursuant to which Mortgage Loans have been purchased in
the past, and may be purchased in the future, on a bulk
and/or flow basis, from AHL's correspondents.
--------------------------------------------------------------------------------
K(a)(xv) Other contracts:
. Insurance and Indemnity Agreement dated as of September
1, 1996 between AHL and FSA.
--------------------------------------------------------------------------------
L. Bank Accounts See Schedule L, Bank Accounts, attached hereto.
------------- -------------
--------------------------------------------------------------------------------
M. Guarantees Guarantees:
----------
. Amended and Restated Guarantee dated as of October 1,
1997 by AHL with respect to AHC's obligations to
Cargill (the "Cargill Guarantee").
--------------------------------------------------------------------------------
N. Certain AHL has receivables from AHC to the extent the deferred
------- portions of the purchase prices of the NIM Assets (as
Advances defined under the Cargill Agreement) have not been fully
-------- paid. See also the disclosure re paragraph H(i) above.
--------------------------------------------------------------------------------
O. Compensation See Schedule O, Compensation Schedule, attached hereto.
------------ ---------------------
--------------------------------------------------------------------------------
E-7
--------------------------------------------------------------------------------
RE EXHIBIT D
--------------------------------------------------------------------------------
Paragraph Disclosure
--------- ----------
--------------------------------------------------------------------------------
P. Related Parties ▇▇. ▇▇▇▇▇▇▇ is a shareholder of, and ▇▇. ▇▇▇▇▇▇▇ is a
------------------ shareholder and director of, American Residential Investment
Trust, a real estate investment trust which purchases and
sells mortgage loans and mortgage-backed securities.
In addition to the Co-Sale Agreement, Investors' Rights
Agreement, Cargill Agreement, Cargill Guarantee and the
other contractual relationships with Affiliates, officers,
directors and/or principal shareholders identified in the
disclosure regarding paragraph K(a)(viii) above, AHC owes
AHL the deferred portions of the purchase prices for the NIM
Assets (as defined under the Cargill Agreement) sold by AHL
to AHC pursuant to two agreements, each entitled "Purchase
Agreement and Purchaser Certification", dated February 1,
1996 and September 1, 1996, respectively, between AHL and
AHC.
AHL owns 100% of the issued and outstanding stock of AHC.
AHL owns 375,000 shares of the Series A Preferred Stock of
Vicon.
--------------------------------------------------------------------------------
T. Business See disclosure regarding paragraph H(b) above.
-----------
Generally
---------
--------------------------------------------------------------------------------
U. Licenses and See Schedule 5.3, Licenses, Approvals and Qualifications,
--------------- ---------------------------------------
Permits attached hereto.
-------
--------------------------------------------------------------------------------
V. Copies of RFC has received copies of such federal and other tax
------------ returns filed by AHL and AHC as RFC has specifically
Certain Documents requested.
-----------------
--------------------------------------------------------------------------------
E-8
SCHEDULE 5.3 TO
EXHIBIT E TO
LOAN AND SECURITY AGREEMENT
(Convertible Debt)
Licenses, Approvals and Qualifications
--------------------------------------
--------------------------------------------------------------------------
State License Type Qualified
--------------------------------------------------------------------------
Arizona Exempt Yes
--------------------------------------------------------------------------
California Finance Lender Yes
--------------------------------------------------------------------------
California Real Estate Broker Yes
--------------------------------------------------------------------------
California Residential Mortgage Lenders Yes
--------------------------------------------------------------------------
Colorado Supervised Lender Yes
--------------------------------------------------------------------------
Connecticut First Mortgage Lender/Broker No
--------------------------------------------------------------------------
Connecticut Secondary Mortgage Lender No
--------------------------------------------------------------------------
Delaware Licensed Lender No
--------------------------------------------------------------------------
District of Columbia Mortgage Lender No
--------------------------------------------------------------------------
Florida Mortgage Lender Yes
--------------------------------------------------------------------------
Georgia Mortgage Lender Yes
--------------------------------------------------------------------------
Hawaii Mortgage Broker Yes
--------------------------------------------------------------------------
Idaho Mortgage Lender Yes
--------------------------------------------------------------------------
Idaho Regulated Lender Yes
--------------------------------------------------------------------------
Illinois Residential Mortgage Yes
--------------------------------------------------------------------------
Indiana Loan License Yes
--------------------------------------------------------------------------
Iowa Mortgage Banker Yes
--------------------------------------------------------------------------
Kansas Supervised Loan Yes
--------------------------------------------------------------------------
Louisiana Mortgage Lender Yes
--------------------------------------------------------------------------
Maine Supervised Lender Yes
--------------------------------------------------------------------------
Maryland Mortgage Lenders Yes
--------------------------------------------------------------------------
Massachusetts Mortgage Lender Yes
--------------------------------------------------------------------------
Massachusetts Collection Agency Yes
--------------------------------------------------------------------------
Michigan Secondary Mortgage Yes
--------------------------------------------------------------------------
Michigan Lender, Servicer, Broker Yes
--------------------------------------------------------------------------
Minnesota Exempt Yes
--------------------------------------------------------------------------
Missouri Exempt Yes
--------------------------------------------------------------------------
Montana Exempt Yes
--------------------------------------------------------------------------
Nebraska Mortgage Banker No
--------------------------------------------------------------------------
New Hampshire First Mortgage Banker Yes
--------------------------------------------------------------------------
New Hampshire Second Mortgage Home Loan Lender Yes
--------------------------------------------------------------------------
New Jersey Licensed Lender Yes
--------------------------------------------------------------------------
New Mexico Registration Certificate No
--------------------------------------------------------------------------
New York Mortgage Banker Yes
--------------------------------------------------------------------------
North Carolina Exempt Yes
--------------------------------------------------------------------------
5.3-1
---------------------------------------------------------------------
State License Type Qualified
---------------------------------------------------------------------
North Dakota Money Broker Yes
---------------------------------------------------------------------
Ohio Certificate of Registration Yes
---------------------------------------------------------------------
Oklahoma Supervised Loan Yes
---------------------------------------------------------------------
Oregon Mortgage Banker Yes
---------------------------------------------------------------------
Pennsylvania First Mortgage Lender Yes
---------------------------------------------------------------------
Pennsylvania Secondary Mortgage Lender Yes
---------------------------------------------------------------------
Rhode Island Licensed Lender Yes
---------------------------------------------------------------------
South Carolina Supervised Lender Yes
---------------------------------------------------------------------
South Dakota Mortgage Lender Yes
---------------------------------------------------------------------
Tennessee Certificate of Registration Yes
---------------------------------------------------------------------
Texas Lending License Yes
---------------------------------------------------------------------
Utah Residential 1st Mortgage Notification Yes
---------------------------------------------------------------------
Vermont Consumer Credit Notification Yes
---------------------------------------------------------------------
Virginia Mortgage Lender Yes
---------------------------------------------------------------------
Washington Consumer Loan Yes
---------------------------------------------------------------------
West Virginia Secondary Mortgage Lender's Yes
---------------------------------------------------------------------
Wisconsin Mortgage Banker Yes
---------------------------------------------------------------------
HUD Approvals:
Title I Investing Lender, #▇▇▇▇▇-▇▇▇▇-▇
Title II Non-Supervised Mortgagee, #▇▇▇▇▇-▇▇▇▇-▇
5.3-2
SCHEDULE H(o) TO
EXHIBIT E TO
LOAN AND SECURITY AGREEMENT
(Convertible Debt)
Projected Capital Expenditures
------------------------------
(dollars in thousands)
---------------------------------------------------------------------------------------------------------
Retail Retail
Branch Branch
Atlanta Omaha ▇▇▇ ▇▇▇ Cincinnati Orange San Diego Total
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Copy Machines/Faxes $ 30 $ 15 $ 15 $ 15 $ 75
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Computers/Software $ 116 $ 39 $ 40 $ 40 $ 65 $ 130 $ 430
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Office Furniture $ 125 $ 31 $ 35 $ 35 $ 25 $ 6 $ 257
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Telephones $ 45 $ 15 $ 17 $ 17 $ 10 $ 104
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Misc $ 15 $ 15 $ 15 $ 15 $ 5 $ 10 $ 75
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Total $ 331 $ 115 $ 122 $ 122 $ 100 $ 11 $ 140 $ 941
---------------------------------------------------------------------------------------------------------
SCHEDULE I TO
EXHIBIT E TO
LOAN AND SECURITY AGREEMENT
(Convertible Debt)
Insurance
---------
I-1
Accredited Home Lenders, Inc.
Property Coverages
================================================================================
COMPANY Federal Insurance Company
--------------------------------------------------------------------------------
POLICY NUMBER 3535-92-75
--------------------------------------------------------------------------------
POLICY TERM 08/30/98 to 08/30/99
--------------------------------------------------------------------------------
ESTIMATED ANNUAL PREMIUM $13,674
================================================================================
================================================================================
BLANKET BUSINESS BUSINESS
BUILDING ADDRESS PERSONAL INCOME WITH
PROPERTY LIMIT EXTRA EXPENSE
================================================================================
See Property Schedule $ 561,600 $2,000,000
(Page 15)
--------------------------------------------------------------------------------
Coinsurance 100% 100%
================================================================================
================================================================================
CAUSES OF LOSS . Special Form,
. Excluding Earthquake & Flood
. Including Machinery Breakdown
--------------------------------------------------------------------------------
VALUATION BASIS . Replacement Cost
--------------------------------------------------------------------------------
BUSINESS INCOME . Unlimited Extended Period of Indemnity
. Ordinary Payroll Included
--------------------------------------------------------------------------------
DEDUCTIBLE . $1,000 Per Occurrence
================================================================================
This is a summary of insurance only. The precise coverage afforded is subject to
the terms, conditions and exclusions of the policies as issued. Barney & Barney
makes no representations, either express or implied, as to the adequacy of any
limits of protection. Determination of the limits of protection is your
responsibility.
I-2
Accredited Home Lenders, Inc.
Additional Subjects of Insurance
CHUBB FORM ONLY
----- ----
The limits of insurance stated for the following subjects of insurance are
granted by Chubb as additions to your insurance program without any premium
charge. These limits of insurance apply separately at each of your premises.
Under Chubb's Customarq form, various coverages are provided within one single
blanket limit. You may choose, at the time of a loss, how coverage should apply,
subject to the limit. For example, you may elect to have $100,000 go toward EDP,
$50,000 to valuable papers and the remaining $100,000 to accounts receivable.
============================================================================================
COVERAGE LIMIT DEDUCTIBLE
============================================================================================
COVERAGES INCLUDED IN $250,000 "BLANKET LIMIT"
============================================================================================
Electronic Data Processing Property Blanket Limit $1,000
--------------------------------------------------------------------------------------------
Personal Property of Employees Blanket Limit $1,000
--------------------------------------------------------------------------------------------
Accounts Receivable Blanket Limit $1,000
--------------------------------------------------------------------------------------------
Valuable Papers Blanket Limit $1,000
--------------------------------------------------------------------------------------------
Fine Arts Blanket Limit $1,000
--------------------------------------------------------------------------------------------
Outdoor Trees, Shrubs, Plants or Lawns Blanket Limit $1,000
--------------------------------------------------------------------------------------------
Fire Department Service Charges Blanket Limit $1,000
--------------------------------------------------------------------------------------------
Extra Expense Blanket Limit $1,000
--------------------------------------------------------------------------------------------
Leasehold Interest - Improvements & Betterments Blanket Limit $1,000
--------------------------------------------------------------------------------------------
Property Damage Extortion Blanket Limit $1,000
============================================================================================
This is a summary of insurance only. The precise coverage afforded is subject to
the terms, conditions and exclusions of the policies as issued. Barney & Barney
makes no representations, either express or implied, as to the adequacy of any
limits of protection. Determination of the limits of protection is your
responsibility.
I-3
Accredited Home Lenders, Inc.
Additional Subjects of Insurance (continued)
CHUBB FORM ONLY
----- ----
===============================================================================================
COVERAGE LIMIT DEDUCTIBLE
===============================================================================================
COVERAGES WITH SPECIFIC LIMITS
===============================================================================================
Electronic Data Processing in Transit $ 50,000 $1,000
-----------------------------------------------------------------------------------------------
Personal Property of Others Part of Personal Property Limit $1,000
-----------------------------------------------------------------------------------------------
Accounts Receivable in Transit $ 10,000 $1,000
-----------------------------------------------------------------------------------------------
Valuable Papers in Transit $ 10,000 $1,000
-----------------------------------------------------------------------------------------------
Fine Arts in Transit $ 10,000 $1,000
-----------------------------------------------------------------------------------------------
Debris Removal $250,000 Included
-----------------------------------------------------------------------------------------------
Invenrory or Appraisals $ 10,000 Included
-----------------------------------------------------------------------------------------------
Pollutant Clean-Up and Removal $ 25,000 $1,000
-----------------------------------------------------------------------------------------------
Money & Securities $1,000
. On Premises $ 20,000
. Off Premises $ 10,000
-----------------------------------------------------------------------------------------------
Changes In Or Extremes of Temperature and/or Covered Peril $1,000
Dampness or Dryness of Atmosphere
-----------------------------------------------------------------------------------------------
Installation - Any Job Site $ 50,000 $1,000
-----------------------------------------------------------------------------------------------
Business Income - Dependent Premises $250,000 None
-----------------------------------------------------------------------------------------------
Personal Property at any other Location $ 10,000 $1,000
-----------------------------------------------------------------------------------------------
Personal Property Exhibitions, Fairs or Trade $ 5,000 $1,000
Shows
-----------------------------------------------------------------------------------------------
Personal Property in Transit $ 10,000 $1,000
===============================================================================================
If these limits of insurance are not sufficient, you may purchase additional
limits of insurance for one or more subjects of insurance at any premises. The
premium charge will be based upon the additional limits of insurance you
purchase.
This is a summary of insurance only. The precise coverage afforded is subject to
the terms, conditions and exclusions of the policies as issued. Barney & Barney
makes no representations, either express or implied, as to the adequacy of any
limits of protection. Determination of the limits of protection is your
responsibility.
I-4
Accredited Home Lenders, Inc.
Property Coverages (continued)
================================================================================
COVERAGE LIABILITY DEDUCTIBLE
LIMIT
================================================================================
Valuable Papers $ 250,000 $1,000
--------------------------------------------------------------------------------
Business Personal Property - Any Other $ 100,000 $1,000
Location
--------------------------------------------------------------------------------
Electronic Data Processing Property
. On Premises $1,510,000 $1,000
. In Transit $ 75,000 $1,000
================================================================================
This is a summary of insurance only. The precise coverage afforded is subject to
the terms, conditions and exclusions of the policies as issued. Barney & Barney
makes no representations, either express or implied, as to the adequacy of any
limits of protection. Determination of the limits of protection is your
responsibility.
I-5
Accredited Home Lenders, Inc.
General Liability Coverages
POLICY FORM:
. Commercial General Liability - Occurrence Form
================================================================================
COVERAGE LIMIT DEDUCTIBLE
================================================================================
General Aggregate $ 2,000,000 None
--------------------------------------------------------------------------------
Personal/Advertising Injury $ 1,000,000 None
--------------------------------------------------------------------------------
Each Occurrence $ 1,000,000 None
--------------------------------------------------------------------------------
Medical Expense $ 10,000 None
--------------------------------------------------------------------------------
Employee Benefit Liability $1,000
. Each Claim $ 1,000,000
. Aggregate $ 1,000,000
. Claims-Made Form
. Retroactive Date: 8/30/97
--------------------------------------------------------------------------------
Hired & Non-Owned Auto Liability $ 1,000,000 None
================================================================================
INCLUDED:
. Bodily Injury and/or Property Damage
. Personal Injury and/or Advertising Injury
. Premises or Operations Liability
. Products and/or Completed Operations Liability
. Blanket Contractual
. "Host" Liquor Liability
. Broad Form Property Damage
. Non-Owned Watercraft Liability (under 55 feet in length)
. Incidental Malpractice
. Limited Automatic Coverage/Newly Acquired Organizations
. Limited Worldwide Liability
. Vicarious Liability Arising from Independent Contractors
. Employees, Leased Workers, and Volunteer Workers as Insureds
. Broad form Vendors
. Lessors of Premises as Insureds
. Non-Owned Aircraft
. All-Risk Legal Liability
. Lessors of Leased Equipment as Insureds
. Written Contractual - Personal Injury and Advertising Injury
This is a summary of insurance only. The precise coverage afforded is subject to
the terms, conditions and exclusions of the policies as issued. Barney & Barney
makes no representations, either express or implied, as to the adequacy of any
limits of protection. Determination of the limits of protection is your
responsibility.
I-6
Accredited Home Lenders, Inc.
General Liability Coverages (continued)
RATING ASSUMPTIONS USED:
================================================================================
RATING ANNUAL SUBJECT TO AUDIT?
CLASSIFICATION BASIS ESTIMATED (YES/NO)
================================================================================
Mortgage Banker Area 30,400 No
================================================================================
LIMITATIONS OR EXCLUSIONS:
All liability policies contain exclusions or limitations. In addition to the
typical exclusions customarily found in policies of this type, the coverage also
will contain, but not be limited to, the following exclusions, limitations or
conditions:
Exclusions:
. Absolute Pollution
. Professional Liability/Professional Services
. Employers Liability
. Termination of Employee
. Asbestos
. California Real Estate Development
. Foreclosure, Trust Leasing Liability
. California Construction Loan
. California Securities & Trade Practices
Limitations:
. Cumis - California Endorsement
This is a summary of insurance only. The precise coverage afforded is subject to
the terms, conditions and exclusions of the policies as issued. Barney & Barney
makes no representations, either express or implied, as to the adequacy of any
limits of protection. Determination of the limits of protection is your
responsibility.
I-7
Accredited Home Lenders, Inc.
Professional Liability Coverages
======================================================================
COMPANY American International Specialty
Lines Insurance Co.
----------------------------------------------------------------------
POLICY NUMBER 2443168
----------------------------------------------------------------------
POLICY TERM 08/30/98 to 08/30/99
----------------------------------------------------------------------
ESTIMATED ANNUAL PREMTUM $12,500 plus 3.35%
$418.75 surplus lines taxes & fees
----------------------------------------------------------------------
Subject to 25% minimum earned premium.
======================================================================
================================================================================
COVERAGE LIMIT OF LMILITY DEDUCTIBLE
================================================================================
Professional Liability
. Per Wrongful Act $1,000,000 $100,000
. Aggregate $1,000,000 Each wrongful act including
. Includes Defense Costs defense costs
================================================================================
OPERATIONS COVERED:
. Solely in the performance of providing services as a mortgage banker
in the origination, processing and selling of residential loans for
others for a fee
ENDORSEMENTS:
. Direct loss payee - Bank United of Texas, FSB
EXCLUSIONS:
. Commingling and Failure to Pay
. Defective Title
. Future Value
. Owned or Affiliated Entity
. Securities and Exchange Commission
. Specified Rate of Return
. Syndication
. Knowledge of Wrongful Act
. Pollution
. Nuclear
. Insured Interest
This is a summary of insurance only. The precise coverage afforded is subject to
the terms, conditions and exclusions of the policies as issued. Barney & Barney
makes no representations, either express or implied, as to the adequacy of any
limits of protection. Determination of the limits of protection is your
responsibility.
I-8
Accredited Home Lenders, Inc.
Crime Policy
=======================================================
COMPANY Fidelity & Deposit Company of
Maryland
-------------------------------------------------------
POLICY NUMBER CCP 001403700
-------------------------------------------------------
POLICY TERM 07/20/95 to "Until Cancelled"
-------------------------------------------------------
ANNUAL PREMIUM $12,991 (8/30/98 - 8/30/99)
=======================================================
================================================================================
COVERAGE LIMIT DEDUCTIBLE
================================================================================
Employee Dishonesty $10,000,000 $100,000
. Blanket
================================================================================
NAMED INSURED:
. Accredited Home Lenders, Inc.
. Accredited Home Capital, Inc.
. Accredited Home Lenders, Inc. 401 (K) Retirement Savings Plan
. Axiom Financial Services
JOINT LOSS PAYABLE ENDORSEMENT:
. FH LMC
This is a summary of insurance only. The precise coverage afforded is subject to
the terms, conditions and exclusions of the policies as issued. Barney & Barney
makes no representations, either express or implied, as to the adequacy of any
limits of protection. Determination of the limits of protection is your
responsibility.
I-9
Accredited Home Lenders, Inc.
====================================================================
COMPANY Federal Insurance Company
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POLICY NUMBER 7977-03-02
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POLICY TERM 8/l/98 to 8/30/99
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TERM PREMIUM $2,299
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Umbrella Coverages
==============================================================
COVERAGE LIMIT
==============================================================
General Aggregate $2,000,000
--------------------------------------------------------------
Products/Completed Operations Aggregate $2,000,000
--------------------------------------------------------------
Personal & Advertising Injury Aggregate $2,000,000
--------------------------------------------------------------
Bodily Injury & Property Damage Liability
. Any One Occurrence $2,000,000
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Retained Limit None
==============================================================
LIMITATIONS OR EXCLUSIONS:
All liability policies contain exclusions or limitations. In addition to the
typical exclusions customarily found in policies of this type, the coverage also
will contain, but not be limited to, the following exclusions, limitations or
conditions:
Exclusions:
. Absolute Pollution . Trust
. Securities and Trade Practices . Foreclosure
. Financial Activities . Lead
. Money and Securities . Employment Related Practices
. Leasing . Real Estate Development/Construction
Limitations:
. Advertising Injury - Following Form
. Personal Injury - Following Form
This is a summary of insurance only. The precise coverage afforded is subject to
the terms, conditions and exclusions of the policies as issued. Barney & Barney
makes no representations, either express or implied, as to the adequacy of any
limits of protection. Determination of the limits of protection is your
responsiblity.
I-10
SCHEDULE K(a)(i) TO
EXHIBIT E TO
LOAN AND SECURITY AGREEMENT
(Convertible Debt)
Mortgage Loan Sale and Purchase Agreements
------------------------------------------
----------------------------------------------------------------------------------------------
Date Other Party Name of Agreement
----------------------------------------------------------------------------------------------
3/31/97 Aames Funding Corporation Loan Purchases and Sale Agreement
----------------------------------------------------------------------------------------------
6/1/97 Advanta Mortgage Conduit Master Loan Purchase Agreement
Services, Inc.
----------------------------------------------------------------------------------------------
12/10/97 American Residential Investment Master Mortgage Loan Sale and Purchase
Trust Agreement
----------------------------------------------------------------------------------------------
10/1/96 AMRESCO Residential Mortgage Continuing Loan Purchase Agreement
Corporation
----------------------------------------------------------------------------------------------
7/25/95 Associates Commercial Master Mortgage Loan Purchasing
Corporation dba First Collateral Agreement
Services
----------------------------------------------------------------------------------------------
9/28/98 Associates Home Equity Services, Loan Purchase Agreement
Inc.
----------------------------------------------------------------------------------------------
5/8/98 Banc One Financial Services, Inc. Master Mortgage Loan Purchase Agreement
----------------------------------------------------------------------------------------------
4/30/98 Beneficial Management Company Agreement for Ongoing Purchase and Sale of
Mortgage Loans
----------------------------------------------------------------------------------------------
9/7/95 Berkeley Federal Bank & Trust Mortgage Loan Purchase and Warranties
FSB Agreement
----------------------------------------------------------------------------------------------
10/30/96 Brentwood Financial Group Purchase Agreement Mortgage Loans
----------------------------------------------------------------------------------------------
Cityscape Corp. Master Agreement for Sale and Purchase of
Mortgages
----------------------------------------------------------------------------------------------
12/29/98 Contimortgage Corporation Master Agreement for Sale and Purchase of
Mortgages
----------------------------------------------------------------------------------------------
2/__/99 Countrywide Home Loans, Inc. . Loan Purchase Agreement
. Addendum to Loan Purchase Agreement
. Addendum to Loan Purchase Agreement
- Subprime
. Addendum to Loan Purchase Agreement
for Junior Loans
----------------------------------------------------------------------------------------------
12/4/97 EquiCredit Corporation of Master Agreement for Purchase and Sale of
America Mortgage Loans
----------------------------------------------------------------------------------------------
Ford Consumer Finance Company, Loan Purchase Agreement
Inc.
----------------------------------------------------------------------------------------------
5/12/98 HomeComings Financial Network, Addendum
Inc.
----------------------------------------------------------------------------------------------
K(a)(i)-1
--------------------------------------------------------------------------------
Date Other Party Name of Agreement
--------------------------------------------------------------------------------
3/28/97 HomeComings Financial Network, Purchase Agreement for Mortgage
Inc.(RFC) Loans and REO Properties
--------------------------------------------------------------------------------
2/26/98 Household Financial Services, Inc. Continuing Loan Purchase Agreement
& JV Mortgage Capital, L.P.
--------------------------------------------------------------------------------
12/9/96 Industry Mortgage Company, L.P. . Master Agreement for Sale and
Purchase of Mortgages
. Addendum
--------------------------------------------------------------------------------
10/30/97 Life Bank Mortgage Loan Purchase and Sale
Agreement
--------------------------------------------------------------------------------
3/__/99 MBNA America Bank (Delaware) Mortgage Loan Sale Agreement
--------------------------------------------------------------------------------
10/1/98 MBNA Consumer Services, Inc. Bulk Mortgage Loan Purchase and
Sale Agreement
--------------------------------------------------------------------------------
12/18/98 Midwest First Financial Limited Loan Sale Agreement
Partnership III
--------------------------------------------------------------------------------
6/26/98 National Mortgage Corporation . Continuing Mortgage Loan
Purchase Agreement,
. Letter
--------------------------------------------------------------------------------
1/21/99 Oceanmark Bank, FSB Purchase and Sale Agreement
--------------------------------------------------------------------------------
1/2/97 OCWEN Federal Bank FSB Master Mortgage Loan and REO
Purchase Agreement
--------------------------------------------------------------------------------
6/22/98 Option One Mortgage Corporation . Correspondent Lending Agreement
. Addendum
--------------------------------------------------------------------------------
10/27/98 PSB Lending Corp. Loan Master Purchase and Sale
Agreement
--------------------------------------------------------------------------------
12/8/98 Residential Funding Corporation . Client Contract
. Consumer Finance Acquisitions
Guide Addendum
--------------------------------------------------------------------------------
3/17/99 Residential Funding Corporation . Loan Sale Commitment
. Shared Execution Forward
Commitment
--------------------------------------------------------------------------------
2/4/98 Saxon Mortgage, Inc. Mortgage Loan Purchase Agreement
--------------------------------------------------------------------------------
3/31/98 Source One Mortgage Services Sale Agreement Contract
Corporation
--------------------------------------------------------------------------------
10/24/97 TMS Mortgage Inc. Sale and Purchase Agreement
--------------------------------------------------------------------------------
K(a)(i)-2
SCHEDULE K(a)(v) TO
EXHIBIT E TO
LOAN AND SECURITY AGREEMENT
(Convertible Debt)
Employee Benefit Plans
Defined Contribution Plan and Trust Basic Plan Document #010 dated as of
December 31, 1995 by California Pension Administration and Consultants, Inc.
("CALPAC, Inc.").
Adoption Agreement for CALPAC, Inc. Non-Standardized Profit Sharing Plan and
Trust for AHL.
Section 125 Flexible Benefit Plan adopted by AHL effective as of January 1,
1999.
Group Health Service Contract Blue Shield Access+ HMO Health Plan effective as
of January 1, 1999 between AHL and California Physicians' Service dba Blue
Shield of California, and Evidence of Coverage and Disclosure Form.
Group Health Service Contract Preferred Plan effective as of January 1, 1999
between AHL and California Physicians' Service dba Blue Shield of California,
and Evidence of Coverage and Disclosure Form.
Group Dental Care Contract dated March 1, 1998 by The Prudential Insurance
Company of America.
Certificate of Group Insurance re Term Life Insurance and Accidental Death &
Dismemberment Insurance from Fortis Benefits Insurance Company.
Administration Incentive Plan effective July 1, 1997.
Team Incentive Plan effective July 1, 1998.
SCHEDULE K(a)(x) TO
EXHIBIT E TO
LOAN AND SECURITY AGREEMENT
(Convertible Debt)
Intellectual Property Contracts
---------------------------------------------------------------------------------------
Date Counterparty Name of Agreement
---------------------------------------------------------------------------------------
7/14/98 Associated Software . License, Services, and Purchase
Consultants, Inc. Agreement
. Addendum
---------------------------------------------------------------------------------------
4/28/97 Data-Link Systems, L.L.C. Software Licensing Agreement
---------------------------------------------------------------------------------------
2/17/99 Pinnacle Data Corporation Combined License and Services Agreement
---------------------------------------------------------------------------------------
12/9/98 ProBusiness Services Services and Software License Agreement
---------------------------------------------------------------------------------------
1l/20/96 RATA Associates Geocoding Services and Software License
Agreement
---------------------------------------------------------------------------------------
2/21/96 Wall Street Analytics, Inc. Software License Agreement
---------------------------------------------------------------------------------------
7/13/98 WorldCorn Technologies, Inc. WorldCom Intelenet Service Agreement
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SCHEDULE K(a)(xi)TO
EXHIBIT E TO
LOAN AND SECURITY AGREEMENT
(Convertible Debt)
Equipment and Office Leases
---------------------------
---------------------------------------------------------------------------------
OFFICE LEASES
---------------------------------------------------------------------------------
Date Location Lessor/Sublessor Name of Document
---------------------------------------------------------------------------------
2/9/99 Atlanta, GA The Corporate Forum Corporate Forum Standard
Group Tenancy Agreement
---------------------------------------------------------------------------------
2/15/99 ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Bedford L.L.C. West Maple Office Park Lease
---------------------------------------------------------------------------------
12/5/97 Rockaway, D P Suites, Inc. dba Agreement for Office Space
NJ Offices Unlimited and Services
International of
Rockaway
---------------------------------------------------------------------------------
7/1/98 Cincinnati, GTE Wireless of the Sublease
OH Midwest Incorporated
---------------------------------------------------------------------------------
8/29/95 San Diego, MBL Life Assurance Office Lease
CA Corporation
---------------------------------------------------------------------------------
8/27/96 San Diego, MBL Life Assurance First Amendment to Lease
CA Corporation
---------------------------------------------------------------------------------
11/__/96 San Diego, MBL Life Assurance Second Amendment to Lease
CA Corporation
---------------------------------------------------------------------------------
2/26/97 San Diego, MBL Life Assurance Third Amendment to Lease
CA Corporation
---------------------------------------------------------------------------------
11/2/98 Tempe, AZ The ▇▇▇▇▇▇ Family Executive Suites and
Trust Services Lease
---------------------------------------------------------------------------------
10/14/97 Anaheim, VPT Real Estate Corp Stadium Towers Center
CA III Office Lease
---------------------------------------------------------------------------------
2/9/99 Anaheim, VPT Real Estate Corp Amendment No. 1 to Stadium
CA III Towers Center Office Lease
[renewal option]
---------------------------------------------------------------------------------
9/14/98 Albany, NY Winstar Commercial Sublease (Accolade "net
Funding branch")
---------------------------------------------------------------------------------
9/14/98 Ithaca, NY Winstar Commercial Sublease (Accolade "net
Funding branch")
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K(a)(xi)-1
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EQUIPMENT LEASES
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Date Lessor Name of Document
--------------------------------------------------------------------------------
9/21/98 AmeriLease Corp. [Untitled]
--------------------------------------------------------------------------------
12/7/98 AmeriLease Corp. Equipment Lease Agreement
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9/9/98 Ascom ▇▇▇▇▇▇ Mailing Postage Meter Rental Agreement
Systems, Inc
--------------------------------------------------------------------------------
12/16/98 Bank Vest Capital Lease Agreement (two separate leases)
Corporation
--------------------------------------------------------------------------------
2/8/99 Bank Vest Capital Lease Agreement
Corporation
--------------------------------------------------------------------------------
9/17/98 Capital +, Inc. [Untitled]
--------------------------------------------------------------------------------
3/16/98 ▇▇▇▇▇▇-▇▇▇▇▇▇▇▇, ▇.▇. Equipment Lease Agreement
--------------------------------------------------------------------------------
1/27/99 Information Leasing [Untitled]
Corporation
--------------------------------------------------------------------------------
3/5/99 Information Leasing [Untitled] (two separate leases)
Corporation
--------------------------------------------------------------------------------
11/24/97 Toshiba America Equipment Lease Agreement
Information Systems, Inc
--------------------------------------------------------------------------------
4/23/98 Toshiba America Equipment Lease Agreement
Information Systems, Inc
--------------------------------------------------------------------------------
5/29/98 Toshiba America Equipment Lease Agreement
Information Systems, Inc
--------------------------------------------------------------------------------
[unknown] Toshiba America [Untitled]
Information Systems, Inc
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K(a)(xi)-2
SCHEDULE L TO
EXHIBIT E TO
LOAN AND SECURITY AGREEMENT
(Convertible Debt)
Bank Accounts
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Authorized
Account Name Account Number Account Type Name of Bank Account Function Personnel
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A/P checks, wires,
AHL Operating 1102402051 Checking Bank of America sales wires, etc A,B
------------------------------------------------------------------------------------------------------------------
Wire Disbursement,
AHL Funding** 1450907604 Checking Bank of America Warehouse Advance B
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Higher interest bearing
AHL Money Market 1102104580 Money Market Bank of America acct D
------------------------------------------------------------------------------------------------------------------
AHL Treasury Money Higher interest bearing
Market Fund 1102402051 Treasury Bank of America acct D
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For retail division,
accept credit card
AHL Visa Account** 1450707624 Checking Bank of America deposits D
------------------------------------------------------------------------------------------------------------------
Phasing Out of use-
Payroll 1102616156 Checking Bank of America payroll acct A,B
------------------------------------------------------------------------------------------------------------------
For Bank United
Bank United Funding 8002081902 Checking Bank United Warehouse Activity B
------------------------------------------------------------------------------------------------------------------
For Bank United
Bank United Operating 8002081910 Checking Bank United Warehouse Activity B
------------------------------------------------------------------------------------------------------------------
Bank United Money For Bank United
Market** 8002664764 Checking Bank United Warehouse Activity B
------------------------------------------------------------------------------------------------------------------
Checks, wires, etc for
AHC Operating 1102206890 Checking Bank of America AHC A,B
------------------------------------------------------------------------------------------------------------------
Wire Disbursement,
Warehouse Adv for
AHC Funding 1102206898 Checking Bank of America AHC B
------------------------------------------------------------------------------------------------------------------
Higher interest bearing
AHC Money Market 1102001766 Money Market Bank of America acct-for AHC D
------------------------------------------------------------------------------------------------------------------
AHC Treasury Money Higher interest bearing
Market Fund 1102206890 Treasury Bank of America acct-for AHC D
------------------------------------------------------------------------------------------------------------------
Wire Disbursement,
AHL Funding*** 4488-837535 Checking ▇▇▇▇▇ Fargo Warehouse Advance E
------------------------------------------------------------------------------------------------------------------
AHL Overland Sweep Higher interest bearing
Account*** 4417-846482 Checking ▇▇▇▇▇ Fargo acct E
------------------------------------------------------------------------------------------------------------------
New A/P checks,
AHL Operating*** 4488-837527 Checking ▇▇▇▇▇ Fargo wires, sales, etc E
------------------------------------------------------------------------------------------------------------------
AHC Analysis Checking
Overview*** 4488-837501 Checking ▇▇▇▇▇ Fargo AHC A/P checks, etc E
------------------------------------------------------------------------------------------------------------------
AHL Payroll*** 4488-837519 Checking ▇▇▇▇▇ Fargo Payroll Use E
------------------------------------------------------------------------------------------------------------------
Wire Disbursement*** 5148871 Checking First Chicago RFC wire disbursement RFC
------------------------------------------------------------------------------------------------------------------
Payoff Account*** ▇▇▇▇▇▇▇ Checking First Chicago RFC sales proceeds RFC
------------------------------------------------------------------------------------------------------------------
Net effect of RFC
Operating*** 5148804 Checking First Chicago warehouse advances D
------------------------------------------------------------------------------------------------------------------
**Note: These accounts opened as of October 1997
***Note: These accounts opened as of December 1998
Authorized Personnel
A B C D E
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Canvea ▇▇▇▇▇ Canvea ▇▇▇▇▇ Canvea ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
SCHEDULE 0 TO
EXHIBIT E TO
LOAN AND SECURITY AGREEMENT
(Convertible Debt)
Compensation
------------
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Base ▇▇▇. '98 Bonus
▇▇▇. or Base ▇▇▇. 1997 Bonus Comm'n Payable in Payable in Current
Name Title Comm'n Paid in 1998 Paid in '98 Paid in 1998 1999* '99 $/Mo.*
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▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Div. Mgr., Retail Both $ 84,000.00 $ 73,777.58 $ 84,000.00 $ 7,000.00
--------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Dir. Operations ▇▇▇. $137,500.00 $11,458.34
--------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇** Div. Mgr. Both $213,750.00 ***
--------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇ Dir. Info. Tech ▇▇▇. $ 78,666.79 $ 3,750.00 $ 88,000.00 $ 15,000.00 $ 7,333.33
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▇▇▇▇▇▇, ▇▇▇▇ Reg. Mgr. Both $ 60.000.00 $ 52,921.90 $ 60,000.00 $ 5,000.00
--------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Reg. Mgr. Both $ 60,000.00 $ 883.90 $130,084.57 $ 60,000.00 $ 5,000.00
--------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. Gen'l Counsel ▇▇▇. $102,000.00 $ 9,600.00 $113,200.00 $ 20,000.00 $ 9,433.34
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▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. CEO ▇▇▇. $178,333.34 $190,000.00 $ 45,000.00 $15,833.34
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▇▇▇▇▇, ▇▇▇▇▇▇ Pres. & COO ▇▇▇. $192,500.00 $25,000.00 $208,000.00 $100,000.00 $17,333.34
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▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ Div Mgr. Both $ 87,500.00 $134,224.86 $111,000.00 $ 7,000.00
--------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇ EVP ▇▇▇. $178,333.34 $190,000.00 $ 45,000.00 $15,833.34
--------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. Dir. Retail ▇▇▇. $108,333.32 $109,200.00 $ 9,100.00
--------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ Reg. Mgr. Both $ 63,299.96 $ 4,000.00 $ 46,527.07 $ 60,000.00 $ 5,000.00
--------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇ CFO ▇▇▇. $104,000.00 $112,000.00 $ 15,000.00 $ 9,333.34
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▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Dir. Cap. Mkts ▇▇▇. $ 95,339.87 **** $106,000.00 $ 16,500.00 $ 8,833.34
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▇▇▇▇▇▇▇▇, ▇▇▇ Acct. Exec. Both $ 32,500.00 $ 3,780.26 $ 95,007.69 $ 36,000.00 $ 3,000.00
--------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ Div. Mgr. Both $ 24,615.39 $ 11,894.93 $115,000.00 $ 8,333.34
--------------------------------------------------------------------------------------------------------------------------------
* Does not include any estimate of commissions payable in 1999.
** 4-l-99 start date.
*** Includes $35,000 signing bonus and $75,000 guaranteed bonus, $50,000 of
which is payable in 1999.
EXHIBIT F TO
LOAN AND SECURITY AGREEMENT
(Convertible Debt)
EXISTING STOCK OPTIONS/PLANS
1995 Stock Option Plan as adopted February 2, 1995 and amended January 31, 1997.
1995 Executive Stock Option Plan as adopted February 13, 1995 and amended
January 31, 1997, February 18, 1998, June 1, 1998 and February 1, 1999.
1998 Stock Option Plan as adopted February 18, 1998 and amended February 1,
1999.
See Exhibit C-l for a list of stock option grants made pursuant to the foregoing
plans.
EXHIBIT G TO
LOAN AND SECURITY AGREEMENT
(Convertible Debt)
DEBENTURE ADVANCE REQUEST
Date: __________ __, [1999 or 200_]
Reference is made to that certain Loan and Security Agreement
(Convertible Debt) between ACCREDITED HOME LENDERS, INC., a California
corporation (the "Borrower") and RESIDENTIAL FUNDING CORPORATION, a Delaware
corporation (the "Lender"), dated as of March 17, 1999 (as the same may be
amended, modified, supplemented, renewed, or restated from time to time, the
"Agreement"). All capitalized terms used herein and all Section numbers given
herein refer to those terms and Sections set forth in the Agreement. This
Debenture Advance Request is submitted to the Lender pursuant to Section 2.2.
The undersigned hereby requests a Debenture Advance in the principal
amount of $__________ to be made on __________ ____, [1999 or 200___]. The
outstanding principal amount of all Debenture Advances, after giving effect to
the requested Debenture Advance, will be $__________.
The undersigned hereby certifies that (i) the Borrower had cumulative
net income, determined on a consolidated basis in accordance with GAAP, [for the
period from January 1, 1999 through the last day of the most recently completed
month] [for the six most recently completed months] of $_________ and (ii) the
outstanding principal amount of all Debenture Advances, after giving effect to
the requested Debenture Advance, complies with the limitations and requirements
of Section 2.1 (c).
The representations and warranties of the Borrower set forth in Article
V of the Agreement (other than Section 5.5 thereof) are true and correct in all
material respects on and as of the date hereof as if made on and as of the date
of such Debenture Advance.
The Borrower has performed all agreements to be performed by it under
the Agreement and, after giving effect to the requested Debenture Advance, no
Event of Default has occurred and is continuing.
Since the Statement Date, the Borrower has not incurred any material
liabilities, direct or contingent, other than in the ordinary course of its
business.
ACCREDITED HOME LENDERS, INC.
By:_________________________
Its:________________________
G-1