EXHIBIT 10.1
================================================================================
AMENDED AND RESTATED MASTER LOAN AND SECURITY AGREEMENT
Dated as of June 20, 2003
NC CAPITAL CORPORATION
as a Borrower
NEW CENTURY MORTGAGE CORPORATION
as a Borrower
and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MORTGAGE CAPITAL INC.
as Lender
================================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS.
Section 1.1 Certain Defined Terms...................................... 1
Section 1.2 Accounting Terms and Determinations........................ 14
ARTICLE II
LOANS, NOTE AND PREPAYMENTS.
Section 2.1 Loans...................................................... 14
Section 2.2 Notes...................................................... 15
Section 2.3 Procedure for Borrowing (Loans Other
than Wet-Ink Transactions)................................. 15
Section 2.4 Procedure For Borrowing (Wet-Ink Transactions)............. 16
Section 2.5 Limitation on Types of Loans; Illegality................... 17
Section 2.6 Repayment of Loans; Interest............................... 18
Section 2.7 Mandatory prepayments or Pledge............................ 18
Section 2.8 Extension of Termination Date.............................. 18
ARTICLE III
PAYMENTS; COMPUTATIONS; ETC.
Section 3.1 Payments................................................... 19
Section 3.2 Computations............................................... 19
Section 3.3 Requirements of Law........................................ 19
Section 3.4 Facility Fee............................................... 20
ARTICLE IV
COLLATERAL SECURITY.
Section 4.1 Collateral; Security Interest.............................. 20
Section 4.2 Further Documentation...................................... 22
Section 4.3 Changes in Locations, Names, etc........................... 22
Section 4.4 Lender's Appointment as Attorney-in-Fact................... 22
Section 4.5 Performance by Lender of Borrowers' Obligations............ 23
Section 4.6 Proceeds................................................... 23
Section 4.7 Remedies................................................... 24
Section 4.8 Limitation on Duties Regarding Preservation of Collateral.. 25
Section 4.9 Powers Coupled with an Interest............................ 25
-i-
Section 4.10 Release of Security Interest............................... 25
ARTICLE V
CONDITIONS PRECEDENT.
Section 5.1 Initial Loan............................................... 25
Section 5.2 Initial and Subsequent Loans............................... 27
Section 5.3 Wet-Ink Transactions....................................... 29
ARTICLE VI
REPRESENTATIONS AND WARRANTIES.
Section 6.1 Existence.................................................. 29
Section 6.2 Financial Condition........................................ 29
Section 6.3 Litigation................................................. 30
Section 6.4 No Breach.................................................. 30
Section 6.5 Action..................................................... 30
Section 6.6 Approvals.................................................. 30
Section 6.7 Margin Regulations......................................... 30
Section 6.8 Taxes...................................................... 30
Section 6.9 Investment Company Act..................................... 31
Section 6.10 Collateral; Collateral Security............................ 31
Section 6.11 Chief Executive Office/Jurisdiction of Organization........ 32
Section 6.12 Location of Books and Records.............................. 32
Section 6.13 True and Complete Disclosure............................... 32
Section 6.14 ERISA...................................................... 32
Section 6.15 Subsidiaries............................................... 32
ARTICLE VII
COVENANTS OF THE BORROWERS.
Section 7.1 Financial Statements....................................... 33
Section 7.2 Litigation................................................. 35
Section 7.3 Existence, etc............................................. 35
Section 7.4 Prohibition of Fundamental Changes......................... 35
Section 7.5 Borrowing Base Deficiency.................................. 36
Section 7.6 Notices.................................................... 36
Section 7.7 Reports.................................................... 36
Section 7.8 Underwriting Guidelines.................................... 36
Section 7.9 Transactions with Affiliates............................... 37
Section 7.10 Limitation on Liens........................................ 37
Section 7.11 Limitation on Guarantees................................... 37
Section 7.12 Limitation on Distributions................................ 37
-ii-
Section 7.13 Servicer; Servicing Tape................................... 37
Section 7.14 Required Filings........................................... 37
Section 7.15 No Adverse Selection....................................... 37
Section 7.16 Remittance of Prepayments.................................. 38
Section 7.17 Minimum Usage.............................................. 38
ARTICLE VIII
EVENTS OF DEFAULT.
Section 8.1 Events of Default.......................................... 38
ARTICLE IX
REMEDIES UPON DEFAULT.
Section 9.1 Remedies................................................... 40
ARTICLE X
NO DUTY OF LENDER.
Section 10.1 No Duty.................................................... 41
ARTICLE XI
MISCELLANEOUS.
Section 11.1 Waiver..................................................... 41
Section 11.2 Notices.................................................... 41
Section 11.3 Indemnification and Expenses............................... 41
Section 11.4 Amendments................................................. 42
Section 11.5 Successors and Assigns..................................... 43
Section 11.6 Survival................................................... 43
Section 11.7 Captions................................................... 43
Section 11.8 Counterparts............................................... 43
Section 11.9 Loan Agreement Constitutes Security Agreement:
Governing Law.............................................. 43
Section 11.10 Submission To Jurisdiction: Waivers........................ 43
Section 11.11 WAIVER OF JURY TRIAL....................................... 44
Section 11.12 Acknowledgments............................................ 44
Section 11.13 Hypothecation or Pledge of Loans........................... 44
Section 11.14 Servicing.................................................. 44
Section 11.15 Due Diligence Review....................................... 45
Section 11.16 Set-Off.................................................... 46
Section 11.17 Intent..................................................... 47
Section 11.18 Joint and Several Liability................................ 47
-iii-
Section 11.19 Replacement by Repurchase Agreement......................... 47
Section 11.20 Treatment of Certain Information........................... 47
-iv-
SCHEDULES
---------
SCHEDULE 1 Representations and Warranties re: Mortgage Loans
SCHEDULE 2 Filing Jurisdictions and Offices
SCHEDULE 3 Subsidiaries
EXHIBITS
--------
EXHIBIT A Form of Promissory Note
EXHIBIT B Form of Custodial Agreement
EXHIBIT C-1 Form of Opinion of Counsel to Borrower
EXHIBIT C-2 Form of Opinion of Counsel to Guarantor
EXHIBIT D Form of Request for Borrowing
EXHIBIT E-1 Form of Borrower's Release Letter
EXHIBIT E-2 Form of Warehouse Lender's Release Letter
EXHIBIT F Underwriting Guidelines
EXHIBIT G Form of Servicer Notice
-v-
AMENDED AND RESTATED MASTER LOAN AND SECURITY AGREEMENT
AMENDED AND RESTATED MASTER LOAN AND SECURITY AGREEMENT, dated as of
June 20, 2003, between NC CAPITAL CORPORATION, a California corporation ("NC
Capital"), NEW CENTURY MORTGAGE CORPORATION, a California corporation ("New
Century" and together with NC Capital, each a "Borrower" and collectively, the
"Borrowers"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MORTGAGE CAPITAL INC., a New York corporation
(the "Lender").
RECITALS
NC Capital and the Lender are parties to that certain Master Loan and
Security Agreement, dated as of December 1, 2002 (as amended, supplemented or
otherwise modified prior to the date hereof, the "Existing Loan Agreement").
The Borrowers have requested that the Lender from time to time make or
continue to make, as applicable, revolving credit loans to them to finance
certain residential mortgage loans owned by the Borrowers, and the Lender is
prepared to continue to make such loans upon the terms and conditions hereof.
Each Borrower is engaged in a business that is complimentary to the business of
the other Borrowers. Each Borrower will directly benefit from each extension of
credit to the other Borrower, and the proceeds of each loan will inure to the
benefit of each Borrower.
The Borrowers and the Lender hereby agrees, in consideration of the
mutual premises and mutual obligations set forth herein, that the Existing Loan
Agreement is hereby amended and restated in its entirety as set forth in the
heading and recitals hereto and as follows.
ARTICLE I
Definitions and Accounting Matters.
Section 1.1 Certain Defined Terms. As used herein, the following
terms shall have the following meanings (all terms defined in this Section 1.1
or in other provisions of this Loan Agreement in the singular to have the same
meanings when used in the plural and vice versa):
"Affiliate" shall mean with respect to any Person, any "affiliate" of
such Person, as such term is defined in the Bankruptcy Code.
"Aged Wet-Ink Mortgage Loans" shall mean, collectively, Five-Day Aged
Wet-Ink Mortgage Loans, Six-Day Aged Wet-Ink Mortgage Loans, Seven-Day Aged
Wet-Ink Mortgage Loans, Eight-Day Aged Wet-Ink Mortgage Loans and Nine-Day Aged
Wet-Ink Mortgage Loans.
"Applicable Collateral Percentage" shall mean, except as may be
reduced pursuant to Section 11.16 hereof, for any date of determination and each
type of Eligible Mortgage Loan, the applicable percentage specified in (a) or
(b) below, as requested by the Borrowers pursuant to Section 2.3 hereof:
(a) "Option One":
----------
Unseasoned Mortgage Loan 98.5%
Second Lien Mortgage Loan 98.5%
30+ Delinquent Mortgage Loan 85%
60+ Delinquent Mortgage Loan 75%
Wet-Ink Mortgage Loan 98.5%
Defaulted Mortgage Loan the applicable BPO Percentage
Discretionary Mortgage Loan the applicable percentage specified by
the Lender one (1) Business Day prior
to the applicable Funding Date
provided, however, if a Tangible Net Worth Trigger Event shall
have occurred, the Applicable Collateral Percentage with
respect to all Unseasoned Mortgage Loans and all Second Lien
Mortgage Loans shall be reduced to 98%;
(b) "Option Two":
----------
Unseasoned Mortgage Loan 97%
Second Lien Mortgage Loan 97%
30+ Delinquent Mortgage Loan 85%
60+ Delinquent Mortgage Loan 75%
Wet-Ink Mortgage Loan 97%
Defaulted Mortgage Loan the applicable BPO Percentage
Discretionary Mortgage Loan the applicable percentage specified by
the Lender one (1) Business Day prior
to the applicable Funding Date
If more than one of the aforementioned categories in (a) or (b) shall apply to
an Eligible Mortgage Loan, the lower percentage shall be applicable.
"Applicable Loan Rate" shall mean the Eurodollar Loan Rate in effect
from time to time, unless an event set forth in Section 2.5 shall occur, in
which case the Applicable Loan Rate from and after the date of such event shall
mean the Federal Loan Rate.
"Applicable Margin" shall mean the sum of the weighted average of the
applicable rates per annum for each type of Eligible Mortgage Loan for each day
that Loans shall be secured by such Eligible Mortgage Loans. For each type of
Eligible Mortgage Loan, the applicable rate shall be equal to the product of (a)
a fraction equal to (1) the Collateral Value of all Eligible Mortgage Loans of
such type, divided by (2) the Collateral Value of all Eligible Mortgage Loans,
and (b) the applicable percentage specified in (i) or (ii) below, as requested
by the Borrowers pursuant to Section 2.3 hereof:
-2-
(i) "Option One":
----------
Unseasoned Mortgage Loan 1.00%
Second Lien Mortgage Loan 1.00%
30+ Delinquent Mortgage Loan 1.20%
60+ Delinquent Mortgage Loan 1.20%
Defaulted Mortgage Loan 1.45%
Wet-Ink Mortgage Loan 1.00%
Discretionary Mortgage Loan the applicable percentage specified
by the Lender one (1) Business Day
prior to the applicable Funding Date
(ii) "Option Two":
----------
Unseasoned Mortgage Loan .75%
Second Lien Mortgage Loan .75%
30+ Delinquent Mortgage Loan 1.00%
60+ Delinquent Mortgage Loan 1.00%
Defaulted Mortgage Loan 1.45%
Wet-Ink Mortgage Loan .75%
Discretionary Mortgage Loan the applicable percentage specified
by the Lender one (1) Business Day
prior to the applicable Funding Date
If more than one of the aforementioned categories in (i) or (ii) shall apply to
an Eligible Mortgage Loan, the higher percentage shall be applicable.
"Bankruptcy Code" shall mean the United States Bankruptcy Code, 11
U.S.C. Section 10 1 et. seq., as amended from time to time.
"Board Report" shall mean the documentation delivered to the Board of
Directors of the Guarantor pursuant to Section 7.1(b), which shall include, but
is not limited to (i) financial overview, (ii) consolidated financial statements
and (iii) any additional financial information included in such report from time
to time.
"Borrower" and "Borrowers" shall have the meanings provided in the
heading hereof.
"Borrowing Base" shall mean the aggregate Collateral Value of all
Eligible Mortgage Loans.
"Borrowing Base Deficiency" shall have the meaning provided in Section
2.7 hereof.
"BPO Percentage" shall mean (i) with respect to any Defaulted Mortgage
Loan for which a Broker Price Opinion has not been obtained, 50% and (ii) with
respect to any Defaulted Mortgage Loan for which a Broker Price Opinion has been
obtained, 65%.
-3-
"Broker Price Opinion" shall mean, with respect to a Mortgage Loan or
an REO Property, a broker's price opinion prepared by a duly licensed real
estate broker who has no interest, direct or indirect, in the Mortgage Loan or
REO Property or in the Borrowers or any Affiliate of the Borrowers and whose
compensation is not affected by the results of the broker's price opinion, and
which valuation (i) indicates the expected proceeds for a sale of the related
Mortgaged Property or REO Property and, (ii) with respect to any condominium
development or planned unit development that was not Federal National Mortgage
Association or Federal Home Loan Mortgage Corporation approved, the amount, if
any, by which the valuation was decreased as a result of such lack of approval,
and (iii) includes certain assumptions, including those as to the condition of
the exterior and interior of the applicable Mortgaged Property or REO property
and carrying costs and expenses during marketing time.
"Business Day" shall mean any day other than (i) a Saturday or Sunday
or (ii) a day on which the New York Stock Exchange, the Federal Reserve Bank of
New York or the Custodian is authorized or obligated by law or executive order
to be closed.
"Capital Lease Obligations" shall mean, for any Person, all
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP, and, for purposes of this Loan
Agreement. the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"Capital Stock" shall mean any and all shares, interests,
participations or other equivalents (however designated) of capital stock of a
corporation, any and all similar ownership interests in a Person (other than a
corporation) and any and all warrants or options to purchase any of the
foregoing.
"Closing Agent" shall mean, with respect to any Loan, the entity
reasonably satisfactory to the Lender (which may be a title company, escrow
company or attorney in accordance with local law and practice in the
jurisdiction where the related Wet-Ink Mortgage Loan is being originated) to
which the proceeds of such Loan are to be wired pursuant to the instructions of
the Borrowers.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral" shall have the meaning provided in Section 4.1(b) hereof.
"Collateral Value" shall mean, with respect to each Eligible Mortgage
Loan, the lesser of (a) the product of (i) the Market Value of such Eligible
Mortgage Loan, and (ii) the Applicable Collateral Percentage for such Eligible
Mortgage Loan, and (b) (i) 101% of the unpaid principal balance of such Eligible
Mortgage Loan for Option One and (ii) 100% of the unpaid principal balance of
such Eligible Mortgage Loan for Option Two; provided, however, if a Tangible Net
Worth Trigger Event shall have occurred, the Collateral Value with respect to
each Option One Eligible Mortgage Loans shall be the lesser of (a) the product
of (1) the Market Value of such Eligible Mortgage Loan, and (ii) the Applicable
Collateral Percentage for such
-4-
Eligible Mortgage Loan, and (b) 100% of the unpaid principal balance of such
Eligible Mortgage Loan; provided, further, that the Collateral Value shall be
deemed to be zero with respect to each Mortgage Loan (1) in respect of which
there is a breach of representation and warranty set forth on Schedule 1
(assuming each representation and warranty is made as of the date the Collateral
Value thereof is determined), (2) which ceases to be an Eligible Mortgage Loan
for any reason (3) which is a Nine-Day Aged Wet-Ink Mortgage Loan, (4) with
respect to each Mortgage Loan, for so long as such Mortgage Loan is a Wet-Ink
Mortgage Loan, as to which the Lender or the Custodian shall have notified the
Borrowers that the Custodian shall have transferred an amount greater than
$1,000,000 to a single settlement location on a Funding Date, unless consented
to by the Lender or (5) for which any Mortgage Loan Documents have been released
from the possession of the Custodian under the Custodial Agreement for a period
in excess of 15 days.
"Collection Account" shall mean one or more accounts established by
the Servicer subject to a security interest in favor of the Lender, into which
all Collections shall be deposited by the Servicer.
"Collections" shall mean, collectively, all collections and proceeds
on, or in respect of the Mortgage Loans, excluding collections required to be
paid to the Servicer or a mortgagor on the Mortgage Loans.
"Control Agreement" shall mean that certain Control Agreement, dated
as of June 20, 2003, among the Borrowers, the Custodian and the Lender, as the
same shall be modified and supplemented and in effect from time to time.
"Controlled Accounts" shall mean collectively, the Collection Account
and the Wet Funding Account.
"Custodial Agreement" shall mean the Custodial Agreement, dated as of
the date hereof, among the Borrowers, the Custodian and the Lender,
substantially in the form of Exhibit B hereto, as the same shall be modified and
supplemented and in effect from time to time.
"Custodian" shall mean Deutsche Bank National Trust Company, as
custodian under the Custodial Agreement, and its successors and permitted
assigns thereunder.
"Default" shall mean an Event of Default or an event that with notice
or lapse of time or both would become an Event of Default.
"Defaulted Mortgage Loan" shall mean, as of any date of determination,
an Eligible Mortgage Loan which is 90 days or more Delinquent and/or is subject
to a foreclosure proceeding.
"Delinquent" shall mean that a Monthly Payment (as defined in Part III
of Schedule 1 hereto) has not been made by the close of business on the related
Due Date (as defined in Part III of Schedule 1 hereto).
"Disbursement Agent" shall mean Deutsche Bank National Trust Company,
as disbursement agent for the Lender pursuant to the Custodial Agreement.
-5-
"Discretionary Mortgage Loan" shall mean a Mortgage Loan which does
not specifically meet the parameters of an Eligible Mortgage Loan as described
herein.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"Due Diligence Review" shall mean the performance by the Lender of any
or all of the reviews permitted under Section 11.15 hereof with respect to any
or all of the Mortgage Loans, as desired by the Lender from time to time.
"Effective Date" shall mean the date upon which the conditions
precedent set forth in Section 5.1 shall have been satisfied.
"Eight-Day Aged Wet-Ink Mortgage Loan" shall mean a Wet-Ink Mortgage
Loan with respect to which the related Mortgage File has not been received by
the Custodian and the Custodian has not issued a Trust Receipt as of the eighth
(8th) Business Day following the applicable Funding Date.
"Eligible Mortgage Loan" shall mean a Mortgage Loan originated by any
Borrower or any Affiliate of any Borrower, secured by a first or second mortgage
Lien on a one-to-four family residential property, as to which the
representations, and warranties in Section 6.10 and Part I and Part II of
Schedule 1 hereof are correct; provided, however, that, in no event shall any
Eligible Mortgage Loan be a security for purposes of any securities or blue-sky
laws; and provided, further, that the following Mortgage Loans shall not be an
Eligible Mortgage Loan: (1) a Mortgage Loan for which the related obligor is
subject to a voluntary or involuntary bankruptcy proceeding or for which the
related Mortgaged Property has been acquired through foreclosure, acceptance of
a deed-in-lieu of foreclosure or otherwise in accordance with applicable law in
connection with the default of such Mortgage Loan, (2) a Defaulted Mortgage Loan
for which a Broker Price Opinion can not be obtained, (3) a Mortgage Loan that
is listed on the Exception Report, and (4) a Mortgage Loan which shall have been
pledged to the Lender hereunder for more than 120 days. The Lender shall have
sole discretion in determining whether the concentration limits provided for in
Part 11 of Schedule 1 hereto have been exceeded.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business that
is a member of any group of organizations (i) described in Section 414(b) or (c)
of the Code of which any Borrower is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which any
Borrower is a member.
"Equity Proceeds" shall mean with respect to the Guarantor, an amount
equal to the net proceeds from the issuance of any securities of the Guarantor
or the net proceeds to the Guarantor from contributions to capital or otherwise
by another Person.
"Eurodollar Loan Rate" shall mean a rate per annum equal to the sum of
the Eurodollar Rate plus the Applicable Margin.
-6-
"Eurodollar Rate" shall mean, with respect to each day a Loan is
outstanding, the rate per annum based on the rate appearing at page 5 of the
Telerate Screen as one-month LIBOR on such date (and if such date is not a
Business Day, the Eurodollar Rate in effect on the Business Day immediately
preceding such date), and if such rate shall not be so quoted, the rate per
annum at which the Lender is offered Dollar deposits at or about 10:00 A.M., New
York City time, on such date by prime banks in the interbank eurodollar market
where the eurodollar and foreign currency exchange operations in respect of its
Loans are then being conducted for delivery on such day for a period of 30 days
and in an amount comparable to the amount of the Loans to be outstanding on such
day.
"Execution" shall have the meaning specified in the Custodial
Agreement.
"Exception Report" shall mean the portion of the Mortgage Loan
Schedule and Exception Report detailing Exceptions in respect of each Mortgage
Loan.
"Event of Default" shall have the meaning, provided in Article VIII
hereof.
"Federal Funds Rate" shall mean, for any day, the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the Lender from three
federal funds brokers of recognized standing selected by it.
"Federal Loan Rate" shall mean a rate per annum equal to the sum of
(a) the Federal Funds Rate plus 1.00% and (b) the Applicable Margin.
"Five-Day Aged Wet-Ink Mortgage Loan" shall mean a Wet-Ink Mortgage
Loan with respect to which the related Mortgage File has not been received by
the Custodian and the Custodian has not issued a Trust Receipt as of the fifth
(5th) Business Day following the applicable Funding Date.
"Funding Date" shall mean the date on which a Loan is made hereunder.
"GAAP" shall mean generally accepted accounting principles as in
effect from time to time in the United States.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government and any court or arbitrator having jurisdiction over any Borrower,
any of its Subsidiaries or any of its properties.
"Guarantee" shall mean, as to any Person, any obligation of such
Person directly or indirectly guaranteeing any Indebtedness of any other Person
or in any manner providing for the payment of any Indebtedness of any other
Person or otherwise protecting the holder of such Indebtedness against loss
(whether by virtue of partnership arrangements, by agreement to keep well, to
purchase assets, goods, securities or services, or to take-or-pay or otherwise);
provided, that the term "Guarantee" shall not include (i) endorsements for
collection or deposit in the
-7-
ordinary course of business or (ii) obligations to make servicing advances for
delinquent taxes and insurance or other obligations in respect of a Mortgaged
Property, to the extent required by the Lender. The amount of any Guarantee of a
Person shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Guarantee is made or,
if not stated or determinable, the maximum reasonably anticipated liability in
respect thereof as determined by such Person in good faith. The terms
"Guarantee" and "Guaranteed" used as verbs shall have correlative meanings.
"Guarantor" shall mean New Century Financial Corporation.
"Indebtedness" shall mean, for any Person: (a) obligations created,
issued or incurred by such Person for borrowed money (whether by loan, the
issuance and sale of debt securities or the sale of Property to another Person
subject to an understanding or agreement, contingent or otherwise, to repurchase
such Property from such Person); (b) obligations of such Person to pay the
deferred purchase or acquisition price of Property or services, other than trade
accounts payable (other than for borrowed money) arising, and accrued expenses
incurred, in the ordinary course of business so long as such trade accounts
payable are payable within 90 days of the date the respective goods are
delivered or the respective services are rendered; (c) Indebtedness of others
secured by a Lien on the Property of such Person, whether or not the respective
Indebtedness so secured has been assumed by such Person; (d) obligations
(contingent or otherwise) of such Person in respect of letters of credit or
similar instruments issued or accepted by banks and other financial institutions
for account of such Person; (e) Capital Lease Obligations of such Person; (f)
obligations of such Person under repurchase agreements, sale/buy-back agreements
or like arrangements; (g) Indebtedness of others Guaranteed by such Person; (h)
all obligations of such Person incurred in connection with the acquisition or
carrying of fixed assets by such Person; and (i) Indebtedness of general
partnerships of which such Person is a general partner.
"Initial Servicer" shall have the meaning provided in Section 11.14(a)
hereof.
"Intangible Assets" shall mean the excess of the cost over book value
of assets acquired, patents, trademarks, copyrights, franchises and other
intangible assets (excluding, in any event, the value of any residual securities
and the value of any owned or purchased mortgage servicing rights).
"Interest Rate Protection Agreement" shall mean, with respect to any
or all of the Mortgage Loans, any short sale of US Treasury Securities, futures
contract, mortgage related security, Eurodollar futures contract, options
related contract, interest rate swap, cap or collar agreement or similar
arrangement providing for protection against fluctuations in interest rates or
the exchange of nominal interest obligations, either generally or under specific
contingencies, entered into by any Borrower and an Affiliate of the Lender, and
acceptable to the Lender.
"Lender" shall have the meaning provided in the heading hereto.
"Lien" shall mean any mortgage, lien, pledge, charge, security
interest or similar encumbrance.
"Loan" shall have the meaning provided in Section 2.1(a) hereof.
-8-
"Loan Agreement" shall mean this Master Loan and Security Agreement,
as the same may be amended, supplemented or otherwise modified from time to
time.
"Loan Documents" shall mean, collectively, this Loan Agreement, the
Note, the Custodial Agreement, the Control Agreement and the New Century
Guaranty.
"Market Value" shall mean, as of any date in respect of an Eligible
Mortgage Loan, the value determined by the Lender in good faith and in its sole
discretion.
"Material Adverse Effect" shall mean a material adverse effect on (a)
the Property, business, operations, financial condition or prospects of any
Borrower or any of its Material Affiliates, (b) the ability of any Borrower or
any of its Material Affiliates to perform its obligations under any of the Loan
Documents to which it is a party, (c) the validity or enforceability of any of
the Loan Documents, (d) the rights and remedies of the Lender under any of the
Loan Documents, (e) the timely payment of the principal of or interest on the
Loans or other amounts payable in connection therewith or (f) the Collateral as
a whole.
"Material Affiliate" shall mean New Century Financial Corporation and
its successors and assigns.
"Maximum Credit" shall mean $1,300,000,000.00, as reduced in
accordance with Section 2.1 hereof.
"Minimum Usage Fee" shall mean, with respect to any date of
determination, an annualized fee equal to the product of (a) the difference, if
any, between (i) $650,000,000 and (ii) the average Borrowing Base for the
previous four (4) calendar months and (b)(i) the Eurodollar Rate plus 1.00% if
the Borrower has chosen Option One pursuant to Section 2.3(a) hereof or there
are no borrowings hereunder or (ii) the Eurodollar Rate plus 0.75% if the
Borrower has chosen Option Two pursuant to Section 2.3(a) hereof.
"Moody's" shall mean ▇▇▇▇▇'▇ Investors Service, Inc.
"Mortgage" shall mean the mortgage, deed of trust or other instrument
securing a Mortgage Note, which creates a first or second Lien on the fee in
real property securing the Mortgage Note.
"Mortgage File" shall have the meaning assigned thereto in the
Custodial Agreement.
"Mortgage Loan" shall mean a mortgage loan which the Custodian has
been instructed to hold for the Lender pursuant to the Custodial Agreement, and
which Mortgage Loan includes, without limitation, a Mortgage Note and related
Mortgage.
"Mortgage Loan Documents" shall mean, with respect to a Mortgage Loan,
the documents comprising the Mortgage File for such Mortgage Loan.
"Mortgage Loan Schedule" shall have the meaning assigned thereto in
the Custodial Agreement.
-9-
"Mortgage Loan Schedule and Exception Report" shall mean the mortgage
loan schedule and exception report prepared by the Custodian pursuant to the
Custodial Agreement.
"Mortgage Loan Data File" shall mean a computer-readable file
containing information with respect to each Mortgage Loan, to be delivered by
the Borrowers to the Lender pursuant to Section 2.3(a) hereof which fields are
identified on Annex I to the Custodial Agreement.
"Mortgage Note" shall mean the original executed promissory note or
other evidence of the indebtedness of a mortgagor/borrower with respect to a
Mortgage Loan.
"Mortgaged Property" shall mean the real property (including all
improvements, buildings, fixtures, building equipment and personal property
thereon and all additions, alterations and replacements made at any time with
respect to the foregoing) and all other collateral securing repayment of the
debt evidenced by a Mortgage Note.
"Mortgagor" shall mean the obligor on a Mortgage Note.
"MS & Co." shall mean ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated, a registered
broker-dealer.
"MS Indebtedness" shall mean any indebtedness of each Borrower
hereunder and under any other arrangement between the Borrowers on the one hand
and the Lender or an Affiliate of the Lender on the other hand (including,
without limitation, any Loans, interest due and default interest, termination
payments, hedging costs, facility fees and expenses).
"Multiemployer Plan" shall mean a multiemployer plan defined as such
in Section 3(37) of ERISA to which contributions have been or are required to be
made by the Borrowers or any ERISA Affiliate and that is covered by Title IV of
ERISA.
"Net Income" shall mean, for any period, the net income of the
Guarantor for such period as determined in accordance with GAAP.
"New Century Guaranty" shall mean the Amended and Restated Guaranty by
and between the Guarantor and the Lender, dated as of the date hereof.
"Nine-Day Aged Wet-Ink Mortgage Loan" shall mean a Wet-Ink Mortgage
Loan with respect to which the related Mortgage File has not been received by
the Custodian and the Custodian has not issued a Trust Receipt by the ninth
(9th) Business Day following the applicable Funding Date.
"1934 Act" shall mean the Securities and Exchange Act of 1934, as
amended.
"Note" shall have the meaning provided in Section 2.2(a) hereof.
"Option One" shall mean, with respect to any requested borrowing
hereunder, the option specified in (a) of the definition of "Applicable
Collateral Percentage" and 2(b)(i) of the definition of "Applicable Margin."
-10-
"Option Two" shall mean, with respect to any requested borrowing
hereunder, the option specified in (b) of the definition of "Applicable
Collateral Percentage and (2)(b)(ii) of the definition "Applicable Margin."
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, limited liability company, trust,
unincorporated association or government (or any agency, instrumentality or
political subdivision thereof).
"Plan" shall mean an employee benefit or other plan established or
maintained by any Borrower or any ERISA Affiliate and covered by Title IV of
ERISA, other than a Multiemployer Plan.
"Post-Default Rate" shall mean, in respect of any principal of any
Loan or any other amount under this Loan Agreement, the Note or any other Loan
Document that is not paid when due to the Lender (whether at stated maturity, by
acceleration, by optional or mandatory prepayment or otherwise), a rate per
annum during the period from and including the due date to but excluding the
date on which such amount is paid in full equal to 4% per annum plus the Prime
Rate in effect on such due date and from time to time thereafter until such
amount is paid in full.
"Prime Rate" shall mean the prime rate announced to be in effect from
time to time, as published as the average rate in The Wall Street Journal.
"Property" shall mean any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Regulations T, U and X" shall mean Regulations T, U and X of the
Board of Governors of the Federal Reserve System (or any successor), as the same
may be modified and supplemented and in effect from time to time.
"Remittance Date" shall mean the 5th Business Day of each month. For
purposes of this definition, "Business Day" shall mean any day other than (a) a
Saturday or Sunday or (b) a day on which banking and savings and loan
institutions in the States of Florida and California are authorized or obligated
by law or executive order to be closed.
"Responsible Officer" shall mean, as to any Person, the chief
executive officer or, with respect to financial matters, the chief financial
officer of such Person.
"Requirement of Law" shall mean as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
-11-
"S&P" shall mean Standard and Poor's Ratings Services, a division of
The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc.
"Second Lien Mortgage Loan" shall mean an Eligible Mortgage Loan which
is secured by a second Lien on the related Mortgaged Property.
"Secured Obligations" shall have the meaning provided in Section
4.1(c) hereof.
"Servicer" shall mean the Initial Servicer or a Third Party Servicer,
as the context requires.
"Servicer Notice" shall have the meaning provided in Section 11.14(c)
hereof.
"Servicing Agreement" shall have the meaning provided in Section
11.14(c) hereof.
"Servicing Records" shall have the meaning provided in Section
11.14(b) hereof.
"Seven-Day Aged Wet-Ink Mortgage Loan" shall mean a Wet-Ink Mortgage
Loan with respect to which the related Mortgage File has not been received by
the Custodian and the Custodian has not issued a Trust Receipt as of the seventh
(7th) Business Day following the applicable Funding Date.
"Six-Day Aged Wet-Ink Mortgage Loan" shall mean a Wet-Ink Mortgage
Loan with respect to which the related Mortgage File has not been received by
the Custodian and the Custodian has not issued a Trust Receipt as of the sixth
(6th) Business Day following the applicable Funding Date.
"60+ Delinquent Mortgage Loan" shall mean, as of any date of
determination, an Eligible Mortgage Loan which is between 60 days and 89 days
(inclusive) Delinquent.
"Sub-prime Mortgage Loan" shall mean an Eligible Mortgage Loan with
respect to which the related Mortgagor has received a credit rating of "C" or
"D" as determined in accordance with New Century's origination guidelines in
effect as of the Effective Date."Subsidiary" shall mean, with respect to any
Person, any corporation, partnership or other entity of which at least a
majority of the securities or other ownership interests having by the terms
thereof ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions of such corporation, partnership or
other entity (irrespective of whether or not at the time securities or other
ownership interests of any other class or classes of such corporation,
partnership or other entity shall have or might have voting power by reason of
the happening of any contingency) is at the time directly or indirectly owned or
controlled by such Person or one or more Subsidiaries of such Person or by such
Person and one or more Subsidiaries of such Person.
"System" shall mean all hardware or software, or any system consisting
of one or more thereof, including, without limitation, any and all enhancements,
upgrades, customizations, modifications and the like utilized by any Person for
the benefit of such Person to perform its obligations and to administer and
track, store, process, provide, and where appropriate, insert,
-12-
true and accurate dates and calculations for dates and time spans with respect
to the Mortgage Loans.
"Tangible Net Worth" shall mean, as of any date of determination, all
amounts which would be included under capital on a balance sheet of the
Guarantor at such date, determined in accordance with GAAP, less (i) amounts
owing to the Guarantor from Affiliates and (ii) Intangible Assets.
"Tangible Net Worth Trigger Event" shall have occurred (based on the
Guarantor's most recent monthly financials) if the Tangible Net Worth of the
Guarantor is less than the sum of (i) $275,000,000, (ii) 75% of the aggregate
consolidated positive Net Income, calculated from the period beginning December
31, 2002 to the most recently ended monthly period and (iii) an amount equal to
50% of any Equity Proceeds received by the Guarantor since December 31, 2002.
"Termination Date" shall mean December 13, 2003 or such earlier date
on which this Loan Agreement shall terminate in accordance with the provisions
hereof or by operation of law.
"Third Party Servicer" shall have the meaning provided in Section
11.14(c) hereof.
"30+ Delinquent Mortgage Loan" shall mean, as of any date of
determination, an Eligible Mortgage Loan which is between 30 days and 59 days
(inclusive) Delinquent.
"Total Indebtedness" shall mean, for any period, the aggregate
Indebtedness of the Guarantor during such period maintained in accordance with
GAAP less the aggregate amount of any such Indebtedness that is reflected on the
balance sheet of the Guarantor in respect of obligations incurred pursuant to a
securitization transaction, solely to the extent such obligations are secured by
the assets securitized thereby and are non-recourse to the Guarantor. In the
event that any Indebtedness would be excluded from the calculation of Total
Indebtedness but for the existence of recourse, the Guarantor shall be entitled
nonetheless to exclude the amount of such Indebtedness that is not subject to
recourse. The amount of any recourse shall be the stated or determinable amount
thereof or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by the Guarantor in good faith.
"Trust Receipt" shall have the meaning provided in the Custodial
Agreement.
"Underwriting Guidelines" shall mean the underwriting guidelines
attached as Exhibit F hereto.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
effect on the date hereof in the State of New York; provided, that if by reason
of mandatory provisions of law, the perfection or the effect of perfection or
non-perfection of the security interest in any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than New York,
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection.
-13-
"Unseasoned Mortgage Loan" shall mean, as of any date of
determination, an Eligible Mortgage Loan (provided, that notwithstanding the
definition of the term "Eligible Mortgage Loan," an Unseasoned Mortgage Loan
must have a first Lien status with respect to the related Mortgaged Property)
which has been originated 120 days or less prior to the related Funding Date.
"Wet-Ink Mortgage Loan" shall mean a Mortgage Loan originated by any
Borrower in a transaction table-funded by the Lender, which origination or table
funding is financed in part or in whole with proceeds of Loans and as to which
the Custodian has not yet received the related Mortgage File. A Mortgage Loan
shall cease to be a Wet-Ink Mortgage Loan on the date on which the Lender has
received a Mortgage Loan Schedule and Exception Report from the Custodian with
respect to such Mortgage Loan confirming that the Custodian has physical
possession of the related Mortgage File and that there are no Exceptions (as
defined in the Custodial Agreement) with respect to such Mortgage Loan.
"Wet-Ink Transaction" shall mean a borrowing in connection with which
Wet-Ink Mortgage Loans are included in the Borrowing Base. A Wet-Ink Transaction
shall cease to be a Wet-Ink Transaction on the date that the underlying Wet-Ink
Mortgage Loan ceases to be a Wet-Ink Mortgage Loan (in accordance with the
definition thereof).
"Wet-Ink Aged Report" shall have the meaning specified in Section 3(a)
of the Custodial Agreement.
"Wet Funding Account" shall have the meaning specified in Section 4(i)
of the Custodial Agreement.
Section 1.2 Accounting Terms and Determinations. Except as
otherwise expressly provided herein, all accounting terms used herein shall be
interpreted, and all financial statements and certificates and reports as to
financial matters required to be delivered to the Lender hereunder shall be
prepared, in accordance with GAAP.
ARTICLE II
Loans, Note and Prepayments.
Section 2.1 Loans.
(a) The Lender agrees to make, on the terms and subject to the
conditions of this Loan Agreement, loans (individually, a "Loan" and,
collectively, the "Loans") to the Borrowers in Dollars, from and including the
Effective Date to but not including the Termination Date in an aggregate
principal amount at any one time outstanding up to but not exceeding the lesser
of (i) the Maximum Credit and (ii) the Borrowing Base as in effect from time to
time.
(b) Subject to the terms and conditions of this Loan Agreement,
during such period the Borrowers may borrow, repay and reborrow hereunder;
provided, that notwithstanding the foregoing, the Lender shall have no
obligation to make Loans to the Borrowers in excess of the lesser of (i) the
Maximum Credit and (ii) the Borrowing Base and, if a Tangible Net Worth Trigger
Event shall have occurred or in the event the obligation of the Lender to make
Loans to
-14-
the Borrowers shall otherwise be terminated as permitted hereunder, the Lender
shall have no further obligation to make additional Loans hereunder.
Section 2.2 Notes.
(a) The Loans made by the Lender shall be evidenced by a single
promissory note of the Borrowers substantially in the form of Exhibit A hereto
(the "Note"), dated the date hereof, payable to the Lender in a principal amount
equal to the amount of the Maximum Credit as originally in effect and otherwise
duly completed. The Lender shall have the right to have its Note subdivided, by
exchange for promissory notes of lesser denominations or otherwise.
(b) The date, amount and interest rate of each Loan made by the
Lender to the Borrowers, and each payment made on account of the principal
thereof, shall be recorded by the Lender on its books and, prior to any transfer
of the Note, endorsed by the Lender on the schedule attached to the Note or any
continuation thereof; provided, that the failure of the Lender to make any such
recordation or endorsement shall not affect the obligations of each Borrower to
make a payment when due of any amount owing hereunder or under the Note in
respect of the Loans.
Section 2.3 Procedure for Borrowing (Loans Other than Wet-Ink
Transactions).
(a) The Borrowers may request a borrowing hereunder that is not a
Wet-Ink Transaction, on any Business Day during the period from and including
the Effective Date to and including the Termination Date, by delivering to the
Lender, with a copy to the Custodian, a written request for borrowing,
substantially in the form of Exhibit D attached hereto, which request must be
received by the Lender prior to 11:00 a.m., New York City time, at least one (1)
Business Day prior to the requested Funding Date. Such request for borrowing
shall (i) attach a schedule identifying the Eligible Mortgage Loans that the
Borrowers propose to pledge to the Lender and which are to be included in the
Borrowing Base in connection with such borrowing, (ii) specify the requested
Funding Date, (iii) be accompanied by a Mortgage Loan Data File containing
information with respect to the Eligible Mortgage Loans that the Borrowers
propose to pledge to the Lender and to be included in the Borrowing Base in
connection with such borrowing, (iv) attach an officer's certificate signed by a
Responsible Officer of each applicable Borrower as required by Section 5.2(b)
hereof and (v) specify either Option One or Option Two for such borrowing, at
which point all borrowings hereunder, including each Eligible Mortgage Loan then
pledged or to be included in the Borrowing Base in connection with such
borrowing, shall be calculated according to such option.
(b) Upon the Borrowers' request for a borrowing pursuant to
Section 2.3(a), the Lender shall, subject to the limitations set forth in
Section 2.1(a) hereof and upon satisfaction of all conditions precedent set
forth in Sections 5.1 and 5.2 hereof, make a Loan to the Borrowers on the
requested Funding Date, in the amount so requested; provided, however, that if
the Mortgage Loan Data File includes Discretionary Mortgage Loans that Borrowers
propose to pledge to the Lender and which are to be included in the Borrowing
Base in connection with such borrowing, the Lender's obligation to fund such
Discretionary Mortgage Loans shall be in its sole and absolute discretion. The
Borrowers acknowledge that the Lender may retain an
-15-
amount equal to $100 per Defaulted Mortgage Loan to cover the costs of obtaining
Broker Price Opinions.
(c) The Borrowers shall release to the Custodian no later than
1:30 p.m. New York time, one (1) Business Day prior to any Funding Date (in the
case of the first 150 Eligible Mortgage Loans delivered in connection with any
Funding Date) plus one (1) additional Business Day prior to any Funding Date
(for each additional 100 Eligible Mortgage Loans in excess thereof delivered in
connection with any Funding Date), the Mortgage File pertaining to each Eligible
Mortgage Loan to be pledged to the Lender and included in the Borrowing Base on
such requested Funding Date, in accordance with the terms and conditions of the
Custodial Agreement.
(d) Pursuant to the Custodial Agreement, the Custodian shall
deliver to the Lender and the Borrowers, no later than 1:00 p.m. New York City
time on a Funding Date, a Trust Receipt (as defined in the Custodial Agreement)
in respect of all Mortgage Loans pledged to the Lender on such Funding Date, and
a Mortgage Loan Schedule and Exception Report. The Borrowers acknowledge that
Mortgage Loans listed in the Exception Report are not Eligible Mortgage Loans
and the Lender is not required to advance funds in respect of such Mortgage
Loans and such Mortgage Loans listed in the Exception Report shall not be
subject to the Lien of this Loan Agreement.
(e) Subject to Article V hereof, such borrowing will then be made
available to the Borrowers by the Lender transferring, via wire transfer, to the
following accounts of the Borrowers: ABA # ▇▇▇▇▇▇▇▇▇, Account #▇▇▇▇▇▇▇▇, Attn:
New Century, in the aggregate amount of such borrowing in funds immediately
available to the Borrowers.
Section 2.4 Procedure For Borrowing (Wet-Ink Transactions).
(a) With respect to each Wet-Ink Transaction, the Borrowers may
request a borrowing hereunder, on any Business Day during the period from and
including the Effective Date to and excluding the Termination Date and provided
that no Borrowing Base Deficiency exists due to the inclusion of Aged Wet-Ink
Mortgage Loans in the Borrowing Base on such date, by delivering to the Lender,
an estimate of the amount required to fund Wet-Ink Transactions the following
Business Day, which estimate must be received by the Lender prior to 5:00 p.m.
New York City time, one (1) Business Day prior to the requested Funding Date.
(b) On the requested Funding Date, the Borrowers may deliver to
the Lender, with a copy to the Custodian, no more than an aggregate total of
three (3) transmissions, which transmissions shall (i) attach a written request
for borrowing, substantially in the form of Exhibit D attached hereto, (ii)
attach a schedule identifying the Eligible Mortgage Loans that the Borrowers
propose to pledge to the Lender, and to be included in the Borrowing Base in
connection with such borrowing, (iii) specify the amount requested to be
borrowed, (iv) attach a schedule identifying the amount and wiring instructions
with respect to the settlement location of each wire transfer on such date and
(v) attach an officer's certificate signed by a Responsible Officer of each
applicable Borrower as required by Section 5.02(b) hereof. Pursuant to the
Custodial Agreement, the Custodian shall deliver to the Lender and the
Borrowers, in connection with each transmission, a Mortgage Loan Schedule in
respect of all Mortgage Loans pledged to
-16-
the Lender, on such Funding Date. The latest transmission must be received by
the Lender no later than 4:00 p.m. New York City time on such Funding Date. Such
request for borrowing shall specify the requested Funding Date.
(c) The Borrowers shall deliver (or cause to be delivered) and
release to the Custodian the Mortgage File pertaining to such Wet-Ink Mortgage
Loan on the next Business Day following receipt of such Mortgage File by the
applicable Borrower, but in any event no later than eight (8) Business Days
following the applicable Funding Date in accordance with the terms and
conditions of the Custodial Agreement. On the applicable Funding Date and on
each Business Day following the applicable Funding Date, no later than 8:00 p.m.
New York City time, pursuant to the Custodial Agreement, the Custodian shall
deliver to the Lender a schedule listing each Wet-Ink Mortgage Loan with respect
to which the complete Mortgage File has not been received by the Custodian (the
"Wet-Ink Aged Report"). On the applicable Funding Date, the Agent shall confirm
that the information in the Wet-Ink Aged Report is consistent with the
information provided to the Agent pursuant to Section 2.4(b).
(d) Subject to Section 5 hereof, such borrowing will be made
available by the Custodian transferring at the direction of the Lender, via wire
transfer, the amount of such borrowing from the account of the Lender maintained
with the Custodian to the account of the designated Closing Agent pursuant to
disbursement instructions provided by the Borrowers on the electronic system
maintained by the Custodian; provided, however, that (i) the Lender shall
approve, in its sole discretion, each wiring location, (ii) the Custodian shall
not, in any event, (A) transfer funds to any Borrower or (B) transfer funds in
excess of the original principal balance of the related Wet-Ink Mortgage Loan.
Pursuant to the Custodial Agreement, the Custodian shall deliver to the Lender
and the Borrowers, no later than 6:00 p.m., New York City time, on each Funding
Date with respect to a Wet-Ink Transaction, a report identifying the wire
transfer amount and the settlement location of each wire transfer amount on such
date. Upon notice from the Closing Agent to the Borrowers that the related
Wet-Ink Mortgage Loan was not originated, the Wet-Ink Mortgage Loan shall be
removed from the list of Eligible Mortgage Loans and the Closing Agent shall
immediately return the funds via wire transfer to the account of the Lender
maintained with the Custodian. The Borrowers shall notify the Lender if a
Wet-Ink Mortgage Loan was not originated and has been removed from the list of
Eligible Mortgage Loans.
Section 2.5 Limitation on Types of Loans; Illegality. Anything
herein to the contrary notwithstanding, if, on or prior to the determination of
any Eurodollar Rate:
(a) the Lender determines, which determination shall be
conclusive, that quotations of interest rates for the relevant deposits referred
to in the definition of "Eurodollar Rate" in Section 1.1 hereof are not being
provided in the relevant amounts or for the relevant maturities for purposes of
determining rates of interest for Loans as provided herein; or
(b) the Lender determines, which determination shall be
conclusive, that the relevant rate of interest referred to in the definition of
"Eurodollar Rate" in Section 1.1 hereof upon the basis of which the rate of
interest for Loans is to be determined is not likely adequately to cover the
cost to the Lender of making or maintaining Loans; or
-17-
(c) it becomes unlawful for the Lender to honor its obligation to
make or maintain Loans hereunder using a Eurodollar Rate;
then the Lender shall give the Borrowers prompt notice thereof and, so long as
such condition remains in effect, the Lender shall be under no obligation to
make additional Loans, and each Borrower shall, at its sole option and
discretion, either prepay all such Loans as may be outstanding or pay interest
on such Loans at a rate per annum equal to the Federal Loan Rate; provided, that
if the Lender determines not to make any additional Loans, then the Lender shall
reimburse the Borrowers a pro rata portion of the facility fee paid to the
Lender pursuant to Section 3.4, based upon the number of days elapsed from the
Effective Date to date of such determination.
Section 2.6 Repayment of Loans; Interest.
(a) The Borrowers hereby promise, jointly and severally, to repay
in full in Dollars on the Termination Date, the aggregate outstanding principal
amount of the Loans.
(b) The Borrowers hereby promise, jointly and severally, to pay to
the Lender interest on the unpaid principal amount of each Loan for the period
from and including the date of such Loan to, but excluding, the date such Loan
shall be paid in full, at a rate per annum equal to the Applicable Loan Rate.
Notwithstanding the foregoing, the Borrowers hereby promise to pay to the Lender
interest at the applicable Post-Default Rate on any principal of any Loan and on
any other amount payable by the Borrowers hereunder or under the Note that shall
not be paid in full when due (whether at stated maturity, by acceleration or by
mandatory prepayment or otherwise) for the period from and including the due
date thereof to but excluding the date the same is paid in full. Interest shall
accrue on the unpaid principal balance of each Loan on a daily basis. Accrued
interest on each Loan shall be payable monthly on the first Business Day of each
month and for the last month of the Loan Agreement on the first Business Day of
such last month and on the Termination Date; provided, that the Lender may, in
its sole discretion, require accrued interest to be paid simultaneously with any
prepayment of principal made by the Borrowers on account of any of the Loans
outstanding. Interest payable at the Post-Default Rate shall accrue daily and
shall be payable in accordance with the foregoing.
(c) It is understood and agreed that, unless and until a Default
shall have occurred and be continuing, the Borrowers shall be entitled to the
proceeds of the Mortgage Loans pledged to the Lender hereunder.
Section 2.7 Mandatory prepayments or Pledge.
If at any time the aggregate outstanding principal amount of Loans
exceeds the Borrowing Base (a "Borrowing Base Deficiency"), as determined by the
Lender and notified to the Borrowers on any Business Day, the Borrowers shall no
later than one (1) Business Day after receipt of such notice, either prepay the
Loans in part or in whole or pledge additional Eligible Mortgage Loans (which
Collateral shall be in all respects acceptable to the Lender in its sole
discretion) to the Lender, such that after giving effect to such prepayment or
pledge of additional Eligible Mortgage Loans a Borrowing Base Deficiency shall
no longer exist.
Section 2.8 Extension of Termination Date.
-18-
At the request of the Borrowers made at least thirty (30) days, but in
no event earlier than ninety (90) days, prior to the then current Termination
Date, the Lender may in its sole discretion extend the Termination Date for a
period to be determined by Lender in its sole discretion by giving written
notice of such extension to the Borrowers no later than twenty (20) days, but in
no event earlier than thirty (30) days, prior to the then current Termination
Date. Any failure by the Lender to deliver such notice of extension shall be
deemed to be the Lender's determination not to extend the then current
Termination Date.
ARTICLE III
Payments; Computations; Etc.
Section 3.1 Payments.
(a) Except to the extent otherwise provided herein, all payments
of principal, interest and other amounts to be made by the Borrowers under this
Loan Agreement and the Note, shall be made in Dollars, in immediately available
funds, without deduction, set-off or counterclaim, to the Lender at the
following account maintained by the Lender: Account No. ▇▇▇▇▇▇▇▇, for the
account of MSMCI, Citibank, N.A., ABA No. ▇▇▇▇▇▇▇▇▇, Attn: Whole Loan
Operations, not later than 1:00 p.m., New York City time, on the date on which
such payment shall become due (and each such payment made after such time on
such due date shall be deemed to have been made on the next succeeding Business
Day). Each Borrower acknowledges that it has no rights of withdrawal from the
foregoing account.
(b) Except to the extent otherwise expressly provided herein, if
the due date of any payment under this Loan Agreement or the Note would
otherwise fall on a day that is not a Business Day, such date shall be extended
to the next succeeding Business Day, and interest shall be payable for any
principal so extended for the period of such extension.
Section 3.2 Computations. Interest on the Loans shall be computed on
the basis of a 360-day year for the actual days elapsed (including the first day
but excluding the last day) occurring in the period for which payable.
Section 3.3 Requirements of Law.
(a) If any Requirement of Law (other than with respect to any
amendment made to the Lender's certificate of incorporation and by-laws or other
organizational or governing documents) or any change in the interpretation or
application thereof or compliance by the Lender with any request or directive
(whether or not having the force of law) from any central bank or other
Governmental Authority made subsequent to the date hereof:
(i) shall subject the Lender to any tax of any kind whatsoever
with respect to this Loan Agreement, the Note or any Loan made by it
(excluding net income taxes) or change the basis of taxation of payments to
the Lender in respect thereof;
(ii) shall impose or hold applicable any reserve, special deposit,
compulsory Loan or similar requirement against assets held by, deposits or
other liabilities in or for the account of, advances, Loans or other
extensions of credit by, or any other acquisition
-19-
of funds by, any office of the Lender which is not otherwise included in
the determination of the Eurodollar Rate hereunder; or
(iii) shall impose on the Lender any other condition;
and the result of any of the foregoing is to increase the cost to the Lender, by
an amount which the Lender deems to be material, of making, continuing or
maintaining any Loan or to reduce any amount due or owing hereunder in respect
thereof, then, in any such case, the Borrowers shall promptly pay the Lender
such additional amount or amounts as will compensate the Lender for such
increased cost or reduced amount receivable.
(b) If the Lender shall have determined that the adoption of or
any change in any Requirement of Law (other than with respect to any amendment
made to the Lender's certificate of incorporation and by-laws or other
organizational or governing documents) regarding capital adequacy or in the
interpretation or application thereof or compliance by the Lender or any
corporation controlling the Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on the Lender's or such corporation's capital as a
consequence of its obligations hereunder to a level below that which the Lender
or such corporation could have achieved but for such adoption, change or
compliance (taking into consideration the Lender's or such corporation's
policies with respect to capital adequacy) by an amount deemed by the Lender to
be material, then from time to time, each Borrower shall either (i) promptly pay
to the Lender such additional amount or amounts as will compensate the Lender
for such reduction or (ii) at its sole option and discretion, prepay all Loans
as may be outstanding and terminate this Loan Agreement. If the Borrowers prepay
all outstanding Loans and terminate this Loan Agreement as provided in (ii) of
the prior sentence, then the Lender shall reimburse the Borrowers a pro rata
portion of the facility fee paid to the Lender pursuant to Section 3.4, based
upon the number of days elapsed from the Effective Date to the date of
termination.
(c) If the Lender becomes entitled to claim any additional amounts
pursuant to this Article, it shall promptly notify the Borrowers of the event by
reason of which it has become so entitled. A certificate as to any additional
amounts payable pursuant to this Section submitted by the Lender to the
Borrowers shall be conclusive in the absence of manifest error.
Section 3.4 Facility Fee.
The Borrowers agree to pay to the Lender on or prior to the execution
of this Loan Agreement a facility fee of $500,000, such payment to be made in
Dollars, in immediately available funds, without deduction, set-off or
counterclaim, to the Lender at the account set forth in Section 3.1(a) hereof.
ARTICLE IV
Collateral Security.
Section 4.1 Collateral; Security Interest.
-20-
(a) Pursuant to the Custodial Agreement, the Custodian shall hold
the Mortgage Loan Documents as exclusive bailee and agent for the Lender
pursuant to terms of the Custodial Agreement and shall deliver Trust Receipts
(as defined in the Custodial Agreement) to the Lender each to the effect that it
has reviewed such Mortgage Loan Documents in the manner and to the extent
required by the Custodial Agreement and identifying any deficiencies in such
Mortgage Loan Documents as so reviewed.
(b) All of each Borrower's right, title and interest in, to and
under each of the following items of property, whether now owned or hereafter
acquired, now existing or hereafter created and wherever located, is hereinafter
referred to as the "Collateral":
(i) all Mortgage Loans;
(ii) all Mortgage Loan Documents, including, without limitation,
all promissory notes and all Servicing Records, Servicing Agreements and
any other collateral pledged or otherwise relating to such Mortgage Loans,
together with all files, documents, instruments, surveys, certificates,
correspondence, appraisals, accounting records and other books and records
relating thereto, including electronic records;
(iii) all mortgage guaranties and insurance (issued by governmental
agencies or otherwise) and any mortgage insurance certificate or other
document evidencing such mortgage guaranties or insurance relating to any
Mortgage Loan and all claims and payments thereunder;
(iv) all other insurance policies and insurance proceeds relating
to any Mortgage Loan or the related Mortgaged Property;
(v) all Interest Rate Protection Agreements, relating to or
constituting any and all of the foregoing;
(vi) the Controlled Accounts and all monies from time to time on
deposit in the Controlled Accounts;
(vii) all collateral, however defined, under any other agreement
between each Borrower or any of its Affiliates on the one hand and the
Lender or any of its Affiliates on the other hand;
(viii) all "general intangibles", "accounts" and "chattel paper" as
defined in the Uniform Commercial Code relating to or constituting any and
all of the foregoing; and
(ix) any and all replacements, substitutions, distributions on or
proceeds of any and all of the foregoing.
(c) Each Borrower hereby assigns, pledges and grants a security
interest in all of its right, title and interest in, to and under the Collateral
to the Lender to secure the MS Indebtedness including, without limitation, the
repayment of principal of and interest on all Loans and all other amounts owing
to the Lender hereunder, under the Note and under the other
-21-
Loan Documents (collectively, the "Secured Obligations"). Each Borrower agrees
to ▇▇▇▇ its computer records and tapes to evidence the interests granted to the
Lender hereunder.
Section 4.2 Further Documentation. At any time and from time to
time, upon the written request of the Lender, and at the sole expense of the
Borrowers, the Borrowers will promptly and duly execute and deliver, or will
promptly cause to be executed and delivered, such further instruments and
documents and take such further action as the Lender may reasonably request for
the purpose of obtaining or preserving the full benefits of this Loan Agreement
and of the rights and powers herein granted, including, without limitation, the
filing of any financing or continuation statements under the Uniform Commercial
Code in effect in any jurisdiction with respect to the Liens created hereby. The
Borrowers also hereby authorize the Lender to file any such financing or
continuation statement without the signatures of the Borrowers to the extent
permitted by applicable law. A photographic or other reproduction of this Loan
Agreement shall be sufficient as a financing statement for filing in any
jurisdiction.
Section 4.3 Changes in Locations, Names, etc. Each Borrower shall
not (i) change the location of its chief executive office/chief place of
business from that specified in Article VI hereof, (ii) change its name,
identity or corporate structure (or the equivalent) or (iii) unless it shall
have given the Lender at least 30 days prior written notice thereof and shall
have filed or delivered to the Lender for filing all Uniform Commercial Code
financing statements and amendments thereto as the Lender shall request and
taken all other actions deemed necessary by the Lender to continue the perfected
status of the Lender in the Collateral with the same or better priority.
Section 4.4 Lender's Appointment as Attorney-in-Fact.
(a) Each Borrower hereby irrevocably constitutes and appoints the
Lender and any officer or agent thereof, with full power of substitution, as its
true and lawful attorney-in-fact with full irrevocable power and authority in
the place and stead of such Borrower and in the name of such Borrower or in its
own name, from time to time in the Lender's discretion, for the purpose of
carrying out the terms of this Loan Agreement, to take any and all appropriate
action and to execute any and all documents and instruments which may be
necessary or desirable to accomplish the purposes of this Loan Agreement, and,
without limiting the generality of the foregoing, such Borrower hereby gives the
Lender the power and right, on behalf of such Borrower, without assent by, but
with notice to such Borrower, if an Event of Default shall have occurred and be
continuing, to do the following:
(i) in the name of such Borrower or its own name, or otherwise, to
take possession of and endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
mortgage insurance or with respect to any other Collateral and to file any
claim or to take any other action or proceeding in any court of law or
equity or otherwise deemed appropriate by the Lender for the purpose of
collecting any and all such moneys due under any such mortgage insurance or
with respect to any other Collateral whenever payable; or
(ii) to pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral; and (A) to direct any party liable for
any payment under any
-22-
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Lender or as the Lender shall direct; (B) to ask
or demand for, collect, receive payment of and receipt for, any and all
moneys, claims and other amounts due or to become due at any time in
respect of or arising out of any Collateral; (C) to sign and endorse any
invoices, assignments, verifications, notices and other documents in
connection with any of the Collateral; (D) to commence and prosecute any
suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any portion thereof and to
enforce any other right in respect of any Collateral; (E) to defend any
suit, action or proceeding brought against such Borrower with respect to
any Collateral; (F) to settle, compromise or adjust any suit, action or
proceeding described in clause (E) above and, in connection therewith, to
give such discharges or releases as the Lender may deem appropriate; and
(G) generally, to sell, transfer, pledge and make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though the Lender were the absolute owner thereof for all
purposes, and to do, at the Lender's option and such Borrower's expense, at
any time, and from time to time, all acts and things which the Lender deems
necessary to protect, preserve or realize upon the Collateral and the
Lender's Liens thereon and to effect the intent of this Loan Agreement, all
as fully and effectively as such Borrower might do.
Each Borrower hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
(b) Each Borrower also authorizes the Lender, at any time and from
time to time, to execute, in connection with any sale provided for in Section
4.7 hereof, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral.
(c) The powers conferred on the Lender are solely to protect the
Lender's interests in the Collateral and shall not impose any duty upon the
Lender to exercise any such powers. The Lender shall be accountable only for
amounts that it actually receives as a result of the exercise of such powers,
and neither the Lender nor any of its officers, directors, or employees shall be
responsible to the Borrowers for any act or failure to act hereunder, except for
its own gross negligence, bad faith or willful misconduct.
Section 4.5 Performance by Lender of Borrowers' Obligations. If any
Borrower fails to perform or comply with any of its agreements contained in the
Loan Documents and the Lender may itself perform or comply, or otherwise cause
performance or compliance, with such agreement, the expenses of the Lender
incurred in connection with such performance or compliance, together with
interest thereon at a rate per annum equal to the Post-Default Rate, shall be
payable by the Borrowers to the Lender on demand and shall constitute Secured
Obligations.
Section 4.6 Proceeds. If an Event of Default shall occur and be
continuing, (a) all proceeds of Collateral received by the Borrowers consisting
of cash, checks and other near-cash items shall be held by the Borrowers in
trust for the Lender, segregated from other funds of the Borrowers, and shall
forthwith upon receipt by the Borrowers be turned over to the Lender in
-23-
the exact form received by the Borrowers (duly endorsed by the Borrowers to the
Lender, if required) and (b) any and all such proceeds received by the Lender
(whether from the Borrowers or otherwise) may, in the sole discretion of the
Lender, be held by the Lender as collateral security for, and/or then or at any
time thereafter may be applied by the Lender against, the Secured Obligations
(whether matured or unmatured), such application to be in such order as the
Lender shall elect. Any balance of such proceeds remaining after the Secured
Obligations shall have been paid in full and this Loan Agreement shall have been
terminated shall be paid over to the Borrowers or to whomsoever may be lawfully
entitled to receive the same. For purposes hereof, proceeds shall include, but
not be limited to, all principal and interest payments, all prepayments and
payoffs, insurance claims, condemnation awards, sale proceeds, real estate owned
rents and any other income and all other amounts received with respect to the
Collateral.
Section 4.7 Remedies. If a Default shall occur and be continuing,
the Lender may, at its option and at the Borrowers' expense, enter into one or
more Interest Rate Protection Agreements covering all or a portion of the
Mortgage Loans pledged to the Lender hereunder, and the Borrowers shall be
responsible for all damages, judgments, costs and expenses of any kind which may
be imposed on, incurred by or asserted against the Lender relating to or arising
out of such Interest Rate Protection Agreements; including, without limitation,
any losses resulting from such Interest Rate Protection Agreements. If an Event
of Default shall occur and be continuing, the Lender may exercise, in addition
to all other rights and remedies granted to it in this Loan Agreement and in any
other instrument or agreement securing, evidencing or relating to the Secured
Obligations, all rights and remedies of a secured party under the Uniform
Commercial Code. Without limiting the generality of the foregoing, the Lender
without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon the Borrowers or any other Person (each and all of which
demands, presentments, protests, advertisements and notices are hereby waived),
may in such circumstances forthwith collect, receive, appropriate and realize
upon the Collateral, or any part thereof, and/or may forthwith sell, lease,
assign, give option or options to purchase, or otherwise dispose of and deliver
the Collateral or any part thereof (or contract to do any of the foregoing), in
one or more parcels or as an entirety at public or private sale or sales, at any
exchange, broker's board or office of the Lender or elsewhere upon such terms
and conditions and at such prices as it may deem best in its good faith
judgment, for cash or on credit or for future delivery without assumption of any
credit risk. The Lender shall have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free of any right or
equity of redemption in the Borrowers, which right or equity is hereby waived or
released. The Borrowers further agree, at the Lender's request, to assemble the
Collateral and make it available to the Lender at places which the Lender shall
reasonably select, whether at any Borrower's premises or elsewhere. The Lender
shall apply the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable costs and
expenses of every kind incurred therein or incidental to the care or safekeeping
of any of the Collateral or in any way relating to the Collateral or the rights
of the Lender hereunder, including, without limitation, reasonable attorneys'
fees and disbursements, to the payment in whole or in part of the Secured
Obligations, in such order as the Lender may elect, and only after such
application and after the payment by the Lender of any other amount required or
permitted by any provision of law, including, without limitation, Section
9-608(a)(l)(c) of the Uniform Commercial Code, need the Lender account for the
surplus, if any, to the Borrowers. To the
-24-
extent permitted by applicable law, each Borrower waives all claims, damages and
demands it may acquire against the Lender arising out of the exercise by the
Lender of any of its rights hereunder, other than those claims, damages and
demands arising from the gross negligence, bad faith or willful misconduct of
the Lender. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 10 days before such sale or other disposition. The Borrowers
shall remain liable for any deficiency (plus accrued interest thereon as
contemplated pursuant to Section 2.5(b) hereof) if the proceeds of any sale or
other disposition of the Collateral are insufficient to pay the Secured
Obligations and the fees and disbursements of any attorneys employed by the
Lender to collect such deficiency.
Section 4.8 Limitation on Duties Regarding Preservation of
Collateral. The Lender's duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the Uniform Commercial Code or otherwise, shall be to deal with it in the
same manner as the Lender deals with similar property for its own account.
Neither the Lender nor any of its directors, officers or employees shall be
liable for failure to demand, collect or realize upon all or any part of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of the Borrowers or
otherwise.
Section 4.9 Powers Coupled with an Interest. All authorizations and
agencies herein contained with respect to the Collateral are irrevocable and
powers coupled with an interest.
Section 4.10 Release of Security Interest. Upon termination of this
Loan Agreement and repayment to the Lender of all Secured Obligations and the
performance of all obligations under the Loan Documents, the Lender shall
release its security interest in any remaining Collateral.
ARTICLE V
Conditions Precedent.
Section 5.1 Initial Loan. The obligation of the Lender to continue
the Loans pursuant to the Existing Loan Agreement and to continue to make Loans
hereunder is subject to the satisfaction of the condition precedent that the
Lender shall have received all of the following items, each of which shall be
satisfactory to the Lender and its counsel in form and substance:
(a) Loan Documents.
(i) Loan Agreement. This Amended and Restated Loan Agreement, duly
executed and delivered by the Borrowers;
(ii) Note. The Amended and Restated Promissory Note, duly executed
and delivered by the Borrowers;
(iii) Custodial Agreement. The Amended and Restated Custodial
Agreement, duly executed and delivered by the Borrowers and the Custodian;
and
-25-
(iv) New Century Guaranty. The Amended and Restated Guaranty duly
executed and delivered by the Guarantor.
(b) Organizational Documents. A good standing certificate and
certified copies of the charter and by-laws (or equivalent documents) of each
Borrower and the Guarantor and of all corporate or other authority for each
Borrower and the Guarantor with respect to the execution, delivery and
performance of the Loan Documents to which it is a party, and each other
document to be delivered by the Borrowers and the Guarantor from time to time in
connection with the Loan Documents (and the Lender may conclusively rely on such
certificate until it receives notice in writing from the Borrowers or the
Guarantor to the contrary).
(c) Legal Opinions. Legal opinions of inside and outside counsels
to the Borrowers and the Guarantor, substantially in the form attached hereto as
Exhibit C.
(d) Trust Receipt and Mortgage Loan Schedule and Exception
Report. A Trust Receipt, substantially in the form of Annex 2 of the Custodial
Agreement, dated the Effective Date, from the Custodian, duly completed, with a
Mortgage Loan Schedule and Exception Report attached thereto.
(e) Servicing Agreement(s). Any Servicing Agreement, certified as
a true, correct and complete copy of the original together, with a fully
executed Servicer Notice and, if the Servicer is any Borrower or an Affiliate of
any Borrower, the letter of the applicable Servicer consenting to termination of
such Servicing Agreement, without charge, upon the occurrence of an Event of
Default.
(f) [Reserved].
(g) Securitization Letter. A letter agreement between the
Borrowers and MS&Co. granting MS&Co., the exclusive option to act as lead
underwriter or placement agent in connection with one offering of mortgage
backed securities backed by residential mortgage loans made by the Borrowers
with respect to the Eligible Mortgage Loans in the calendar year 2003, duly
executed and delivered by the Borrowers, which shall be satisfactory to the
Lender in form and substance.
(h) Facility Fee. The facility fee as contemplated by Section 3.4.
(i) Financial Statements. The financial statements referenced in
Section 6.2.
(j) Underwriting Guidelines. A certified copy of the Underwriting
Guidelines, which shall be in form and substance satisfactory to the Lender.
(k) Consents, Licenses, Approvals, etc. Copies certified by the
Borrowers of all consents, licenses and approvals, if any, required in
connection with the execution, delivery and performance by the Borrowers of, and
the validity and enforceability of, the Loan Documents, which consents, licenses
and approvals shall be in full force and effect.
(l) Other Documents. Such other documents as the Lender may
reasonably request.
-26-
Section 5.2 Initial and Subsequent Loans. The making of each Loan to
the Borrowers (including the initial Loan) on any Business Day is subject to the
satisfaction of the following further conditions precedent, both immediately
prior to the making of such Loan and also after giving effect thereto and to the
intended use thereof:
(a) No Default. No Default or Event of Default shall have occurred
and be continuing.
(b) Representations and Warranties. Both immediately prior to the
making of such Loan and also after giving effect thereto and to the intended use
thereof, the representations and warranties made by the Borrowers in Article VI
and Schedules 1 and 2 hereof, and elsewhere in each of the Loan Documents, shall
be true, correct and complete on and as of the date of the making of such Loan
in all material respects (in the case of the representations and warranties in
Section 6.10 and Schedules 1 and 2, solely with respect to Mortgage Loans
included in the Borrowing Base) with the same force and effect as if made on and
as of such date (or, if any such representation or warranty is expressly stated
to have been made as of a specific date, as of such specific date). The Lender
shall have received an officer's certificate signed by a Responsible Officer of
each Borrower certifying as to the truth, accuracy and completeness of the
above, which certificate shall specifically include a statement that each
Borrower is in compliance with all governmental licenses and authorizations and
is qualified to do business and in good standing in all required jurisdictions.
(c) Borrowing Base. The aggregate outstanding principal amount of
the Loans shall not exceed the Borrowing Base.
(d) Due Diligence. Subject to the Lender's right to perform one or
more Due Diligence Reviews pursuant to Section 11.15 hereof, the Lender shall
have completed its due diligence review of the Mortgage Loan Documents for each
Loan and such other documents, records, agreements, instruments, mortgaged
properties or information relating to such Mortgage Loans as the Lender in its
sole discretion deems appropriate to review and such review shall be
satisfactory to the Lender in its sole discretion.
(e) Mortgage Loan Schedule and Exception Report. The Lender shall
have received from the Custodian a Mortgage Loan Schedule and Exception Report
with Exceptions as are acceptable to the Lender in its sole discretion in
respect of Eligible Mortgage Loans to be pledged hereunder on such Business Day.
(f) Release Letter. If applicable, the Lender shall have received
from the Borrowers a Warehouse Lender's Release Letter substantially in the form
of Exhibit E-2 hereto (or such other form acceptable to the Lender) or a
Seller's Release Letter substantially in the form of Exhibit E-1 hereto (or such
other form acceptable to the Lender) covering each Mortgage Loan to be pledged
to the Lender.
(g) Fees and Expenses. The Lender shall have received all fees and
expenses of counsel to the Lender as contemplated by Section 11.3, which amount,
at the Lender's option, may be netted from any Loan advanced under this
Agreement.
-27-
(h) No Market Events. None of the following shall have occurred
and/or be continuing:
(i) an event or events shall have occurred resulting in the
effective absence of a "repo market" or comparable "lending market" for
financing debt obligations secured by mortgage loans or securities or an
event or events shall have occurred resulting in the Lender not being able
to finance any Mortgage Loans through the "repo market" or "lending market"
with traditional counterparties at rates which would have been reasonable
prior to the occurrence of such event or events;
(ii) an event or events shall have occurred resulting in the
effective absence of a "securities market" for securities backed by
mortgage loans or an event or events shall have occurred resulting in the
Lender not being able to sell securities backed by mortgage loans at prices
which would have been reasonable prior to such event or events; or
(iii) there shall have occurred a material adverse change in the
financial condition of the Lender which affects (or can reasonably be
expected to affect) materially and adversely the ability of the Lender to
fund its obligations tinder this Loan Agreement;
provided, however, that if any such events shall have occurred or be continuing
and the Lender shall have determined, in its sole discretion, to not make any
additional Loans, then the Lender shall reimburse the Borrowers a pro rata
portion of the facility fee paid to the Lender pursuant to Section 3.4 based
upon the number of days elapsed from the Effective Date to date of such
determination.
(i) No ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Downgrade. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co.'s corporate
bond rating as calculated by S&P or ▇▇▇▇▇'▇ has not been lowered or downgraded
to a rating below "A-" as indicated by S&P or below "A3" as indicated by
▇▇▇▇▇'▇.
(j) Filings, Registrations, Recordings. Any documents (including,
without limitation, financing statements) required to be filed, registered or
recorded in order to create, in favor of the Lender, a perfected, first-priority
security interest in the Collateral, subject to no Liens other than those
created hereunder, shall have been properly prepared and executed for filing
(including the applicable county(ies) if the Lender determines such filings are
necessary in its sole discretion), registration or recording in each office in
each jurisdiction in which such filings, registrations and recordations are
required to perfect such first-priority security interest; provided, that
assignments of the Mortgages securing or related to the Mortgage Loans shall not
be required to be recorded prior to the occurrence of an Event of Default.
(k) Discretionary Mortgage Loans. At least three (3) Business Days
prior to a Funding Date, the Borrowers shall have provided to the Lender a
certification as to the reason why a Discretionary Mortgage Loan has not been
previously disposed of by the Borrowers and the Lender shall have approved of
the inclusion of such Discretionary Mortgage Loan in the Mortgage Loan Schedule
and Exception Report to be pledged hereunder on such Funding Date.
Each request for a borrowing by the Borrowers hereunder shall
constitute a certification by the Borrowers that all the conditions set forth in
this Article V (other than
-28-
Sections 5.2(h) and (i)) have been satisfied (both as of the date of such
notice, request or confirmation and as of the date of such borrowing).
(l) Minimum Usage Fee. The Lender shall have received the Minimum
Usage Fee, if any.
Section 5.3 Wet-Ink Transactions. The funding of each Wet-Ink
Transaction on any Business Day is subject to the following further conditions
precedent:
(a) Wet- Ink Aged Report. The Lender shall have received from the
Custodian a Wet- Ink Aged Report in form and substance satisfactory to the
Lender; and
(b) Wet Aging. A Borrowing Base Deficiency shall not have occurred
and be continuing because of the inclusion of Aged Wet-Ink Mortgage Loans in the
Borrowing Base.
ARTICLE VI
Representations and Warranties.
The Borrowers represent and warrant to the Lender that throughout the
term of this Loan Agreement:
Section 6.1 Existence. Each Borrower (a) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (b) has all requisite corporate or other
power, and has all governmental licenses, authorizations, consents and approvals
necessary to own its assets and carry on its business as now being or as
proposed to be conducted, except where the lack of such licenses,
authorizations, consents and approvals would not be reasonably likely to have a
Material Adverse Effect, and (c) is qualified to do business and is in good
standing in all other jurisdictions in which the nature of the business
conducted by it makes such qualification necessary, except where failure so to
qualify would not be reasonably likely (either individually or in the aggregate)
to have a Material Adverse Effect.
Section 6.2 Financial Condition. Each of the Borrowers and the
Guarantor has heretofore furnished to the Lender a copy of (a) its consolidated
balance sheet and the consolidated balance sheets of its consolidated
Subsidiaries for the fiscal year of the Borrowers ended December 31, 2002 and
the related consolidated statements of income and retained earnings and of cash
flows for the Borrowers, the Guarantor and their consolidated Subsidiaries for
such fiscal year, setting forth in each case in comparative form the figures for
the previous year, with the opinion thereon of KPMG, LLC and (b) its
consolidated balance sheet and the consolidated balance sheets of its
consolidated Subsidiaries for the three most recently ended quarterly fiscal
periods of the Borrowers and the related consolidated statements of income and
retained earnings and of cash flows for the Borrowers, the Guarantor and its
consolidated Subsidiaries for such quarterly fiscal periods, setting forth in
each case in comparative form the figures for the previous year. All such
financial statements fairly present, in all material respects, the consolidated
financial condition of the Borrowers, the Guarantor and its Subsidiaries and the
consolidated results of their operations as at such dates and for such fiscal
periods, all in accordance with GAAP applied on a consistent basis. Since the
date of the most recently
-29-
delivered financials, there has been no material adverse change in the
consolidated business, operations or financial condition of the Borrowers, the
Guarantor and its consolidated Subsidiaries taken as a whole from that set forth
in said financial statements.
Section 6.3 Litigation. There are no actions, suits, arbitrations,
investigations (including, without limitation, any of the foregoing which are
pending or, to each Borrower's knowledge, threatened) or other legal or
arbitrable proceedings affecting the Borrowers or any of its Affiliates or
affecting any of the Property of any of them before any Governmental Authority
that (i) questions or challenges the validity or enforceability of any of the
Loan Documents or any action to be taken in connection with the transactions
contemplated hereby, (ii) makes a claim or claims in an aggregate amount greater
than $1,000,000, (iii) which, individually or in the aggregate, if adversely
determined, could reasonably be likely to have a Material Adverse Effect or (iv)
requires filing with the Securities and Exchange Commission in accordance with
the 1934 Act or any rules thereunder.
Section 6.4 No Breach. Neither (a) the execution and delivery of the
Loan Documents nor (b) the consummation of the transactions therein contemplated
in compliance with the terms and provisions thereof will conflict with or result
in a breach of the charter or by-laws of each Borrower, or any applicable law,
rule or regulation, or any order, writ, injunction or decree of any Governmental
Authority, or any Servicing Agreement or other material agreement or instrument
to which each Borrower or any of its Affiliates is a party or by which any of
them or any of their Property is bound or to which any of them is subject, or
constitute a default under any such material agreement or instrument or result
in the creation or imposition of any Lien (except for the Liens created pursuant
to this Loan Agreement) upon any Property of each Borrower or any of its
Subsidiaries pursuant to the terms of any such agreement or instrument.
Section 6.5 Action. Each Borrower has all necessary corporate or
other power, authority and legal right to execute, deliver and perform its
obligations under each of the Loan Documents to which it is a party; the
execution, delivery and performance by each Borrower of each of the Loan
Documents to which it is a party have been duly authorized by all necessary
corporate or other action on its part; and each Loan Document has been duly and
validly executed and delivered by the Borrowers and constitutes a legal, valid
and binding obligation of the Borrowers, enforceable against the Borrowers in
accordance with its terms.
Section 6.6 Approvals. No authorizations, approvals or consents of,
and no filings or registrations with, any Governmental Authority or any
securities exchange are necessary for the execution, delivery or performance by
the Borrowers of the Loan Documents or for the legality, validity or
enforceability thereof, except for filings and recordings in respect of the
Liens created pursuant to this Loan Agreement.
Section 6.7 Margin Regulations. Neither the making of any Loan
hereunder, nor the use of the proceeds thereof, will violate or be inconsistent
with the provisions of Regulations T, U or X.
Section 6.8 Taxes. Each Borrower and its Subsidiaries have filed all
Federal income tax returns and all other material tax returns that are required
to be filed by them and have paid all taxes due pursuant to such returns or
pursuant to any assessment received by any of
-30-
them, except for any such taxes as are being appropriately contested in good
faith by appropriate proceedings diligently conducted and with respect to which
adequate reserves have been provided. The charges, accruals and reserves on the
books of each Borrower and its Subsidiaries in respect of taxes and other
governmental charges are, in the opinion of each Borrower, adequate.
Section 6.9 Investment Company Act. No Borrower nor any of its
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
Section 6.10 Collateral; Collateral Security.
(a) No Borrower has assigned, pledged, or otherwise conveyed or
encumbered any Mortgage Loans or other Collateral to any other Person, and
immediately prior to the pledge of such Mortgage Loan or any other Collateral to
the Lender, a Borrower was the sole owner of such Mortgage Loans or such other
Collateral and had good and marketable title thereto, free and clear of all
Liens, in each case except for Liens to be released simultaneously with the
Liens granted in favor of the Lender hereunder. No Mortgage Loans or other
Collateral pledged to the Lender hereunder was acquired (by purchase or
otherwise) by a Borrower from any Affiliate of any Borrower, other than those
Mortgage Loans or other Collateral which were acquired by NC Capital pursuant to
(i) the Mortgage Loan Purchase and Servicing Agreement, dated December 1, 1998
between the Borrower and New Century Mortgage Corporation and (ii) the Mortgage
Loan Purchase and Servicing Agreement, dated July 1, 2001 between Worth Funding
Incorporated and New Century Mortgage Corporation, unless such acquisition (by
purchase or otherwise) is evidenced by a sale agreement and an assignment of
rights thereunder to the Lender, in each case, in form and substance acceptable
to the Lender, and the Borrower and its Affiliate file or have filed in all
relevant jurisdictions, UCC-1 financing statements reflecting the transfer of
such Mortgage Loan to the Borrower, together with the assignment of such
interest described in such financing statement to the Lender.
(b) The provisions of this Loan Agreement are effective to create
in favor of the Lender a valid security interest in all right, title and
interest of each Borrower in, to and under the Collateral.
(c) Upon receipt by the Custodian of each Mortgage Note, endorsed
in blank by a duly authorized officer of the relevant Borrower, the Lender shall
have a fully perfected first priority security interest therein, in the Mortgage
Loan evidenced thereby and in the relevant Borrower's interest in the related
Mortgaged Property.
(d) Upon the filing of financing statements on Form UCC-1 naming
the Lender as "Secured Party" and each Borrower as "Debtor" and describing the
Collateral in the jurisdictions and recording offices listed on Schedule 2
attached hereto, the security interests granted hereunder in the Collateral will
constitute fully perfected first priority security interests under the Uniform
Commercial Code in all right, title and interest of the Borrowers in, to and
under such Collateral which can be perfected by filing under the Uniform
Commercial Code.
-31-
Section 6.11 Chief Executive Office/Jurisdiction of Organization. On
the Effective Date, and during the four months immediately preceding the
Effective Date, each Borrower's chief executive office, is, and has been,
located at ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. On the
Effective Date, each Borrower's jurisdiction of organization is California.
Section 6.12 Location of Books and Records. The location where each
Borrower keeps its books and records, including all computer tapes and records
relating to the Collateral is its chief executive office.
Section 6.13 True and Complete Disclosure. The information, reports,
financial statements, exhibits and schedules furnished in writing by or on
behalf of each Borrower to the Lender in connection with the negotiation,
preparation or delivery of this Loan Agreement and the other Loan Documents or
included herein or therein or delivered pursuant hereto or thereto, when taken
as a whole, do not contain any untrue statement of material fact or omit to
state any material fact necessary to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading. All
written information furnished after the date hereof by or on behalf of each
Borrower to the Lender in connection with this Loan Agreement and the other Loan
Documents and the transactions contemplated hereby and thereby will be true,
complete and accurate in every material respect, or (in the case of projections)
based on reasonable estimates, on the date as of which such information is
stated or certified. There is no fact known to a Responsible Officer of each
Borrower, after due inquiry, that could reasonably be expected to have a
Material Adverse Effect that has not been disclosed herein, in the other Loan
Documents or in a report, financial statement, exhibit, schedule, disclosure
letter or other writing, furnished to the Lender for use in connection with the
transactions contemplated hereby or thereby.
Section 6.14 ERISA. Each Plan to which each Borrower or its
Subsidiaries make direct contributions, and, to the knowledge of each Borrower,
each other Plan and each Multiemployer Plan is in compliance in all material
respects with, and has been administered in all material respects in compliance
with, the applicable provisions of ERISA, the Code and any other Federal or
State law. No event or condition has occurred and is continuing as to which the
Borrowers would be under an obligation to furnish a report to the Lender under
Section 7.1 (d) hereof
Section 6.15 Subsidiaries. Schedule 3 sets forth the name of each
direct or indirect Subsidiary of each Borrower and of the holders of Capital
Stock of each Borrower, its form of organization, its jurisdiction of
organization, the total number of issued and outstanding shares or other
interests of Capital Stock thereof, the classes and number of issued and
outstanding shares or other interests of Capital Stock of each such class, the
name of each holder of Capital Stock thereof and the number of shares or other
interests of such Capital Stock held by each such holder and the percentage of
all outstanding shares or other interests of such class of Capital Stock held by
such holders.
-32-
ARTICLE VII
Covenants of the Borrowers.
The Borrowers covenant and agree with the Lender that, so long as any
Loan is outstanding, and until payment in full of all Secured Obligations:
Section 7.1 Financial Statements. The Borrowers shall deliver to the
Lender:
(a) as soon as available and in any event within 90 days after the
end of each fiscal year of each Borrower, the consolidated balance sheets of
each Borrower and its consolidated Subsidiaries as at the end of such fiscal
year and the related consolidated statements of income and retained earnings and
of cash flows for each Borrower and its consolidated Subsidiaries for such year,
setting forth in each case in comparative form the figures for the previous
year, accompanied by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall not be
qualified as to scope of audit or going concern and shall state that said
consolidated financial statements fairly present the consolidated financial
condition and results of operations of each Borrower and its consolidated
Subsidiaries as at the end of, and for, such fiscal year in accordance with
GAAP, and a certificate of such accountants stating that, in making, the
examination necessary for their opinion, they obtained no knowledge, except as
specifically stated, of any Default or Event of Default;
(b) as soon as available and in any event within 30 days after the
end of each month, the unaudited consolidated balance sheets of each Borrower
and its consolidated Subsidiaries as at the end of such month and the related
unaudited consolidated statements of income and retained earnings and of cash
flows of each Borrower and its consolidated Subsidiaries for such month and the
portion of the fiscal year through the end of such month, setting forth in each
case in comparative form the figures for the previous year, accompanied by (i) a
certificate of a Responsible Officer of each Borrower, which certificate shall
state that said consolidated financial statement fairly represents the
consolidated financial condition and results of operation of each Borrower and
its consolidated Subsidiaries in accordance with GAAP, consistently applied, as
of the end of, and for, such month (subject to normal year-end audit
adjustments) and (ii) the Board Report.
(c) from time to time such other information regarding the
financial condition, operations, or business of each Borrower as the Lender may
reasonably request; and
(d) as soon as reasonably possible, and in any event within thirty
(30) days after a Responsible Officer of any Borrower knows, or with respect to
any Plan or Multiemployer Plan to which the Borrower or any of its Subsidiaries
makes direct contributions, has reason to believe, that any of the events or
conditions specified below with respect to any Plan or Multiemployer Plan has
occurred or exists, a statement signed by a senior financial officer of the
Borrower setting forth details respecting such event or condition and the
action, if any, that the Borrower or its ERISA Affiliate proposes to take with
respect thereto (and a copy of any report or notice required to be filed with or
given to PBGC by the Borrower or an ERISA Affiliate with respect to such event
or condition):
-33-
(i) any reportable event, as defined in Section 4043(c) of ERISA
and the regulations issued thereunder, with respect to a Plan, as to which
PBGC has not by regulation waived the requirement of Section 4043(a) of
ERISA that it be notified within thirty (30) days of the occurrence of such
event (provided, that a failure to meet the minimum funding standard of
Section 412 of the Code or Section 302 of ERISA, including, without
limitation, the failure to make on or before its due date a required
installment under Section 412(m) of the Code or Section 302(e) of ERISA,
shall be a reportable event regardless of the issuance of any waivers in
accordance with Section 412(d) of the Code); and any request for a waiver
under Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041(c) of ERISA of a notice of
intent to terminate any Plan or any action taken by any Borrower or an
ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by any Borrower or any ERISA Affiliate
of a notice from a Multiemployer Plan that such action has been taken by
PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer Plan by
any Borrower or any ERISA Affiliate that results in liability under Section
4201 or 4204 of ERISA (including the obligation to satisfy secondary
liability as a result of a purchaser default) or the receipt by any
Borrower or any ERISA Affiliate of notice from a Multiemployer Plan that it
is in reorganization or insolvency pursuant to Section 4241 or 4245 of
ERISA or that it intends to terminate or has terminated under Section 4041A
of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against any Borrower or any ERISA Affiliate to enforce
Section 515 of ERISA, which proceeding is not dismissed within 30 days; and
(vi) the adoption of an amendment to any Plan that would result in
the loss of tax-exempt status of the Plan and trust of which such Plan is a
part if any Borrower or an ERISA Affiliate fails to provide timely security
to such Plan if and as required by the provisions of Section 401(a)(29) of
the Code or Section 307 of ERISA.
Each Borrower will furnish to the Lender, at the time it furnishes each set of
financial statements pursuant to paragraphs (a) and (b) above, a certificate of
a Responsible Officer of such Borrower to the effect that, to the best of such
Responsible Officer's knowledge, such Borrower during such fiscal period or year
has observed or performed all of its covenants and other agreements, and
satisfied every condition, contained in this Loan Agreement and the other Loan
Documents to be observed, performed or satisfied by it, and that such
Responsible Officer has obtained no knowledge of any Default or Event of Default
except as specified in such certificate (and, if any Default or Event of Default
has occurred and is continuing, describing, the same in reasonable detail and
describing the action such Borrower has taken or proposes to take with respect
thereto).
-34-
Section 7.2 Litigation. The Borrowers will promptly, and in any
event within ten (10) days after service of process on any of the following,
give to the Lender notice of all litigation, actions, suits, arbitrations,
investigations (including, without limitation, any of the foregoing which are
pending or threatened) or other legal or arbitrable proceedings affecting the
Borrowers or any of its Subsidiaries or affecting, any of the Property of any of
them before any Governmental Authority that (i) questions or challenges the
validity or enforceability of any of the Loan Documents or any action to be
taken in connection with the transactions contemplated hereby, (ii) makes a
claim or claims in an aggregate amount greater than $1,000,000, (iii) which,
individually or in the aggregate, if adversely determined, could be reasonably
likely to have a Material Adverse Effect or (iv) requires filing with the
Securities and Exchange Commission in accordance with the 1934 Act and any rules
thereunder.
Section 7.3 Existence, etc. Each Borrower will:
(a) preserve and maintain its legal existence and all of its
material rights, privileges, licenses and franchises (provided, that nothing in
this Section 7.3(a) shall prohibit any transaction expressly permitted under
Section 7.4 hereof);
(b) comply with the requirements of all applicable laws, rules,
regulations and orders of Governmental Authorities (including, without
limitation, all environmental laws) if failure to comply with such requirements
would be reasonably likely (either individually or in the aggregate) to have a
Material Adverse Effect;
(c) keep adequate records and books of account, in which complete
entries will be made in accordance with GAAP consistently applied;
(d) change its jurisdiction of organization from the jurisdiction
referred to in Section 6.11 unless it shall have provided the Lender 30 days'
prior written notice of such change;
(e) pay and discharge all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or on any of its
Property prior to the date on which penalties attach thereto, except for any
such tax, assessment, charge or levy, the payment of which is being contested in
good faith and by proper proceedings and against which adequate reserves are
being maintained; and
(f) permit representatives of the Lender, during normal business
hours, to examine, copy and make extracts from its books and records, to inspect
any of its Properties, and to discuss its business and affairs with its
officers, all to the extent reasonably requested by the Lender.
Section 7.4 Prohibition of Fundamental Changes. No Borrower shall
enter into any transaction of merger or consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or
dissolution) or sell all or substantially all of its assets; provided, that each
Borrower may merge or consolidate with (a) any wholly owned subsidiary of such
Borrower or (b) any other Person if such Borrower is the surviving corporation
and such Borrower's Net Worth would not be affected by such merger or
-35-
consolidation and provided further, that if after giving effect thereto, no
Default would exist hereunder.
Section 7.5 Borrowing Base Deficiency. If at any time there exists a
Borrowing Base Deficiency the Borrowers shall cure same in accordance with
Section 2.7 hereof
Section 7.6 Notices. The Borrowers shall give notice to the Lender:
(a) promptly upon receipt of notice or knowledge of the occurrence
of any Default or Event of Default;
(b) with respect to any Mortgage Loan pledged to the Lender
hereunder, immediately upon receipt of any principal prepayment (in full or
partial) of such pledged Mortgage Loan;
(c) with respect to any Mortgage Loan pledged to the Lender
hereunder, immediately upon receipt of notice or knowledge that the underlying
Mortgaged Property has been damaged by waste, fire, earthquake or earth
movement, windstorm, flood, tornado or other casualty, or otherwise damaged so
as to affect adversely the Collateral Value of such pledged Mortgage Loan;
(d) promptly upon receipt of notice or knowledge of (i) any default
related to any Collateral, (ii) any Lien or security interest (other than
security interests created hereby or by the other Loan Documents) on, or claim
asserted against, any of the Collateral or (iii) any event or change in
circumstances which could reasonably be expected to have a Material Adverse
Effect; and
(e) promptly upon any material change in the market value of any or
all of each Borrower's assets.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer of the Borrower setting forth details of the occurrence
referred to therein and stating what action the Borrower has taken or proposes
to take with respect thereto.
Section 7.7 Reports. The Borrowers shall provide the Lender with a
quarterly report, which report shall include, among other items, (a) a summary
of each Borrower's delinquency and loss experience with respect to mortgage
loans serviced by any Borrower, any Servicer or any designee of either, plus any
such additional reports as the Lender may reasonably request with respect to any
Borrower's or any Servicer's servicing portfolio or pending originations of
mortgage loans and (b) a ▇▇▇▇ to market summary of any residual and/or
subordinate securities held by any Borrower.
Section 7.8 Underwriting Guidelines. Without the prior written
consent of the Lender, the Borrowers shall not materially amend or otherwise
modify the Underwriting Guidelines. Notwithstanding the preceding sentence, in
the event that any Borrower makes any amendment or modification to the
Underwriting Guidelines, (i) the Borrower shall promptly deliver to the Lender a
complete copy of the amended or modified Underwriting Guidelines and (ii) if
such change is made without the prior written consent of the Lender, then Lender
may, at
-36-
its sole option and discretion, refrain from funding any additional borrowings
under Section 2.3 hereof.
Section 7.9 Transactions with Affiliates. The Borrowers will not
enter into any transaction, including, without limitation, any purchase, sale,
lease or exchange of property or the rendering of any service, with any
Affiliate unless such transaction is (a) otherwise permitted under this Loan
Agreement, (b) in the ordinary course of each Borrower's business and (c) upon
fair and reasonable terms no less favorable to the Borrower than it would obtain
in a comparable arm's length transaction with a Person which is not an
Affiliate, or make a payment that is not otherwise permitted by this Section 7.9
to any Affiliate. In no event shall any Borrower pledge to the Lender hereunder
any Mortgage Loan acquired by the Borrower from an Affiliate of the Borrower.
Section 7.10 Limitation on Liens. The Borrowers will defend the
Collateral against, and will take such other action as is necessary to remove,
any Lien, security interest or claim on or to the Collateral, other than the
security interests created under this Loan Agreement, and the Borrowers will
defend the right, title and interest of the Lender in and to any of the
Collateral against the claims and demands of all persons whomsoever.
Section 7.11 Limitation on Guarantees. The Borrowers shall not
create, incur, assume or suffer to exist any Guarantees (provided that acting as
a co-borrower with respect to credit facilities entered into as the ordinary
course of business shall not be deemed Guarantees.)
Section 7.12 Limitation on Distributions. After the occurrence and
during the continuation of any Default, the Borrowers shall not make any payment
on account of, or set apart assets for, a sinking or other analogous fund for
the purchase, redemption, defeasance, retirement or other acquisition of any
equity or partnership interest of the Borrowers, whether now or hereafter
outstanding, or make any other distribution in respect of any of the foregoing
or to any shareholder or equity owner of the Borrowers, either directly or
indirectly, whether in cash or property or in obligations of the Borrowers or
any of each Borrower's consolidated Subsidiaries.
Section 7.13 Servicer; Servicing Tape. The Borrowers shall provide to
the Lender on the tenth (10th) Business Day of each month a computer readable
file containing servicing information, including, without limitation, those
fields specified by the Lender from time to time, on a loan-by-loan basis and in
the aggregate, with respect to the Mortgage Loans serviced hereunder by the
Borrowers or any Servicer. The Borrowers shall not cause the Mortgage Loans to
be serviced by any servicer other than a servicer expressly approved in writing
by the Lender.
Section 7.14 Required Filings. The Borrowers shall promptly provide
the Lender with copies of all documents which the Borrowers or any Affiliates of
the Borrowers are required to file with the Securities and Exchange Commission
in accordance with the 1934 Act or any rules thereunder.
Section 7.15 No Adverse Selection. The Borrowers have not selected
the Collateral in a manner so as to adversely affect the Lender's interests.
-37-
Section 7.16 Remittance of Prepayments. The Borrowers shall remit,
with sufficient detail to enable the Lender to appropriately identify the
Mortgage Loan to which any amount remitted applies, to the Lender on each
Remittance Date all principal prepayments that the Borrowers have received since
the prior Remittance Date.
Section 7.17 Minimum Usage. If, as of any date of determination on or
after June 17, 2003, the average Borrowing Base for the preceding four (4)
calendar months is less than $650,000,000, the Borrowers shall remit to the
Lender within one (1) Business Day of such deficiency, the Minimum Usage Fee.
ARTICLE VIII
Events of Default.
Section 8.1 Events of Default.
Each of the following events shall constitute an event of default (an
"Event of Default") hereunder:
(a) any Borrower shall default in the payment of any principal of
or interest on any Loan when due (whether at stated maturity, upon acceleration
or at mandatory or optional prepayment); or
(b) any Borrower shall default in the payment of any other amount
payable by it hereunder or under any other Loan Document after notification by
the Lender of such default, and such default shall have continued unremedied for
five (5) Business Days; or
(c) any representation, warranty or certification made or deemed
made herein or in any other Loan Document by the Borrowers or any certificate
furnished to the Lender pursuant to the provisions hereof or thereof shall prove
to have been false or misleading in any material respect as of the time made or
furnished (other than the representations and warranties set forth in Schedule
1, which shall be considered solely for the purpose of determining the
Collateral Value of the Mortgage Loans; unless (i) the Borrowers shall have made
any such representations and warranties with knowledge that they were materially
false or-misleading at the time made or (ii) any such representations and
warranties have been determined by the Lender in its sole discretion to be
materially false or misleading on a regular basis); or
(d) any Borrower shall fail to comply with the requirements of
Section 7.3(a), Section 7.4, Section 7.5, Section 7.6, or Sections 7.9 through
7.16 hereof; or any Borrower shall otherwise fail to comply with the
requirements of Sections 7.3, 7.7 and 7.8 hereof and such default shall continue
unremedied for a period of five (5) Business Days; or the Borrowers shall fail
to observe or perform any other covenant or agreement contained in this Loan
Agreement or any other Loan Document and such failure to observe or perform
shall continue unremedied for a period of seven (7) Business Days; or
(e) a final judgment or judgments for the payment of money in
excess of $1,500,000 in the aggregate shall be rendered against any Borrower or
any of its Material Affiliates by one or more courts, administrative tribunals
or other bodies having jurisdiction and
-38-
the same shall not be satisfied, discharged (or provision shall not be made for
such discharge) or bonded, or a stay of execution thereof shall not be procured,
within 30 days from the date of entry thereof, and the Borrower or any such
Material Affiliate shall not, within said period of 30 days, or such longer
period during which execution of the same shall have been stayed or bonded,
appeal there from and cause the execution thereof to be stayed during such
appeal; or
(f) any Borrower or any of its Material Affiliates shall admit in
writing its inability to pay its debts as such debts become due; or
(g) any Borrower or any of its Material Affiliates shall (i) apply
for or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee, examiner or liquidator or the like of itself or of
all or a substantial part of its property, (ii) make a general assignment for
the benefit of its creditors, (iii) commence a voluntary case under the
Bankruptcy Code, (iv) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, liquidation, dissolution,
arrangement or winding-up, or composition or readjustment of debts, (v)
acquiesce in writing to, any petition filed against it in an involuntary case
under the Bankruptcy Code or (vi) take any corporate or other action for the
purpose of effecting any of the foregoing; or
(h) a proceeding or case shall be commenced, without the
application or consent of any Borrower or any of its Material Affiliates, in any
court of competent jurisdiction, seeking (i) its reorganization, liquidation,
dissolution, arrangement or winding-up, or the composition or readjustment of
its debts, (ii) the appointment of, or the taking of possession by, a receiver,
custodian, trustee, examiner, liquidator or the like of the Borrower or any such
Affiliate or of all or any substantial part of its property or (iii) similar
relief in respect of the Borrower or any such Affiliate under any law relating
to bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement
or winding-up, or composition or adjustment of debts, and such proceeding or
case shall continue undismissed, or an order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue unstayed and in
effect, for a period of 30 or more days; or an order for relief against the
Borrower or any such Affiliate shall be entered in an involuntary case under the
Bankruptcy Code; or
(i) the Custodial Agreement or any Loan Document shall for whatever
reason be terminated or cease to be in full force and effect, or the
enforceability thereof shall be contested by any Borrower; or
(j) any Borrower shall grant, or suffer to exist, any Lien on any
Collateral except the Liens contemplated hereby; or the Liens contemplated
hereby shall cease to be first priority perfected Liens on the Collateral in
favor of the Lender or shall be Liens in favor of any Person other than the
Lender; or
(k) any Borrower or any of the Borrower's Material Affiliates shall
be in default under any note, indenture, loan agreement, guaranty, swap
agreement or any other contract to which it is a party in excess of $1,000,000,
including, without limitation, any MS Indebtedness, which default (i) involves
the failure to pay a matured obligation or (ii) permits the acceleration of the
maturity of obligations by any other party to or beneficiary of such note,
indenture, loan agreement, guaranty, swap agreement or other contract; or
-39-
(l) any materially adverse change in the Property, business,
financial condition or prospects of any Borrower or any of its Material
Affiliates shall occur, in each case as determined by the Lender in its sole
discretion, or any other condition shall exist which, in the Lender's sole
discretion, constitutes a material impairment of the Borrower's ability to
perform its obligations under this Loan Agreement, the Note or any other Loan
Document; or
(m) MS & Co.'s corporate bond rating has been lowered or downgraded
to a rating below "A-" by S&P or "A3" by ▇▇▇▇▇'▇ and any Borrower shall have
failed to repay all amounts owing to the Lender under this Agreement, the Note
and the other Loan Documents within 90 days following such downgrade; or
(n) the discovery by the Lender of a condition or event which
existed at or prior to the execution hereof and which the Lender, in its sole
discretion, determines materially and adversely affects: (i) the condition
(financial or otherwise) of the Borrowers and the Guarantor, their Subsidiaries
or Affiliates; or (ii) the ability of the Borrowers or the Guarantor to fulfill
their respective obligations under this Loan Agreement; or
(o) any representation, warranty or certification made or deemed
made in the New Century Guaranty by the Guarantor shall prove to have been false
or misleading in any material respect as of the time made or furnished; or
(p) the Guarantor shall fail to observe or perform any covenant or
agreement contained in Section 11 of the New Century Guaranty.
ARTICLE IX
Remedies Upon Default.
Section 9.1 Remedies.
(a) An Event of Default shall be deemed to be continuing unless
expressly waived by the Lender in writing. Upon the occurrence of one or more
Events of Default hereunder, the Lender's obligation to make additional Loans to
the Borrowers shall automatically terminate without further action by any
Person. Upon the occurrence of one or more Events of Default other than those
referred to in Sections (f), (g) and (h) of Article VIII, the Lender may
immediately declare the principal amount of the Loans then outstanding under the
Note to be immediately due and payable, together with all accrued and unpaid
interest thereon and fees and expenses accruing under this Loan Agreement. Upon
the occurrence of an Event of Default referred to in Sections (f), (g) and (h)
of Article VIII, such amounts shall immediately and automatically become due and
payable without any further action by any Person. Upon such declaration or such
automatic acceleration, the balance then outstanding on the Note shall become
immediately due and payable, without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by the
Borrowers.
(b) Upon the occurrence of a Default, the Lender shall have the
right to obtain, and the Borrowers shall deliver or cause to be delivered, on
demand, physical possession of the Servicing Records and all other files of the
Borrowers relating to the Collateral and all documents relating to the
Collateral which are then or may thereafter come in to the possession
-40-
of the Borrowers or any third parties acting for the Borrowers and the Borrowers
shall deliver to the Lender such assignments as the Lender shall request. The
Lender shall be entitled to specific performance of all agreements of the
Borrowers contained in this Loan Agreement.
ARTICLE X
No Duty of Lender.
Section 10.1 No Duty. The powers conferred on the Lender hereunder
are solely to protect the Lender's interests in the Collateral and shall not
impose any duty upon it to exercise any such powers. The Lender shall be
accountable only for amounts that it actually receives as a result of the
exercise of such powers, and neither it nor any of its officers, directors,
employees or agents shall be responsible to the Borrowers for any act or failure
to act hereunder, except for its or their own gross negligence, bad faith or
willful misconduct.
ARTICLE XI
Miscellaneous.
Section 11.1 Waiver. No failure on the part of the Lender to exercise
and no delay in exercising, and no course of dealing with respect to, any right,
power or privilege under any Loan Document shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, power or privilege under
any Loan Document preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
Section 11.2 Notices. Except as otherwise expressly permitted by this
Loan Agreement, all notices, requests and other communications provided for
herein and under the Custodial Agreement (including without limitation any
modifications of, or waivers, requests or consents under, this Loan Agreement)
shall be given or made in writing (including without limitation by telex or
telecopy) delivered to the intended recipient at the "Address for Notices"
specified below its name on the signature pages hereof or thereof); or, as to
any party, at such other address as shall be designated by such party in a
written notice to each other party provided, that a copy of all notices given
under Section 7.1 shall simultaneously be delivered to Credit Department, ▇▇▇▇▇▇
▇▇▇▇▇▇▇, 1221 Avenue of the Americas, 35th Floor, Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
Except as otherwise provided in this Loan Agreement and except for notices given
under Article II (which shall be effective only on receipt), all such
communications shall be deemed to have been duly given when transmitted by telex
or telecopy or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.
Section 11.3 Indemnification and Expenses. The Borrowers agree to
hold the Lender and its Affiliates and their officers, directors, employees,
agents and advisors (each an "Indemnified Party") harmless from and indemnify
any Indemnified Party against all liabilities, losses, damages, judgments, costs
and expenses of any kind which may be imposed on, incurred by or asserted
against such Indemnified Party (collectively, the "Costs") relating to or
arising out of this Loan Agreement, the Note, any other Loan Document or any
transaction contemplated hereby or thereby, or any amendment, supplement or
modification of, or any waiver or consent
-41-
under or in respect of, this Loan Agreement, the Note, any other Loan Document
or any transaction contemplated hereby or thereby, that, in each case, results
from anything, other than any Indemnified Party's gross negligence, bad faith or
willful misconduct. Without limiting the generality of the foregoing, the
Borrowers agree to hold any Indemnified Party harmless from and indemnify such
Indemnified Party against all Costs with respect to all Mortgage Loans relating
to or arising, out of any violation or alleged violation of any environmental
law, rule or regulation or any consumer credit laws, including without
limitation, the Truth in Lending Act and/or the Real Estate Settlement
Procedures Act, that, in each case, results from anything other than such
Indemnified Party's gross negligence, bad faith or willful misconduct. In any
suit, proceeding or action brought by an Indemnified Party in connection with
any Mortgage Loan for any sum owing thereunder, or to enforce any provisions of
any Mortgage Loan, the Borrowers will save, indemnify and hold such Indemnified
Party harmless from and against all expense, loss or damage suffered by reason
of any defense, set-off, counterclaim, recoupment or reduction or liability
whatsoever of the account debtor or obligor thereunder, arising out of a breach
by the Borrowers of any obligation thereunder or arising out of any other
agreement, indebtedness or liability at any time owing to or in favor of such
account debtor or obligor or its successors from the Borrowers. The Borrowers
also agree to reimburse an Indemnified Party as and when billed by such
Indemnified Party for all such Indemnified Party's costs and expenses incurred
in connection with the enforcement or the preservation of such Indemnified
Party's rights under this Loan Agreement, the Note, any other Loan Document or
any transaction contemplated hereby or thereby, including, without limitation,
the reasonable fees and disbursements of its counsel. The Borrowers hereby
acknowledge that, notwithstanding the fact that the Note is secured by the
Collateral, the obligation of the Borrowers under the Note is a recourse
obligation of the Borrowers.
The Borrowers agree to pay as and when billed by the Lender all of the
out-of-pocket costs and expenses incurred by the Lender in connection with the
development, preparation and execution of, and any amendment, supplement or
modification to, this Loan Agreement, the Note, any other Loan Document or any
other documents prepared in connection herewith or therewith, including the New
Century Guaranty. The Borrowers agree to pay as and when billed by the Lender
all of the out-of-pocket costs and expenses incurred in connection with the
consummation and administration of the transactions contemplated hereby and
thereby including, without limitation, (i) all the reasonable and documented
fees, disbursements and expenses of counsel to the Lender, (ii) all the due
diligence, inspection, testing and review costs and expenses incurred by the
Lender with respect to Collateral under this Loan Agreement, including, but not
limited to, those costs and expenses incurred by the Lender pursuant to Sections
11.3, 11.14 and 11.15 hereof and (iii) except to the extent amounts in respect
thereof have previously paid pursuant to Section 2.3, the costs of Broker Price
Opinions in respect of Defaulted Mortgage Loans.
Section 11.4 Amendments. Except as otherwise expressly provided in
this Loan Agreement, any provision of this Loan Agreement may be modified or
supplemented only by an instrument in writing signed by the Borrowers and the
Lender and any provision of this Loan Agreement may be waived by the Lender.
-42-
Section 11.5 Successors and Assigns. This Loan Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
Section 11.6 Survival. The obligations of the Borrowers under
Sections 3.3 and 11.3 hereof shall survive the repayment of the Loans and the
termination of this Loan Agreement. In addition, each representation and
warranty made or deemed to be made by a request for a borrowing, herein or
pursuant hereto shall survive the making of such representation and warranty,
and the Lender shall not be deemed to have waived, by reason of making, any
Loan, any Default that may arise because any such representation or warranty
shall have proved to be false or misleading, notwithstanding that the Lender may
have had notice or knowledge or reason to believe that such representation or
warranty was false or misleading at the time such Loan was made.
Section 11.7 Captions. The table of contents and captions and section
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this Loan
Agreement.
Section 11.8 Counterparts. This Loan Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument, and any of the parties hereto may execute this Loan Agreement
by signing any such counterpart.
Section 11.9 Loan Agreement Constitutes Security Agreement: Governing
Law. This Loan Agreement shall be governed by New York law without reference to
choice of law doctrine, and shall constitute a security agreement within the
meaning of the Uniform Commercial Code.
Section 11.10 Submission To Jurisdiction: Waivers. Each Borrower
hereby irrevocably and unconditionally:
1. SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS LOAN AGREEMENT, THE NOTE AND THE OTHER
LOAN DOCUMENTS, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN
RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK, THE FEDERAL COURTS OF THE UNITED
STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE
COURTS FROM ANY THEREOF;
2. CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN
SUCH COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION
THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS
BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE
SAME;
-43-
3. AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR
CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE
PREPAID, TO ITS ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW OR AT SUCH
OTHER ADDRESS OF WHICH THE LENDER SHALL HAVE BEEN NOTIFIED; AND
4. AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT
THE RIGHT TO ▇▇▇ IN ANY OTHER JURISDICTION.
Section 11.11 WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE
LENDER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS LOAN AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
Section 11.12 Acknowledgments. Each Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution
and delivery of this Loan Agreement, the Note and the other Loan Documents;
(b) the Lender has no fiduciary relationship to the Borrower, and
the relationship between the Borrower and the Lender is solely that of debtor
and creditor; and
(c) no joint venture exists between the Lender and the Borrower.
Section 11.13 Hypothecation or Pledge of Loans. The Lender shall have
free and unrestricted use of all Collateral and nothing in this Loan Agreement
shall preclude the Lender from engaging in repurchase transactions with the
Collateral or otherwise pledging, repledging, transferring, hypothecating, or
rehypothecating the Collateral. Nothing contained in this Loan Agreement shall
obligate the Lender to segregate any Collateral delivered to the Lender by the
Borrowers.
Section 11.14 Servicing.
(a) Each Borrower covenants to maintain or cause the servicing of
the Mortgage Loans to be maintained in conformity with accepted and prudent
servicing practices in the industry for the same type of mortgage loans as the
Mortgage Loans and in a manner at least equal in quality to the servicing the
Borrower provides for mortgage loans which it owns. In the event that the
preceding language is interpreted as constituting one or more servicing
contracts, each such servicing contract shall terminate automatically upon the
earliest of (i) an Event of Default, (ii) the date on which all the Secured
Obligations have been paid in full or (iii) the transfer of servicing approved
by the Lender in writing. The Lender hereby approves New Century as the initial
servicer (the "Initial Servicer") of the Mortgage Loans.
-44-
(b) If the Mortgage Loans are serviced by New Century, (i) New
Century agrees that the Lender is the collateral assignee of all servicing
records, including, but not limited to, any and all servicing agreements, files,
documents, records, data bases, computer tapes, copies of computer tapes, proof
of insurance coverage, insurance policies, appraisals, other closing
documentation, payment history records, and any other records relating to or
evidencing the servicing of Mortgage Loans (the "Servicing Records"), and (ii)
New Century grants the Lender a security interest in all servicing fees and
rights relating to the Mortgage Loans and all Servicing Records to secure the
obligation of New Century or its designee to service in conformity with this
Section and any other obligation of New Century to the Lender. New Century
covenants to safeguard such Servicing Records and to deliver them promptly to
the Lender or its designee (including the Custodian) at the Lender's request.
(c) If the Mortgage Loans are serviced by a third party servicer
(such third party servicer, the "Third Party Servicer") the Borrowers (i) shall
provide a copy of the servicing agreement to the Lender, which shall be in form
and substance acceptable to the Lender (the "Servicing Agreement"), and (ii)
shall provide a Servicer Notice to the Third Party Servicer substantially in the
form of Exhibit G hereto (a "Servicer Notice") and shall cause such Third Party
Servicer to acknowledge and agree to the same. Any successor or assignee of a
Third Party Servicer shall be approved in writing by the Lender and shall
acknowledge and agree to a Servicer Notice prior to such successor's assumption
of servicing obligations with respect to the Mortgage Loans.
(d) If the Servicer of the Mortgage Loans is a Borrower or an
Affiliate of a Borrower, the Borrower shall provide to the Lender a letter to
the effect that upon the occurrence of an Event of Default, the Lender may
terminate any Servicing Agreement and in any event transfer servicing to the
Lender's designee, at no cost or expense to the Lender, it being agreed that the
Borrower will pay any and all fees required to terminate the Servicing Agreement
and to effectuate the transfer of servicing to the designee of the Lender.
(e) After the Funding Date, until the pledge of any Mortgage Loan
is relinquished by the Custodian, (i) the Borrowers shall give prior written
notice to the Lender of any proposed modification or alteration to the terms of
any such Mortgage Loan and unless the Borrowers shall have received the Lender's
written approval of such modification or alteration within five (5) Business
Days thereafter, in the event the Borrowers nevertheless make such modification
or alteration to the terms of such Mortgage Loan thereafter, such Mortgage Loan
shall thereupon have a Collateral Value equal to zero, and (ii) the Borrowers
will have no obligation or right to repossess such Mortgage Loan or substitute
another Mortgage Loan, except as provided in the Custodial Agreement.
(f) In the event any Borrower or its Affiliate is servicing the
Mortgage Loans, the Borrower shall permit the Lender from time to time during
business hours and upon prior reasonable notice (provided, that if a Default
shall have occurred and be continuing, no such notice shall be required) to
inspect the Borrower's or its Affiliate's servicing facilities, as the case may
be, for the purpose of satisfying the Lender that the Borrower or its Affiliate,
as the case may be, has the ability to service the Mortgage Loans as provided in
this Loan Agreement.
Section 11.15 Due Diligence Review.
-45-
(a) Mortgage Loans. The Borrowers acknowledge that the Lender has
the right to perform continuing due diligence reviews with respect to the
Mortgage Loans, for purposes of verifying compliance with the representations,
warranties and specifications made hereunder or otherwise, and the Borrowers
agree that upon reasonable (but no less than one (1) Business Day's) prior
notice to the Borrowers or the Servicer, as the case may be, the Lender or its
authorized representatives will be permitted during normal business hours to
examine, inspect, and make copies and extracts of, the Mortgage Files and
Servicing Records and any and all documents, records, agreements, instruments or
information relating to such Mortgage Loans in the possession or under the
control of the Borrowers, the Servicer and/or the Custodian. The Borrowers also
shall make available to the Lender a knowledgeable financial or accounting,
officer for the purpose of answering questions respecting the Mortgage Files and
the Mortgage Loans. Without limiting the generality of the foregoing, the
Borrowers acknowledge that the Lender may make Loans to the Borrowers based
solely upon the information provided by the Borrowers to the Lender in the
Mortgage Loan Data File and the representations, warranties and covenants
contained herein, and that the Lender, at its option, has the right at any time
to conduct a partial or complete due diligence review on some or all of the
Mortgage Loans securing such Loan, including without limitation ordering new
credit reports and new appraisals on the related Mortgaged Properties and
otherwise re-generating the information used to originate such Mortgage Loan.
The Lender may underwrite such Mortgage Loans itself or engage a mutually agreed
upon third party underwriter to perform such underwriting. The Borrowers agree
to cooperate with the Lender and any third party underwriter in connection with
such underwriting, including, but not limited to, providing the Lender and any
third party underwriter with access to any and all documents, records,
agreements, instruments or information relating to such Mortgage Loans in the
possession, or under the control, of the Borrowers.
(b) Borrowers. The Borrowers acknowledge that the Lender has the
right to perform quarterly due diligence reviews of each Borrower's operations,
including, but not limited to, a review of (1) the financial condition of the
Borrowers, (2) loan origination and servicing guidelines, and (3) other
corporate due diligence matters at the discretion of the Lender. In connection
therewith, the Borrowers agree that upon reasonable (but no less than two (2)
Business Day's) prior notice to the Borrowers (provided, that if a Default has
occurred and is continuing, no such notice shall be required), the Lender or its
authorized representatives will be permitted during normal business hours to
examine, inspect, and make copies and extracts of all documents, records,
agreements, instruments or information relating to the Borrowers which are in
possession or under the control of the Borrowers, as the Lender may reasonably
request. The Borrowers shall also make available to the Lender a knowledgeable
financial or accounting officer for the purpose of answering questions
respecting the financial condition of the Borrowers and make available to the
Lender an officer of each Borrower for the purpose of answering questions
respecting other corporate due diligence matters.
(c) Fees and Expenses of Due Diligence Review. The Borrowers
further agree that the Borrowers shall reimburse the Lender for any and all
out-of-pocket costs and expenses incurred by the Lender in connection with the
Lender's activities pursuant to this Section 11.15.
Section 11.16 Set-Off. In addition to any rights and remedies of the
Lender provided by this Loan Agreement and by law, the Lender shall have the
right, without prior
-46-
notice to the Borrowers, any such notice being expressly waived by the Borrowers
to the extent permitted by applicable law, upon any amount becoming due and
payable by the Borrowers hereunder (whether at the stated maturity, by
acceleration or otherwise) to set-off and appropriate and apply against such
amount any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by the Lender or any Affiliate
thereof to or for the credits or the accounts of the Borrowers. The Lender
agrees promptly to notify the Borrowers after any such set-off and application
made by the Lender; provided, that the failure to give such notice shall not
affect the validity of such set-off and application.
Section 11.17 Intent. The parties recognize that each Loan is a
"securities contract" as that term is defined in Section 741 of Title 11 of the
United States Code, as amended.
Section 11.18 Joint and Several Liability. Each Borrower hereby
acknowledges and agrees that such Borrower shall be jointly and severally liable
to the Lender to the maximum extent permitted by the applicable law for all
representations, warranties, covenants, obligations and indemnities of the
Borrowers hereunder.
Section 11.19 Replacement by Repurchase Agreement. The Borrowers
hereby acknowledge and agree that this Loan Agreement may at any time and
without any further cost to the Borrowers, in the sole discretion of the Lender,
be replaced by a repurchase facility with substantially similar terms as those
contained in this Loan Agreement. The Borrowers hereby agree to take such action
and execute such documents and instruments as is necessary to effectuate such
conversion.
Section 11.20 Treatment of Certain Information. Notwithstanding
anything to the contrary contained herein or in any other Loan Document, all
Persons may disclose to any and all Persons, without limitation of any kind, the
federal income tax treatment of the Loans or any of the transactions
contemplated by this Agreement or any other Loan Document (collectively, the
"Transactions"), any fact relevant to understanding the federal tax treatment of
the Transactions and all materials of any kind (including opinions or other tax
analyses) relating to such federal income tax treatment.
-47-
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement
to be duly executed and delivered as of the day and year first above written.
BORROWERS
NC CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: President
Address for Notices:
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
NEW CENTURY MORTGAGE CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Senior President
Address for Notices:
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
G-1
LENDER
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MORTGAGE CAPITAL INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Vice President
Address for Notices:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
G-2