FLOW WAREHOUSING CREDIT AND SECURITY AGREEMENT between FRANKLIN CREDIT MANAGEMENT CORPORATION Borrower and SKY BANK Lender Dated as of August 11, 2006
between
FRANKLIN
CREDIT MANAGEMENT CORPORATION
Borrower
and
SKY
BANK
Lender
Dated
as
of August 11, 2006
FLOW WAREHOUSING CREDIT AND SECURITY AGREEMENT
THIS FLOW WAREHOUSING CREDIT AND
SECURITY AGREEMENT
(the
“Agreement”)
is
entered into as of August 10, 2006, between Franklin Credit Management
Corporation, a New York corporation (the “Company”
or
the
“Borrower”),
having its principal office at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, and
Sky
Bank, an Ohio banking corporation (the “Bank”),
having an office at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇.
WHEREAS,
the
Company has requested the Bank, and the Bank is willing, to extend a revolving
warehousing line of credit to the Company to finance the purchasing of
residential mortgage loans in mortgage loan portfolio pools of less than
$1,500,000, in the aggregate, at the time of purchase, and the parties desire
to
set forth herein the terms and conditions under which Advances under the
revolving warehousing line of credit shall be made and security provided for
the
repayment thereof;
NOW,
THEREFORE,
the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1.Defined
Terms.
Capitalized terms defined below or elsewhere in this Agreement (including the
Exhibits hereto) shall have the following meanings:
“Advance”
means a
disbursement by the Bank under the Commitment, including readvances of funds
previously advanced to the Company and repaid to the Bank.
“Advance
Request”
has the
meaning set forth in Section 2.2 hereof.
“Affiliate”
has the
meaning set forth in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act.
“Agreement”
means
this FLOW Warehousing Credit and Security Agreement, either as originally
executed or as it may from time to time be supplemented, modified or
amended.
“Bank”
has the
meaning set forth in the first paragraph of this Agreement.
“Business
Day”
means
any day excluding Saturday, Sunday and any day which is a legal holiday for
banks under the laws of the State of Ohio.
“Collateral”
has the
meaning set forth in Section 3 hereof.
1
“Collateral
Documents”
means
all Mortgage Loan Documents evidencing or securing or pertaining to any Pledged
Mortgage Loan, whether now existing or hereafter arising, and being generally
described on Exhibit
C
attached
hereto. The term Collateral Documents shall also include any endorsements or
assignments of such Mortgage Loan Documents to the Company. The Bank shall
have
the right, on not less than thirty (30) Business Days’ prior written notice to
the Company to modify Exhibit
C
to
conform to current legal requirements or Bank practices, and, as so modified,
said Exhibits shall be deemed a part hereof.
“Commitment”
has the
meaning set forth in Section 2.1 hereof.
“Company”
has the
meaning set forth in the first paragraph of this Agreement.
“Conventional
Mortgage Loan”
means a
Mortgage Loan other than a FHA-insured or VA-guaranteed Mortgage
Loan.
“Custodian”
means
the organization, if any, which holds Mortgage Loan Documents under any
custodial agreement relating to pooled Mortgage Loans on the Company and Bank’s
behalf.
Custodial
Agreement” means
any
custodial agreement entered into by Bank, Company and the Custodian, if
any.
“Debt”
means,
with respect to any Person, at any date (a) all indebtedness or other
obligations of such Person which, in accordance with GAAP, would be included
in
determining total liabilities as shown on the liabilities side of a balance
sheet of such Person at such date; (b) all indebtedness or other
obligations of such Person for borrowed money or for the deferred purchase
price
of property or services; (c) all indebtedness or other obligations of any
other Person for borrowed money or for the deferred purchase price of property
or services in respect of which such Person is liable, contingently or
otherwise, to pay or advance money or property as guarantor, endorser, or
otherwise (except as endorser of negotiable instruments for collection in the
ordinary course of business), or which such Person has agreed to purchase or
otherwise acquire; and (d) all indebtedness for borrowed money or for the
deferred purchase price of property or services secured by a Lien on any
property owned or being purchased by such Person (even though such Person has
not assumed or otherwise become liable for the payment of such
indebtedness).
“Default”
means
the occurrence of any event or existence of any condition which, but for the
giving of notice, the lapse of time, or both, would constitute an Event of
Default.
“Event
of Default”
means
any of the conditions or events set forth in Section 8.1
hereof.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended from time to time, and any
successor statute.
“FHA”
means
The Federal Housing Administration of the United States Department of Housing
and Urban Development and any successor thereto.
2
“FHLMC”
means
The Federal Home Loan Mortgage Corporation and any successor
thereto.
“Floating
Rate”
has the
meaning set forth in Section 2.4 hereof.
“FNMA”
means
The Federal National Mortgage Association and any successor
thereto.
“GAAP”
means
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute
of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity
as
may be approved by a significant segment of the accounting profession, which
are
applicable to the circumstances as of the date of determination.
“GNMA”
means
Government National Mortgage Association or any successor thereto.
“HUD”
means
the United States Department of Housing and Urban Development or any successor
thereto.
“Indemnified
Liabilities”
has the
meaning set forth in Section 9.3 hereof.
“Index”
has the
meaning set forth in Section 2.4 hereof.
“Insurer”
means
FHA, VA or a private mortgage insurer, as applicable.
“Internal
Revenue Code”
means
the Internal Revenue Code of 1986, or any subsequent federal income tax law
or
laws, as any of the foregoing have been or may from time to time be
amended.
“Investor”
means a
third party financially responsible institution purchasing Mortgage Loans from
the Company pursuant to a Purchase Commitment.
“Lien”
means
any lien, mortgage, deed of trust, pledge, security interest, charge or
encumbrance of any kind (including any conditional sale or other title retention
agreement, any lease in the nature thereof, and any agreement to give any
security interest).
“Lock-box
Terms” has
the
meaning set forth in Section
3.5
hereof.
“Margin
Stock”
has the
meaning assigned to that term in Regulation U of the Board of Governors of
the Federal Reserve System as in effect from time to time.
“Mortgage”
means
either (1) a first-lien mortgage, deed of trust, security deed or similar
instrument on improved real property; or (2) a second-lien mortgage, deed
of trust, security deed or similar instrument on improved real
property.
3
“Mortgage
Loan”
means
any loan evidenced by a Mortgage Note, including any modifications thereof.
A
Mortgage Loan, unless otherwise expressly stated herein, means a Residential
Mortgage Loan.
“Mortgage
Loan Documents”
means
the Mortgage, Mortgage Note, credit and closing packages, disclosures, and
all
other files, records and documents evidencing, securing, guaranteeing or
otherwise arising in connection with or relating to any Pledged Mortgage Loan,
and including, without limitation, (to the extent applicable) those documents
listed on Exhibit
C.
“Mortgage
Note”
means a
note secured by a Mortgage and evidencing a Mortgage Loan.
“Net
Worth”
means,
at any date of determination, (a) Consolidated total assets of the Company
and
its Subsidiaries at such date less (b) the sum of (i) Consolidated total
liabilities of the Company and its Subsidiaries at such date and (ii) the
liquidation value of any redeemable preferred stock of the Company and its
Subsidiaries at such date, in each case as determined in accordance with
GAAP.
“Note”
has the
meaning set forth in Section 2.3 hereof.
“Notices”
has the
meaning set forth in Section 11.3.
“Officers’
Certificate”
means a
certificate executed on behalf of the Company by its vice president, cashier
or
other appropriate officer.
“Person”
means
and includes natural persons, corporations, limited liability companies,
partnerships, joint stock companies, joint ventures, associations, companies,
trusts, banks, trust land trusts, business trusts or other organizations,
whether or not legal entities, and companies, governmental agencies and
political subdivisions thereof.
“Pledged
Mortgage Loans”
has the
meaning set forth in Section 3.1 hereof.
“Post-Default
Rate”
means
in respect of any day (a “Post-Default
Day”)
an
Event of Default has occurred and is continuing hereunder, a rate per annum
on a
360 day per year basis equal to 2% per annum plus the applicable Floating Rate
on such Post-Default Day.
“Covered
Loan” means (a) a“high
cost mortgage” as defined in Section 152(a) of the Home Ownership and Equity
Protection Act of 1994; (b) a “high cost home loan” or a “predatory loan” within
the meaning of any corresponding state or local laws, including but not limited
to, the Georgia Fair Lending Act, the New York State Anti-Predatory Lending
Law,
and the New Jersey Homeownership Security Act; (c) any loan which under any
other state or local law or ordinance could result in such loan being deemed
to
be unenforceable or could result in the refund or recession of all principal
and/or interest paid or to be paid under such loan; and (d) any loan which
under
a state or local law may otherwise subject the originator and/or holder of
such
loan to civil or criminal sanctions related to the origination, holding,
servicing, and/or transfer of such loan.
4
“Purchase
Commitment”
means a
written commitment, in form and substance reasonably satisfactory to the Bank,
issued in favor of the Company by an Investor pursuant to which that Investor
commits to purchase one or more Mortgage Loans, along with the related
correspondent or whole loan purchase agreement by and between the Company and
the Investor, in form and substance reasonably satisfactory to the Bank,
governing the terms and conditions of any such purchases.
“Redemption
Amount”
has the
meaning set forth in Section 3.3 hereof.
“Residential
Mortgage Loan”
means a
Mortgage Loan secured by a Mortgage covering improved real property containing
one- to four-family residences, including, condominiums, and cooperative housing
units.
“Subsidiary”
means
any corporation, association or other business entity in which more than fifty
percent (50%) of the total voting power or shares of stock entitled to vote
in
the election of directors, managers or trustees thereof is at the time owned
or
controlled, directly or indirectly, by any Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
“VA”
means
the Department of Veterans Affairs and any successor thereto.
Section 1.2.Other
Definitional Provisions.
(a) Accounting terms not otherwise defined herein shall have the meanings
given them under GAAP.
(b)
Defined
terms may be used in the singular or the plural, as the context
requires.
ARTICLE II
THE CREDIT
Section 2.1. The
Commitment.
(a) Subject to the terms and conditions of this Agreement, including the
conditions precedent set forth in Section 4.1 below, and provided no Default
has
occurred and is continuing, the Bank agrees, from time to time during the period
from the date hereof to the expiration date as provided in Section 2.6
hereof, to make Advances to, or on behalf of, the Company solely for the
purchase of Mortgage Loans in mortgage loan portfolio pools of less than
$1,500,000, in the aggregate, at the time of purchase (and known between the
parties individually as a “Flow Transaction” and collectively, as the “Flow
Transactions”), provided
the
total aggregate principal amount which is outstanding at any one time of all
such Advances shall not exceed Forty Million Dollars ($40,000,000.00) unless
there is a written request by the Company and subsequent approval by an officer
of the Bank to modify this amount. The obligation of the Bank to make Advances
hereunder up to such limits or the amount to which such limit may be reduced
pursuant to Section 2.7(b) hereof, is hereinafter referred to as the
“Commitment.”
Within
the Commitment, the Company may borrow, repay and re-borrow.
5
(b)
Advances
shall be used by the Company solely for the purpose of funding or financing
the
purchase of Flow Transaction Mortgage Loans and shall be made at the request
of
the Company, in the manner hereinafter provided in Section 2.2., secured by
the assignment and pledge of such Mortgage Loans to Bank.
(c)
Unless
otherwise agreed to by Bank at its sole discretion, no Advance for the purchase
of a Mortgage Loan shall exceed (100%) of the purchase price, inclusive of
the
transaction fee payable to Bank and all out of pocket costs incurred by the
Company for the acquisition of such Mortgage Loan.
(d)
Notwithstanding anything to the contrary herein, Advances may be obtained by
the
Company for the purpose of repurchasing Mortgage Loans that were sold by the
Company to an Investor, provided, however, an Advance for such purpose shall
be
limited to 98% of the then unpaid principal balance of the to be repurchased
Mortgage Loan, and such Advances shall be repaid not later than the later of
(i)
sixty (60) days from the date of such Advance, or (ii) at the time of and
included with the next refinancing of Advances through a term loan issued under
and pursuant to the Senior Debt Facility provided such repurchased Mortgage
Loan
qualifies for refinancing into the Senior Debt Facility.
Section 2.2.Procedures
for Obtaining Advances.
(a) The Company may obtain an Advance hereunder, subject to the
satisfaction of the conditions set forth in Sections 4.1 hereof, upon
compliance with the procedures set forth in this Section 2.2. Requests for
Advances shall be initiated by the Company by delivering to the Bank a completed
and signed request for an Advance (an “Advance
Request”)
on the
then current form therefor approved by the Bank and provided to the Company.
The
current form in use by the Bank is set forth in Exhibit B
hereto.
The Bank shall have the right to revise or supplement approved forms of Advance
Request by giving prior written-notice thereof to the Company. Bank, in all
events, reserves the right to reject any Loan Request to finance the acquisition
of a Covered Loan.
(b)
The
procedures to be followed by the Company in making an Advance Request for the
purchase of Mortgage Loans, and the documents relating to the Collateral
described in the Advance Request required to be delivered to the Bank, shall
consist of those set forth in the following described Exhibit C
attached
hereto and hereby made part hereof entitled: Procedures and Documentation for
Warehousing Residential Mortgage Loans.
The
Bank
shall have the right, on not less than thirty (30) days’ prior written notice to
the Company, to modify said Exhibit(s) to conform to current legal requirements
or requirements set forth by the regulators and independent certified auditors
of the Bank, and, as so modified, said Exhibit shall be deemed part hereof
for
any Advance Requests thereafter delivered.
(c)
Before
funding any Advance, the Bank shall have three (3) Business Days to examine
each
Advance Request to be delivered prior to the Advance, as set forth in
Exhibit
C
hereto,
and may reject such of them as do not meet the requirements of this Agreement.
Bank, in all events, reserves the right to reject any Advance Request to finance
the purchase of (i) any Mortgage Loan which in the Bank’s judgment does not
comply or did not comply at the time of origination with any federal or state
statute or regulation applicable to such Mortgage Loan, and/or (ii) any Covered
Loan.
6
(d)
To
make
an Advance, the Bank shall debit this warehousing credit line account for the
amount of the Advance and, unless otherwise agreed to by the Bank, the Bank
shall wire the proceeds of such Advance to the Company’s operating account
no. _____________
with the Bank.
(e)
All
Advances under this Agreement shall constitute a single indebtedness and all
of
the Collateral shall be security for the Note and for the performance of all
obligations of the Company to the Bank.
(f)
This
Agreement shall be separate from and shall not be subject to the Senior Credit
Facility except as specifically otherwise provided in this
Agreement.
Section 2.3.Note.
The
Company’s obligation to pay the principal of, and interest on, all Advances made
by the Bank shall be evidenced by the promissory note (the “Note”)
of the
Company dated as of the date hereof substantially in the form of Exhibit A
attached
hereto. The term “Note”
shall
include all extensions, renewals and modifications of the Note and all
substitutions therefor. All terms and provisions of the Note are incorporated
herein.
Section 2.4. Interest
& Transaction Fees.
(a) The unpaid principal balance of Advances shall bear interest, payable
monthly, on the fifth (5th)
day of
each month, from the date of such Advance until paid in full, at a floating
per
annum rate of interest (the “Floating
Rate”)
from
time to time which is fifty (50) basis points less that the Index. The interest
rate charged herein shall be adjusted monthly, effective on the first
(1st)
day of
each month, based upon the Index in effect on the last Business Day of the
then
prior month. As used herein, the term “Index” shall mean the independent index,
which is the Prime Rate as published from time to time in the Money Rates Column
of The
Wall Street Journal.
If more
than one such prime rate or a range of prime rates is published, the highest
prime rate will be used when calculating the Index, and if The
Wall Street Journal
ceases
to publish the Prime Rate, Lender and Company will mutually and reasonably
agree
upon an independent, replacement source for determining the Prime Rate when
calculating the Index. Interest
will be calculated on the basis of actual days elapsed over a 360 day year
(365/360
basis).
Interest
will be billed monthly and will be due within ten (10) days of the issuance
of
the relevant monthly billing statement.
(b)
If an
Event of Default has occurred and is continuing hereunder, the Company shall
be
obligated to pay to Bank interest on the outstanding principal balance of
outstanding Advances at a rate per annum equal to the Post-Default Rate until
paid in full or such Event of Default is cured or waived by the
Bank.
(c)
The
record of the dates and amounts of each Advance, the payments of principal
and
interest, and applicable interest rates and other information with respect
thereto shall be maintained on the books and records of the holder of the Note
and such records shall constitute prima facie evidence of the accuracy of the
information so recorded.
7
Section 2.5.Principal
Payments.
(a) The outstanding principal amount of each Advance shall be payable in
full upon the earliest to occur of (i) the occurrence of any event
described in Section 2.5(c) hereof with respect to such Advance,
(ii) the due date required for such principal amount upon the expiration or
termination of the Commitment in accordance with and subject to the terms of
Section 2.6 below; or (iii) the occurrence of an Event of Default.
(b)
The
Company shall have the right to prepay the outstanding Advances in whole or
in
part, from time to time, without premium or penalty or advance notice, and
in
accordance with and subject to the terms of Section 3.4 herein-below, the
corresponding Pledged Mortgage Loans shall be released from Bank’s security
interest.
(c)
The
Mortgage Loans will be reviewed on a monthly basis and the
Company shall be obligated to pay to the Bank, without the necessity of prior
demand or notice from the Bank, and the Company authorizes the Bank to charge
its account for, the amount of any outstanding Advance against a specific
Mortgage Loan upon the occurrence of any of the following events:
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1.
|
One
hundred twenty (120) calendar days elapse from the date of the
Advance;
|
|
2.
|
Ten
(10) Business Days elapse from the date the Collateral Documents
relating
to a Mortgage Loan against which the Advance was made, were required
to be
received by the Bank or the custodian without the actual receipt
thereof;
or
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|
3.
|
Thirty
(30) calendar days elapse from the date a Collateral Document relating
to
a Mortgage Loan against which the Advance was made was delivered to the
Company for correction or completion, without being returned to the
Bank,
or such Collateral Documents, upon examination by the Bank, are found
not
to be in compliance with the requirements of this Agreement or the
related
Purchase Commitment; or
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|
4.
|
Upon
sale of the Mortgage Loan; or
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|
5.
|
Upon
a determination by Bank within thirty (30) days of the date of the
Advance
that the Mortgage Loan with respect to which such Advance was made
is (a)
a fraudulent loan, or (b) does not comply, in a material manner,
with the
requirements of this Agreement, provided, however, in such event,
Company
shall have sixty (60) days from the date of notification to Company
of
such determination to either re-pay such Advance to Bank, or in the
event
of subpart (b), to cure such defect;
or
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6.
|
Upon
a determination by the regulators or auditors of either the Bank
or the
Company, that the Mortgage Loan is a predatory loan, as defined in
any
applicable federal, state or local statute or
regulation
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(d)
Notwithstanding the foregoing, any such Advance related to a Mortgage Loan
meeting criteria 1 above may, at the option of Company, be refinanced through
a
term loan issued under and pursuant to the related Master
Credit and Security Agreement
dated
October 13, 2004, between the Bank, certain now existing and hereafter arising
subsidiaries of the Company (individually, a “Company
Subsidiary”
and
collectively and severally, the “Company
Subsidiaries”),
and
the Company (the “Senior
Credit Facility”)
(subject to the terms, conditions, covenants and any amendments thereof and
provided that term loan advances are then available under such Senior Credit
Facility), provided, further however, in the event that such Advance relates
to
a Mortgage Loan that has been originated with the specific intent to sell such
Mortgage Loan to a 3rd
party,
not more than ninety-eight percent (98%) of such advance may be refinanced
with
funds from said Senior Credit Facility.
8
(e)
Upon
making such payment to the Bank as outlined in 2.5(c) above, the Company shall
be deemed to have redeemed such Mortgage Loan from pledge (other than in the
event of a re-finance under the Senior Credit Facility), and the Collateral
Documents relating thereto shall be promptly released by the Bank to the Company
or to the applicable Investor. The Bank agrees to take such other steps
reasonably requested by the Company in connection with such
release.
Section 2.6. Expiration
and/or Termination of Commitment.
(a) Unless terminated earlier as permitted hereunder, the Commitment shall
expire of its own term, and without the necessity of action by the Bank,
on
August 11, 2007.
Notwithstanding anything to the foregoing, for any Advance made by the Bank
prior to the termination date, the Company shall still have one hundred twenty
(120) days from the date of the Advance to pay the Bank the amount of any
outstanding Advance or the Company may, at its option, re-finance any such
Outstanding Advance through a term loan issued under the Senior Credit
Facility.
(b)
The
Bank
shall have the right, without cause, at any time to terminate the Agreement
on
not less than sixty (60) days’ prior written notice to the Company. During such
sixty (60) day notice period, Company may continue to obtain Advances in
accordance with the terms of this Agreement, and upon expiration of such sixty
(60) day notice period, as set forth above, Company shall continue to have
one
hundred twenty (120) days from the date of each Advance to pay the Bank the
amount of any then outstanding Advances or the Company may, at its option,
re-finance any such Outstanding Advances through a term loan issued under the
Senior Credit Facility.
(c)
The
Bank
shall also have the right to terminate this Agreement and the line of credit
extended to the Company pursuant to the terms of this Agreement, upon any
adverse material change in the Company’s financial condition as defined by the
Bank in its reasonable discretion during the term of this Agreement upon written
notice to the Company. For purposes of this Section
2.6(c),
the
term “adverse material change” means Company’s failure to comply with and
maintain during the term of this Agreement any of the Financial Requirements
set
forth under Section
6.15.
Notwithstanding the foregoing, the Company shall continue to have one hundred
twenty (120) days from the date of each Advance to pay the Bank the amount
of
any then outstanding Advances or, at the discretion of the Bank, may re-finance
any such Outstanding Advances through a term loan issued under the Senior Credit
Facility.
(d)
The
Bank
shall have the right from time to time and in its sole discretion, to extend
the
term of this Agreement with prior written notice to the Company. The length
of
any such extension shall also be determined in the Bank’s sole discretion. Such
extension may be made subject to the renegotiation of the terms hereunder and
to
any other such conditions as the Bank may deem necessary. Under no circumstances
shall such an extension by the Bank be interpreted or construed as the Bank’s
forfeiture of any of its rights, entitlements or interest created hereunder.
The
Company acknowledges and understands that the Bank is under no obligation
whatsoever to extend the term of this Agreement beyond its expiration date
as
originally stated in this Agreement, or if extended, to further extend the
expiration date beyond any such extension thereof.
9
Section 2.7.Method
of Making Payments; Reductions in Commitment.
(a) Except as otherwise specifically provided herein, all payments
hereunder shall be received by the Bank on the date when due and shall be made
in lawful money of the United States of America in immediately available funds
at the office of the Bank, at East
Liverpool, Ohio, P.O. Box 5399,
zip
code 43920,
or at
such other place as the Bank from time to time shall designate. Whenever any
payment to be made hereunder or under the Note shall be stated to be due on
a
day which is not a Business Day, the due date thereof shall be extended to
the
next succeeding Business Day, and, with respect to payments of principal, the
interest thereon shall be payable at the applicable rate during such extension.
Funds received by the Bank after 4:00 p.m. (East Liverpool, Ohio, time) on
a
Business Day shall be deemed to have been paid by the Company on the next
succeeding Business Day.
(b)
The
Company shall have the right, at any time and from time to time, effective
as of
the first day of any calendar month, to terminate in whole or permanently reduce
in part, without premium or penalty, the amount of the Commitment in excess
of
the then outstanding principal amount of all Advances hereunder. The Company
shall give written notice to the Bank designating the date of such termination
or reduction not less than five (5) Business Days’ prior to the date such
termination or reduction is to take effect, and the amount of any partial
reduction of the Commitment shall be in an aggregate minimum amount of One
Hundred Thousand Dollars ($100,000.00) or integral multiples of One Hundred
Thousand Dollars ($100,000.00) in excess of that amount.
Section 2.8.Late
Payment Fees.
In the
event the Company fails to make any payment (whether of principal or interest)
on the date such payment is due and payable hereunder or under the Note, and
such failure continues for more than fifteen (15) days after notice from the
Bank, the Company shall pay to the Bank, upon demand therefor, a late payment
fee equal to five
percent (5%)
of the
amount of such payment or One
Thousand Dollars ($1,000.00),
whichever is greater.
Section ▇.▇.▇▇▇
Payments.
All
payments with respect to any Advance shall be made without offset or
counterclaim and free from any present or future taxes, levies, imports, duties
or other similar charges of whatsoever nature imposed by any government or
any
political subdivision or taxing authority hereof, other than any taxes on or
measured by the net income of the Bank.
Section 2.10.Commitment
& Transaction Fees. The
Company shall pay the Bank the transaction fee equal to Fifty
Dollars ($50.00)
for each
Advance obtained under
the
terms of this Agreement which fee shall be billed monthly and will be due within
ten (10) days of the issuance of the relevant monthly billing statement. In
addition, so long as this Agreement is in effect, the Company shall annually
pay
the Bank a commitment fee computed as follows: Ten
Thousand Dollars ($10,000.00)
multiplied by a fraction, the numerator of which is equal to the average monthly
un-borrowed amount of the Commitment during the previous year, and the
denominator of which is equal to the Commitment. The commitment fee shall be
payable by the Company to the Bank within thirty (30) days of the anniversary
date of this Agreement. The Bank shall provide the Company with an annual
statement showing its computation of the average daily un-borrowed amount of
the
Commitment for the previous year. Unless the Company contests the accuracy
of
the Bank’s statement within ten (10) days of receipt, the Bank may debit this
credit line account for the amount of the commitment fee.
10
ARTICLE III
COLLATERAL
Section 3.1.Assignments
and Grant of Security Interest.
In
consideration of the Commitment, and as security for (i) the payment of the
Note
and (ii) payment and performance of all of the Company’s obligations hereunder,
the Company hereby grants to the Bank a security interest in all rights and
interest of the Company in and to the following described property
(collectively, the “Collateral”):
(a) All
Mortgage Loans, including all Mortgage Notes and Mortgages evidencing or
securing such Mortgage Loans and all other related Mortgage Loan Documents
which
from time to time are delivered, or caused to be delivered, or which heretofore
have been delivered to the Bank (including delivery to a third party on behalf
of the Bank) pursuant hereto or in respect of which an Advance has been made
by
the Bank or which is hereafter made by the Bank hereunder (the “Pledged
Mortgage Loans”);
the
Company shall deliver a schedule, in form and detail acceptable to Bank, of
the
Mortgage Loan(s) being purchased from the proceeds of such Advance.
(b) All
mortgage insurance and all commitments issued by Insurers to insure or guarantee
any Pledged Mortgage Loan; all Purchase Commitments held by the Company covering
the Pledged Mortgage Loans and all proceeds resulting from the sale thereof
to
Investors pursuant thereto; and all personal property, contract rights,
collection and servicing rights and servicing fees and income, accounts and
general intangibles of whatsoever kind relating to the Pledged Mortgage Loans;
said Insurer commitments and the Purchase Commitments, and all other documents
or instruments delivered to the Bank in respect of the Pledged Mortgage Loans,
and including, without limitation, the right to receive all insurance proceeds
and condemnation awards which may be payable in respect of the premises
encumbered by any Pledged Mortgage Loan;
11
(c) All
right, title and interest of the Company in and to all files, surveys,
certificates, correspondence, appraisals, computer programs, tapes, discs,
cards, accounting records, information and data of the Company relating to
the
Pledged Mortgage Loans;
(d)
All
rights, but not any obligations or liabilities under all purchase agreements
relating to the Company’s acquisition of Pledged Mortgage Loans.
(e) All
property of the Company, in any form or capacity now or at any time hereafter
in
the possession or direct or indirect control of the Bank relating to the Pledged
Mortgage Loans (including possession by a parent company, affiliate or
subsidiary of the Bank);
(f) All
rights (but not any obligations or liabilities) of the Company under the
Custodial Agreements; and
(g) All
replacements, products and proceeds of any and all of the
foregoing.
In
addition to the foregoing grant of a security interest to the Bank in the
Collateral, the Company hereby assigns and delivers to the Bank and grants
to
Bank a security interest in all of the following: (i) the Company’s right
(but not any liabilities of the Company) under all Purchase Commitments now
held
or hereafter acquired by the Company covering Pledged Mortgage Loans and all
proceeds resulting from the sale of Pledged Mortgage Loans pursuant thereto;
and
(ii) all rights of the Company (but not any liabilities of the Company)
with respect to Investors to the extent related to the Pledged Mortgage Loans.
Upon the request of the Bank, the Company shall execute any further document
or
instrument reasonably requested by the Bank to further evidence or effectuate
the assignments set forth in this subparagraph.
Without
limiting the foregoing, it is the express intention of the Company, that the
security interest granted above is and shall be a continuing security interest
covering all now present (or then present), and all future obligations of the
Company to Bank hereunder or arising hereunder; and that the security interests
granted herein by the Company shall remain in effect until all indebtedness
secured hereby has been paid in full and the Commitment has expired or has
been
otherwise terminated.
Upon
the
request of the Bank, the Company shall execute any further document or
instrument reasonably requested by the Bank to further evidence or effectuate
the assignments and security interests set forth in this Section. Furthermore,
the Company (a) hereby authorizes Bank to sign (if required) and file financing
statements at any time with respect to any of the Collateral, without such
financing statements being executed by, or on behalf of, the Company, (b) shall,
at any time on request of Bank, execute or cause to be executed financing
statements in respect of any Collateral, and (c) shall reasonably cooperate
to
provide any information reasonably required by the Bank in connection with
the
filing of financing statements with respect to the Collateral. The Company
agrees to pay all filing fees, including fees for filing continuation statements
in connection with such financing statements, and to reimburse Bank for all
costs incurred in connection therewith.
Section 3.2.Reserved.
Section 3.3.Right
of Redemption from Pledge.
Provided no Default or Event of Default has occurred and is continuing, the
Company may redeem a Mortgage Loan from pledge, by either paying, or causing
an
Investor to pay, to the Bank, for application to prepayment of the principal
balance of the Note, an amount (the “Redemption
Amount”)
equal
to amount of the Advance made with respect to such Mortgage Loan, which is
still
outstanding. To determine the exact amount of an Advance for an individual
Mortgage Loan under this Section 3.3, the Bank will be provided, prior to making
an Advance, with loan level pricing detailing the percentage price to be paid,
(rounded to the nearest tenth of one percent) and the proposed funding cost
to
the Bank (rounded to the nearest one dollar) for each Mortgage Loan proposed
for
purchase by the Company.
12
Section 3.4.Collection
and Servicing Rights.
(a) The
Company agrees that the “Lock Box Terms” set forth on Exhibit
F
shall be
utilized by Company for the receiving, collecting, and processing of all sums
payable to the Company in respect of the Collateral (the “Lock-box
Terms”).
Under
that Lock-box Terms the Bank shall be entitled to receive all sums payable
to
the Company in respect of the Collateral. All amounts payable to the Company
for
the purchase by any Investor of any Pledged Mortgage Loans shall also be paid
directly to the Bank. The Company shall instruct each Pledged Mortgage Loan
obligor to direct all payments due under the Pledged Mortgage Loans, and shall
direct each Investor to pay the amounts payable for the purchase of such Pledged
Mortgage Loans, directly to the Lockbox address at the Bank. Without limiting
the foregoing, Following the occurrence of any Event of Default, the Bank may,
at any time thereafter, upon written notice to the Company, be entitled to
service, receive and collect all sums payable to the Company in respect of
the
Collateral, and in such case: (i) the Bank in its discretion may, in its
own name or in the name of the Company or otherwise, demand, ▇▇▇ for, collect
or
receive any money or property at any time payable or receivable on account
of or
in exchange for any of the Collateral, but shall be under no obligation to
do
so; and (ii) all amounts so received and collected by the Bank shall be
held by it as part of the Collateral.
(b) The
Bank
shall have the right on not less than thirty (30) days prior notice to the
Company to reasonably modify the Lock-box Terms to conform to then current
Bank
practices upon mutual agreement of Company, not to be unreasonably withheld,
and/or banking regulations.
Section 3.5.Return
of Collateral at End of Commitment.
If
(i) the Commitment shall have expired or been terminated, and (ii) no
Advances, interest or other amounts evidenced by the Note or due under this
Agreement shall be outstanding and unpaid, the Bank shall promptly deliver
or
release all Collateral in its possession to the Company. The Bank shall also
execute and deliver such assignments and other instruments and documents
reasonably requested by the Company to vest title in the Collateral into the
Company. The receipt of the Company for any Collateral released or delivered
to
the Company pursuant to any provision of this Agreement shall be a complete
and
full acquittance for the Collateral so returned.
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.1.Advances.
The
obligation of the Bank to make Advances under this Agreement are subject to
the
following conditions precedent:
13
(a)
The
Bank shall have received the following, all of which must be satisfactory
in
form and content to the Bank, in its reasonable discretion:
(1)
On or
before the date hereof, the Note duly executed by the Company;
(2)
On or
before the date hereof of Certified copies of the Company’s articles of
organization and by-laws, and certificate of good standing dated no less
recently than one (1) month prior to the date of the initial
Advance;
(3)
On or
before the date hereof of an original resolution of the board of directors
of
the Company, certified as of the date of this Agreement by its secretary,
authorizing the execution, delivery and performance of this Agreement and
the
Note, and all other instruments or documents to be delivered by the Company
pursuant to this Agreement;
(4)
On or
before the date hereof of a true and complete copy of the audited
financial statements of the Company for the most recent fiscal year-end
containing a balance sheet and related statements of income and retained
earnings (the “Statement
Date”)
and
changes in financial position for the period ended on the Statement Date,
all
prepared in accordance with GAAP;
(5)
On or
before the date hereof of copies of the certificates, documents or other
written
instruments which evidence the Company’s eligibility described in Section 5.13
hereof,
all in form and substance satisfactory to the Bank;
(6)
On or
before the date hereof of Copies of the Company’s errors and omissions insurance
policy or mortgage impairment insurance policy and blanket bond coverage
policy,
or certificates in lieu of policies, all in form and content satisfactory
to the
Bank, showing compliance by the Company; and
(7)
On or
before the date hereof of a Power of Attorney to indorse negotiable instruments
in the form of Exhibit E.
(8)
On or
before the date hereof of The Bank shall have received evidence satisfactory
to
it as to the due filing and recording in all appropriate offices of all
financing statements and other instruments as may be necessary to perfect
the
security interest of the Bank in the Collateral under the Uniform Commercial
Code of the State of New York or other applicable law.
(9)
Prior
to each Advance, (a) the Bank shall
have received a true and complete copy of each of the following: (i) the
purchase agreement relating to the acquisition of the Mortgage Loan(s) being
acquired with the Advance, and the assignment documents assigning such Mortgage
Loan(s) to the Company or, where applicable, the Mortgage Identification
Number
(“MIN”) for each Mortgage Loan registered on the MERS® System to track the
transfer of ownership and/or servicing rights to the Company; and evidence
that
such assignment to Borrower has been appropriately registered on the MERS®
System; and (ii) a schedule, in form and detail acceptable to Bank of the
Mortgage Loan(s) being purchased; and (b) the
Company shall have delivered to the Bank an Advance Request, and shall have
delivered to the Bank or the Custodian the Collateral Documents called for
under
this Agreement, and shall have satisfied the procedures set forth in, Sections
2
and the applicable Exhibits related thereto. All items delivered to the Bank
must be reasonably satisfactory to the Bank in form and content, and the
Bank
may reject such of them as do not meet the requirements of this
Agreement.
14
(10)
The
representations and warranties of the Company contained in Article V hereof
shall be true and correct in all material respects as if made on and as of
the
date of each Advance unless the same by its terms relates to an earlier
date.
(11)
The
Company shall have performed all agreements to be performed by it hereunder
and
under the Note, and after giving effect to the requested Advance, there shall
exist no Default or Event of Default hereunder or under the Note.
(12)
As
of the date of such Advance, the Company shall not have (i) incurred any
material liabilities, direct or contingent, other than in the ordinary course
of
its business that would render it to be noncompliant with the financial
requirements set forth in Article 6 herein, since the dates of the Company’s
most recent financial statements theretofore delivered to the Bank, or
(ii) experienced any other material adverse change in its business or
operations.
Acceptance
of the proceeds of the requested Advance by the Company shall be deemed a
representation by the Company that all conditions set forth in this
Section 4 shall have been satisfied as of the date of such
Advance.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
In
order
to induce the Bank to enter into this Agreement and make each Advance, the
Company hereby represents and warrants to the Bank, as of the date of this
Agreement and as of the date of each Advance Request and of each Advance,
that:
Section 5.1.Organization;
Good Standing.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, has the full legal power and authority
to own its property and to carry on its business as currently conducted and
is
duly qualified as a foreign corporation to do business and is in good standing
in each jurisdiction in which the transaction of its business makes such
qualification necessary, except in jurisdictions, if any, where a failure
to be
in good standing has no material adverse effect on the business, operations,
assets or financial condition of the Company.
15
Section 5.2.Authorization
and Enforceability.
The
Company has the power and authority to execute, deliver and perform this
Agreement, the Note and all other documents contemplated hereby or thereby.
The
execution, delivery and performance by the Company of this Agreement, the
Note
and all other documents contemplated hereby or thereby and the making of
the
borrowing hereunder and thereunder, have been duly and validly authorized
by all
necessary corporate action on the part of the Company (none of which actions
have been modified or rescinded, and all of which actions are in full force
and
effect) and do not and will not conflict with or violate any provision of
law or
of the articles of organization or bylaws of the Company, conflict with or
result in a breach of or constitute a default or require any consent under,
or
result in the creation of any Lien upon any property or assets of the Company
(other than pursuant to this Agreement), or result in or require the
acceleration of any indebtedness of the Company pursuant to any agreement,
instrument or indenture to which the Company is a party or by which the Company
or its property may be bound or affected. This Agreement, the Note and all
other
documents contemplated hereby or thereby constitute legal, valid, and binding
obligations of the Company enforceable in accordance with their respective
terms, except as limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors’ rights and by general principles of
equity.
Section 5.3.Approvals.
The
execution and delivery of this Agreement, the Note and all other documents
contemplated hereby or thereby and the performance of the Company’s obligations
hereunder and thereunder do not require any license, consent, approval or
other
action of any state or federal agency or governmental or regulatory
authority.
Section ▇.▇.▇▇▇▇▇▇▇▇▇
Condition.
The
balance sheet of the Company as at the Statement Date, and the related
statements of income and cash flows for the fiscal year ended on the Statement
Date, heretofore furnished to the Bank, fairly present the financial condition
of the Company as at the Statement Date and the results of its operations
for
the fiscal period ended on the Statement Date. The Company had, on the Statement
Date, no known liabilities, direct or indirect, fixed or contingent, matured
or
unmatured, or liabilities for taxes, long-term leases or unusual forward
or
long-term commitments not disclosed by, or reserved against in, said balance
sheet and related statements, except as heretofore disclosed to the Bank
in
writing or otherwise reflected on the Company’s balance sheet, and except for
the Bank’s extension(s) of credit to the Company Except for financial statements
prepared for interim periods between the fiscal year-end, all financial
statements were prepared in accordance with GAAP applied on a consistent
basis
throughout the periods involved. Since the Statement Date, there has been
no
material adverse change in the business, operations, assets or financial
condition of the Company, nor is the Company aware of any state of facts
which
(with or without notice or lapse of time or both) would or could result in
any
such material adverse change.
Section 5.5.Litigation.
There
are no actions, claims, suits or proceedings pending, or to the knowledge
of the
Company, threatened against or affecting the Company in any court or before
any
arbitrator or before any government commission, board, bureau or other
administrative agency which, if adversely determined, may reasonably be expected
to result in any material and adverse change in the business, operations,
assets, licenses, qualifications or financial condition of the
Company.
16
Section 5.6.Licenses;
Compliance with Laws.
The
Company has all material permits, licenses, authorizations and approvals
with
all governmental authorities or agencies that are required in order to permit
it
to conduct its business as presently conducted, and all such material permits,
licenses, authorizations and approvals that are required to conduct its business
as presently conducted are in full force and effect. The Company, to the
best of
its knowledge, is not in violation of any provision of any law, or of any
judgment, award, rule, regulation, order, decree, writ or injunction of any
court or public regulatory body or authority which might have a material
adverse
effect on the business, operations, assets or financial condition of the
Company.
Section 5.7.Regulation U.
No part
of the proceeds of any Advances made hereunder will be used to purchase or
carry
any Margin Stock or to extend credit to others for the purpose of purchasing
or
carrying any Margin Stock.
Section 5.8.Investment
Company Act.
The
Company is not an “investment company,” or a company controlled by an
“investment company,” within the meaning of the Investment Company Act of 1940,
as amended.
Section 5.9.Payment
of Taxes.
The
Company has filed or caused to be filed all federal, state, and local income,
excise, property and other tax returns with respect to the operations of
the
Company, which to the knowledge of the Company are required to be filed,
all
such returns are true and correct in all material respects, and the Company
has
paid or caused to be paid all taxes as shown on such returns or on any
assessment to the extent that such taxes have become due, except in cases
where
the Company has disputed in good faith the amount of said taxes.
Section 5.10.Agreements.
The
Company is not a party to any agreement, instrument or indenture or subject
to
any restriction materially and adversely affecting its business, operations,
assets or financial condition, except as disclosed in the financial statements
described in this Agreement. The Company is not in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any agreement, instrument, or indenture which default could
have a
material adverse effect on the business, operations, properties or financial
condition of the Company. No holder of any indebtedness of the Company has
given
notice of any asserted default thereunder, and no liquidation or dissolution
of
the Company and no receivership, insolvency, bankruptcy, reorganization or
other
similar proceedings relative to the Company or any of its properties is pending,
or to the knowledge of the Company, threatened.
Section 5.11.Title
to Properties.
The
Company has good, valid, insurable (in the case of real property) and marketable
title to all material portions of its properties and assets (whether real
or
personal, tangible or intangible) reflected on the financial statements
described in this Agreement, except for such properties and assets as have
been
disposed of since the date of such financial statements as no longer used
or
useful in the conduct of its business or as have been disposed of in the
ordinary course of business, and all such properties and assets are free
and
clear of all Liens except as disclosed in such financial statements, and
liens
created in favor of Bank (the “Bank Liens”)
17
Section 5.12.Reserved.
Section 5.13.Eligibility.
The
Company has and shall maintain in good standing all state and local permits,
licenses, approvals, registrations and qualifications which are required
in
order to permit the Company to conduct its business, in all material manners,
as
presently conducted, and which if not maintained in good standing could
materially and adversely affect the Companies business, operations, assets,
or
financial condition or which could materially and adversely impair the ability
of Company to perform its obligation hereunder.
Section 5.14.Special
Representations Concerning Collateral.
The
Company hereby represents and warrants to the Bank, as of the date of this
Agreement and as of the date of each Advance Request and of each Advance,
that:
(a)
The
Company owns the Collateral free and clear of any Lien, except for the security
interest created by this Agreement, and any rights of Investors and Insurers
of
the Pledged Mortgage Loans. No financing statement or other instrument similar
in effect covering all or any part of the Collateral is on file in any recording
office, except such as may have been filed in favor of Bank relating to this
Agreement. The Company has no trade name.
(b)
This
Agreement, together with the Bank’s possession of the Mortgage Notes and a duly
filed financing statement, creates a valid and perfected first priority security
interest in the Mortgage Notes in favor of the Bank, securing the payment
of the
Note, and all filings and other actions necessary or desirable to perfect
and
protect such security interest have been duly taken or shall be taken at
the
time of the initial Advance hereunder.
(c)
No
authorization, approval or other action by, and no notice to or filing with,
any
governmental authority or regulatory body is required (and has not been
obtained, delivered or filed, as applicable) either (i) for the grant by
the Company of the security interest granted hereby or for the execution,
delivery or performance of this Agreement by the Company, or (ii) for the
perfection of or the exercise by the Bank of its rights and remedies hereunder,
other than the filing of a financing statement which has been duly executed
by
the Company and delivered to the Bank for filing.
(d)
The
Mortgage Loan Documents have been duly executed by the mortgagor and create
valid and legally binding obligations of the mortgagor, enforceable in
accordance with their terms, except as may be limited by bankruptcy or other
similar laws affecting the enforcement of creditors’ rights generally, and
general principles of equity, and to the knowledge of the Company there are
no
rights of rescission, set-offs, counterclaims or other defenses with respect
thereto. The full original principal amount of each Mortgage Loan (net of
any
discounts) has been fully advanced or disbursed to the mortgagor named therein.
There is no requirement for future advances and except for Mortgage Loans
insured under Section 203(k) of the National Housing Act, any and all
requirements as to completion of any on-site or off-site improvements and
as to
disbursements of any escrow funds therefor have been satisfied. To Company’s
knowledge and except as disclosed to Bank, there is no material default,
breach,
violation or event of acceleration existing under the Mortgage or the related
Mortgage Note, and no event has occurred which, with the passage of time
or with
notice and the expiration of any grace or cure period, would constitute a
material default, breach, violation or event of acceleration, other than
waivers
in the ordinary course of servicing the Mortgage Loan which do not have a
material adverse effect of the Collateral; the Company has not waived any
material default, breach, violation or event of acceleration; and the terms
of
the Mortgage Loan have in no way been waived, impaired, changed or modified.
To
Company’s knowledge and except as disclosed to Bank, all tax identifications and
property descriptions are legally sufficient; tax segregation, where required,
has been completed and all taxes, governmental assessments, insurance premiums,
water, sewer and municipal charges, leasehold payments or ground rents which
previously became due and owing have been paid, or an escrow of funds has
been
established in an amount sufficient to pay for every such item which remains
unpaid.
18
(e)
Except as disclosed to Bank in writing, to the best of the Company’s knowledge
based upon due diligence conducted by the Company, each of the Mortgage Loans
has been originated, made and serviced in material compliance with all industry
standards, and all applicable federal, state and local statutes, regulations
and
rules, including, without limitation, the Federal Truth-in-Lending Act of
1968,
as amended, and Regulation Z thereunder, the Federal Fair Credit Reporting
Act,
the Federal Equal Credit Opportunity Act, the Federal Real Estate Settlement
Procedures Act of 1974, as amended, and Regulation X thereunder, the Home
Ownership and Equity Protection Act of 1994, Section 32 of regulation Z
thereunder, and all applicable usury, licensing, real property, consumer
protection and other laws.
(f)
Except as disclosed to Bank in writing, to the best of the Company’s knowledge
based upon due diligence conducted by the Company, each of the Mortgage Loans
presently is covered by a policy of hazard insurance, unless the Mortgage
is not
a first lien mortgage, (and flood insurance and insurance against other
insurable risks and hazards as required), in amounts not less than outstanding
principal balance of the Mortgage Loans or such maximum lesser amount as
permitted by applicable law, all in a form usual and customary in the industry
and which is in full force and effect, and all amounts required to have been
paid under any such policy have been paid;.
(g)
Except as is disclosed to Bank in writing, to the best of the Company based
upon
due diligence conducted by the Company, no Mortgage Loan is a Covered Loan.
(h)
A
title commitment or a valid and enforceable title policy currently in full
force
and effect has been issued for each Mortgage Loan which is a first mortgage
lien, and in the case of title insurance, in an amount not less than the
original principal amount of such Mortgage Loan, and which title opinion
opines
or which title policy insures that the Mortgage relating thereto is a valid
first lien on the property therein described and that the mortgaged property
is
free and clear of all encumbrances and liens having priority over the first
lien
of the Mortgage except for taxes not yet due and payable and minor title
irregularities that do not have a material adverse effect on the use or
marketability of the mortgaged property.
19
(i)
All
escrow/custodial accounts have been established in accordance with applicable
laws and by the terms of the related Mortgages.
(j)
Except
as
disclosed to Bank in writing, any and all payments made with respect to the
individual Pledged Mortgage Loans have been and will be applied to such Mortgage
Loan in accordance with the terms of the Mortgage Note and Mortgage and any
modifications thereof evidencing and securing that Mortgage Loan.
ARTICLE VI
AFFIRMATIVE COVENANTS
The
Company agrees that so long as the Commitment is outstanding or there remain
any
obligations of the Company to be paid or performed under this Agreement or
under
the Note, the Company agrees as follows:
Section 6.1.Payment
of Note.
The
Company will punctually pay or cause to be paid the principal and interest
on
and all other amounts due and payable hereunder and under the Note in accordance
with the terms hereof and thereof.
Section ▇.▇.▇▇▇▇▇▇▇▇▇
Statements and Other Reports.
The
Company will deliver or cause to be delivered to the Bank, or make available
to
the Bank, as applicable:
(a)
Upon
request by the Bank, as soon as available and in any event within forty-five
(45) days after each calendar quarter, statements of income and cash flows
of
the Company for the immediately preceding quarter, and related balance sheet
as
of the end of the immediately preceding quarter, all in reasonable detail
and
certified by the chief financial officer or other appropriate officer of
the
Company, subject, however, to year-end audit adjustments.
(b)
As
soon as available and in any event within one hundred twenty (120) days
after the close of each fiscal year: a true and complete copy of the Company’s
independently audited financial statements of the Company for the then most
recent fiscal year-end (the “Statement
Date”),
containing a balance sheet and related statements of income and retained
earnings and changes in financial position for the period ended on the Statement
Date, all prepared in accordance with GAAP and accompanied by an opinion
of an
accounting firm reasonably satisfactory to the Bank, or other independent
public
accountants of recognized standing selected by the Company and acceptable
to the
Bank, as to said financial statements and a certificate signed by the chief
financial officer or other appropriate officer of the Company stating that
said
financial statements fairly present the financial condition and results of
operations of the Company as at the end of, and for, such year.
20
(c)
Such
other reports in respect of the Mortgage Loans pledged as collateral, in
such
detail and at such times as the Bank in its reasonable discretion may request
at
any time or from time to time.
(d)
Upon
request, copies of all audits, examinations and reports concerning the
operations of the Company from any licensing authority, to the extent not
subject to restrictions on disclosure,
(e)
From
time to time, with reasonable promptness, such further information regarding
the
business, operations, properties or financial condition of the Company as
the
Bank may reasonably request.
Except
for financial statements prepared for interim periods between the fiscal
year
end, all financial statements and reports furnished to the Bank hereunder
shall
be prepared in accordance with GAAP, applied on a basis consistent with that
applied in preparing the financial statements as at, and for the period ended,
the Statement Date (except to the extent otherwise required to conform to
good
accounting practice).
Section 6.3.Maintenance
of Existence; Conduct of Business.
The
Company will preserve and maintain its corporate existence in good standing
and
all of its material rights, privileges, licenses, qualifications and franchises
necessary or desirable in the normal conduct of its business, including,
without
limitation, its eligibility as an approved servicer of mortgage loans, where
required, as described under Article 5 hereof; and make no material change
in the nature or character of its business, if such material change would
result
in Company being unable to fulfill or complete its duties and obligations
under
this Agreement.
Section 6.4.Compliance
with Applicable Laws.
The
Company will comply with the requirements of all applicable laws, rules,
regulations (including laws, rules and regulations relating to predatory
lending) and orders of any governmental authority and prudent industry
standards, a breach of which could materially adversely affect its business,
operations, assets, or financial condition or which could materially adversely
impair the ability of Company to perform its obligation hereunder, except
where
contested in good faith and by appropriate proceedings.
Section 6.5.Inspection
of Properties and Books.
The
Company will permit authorized representatives of the Bank, its parent company
or affiliates (i), to discuss the business, operations, assets and financial
condition of the Company and its Subsidiaries with their officers and employees,
(ii) to examine their books, records, information and service systems and
properties, and make copies or extracts thereof subject to applicable laws
with
respect to confidentiality of customer records, (iii) to examine and audit
the
Company’s Loan accounts, individual Pledged Mortgage Loans, and related
documentation and Collateral, and (iv) for those purposes, to visit the
Company’s, all at such reasonable times as the Bank may request. Upon the
request of its accountants, the Company will provide its accountants with
a copy
of this Agreement promptly after the execution hereof and will instruct its
accountants to answer candidly and fully any and all questions that the officers
of the Bank or any authorized representatives of the Bank may address to
them in
reference to the financial condition or affairs of the Company. In addition
to
the foregoing, the Company shall provide, or cause to be provided, live,
“real
time” read/view only access to the data system(s) for all records maintained by
the Company related to the Pledged Mortgage Loans. The purposes or uses for
which the Bank may use the right of access to such data system records, and
the
rights of inspection, examination, and audit set forth in this Section shall
include, without limitation, the following: (i) to ensure that the
administration, and their payment processing remain in compliance with the
terms
of this Agreement; (ii) to enable the Bank to periodically sample or test
the
flow of payments received from the Pledged Mortgage Loan obligors; and (iii)
to
enable the Bank to periodically determine the value of the Bank’s Collateral
from time to time and to ensure that the Collateral continues to meet the
Bank’s
underwriting standards throughout the life of those Mortgage Loans.
21
Section 6.6.Notice.
The
Company will
give
prompt written notice to the Bank of (a) any action, suit or proceeding
instituted against the Company in any federal or state
court or before any commission or other regulatory body (federal, state or
local, domestic or foreign) which may reasonably be expected to result in
damages of Five Hundred Thousand Dollars ($500,000.00) or more, or of any
written notification that the filing of any such action, suit or proceeding
against the Company is imminent, and containing the details thereof,
(b) the filing, recording or assessment of any federal, state or local tax
lien of more than $100,000.00, individually or in the aggregate, against
the
Company, or any of its assets, which lien is not released or satisfied within
sixty (60) days and the Company has not commenced and is not then diligently
pursing appropriate actions to stay enforcement of the lien or assessment
or to
contest the validity of such filing, (c) the occurrence of any Default or
Event of Default hereunder, (d) the actual or written threat of the
imminent suspension, revocation or termination of the Company’s eligibility, in
any respect, as an approved servicer of mortgage loans, where required, as
described under Section 5.13 hereof which will have a material and adverse
effect on the Company’s business operations, , and (e) any other action,
event or condition of any nature which may lead to or result in a material
adverse effect upon the business, operations, assets, or financial condition
of
the Company or which, with or without notice or lapse of time or both, would
constitute a default under any other material agreement, instrument or indenture
to which the Company is a party or to which the Company, its properties or
assets may be subject.
Section 6.7.Payment
of Debt, Taxes, etc.
The
Company will pay and perform all obligations of the Company promptly and
in
accordance with the terms thereof and pay and discharge or cause to be paid
and
discharged promptly all taxes, assessments and governmental charges or levies
imposed upon the Company or upon its income, receipts or properties before
the
same shall become past due, as well as all lawful claims for labor, materials
and supplies or otherwise which, if unpaid, might become a Lien or charge
upon
such properties or any part thereof; provided,
however, that
the
Company shall not be required to pay taxes, assessments or governmental charges
or levies or claims for labor, materials or supplies for which the Company
shall
have obtained an adequate bond or adequate insurance or which are being
contested in good faith and by proper proceedings which are being reasonably
and
diligently pursued.
22
Section ▇.▇.▇▇▇▇▇▇▇▇▇.
The
Company will maintain (a) errors and omissions insurance or mortgage
impairment insurance and blanket bond coverage, with responsible companies
and
in such amounts as is customary and usual for a prudent mortgage servicing
institution, and (b) liability insurance and fire and other hazard
insurance on its properties, with responsible insurance companies, in such
amounts and against such risks as is customarily carried by similar businesses
operating in the same vicinity, and (c) within thirty (30) days after
written notice from the Bank, will obtain such additional insurance as the
Bank
shall reasonably require, all at the sole expense of the Company. Copies
of all
such policies shall be furnished to the Bank without charge upon request
of the
Bank.
Section 6.9Reserved.
Section 6.10.Purchased
Loans.
The
Company will indemnify and hold the Bank harmless from and against any loss,
including reasonable attorneys’ fees and costs, attributable to the failure of
any correspondent of the Company to comply with the disbursement or instruction
letter or letters of the Company or of the Bank relating to Mortgage Loans
purchased by the Company with Advances hereunder.
Section
6.11 Loan Purchase Agreement. The
Company will
use its
best commercially reasonable efforts, reasonably and in good faith, to include
covenants, representations, and warranties covering the following items in
its
Mortgage Loan purchase agreements with respect to the acquisition of the
Pledged
Mortgage Loans, and cause such purchase agreements to include, except as
disclosed to Bank in writing: (i) standard representations and warranties
as to
the due organization of the seller and the seller’s authorization to sell the
loans; (ii) representations and warranties regarding the mortgage loans being
purchased, and the documentation for the same consistent with general commercial
standards, but in any event, having representations and warranties consistent
with the requirements for Mortgage Loans set forth in this Agreement; (iii)
standard remedies for breach of contract; (iv) covenant that the seller will
buy
back from the Company (or any assignee) any mortgage loan which does not
comply
with representations and warranties regarding it; and (vi) covenant that
the
seller will indemnify and hold the Company, and any assignee, harmless against
any and all damages which the indemnified party may suffer on account of
any
mortgage loan which does not meet representations and warranties.
Section 6.12.Other
Loan Obligations.
The
Company will perform in all material respects all obligations under the terms
of
each loan agreement, note, mortgage, security agreement or debt instrument
by
which the Company is bound or to which any of its property is subject, and
will
promptly notify the Bank in writing of the cancellation or reduction of any
of
its other mortgage warehousing lines of credit or agreements with any other
lender.
Section 6.13.Use
of Proceeds of Advances.
The
Company will use the proceeds of each Advance solely for the purpose of
financing the purchase of Mortgage Loans in accordance with the terms,
conditions, requirements and representations and warranties set forth in
this
Agreement.
23
Section 6.14.The
Company will assist the Bank in the performance of the Bank’s due diligence in
response to Advance Requests in order for the Bank to gain assurance that
the
terms and conditions of this Agreement will be met; and The Company will
perform
reasonable due diligence when agreeing to purchase Mortgage Loans to be financed
by Advances from Bank hereunder in order to ensure that the Mortgage Loans
comply with the terms and conditions of this Agreement.
Section
6.15. Financial Requirements.
(a)
Net
Worth.
The
Company will maintain at all times a Net Worth equal to or greater than
$10,000,000.00.
Section
6.16. Custodial Agreement.
The
Company will maintain in effect the Custodial Agreement, or another custodial
agreement with another custodian with substantially the same terms as the
Custodial Agreement.
Section 6.17.Special
Affirmative Covenants Concerning Collateral.
(a) The Company warrants and will defend the right, title and interest of
the Bank in and to the Pledged Mortgage Loans against the claims and demands
of
all persons whomsoever.
(b)
The
Company shall service or cause to be serviced in all material respects all
Pledged Mortgage Loans in accordance with all applicable governmental
requirements, including without limitation taking all actions necessary to
enforce the obligations of the obligors under such Pledged Mortgage Loans.
The
Company shall hold all escrow funds collected in respect of Pledged Mortgage
Loans in trust, without commingling the same with non-custodial funds, and
apply
the same for the purposes for which such funds were collected.
(c)
The
Company shall execute and deliver to the Bank such Uniform Commercial Code
financing statements with respect to the Collateral as the Bank may reasonably
request. The Company shall also execute and deliver to the Bank such further
instruments of sale, pledge or assignment or transfer, and such powers of
attorney, as reasonably required by the Bank, and shall do and perform all
matters and things necessary or desirable to be done or observed, for the
purpose of effectively creating, maintaining and preserving the security
and
benefits intended to be afforded the Bank under this Agreement. The Bank
shall
have all the rights and remedies of a secured party under the Uniform Commercial
Code of the State of Ohio, or any other applicable law, in addition to all
rights provided for herein.
(d)
The
Company shall maintain, at its principal office or in a regional office approved
by the Bank, or in the office of the custodian under the Custodial Agreement,
and, upon request, shall make available to the Bank the originals, or copies
in
any case where the original has been delivered to the Bank, or to an Investor,
of its Mortgage Notes and Mortgages included in Mortgage Loans, Purchase
Commitments, and all related Pledged Mortgage Loan documents and instruments,
and all files, surveys, certificates, correspondence, appraisals, computer
programs, tapes, discs, cards, accounting records and other information and
data
relating to the Collateral.
24
(e)
Any
and all payments made with respect to the individual Pledged Mortgage Loans
will
be applied to such Pledged Mortgage Loan in accordance with the terms of
the
Mortgage Note and Mortgage and any modifications thereof evidencing and securing
that Pledged Mortgage Loan, and the books, records, accounts and reports
of the
Company
with
respect to the Pledged Mortgage Loans and servicing contracts have will be
prepared and maintained in accordance with all applicable Investor and Insurer
requirements.
ARTICLE VII
NEGATIVE COVENANTS
The
Company agrees that so long as the Commitment is outstanding or there remain
any
obligation of the Company to be paid or performed hereunder or under the
Note,
the Company shall not, either directly or indirectly, without the prior written
consent of the Bank:
Section 7.1.Contingent
Liabilities.
Assume,
guarantee, endorse, or otherwise become liable for the obligation of any
Person,
other than a subsidiary or affiliate of the Company, except by endorsement
of
negotiable instruments for deposit or collection in the ordinary course of
business.
Section 7.2.Merger;
Sale of Assets; Acquisitions; Change in Control; Change of Senior
Management.
Except
for the securitization, sale or purchase of loans in the ordinary course
of the
business, liquidate, dissolve, consolidate or merge or sell, transfer or
otherwise dispose of, any substantial part of its assets, which would cause
the
Company to not be in compliance with the financial covenants of Section 6.14,
or
which would otherwise cause a material adverse change in the Company’s financial
condition, or which would result in a material adverse change in the Company’s
business operations, or permit ownership beneficially or of record of the
voting stock of Company which results in ▇▇▇▇▇▇ ▇. ▇▇▇▇ having a non-controlling
ownership interest of the voting stock of the Company. For purposes of this
section, “control” shall have the meaning set forth in Rule 12b-2 under the
Exchange Act.
Section 7.3.Loss
of Eligibility.
Take,
or fail to take, any action that would cause the Company to lose all or any
part
of its status as an eligible servicer of mortgage loans, where required,
which
if not maintained in good standing could materially and adversely affect
the
Company’s business, operations, assets, or financial condition or which could
materially and adversely impair the ability of Company to perform its obligation
hereunder, as described under Section 5.13 hereof.
Section 7.4.Special
Negative Covenants Concerning Collateral.
Except
in the ordinary course of business of servicing the Pledged Mortgage Loans
in
accordance with reasonable and customary servicing practices in the industry
for
the same type of mortgage loans as the Pledged Mortgage Loans, Company shall
not
do or permit any of the following:
(i)
cancel or terminate any of the Collateral Documents (in any capacity), or
consent to or accept any cancellation or termination of any of such agreements,
or materially amend or otherwise modify any term or condition of any of the
Collateral Documents; settle or compromise any claim in respect of any Pledged
Mortgage Loan or any other Collateral; or give any consent, waiver or approval
under any such agreement, or waive any default under or breach of any of
the
Collateral Documents or take any other action under any such agreement not
required by the terms thereof, unless (in each case) Bank shall have consented
thereto.
25
(ii)
Except as permitted in this Agreement, sell, assign, transfer or otherwise
dispose of, or grant any option with respect to the Collateral or any interest
therein; or
(iii)
pledge or otherwise encumber any of the Collateral, or accept consideration
other than cash in payment or liquidation of the Collateral.
ARTICLE VIII
DEFAULTS;
REMEDIES
Section ▇.▇.▇▇▇▇▇▇
of Default.
The
occurrence of any of the following conditions or events shall be in event
of
default (“Event
of Default”):
(a)
Failure to pay the principal of any Advance when due or required under the
Note
or this Agreement, whether at stated due date or stated maturity date, or
by
acceleration, or otherwise; or failure to pay any installment of interest
on any
Advance or any other amount due under this Agreement when due and any such
failure shall continue unremedied for fifteen days; or
(b)
Failure of the Company to pay, or any default in the payment of any principal
or
interest on, any other indebtedness or in the payment of any contingent
obligation which are in the aggregate amount of One Hundred Thousand Dollars
($100,000.00); or breach or default with respect to any other material term
of
any other indebtedness or of any loan agreement, note, mortgage, security
agreement, indenture or other agreement relating thereto, if the effect of
such
failure, default or breach is to cause, or to permit the holder or holders
thereof (or a trustee on behalf of such holder or holders) to cause,
indebtedness of the Company or its Subsidiaries in the aggregate amount of
One
Hundred Thousand Dollars ($100,000.00) or more to become or be declared due
prior to its stated maturity; or
(c)
Failure of the Company to perform or comply with any term or condition
applicable to it contained in Sections 6.1 through 6.16 inclusive, or 7.1
through 7.5, inclusive, of this Agreement; or
(d)
If
any of the Company’s representations or warranties made herein or in any
statement or certificate at any time given by the Company in writing pursuant
hereto or in connection herewith shall be false in any material respect on
the
date as of which made; or
26
(e)
If,
the Company shall default in the observance or performance of, or compliance
with, any term contained in this Agreement other than those referred to above
in
subsections 8.1(a), (b), (c) or (d), and such default shall not have been
remedied or waived within thirty (30) days after receipt of notice from the
Bank
of such default; or
(f)
(i) A court having jurisdiction shall enter a decree or order for relief in
respect of the Company in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, which decree
or
order is not stayed; or (ii) any other similar relief shall be granted
under any applicable federal or state law; or a decree or order of a court
having jurisdiction for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over the Company,
or
over all or a substantial part of their respective properties, shall have
been
entered; or the involuntary appointment of an interim receiver, trustee or
other
custodian of the Company for all or a substantial part of its respective
property; or the issuance of a warrant of attachment, execution or similar
process against any substantial part of the property of the Company, and
the
continuance of any such events in this clause (ii) for sixty (60) days
unless dismissed, bonded off or discharged; or
(g)
If
the Company shall have an order for relief entered with respect to it or
commence a voluntary case under any applicable bankruptcy, insolvency or
other
similar law now or hereafter in effect, or shall consent to the entry of
an
order for relief in an involuntary case, or to the conversion to an involuntary
case, under any such law, or shall consent to the appointment of or taking
possession by a receiver, trustee or other custodian for all or a substantial
part of its property; the making by the Company of any assignment for the
benefit of creditors; or the inability or failure of the Company, or the
admission by the Company in writing of its inability to pay its debts as
such
debts become due; or
(h)
If
any money judgment, writ or warrant of attachment, or similar process involving
in any case an amount in excess of One Hundred Thousand Dollars ($100,000.00)
shall be entered or filed against the Company or any of its assets and shall
remain undischarged, unvacated, unbonded or unstayed for a period of sixty
(60)
days or in any event later than five (5) days prior to the date of any proposed
sale thereunder; or
(i)
If
any order, judgment or decree shall be entered against the Company decreeing
the
dissolution, liquidation or split up of the Company and such order shall
remain
undischarged or unstayed for a period in excess of sixty (60) days;
or
(j)
If
the Company, other than in good faith, shall purport to disavow its obligations
hereunder or shall contest the validity or enforceability hereof; or the
Bank’s
security interest in any material portion of the Collateral shall become
unenforceable or otherwise impaired; or
(k)
If
the Company shall have been subject to an enforcement action by any federal
regulatory agency which may reasonably be expected to result in any material
and
adverse change in the business, operations, assets, licenses, qualifications
or
financial condition of the Company;
27
Section 8.2.
Remedies.
(a) Upon the occurrence of any Event of Default described in
Section 8.1(f) or (g) the unpaid principal amount of and accrued interest
on the Note shall automatically become due and payable, without presentment,
demand or other requirements of any kind, all of which are hereby expressly
waived by the Company, and the obligation of the Bank to make Advances shall
thereupon terminate.
(b)
Upon
the occurrence of any Event of Default (other than those described in
Section 8.1(f) or (g)), the Bank may, by written notice to the Company
declare all or any portion of the Advances to be due and payable whereupon
the
same shall forthwith become due and payable, together with all accrued interest
thereon, and the obligation of the Bank to make Advances shall thereupon
terminate.
(c)
Upon
the occurrence of any Event of Default, the Bank may also do any one or more
or
all of the following:
(1)
Foreclose upon or otherwise enforce its security interest in and Lien on
all of
the Collateral or on any portion thereof to secure all payments and performance
of obligations owed by the Company under this Agreement.
(2)
Notify all obligors of Collateral or on any portion thereof that the Collateral
has been assigned to the Bank and that all payments thereon are to be made
directly to the Bank or such other party as may be designated by the Bank;
settle, compromise, or release, in whole or in part, any amounts owing on
the
Collateral, any such obligor or Investor or any portion of the Collateral,
on
terms acceptable to the Bank; enforce payment and prosecute any action or
proceeding with respect to any and all Collateral; and where any such Collateral
is in default, foreclose on and enforce security interests in, such Collateral
by any available judicial procedure or, if permitted by applicable law, without
judicial process and sell property acquired as a result of any such
foreclosure.
(3)
Act,
or contract with a qualified third party to act, as servicer of all or any
item
of Collateral requiring servicing and perform all obligations required in
connection with Purchase Commitments, such third party’s fees to be paid by the
Company.
(4)
Exercise all rights and remedies of a secured creditor under the Uniform
Commercial Code of the State of New York or the state in which the Collateral
is
located, including but not limited to selling the collateral at public or
private sale. The Bank shall give the Company not less than sixty (60) days’
written notice of any such public sale or of the date after which private
sale
may be held. The Company agrees that sixty (60) days’ notice shall be reasonable
notice. At any such sale the Collateral may be sold as an entirety or in
separate parts, as the Bank may determine, but any such sale shall be conducted
in a commercially reasonable manner. The Bank may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
the
sale, and such sale may be made at any time or place to which the same may
be so
adjourned. In case of any sale of all or any part of the Collateral on credit
or
for future delivery, the Collateral so sold may be retained by the Bank until
the selling price is paid by the purchaser thereof, but the Bank shall not
incur
any liability in case of the failure of such purchaser to take up and pay
for
the Collateral so sold and, in case of any such failure, such Collateral
may
again be sold upon like notice. The Bank may, however, instead of exercising
the
power of sale herein conferred upon it, proceed by a suit or suits at law
or in
equity to collect all amounts due upon all or any portion of the Collateral
or
to foreclose the pledge and sell all or any portion of the Collateral under
a
judgment or decree of a court or courts of competent jurisdiction, or
both.
28
(5)
Proceed against the Company on the Note.
(6)
Pursue any rights and/or remedies available at law or in equity against the
Company.
(d)
The
Bank shall not be required to take any steps necessary to preserve any rights
of
the Company against holders of mortgages prior in lien to the Lien of any
Mortgage included in the Collateral or to preserve rights against prior
parties.
(e)
The
Bank may, but shall not be obligated to, advance any sums or do any act or
thing
necessary to uphold and enforce the Lien and priority of, or the security
intended to be afforded by, any Mortgage included in the Collateral, including,
without limitation, payment of delinquent taxes or assessments and insurance
premiums. All advances, charges, costs and expenses, including reasonable
attorneys’ fees and disbursements, incurred or paid by the Bank in exercising
any right, power or remedy conferred by this Agreement, or in the enforcement
hereof, shall be paid by the Company, shall be secured by the Collateral,
and
until paid, shall bear interest from the date of expenditure at the rate
of
interest specified herein and/or in the Note.
(f)
No
failure on the part of the Bank to exercise, and no delay in exercising,
any
right, power or remedy provided hereunder, at law or in equity shall operate
as
a waiver thereof; nor shall any single or partial exercise by the Bank of
any
right, power or remedy provided hereunder, at law or in equity preclude any
other or further exercise thereof or the exercise of any other right, power
or
remedy. The remedies herein provided are cumulative and are not exclusive
of any
remedies provided at law or in equity.
Section 8.3.
Application
of Proceeds.
Unless
otherwise required by applicable law, the proceeds of any sale or other
enforcement of the Bank’s security interest in all or any part of the Collateral
may be applied by the Bank in such order of priority as the Bank may determine
at its sole discretion, including, without limitation, the following:
(a)
To
the payment of the costs and expenses of such sale or enforcement, including
reasonable compensation to the Bank’s agents and counsel, and all customary and
usual expenses, liabilities and advances made or incurred by or on behalf
of the
Bank in connection therewith;
29
(b)
To
the payment of any other amounts due under the Note or this Agreement (whether
for principal or interest or otherwise), in such order and manner as the
Bank
elects; and
(c)
To
the payment to the Company, or to its successors or assigns, or as a court
of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.
If
the
Proceeds of any such sale are insufficient to cover the costs and expenses
of
such sale, as aforesaid, and the payment in full of the Note and all other
amounts due hereunder, the Company shall remain liable for any
deficiency.
All
references to costs and expenses of Bank (including attorney fees) to be
reimbursed to Bank by Borrower shall mean Bank’s reasonable costs, and expenses
(including reasonable attorney fees).
Section 8.4.
Bank
Appointed Attorney-in-Fact.
The
Bank
is hereby appointed the attorney-in-fact of the Company, after the occurrence
and during the continuance of an Event of Default hereunder, with full power
of
substitution, for the purpose of carrying out the provisions hereof, and
taking
any action and executing any instruments which the Bank may deem necessary
or
advisable to accomplish the purposes hereof or thereof, after the occurrence
and
during the continuance of an Event of Default hereunder, which appointment
as
attorney-in-fact is irrevocable and coupled with an interest. Without limiting
the generality of the foregoing, the Bank shall have the right and power
to give
notices of its security interest in the Collateral to any Person, either
in the
name of the Company, or in its own name, after the occurrence and during
the
continuance of an Event of Default hereunder to endorse all Pledged Mortgage
Loans payable to the order of the Company or, after the occurrence and during
the continuance of an Event of Default hereunder, to receive, endorse and
collect all checks made payable to the order of the Company, representing
any
payment on account of the principal of or interest on, or the proceeds of
sale
of, any of the Pledged Mortgage Loans and to give full discharge for the
same
and execute any and all instruments in writing whatever kind and nature,
if they
be necessary, and be necessary and deemed proper by Bank to effectively assure
its appropriate lien position in the Collateral and in the Pledged Mortgage
Loans.
Section 8.5.
Right
of Set-off.
If the
Company shall default in the payment of the Note, any interest accrued thereon,
or any other sums which may become payable hereunder when due, or in the
performance of any of its other obligations or liabilities under this Agreement,
the Bank, shall have the right, at any time and from time to time, without
notice, to set-off and to appropriate or apply any and all deposits of money
or
property or any other indebtedness at any time held or owing by the Bank
or a
parent company, affiliate, or subsidiary to or for the credit of the account
of
the Company against and on account of the obligations and liabilities of
the
Company under the Note and this Agreement, irrespective of whether or not
the
Bank shall have made any demand hereunder and whether or not said obligations
and liabilities shall have matured, provided,
however, that
the
aforesaid right of set-off shall not apply to any deposits of escrow monies
or
other funds being held on behalf of the mortgagors under Mortgage Loans or
other
third parties, and Bank shall promptly notify Company subsequent to Bank
exercising any such set-off.
30
ARTICLE IX
REIMBURSEMENT OF EXPENSES;
INDEMNITY
The
Company shall:
Section 9.1.Cost
of Enforcement.
Pay all
reasonable costs and expenses of the Bank, including reasonable attorney’s fees,
in connection with the enforcement of this Agreement, the Note, and other
documents and instruments related hereto.
Section 9.2.Payments
of Taxes.
Pay,
and hold the Bank and any holder of the Note harmless from and against, any,
and
all, present and future stamp, documentary and other similar taxes with respect
to the foregoing matters and save the Bank and the holder or holders of the
Note
harmless from and against any and all liabilities with respect to or resulting
from any delay or omission to pay such taxes.
Section 9.3.Indemnification.
Indemnify, pay and hold harmless the Bank and any of its officers, directors,
employees or agents and any subsequent holder of the Note from and against
any
and all liabilities, obligations, losses, damages, penalties, judgments,
suits,
costs, expenses and disbursements of any kind whatsoever (the “Indemnified
Liabilities”)
(excluding any such Indemnified Liabilities resulting from failure by the
Bank
to perform any of its obligations under this Agreement, the Note, or any
other
document referred to herein as established in a suit between the Company
and the
Bank which may be the same suit in which indemnification is being sought
hereunder by the Bank and any liabilities arising from the Bank’s gross
negligence or willful misconduct) which may be imposed upon, incurred by
or
asserted against the Bank or such holder in any way relating to or arising
out
of this Agreement, the Note, or any other document referred to herein or
any of
the transactions contemplated hereby or thereby to the extent that any such
Indemnified Liabilities result (directly or indirectly) from (i) the
inaccuracy or incompleteness of any representation or warranty made by the
Company in this Agreement or any schedule, statement, Exhibit or certificate
furnished by the company pursuant to this Agreement or (ii) the failure by
the Company to observe or perform any term or provision of this Agreement
or of
any agreement executed in connection herewith, including without limitation
any
claims made, or any actions, suits or proceedings commenced or threatened,
by or
on behalf of any creditor (excluding the Bank and the holder or holders of
the
Note), security holder, shareholder, mortgagor, customer (including, without
limitation, any person or entity having any dealings of any kind with the
Company), trustee, director, officer, employee and/or agent of the Company
acting in such capacity, the Company or any governmental regulatory body
or
authority.
31
ARTICLE X
DELIVERIES OF COLLATERAL DOCUMENTS
Section
10. 1. Delivery of Collateral Documents. The
Bank
reserves the right to exclusively deliver Pledged Mortgage Loans to an Investor
under a Purchase Commitment with respect thereto for its examination and
purchase, against a bailee letter substantially in the form attached hereto
as
Exhibit D.
In
addition, the Bank may deliver any document relating to the Collateral to
the
Company for correction or completion against a properly executed trust receipt
in the form approved by the Bank with instructions to the Company to either
return the corrected document to the Bank within ten (10) calendar days after
such delivery or redeem the Mortgage Loan from pledge. In the case of deliveries
of Pledged Mortgage Loans by the Bank, the Company shall deliver to the Bank
a
letter, to accompany the delivery, confirming the security interest of the
Bank
and designating the Bank as payee under any Purchase Commitment.
Section
10.2. Reserved.
ARTICLE XI
MISCELLANEOUS
Section 11.1.Relationship
of Parties.
The
relationship between Bank and the Company is limited to that of creditor/secured
party, on the one hand, and borrower, on the other hand. The provisions herein
for compliance with financial covenants and delivery of financial statements,
are intended solely for the benefit of Bank to protect its interests as lender
in assuring performance of the obligations hereunder, and nothing contained
in
this Agreement shall be construed as permitting or obligating Bank to act
as a
financial or business advisor or consultant to the Company, as permitting
or
obligating the Bank to control the Company or to conduct the Company’s
operations, as creating any joint venture, agency, fiduciary, trustee, or
other
relationship between the parties other than as explicitly and specifically
stated in this Agreement. The Company acknowledges that it has had the
opportunity to obtain the advice of experienced counsel of its own choosing
in
connection with the negotiation and execution of this Agreement and to obtain
the advice of such counsel with respect to all matters contained herein.
The
Company further acknowledges that it is experienced with respect to financial
and credit matters and has made its own independent decision to execute and
deliver this Agreement.
Section 11.2.Recourse.
The
Company acknowledges and agrees that it is fully liable for repayment of
all
Advances and all sums due hereunder or under the Note and for performance
of all
obligations contained in this Agreement.
Section 11.3.Notices.
All
notices, demands, consents, requests and other communications required or,
permitted to be given or made hereunder (collectively, “Notices”)
shall,
except as otherwise expressly provided hereunder, be in writing and shall
be
delivered in person, or mailed, first class, return
receipt requested, postage prepaid, or by overnight delivery service or by
facsimile or other telecommunications device addressed to the respective
parties
hereto at their respective addresses hereinafter set forth or, as to any
such
party, at such other address as may be designated by it in a Notice to the
other. All Notices shall be conclusively deemed to have been properly given
or
made when duly delivered, in person or by facsimile or other telecommunications
device, on the next business day if sent by overnight delivery service, or,
if
mailed, on the third Business Day after being deposited in the mails or when
delivered to the telegraph company, addressed as follows:
32
|
if
to the Company:
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Franklin
Credit Management Corporation
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▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
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Attention:
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
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||
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C.E.O
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Facsimile
No. 212.625.9830
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with
a copy to:
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Franklin
Credit Management Corporation
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▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
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Attention:
▇▇▇▇▇ ▇▇▇▇▇▇
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General
Counsel
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Facsimile
No. 212.625.9830
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if
to the Bank:
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Sky
Bank
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▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇
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Attention:
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Senior
Vice President
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Facsimile
No. 330.679.2377
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with
a copy to:
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Sky
Financial Group, Inc.
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▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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Attention:
General Counsel
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||
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Facsimile
No. ▇▇▇.▇▇▇.▇▇▇▇
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Section 11.4.Terms
Binding Upon Successors; Survival.
The
terms and provisions of this Agreement shall be binding upon and inure to
the
benefit of the parties hereto and their respective successors and assigns.
All
representations, warranties, covenants and agreements herein contained on
the
part of the Company shall survive the making of any Advance and the execution
of
the Note, and shall be effective so long as the Commitment is outstanding
or
there remains any obligation of the Company hereunder or under the Note to
be
paid or performed.
Section 11.5.Assignment.
This
Agreement may not be assigned by the Company without the written consent
of
Bank. This Agreement and the Note, along with the Bank’s security interest in
any or all of the Collateral, may, at any time, be transferred or assigned,
in
whole or in part, by the Bank, and any such transferee or assignee thereof
may
enforce this Agreement, the Note and such security interest.
33
Section 11.6.Amendments.
This
Agreement may not be modified or amended or waived unless such modification,
waiver or amendment is in writing signed by the parties.
Section ▇▇.▇.▇▇
Waiver; Remedies Cumulative.
No
failure or delay on the part of the Company or the Bank or any holder of
the
Note in exercising any right, power or privilege hereunder and no course
of
dealing between the Company and the Bank or the holder of the Note shall
operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder or under the Note preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder. The rights and remedies herein expressly provided are cumulative
and
not exclusive of any rights or remedies which the Company or the Bank or
the
holder of the Note would otherwise have. No notice to or demand on the Company
in any case shall entitle the Company to any other or further notice or demand
in similar or other circumstances or constitute a waiver of the rights of
the
Bank or the holder of the Note to any other or further action in any
circumstances without notice or demand.
Section 11.8.Invalidity.
In case
any one or more of the provisions contained in this Agreement shall for any
reason be held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions
hereof, and this Agreement shall be construed as if such invalid, illegal
or
unenforceable provision had not been included.
Section 11.9.Participations.
The
Bank may from time to time sell or otherwise grant participations in the
Note,
and the holder of any such participation, if the participation agreement
so
provides, (i) shall, with respect to its participation, be entitled to all
of the rights of the Bank and (ii) may exercise any and all rights of
setoff or banker’s lien with respect thereto, in each case as fully as though
the Company were directly indebted to the holder of such participation in
the
amount of such participation; provided,
however, that
the
Company shall not be required to send or deliver to any of the participants
other than the Bank any of the materials or notices required to be sent or
delivered by it under the terms of this Agreement, nor shall it have to act
except in compliance with the instructions of the Bank.
Section 11.10.Integration.
This
Agreement, together with the Note, and other documents executed pursuant
to the
terms hereof, constitute the entire agreement between the parties hereto,
with
respect to the subject matter hereof.
Section 11.11.Additional
Instruments, etc.
The
Company shall execute and deliver such further instruments and shall do and
perform all matters and things necessary or expedient to be done or observed
for
the purpose of effectively creating, maintaining and preserving the security
and
benefits intended to be afforded by this Agreement.
Section 11.12.Governing
Law.
This
Agreement and the rights and obligations of the parties hereunder and under
the
Note shall be construed in accordance with and governed by the laws of the
State
of Ohio.
34
Section ▇▇.▇▇.▇▇▇▇▇▇▇
Information.
The
Company hereby authorizes the Bank to provide any Affiliate of the Bank with
information regarding the Company, including copies of documents, financial
statements, corporate records and reports, obtained by the Bank from the
Company
or any other entity during the course of the negotiation or administration
of
this Agreement.
Section 11.14.Counterparts.
This
Agreement may be executed in any number of counterparts and by the different
parties hereto on separate counterpart signature pages, each of which when
so
executed and delivered shall be an original, but all of which together
constitute one and the same instrument.
Section
11.15.Privacy
and Security.
Bank
acknowledges that the Company and its affiliates are required to safeguard
nonpublic personal information of their respective customers. This duty to
safeguard personal information requires the Company and its affiliates to
ensure
that third parties who may observe or obtain nonpublic personal information
also
safeguard this information to the same extent. Accordingly, Bank agrees and
represents and warrants the Bank shall, at all times, comply with the
requirements of the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, Pub. L. 106-102, as amended,
and its
implementing regulations, with respect to maintaining the confidentiality
and
security of nonpublic personal information of the Company’s customers in
connection with the Bank’s rights under this Agreement. Bank acknowledges that
all documents and information furnished to or obtained by Bank, whether in
written or verbal form, relating to the personal, non-public information
of the
Company’s customers (collectively, the “Confidential Information”), constitute
valuable assets of, and are proprietary to, the Company and its affiliates.
Accordingly, Bank agrees not to disclose (whether directly or indirectly)
or use
any Confidential Information except as required to carry out its duties under
the Agreement or as required by law. Third party disclosures made in the
ordinary course of Bank’s business are permitted, provided they are solely in
furtherance of Bank’s duties under this Agreement and are made to a party bound
by privacy and security provisions consistent herewith. Bank agrees to establish
and maintain procedures reasonably designed to assure the security of all
Confidential Information. This Privacy and Security Section 11.15 shall survive
termination of the Agreement.
[This
space has been left blank intentionally.]
35
IN WITNESS WHEREOF,
the
parties hereto have caused this Agreement to be duly executed as of the date
first above written.
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COMPANY:
FRANKLIN
CREDIT MANAGEMENT CORPORATION
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By
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Printed
Name:
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Title:
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BANK:
SKY BANK
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By
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Printed
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Title:
SENIOR VICE PRESIDENT
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36
EXHIBIT A
PROMISSORY NOTE
|
$40,000,000.00
|
Date:
August 11, 2006
|
FOR
VALUE
RECEIVED the undersigned (herein called the "Company”), hereby promises to pay
to the order of Sky Bank (the "Bank" or, together with its successors and
assigns, the "Holder”) at Sky Bank, ▇.▇. ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, or
at such other place as the Holder may designate from time to time, the principal
sum of Forty Million Dollars ($40,000,000.00) or so much thereof as may be
outstanding from time to time at such times and in such amounts as set forth
in
the Flow Warehousing
Credit and Security Agreement of
even
date herewith, as the same may be amended from time to time, between the
Company
and the Bank (the "Agreement”). The unpaid principal balance of Advances shall
bear interest, payable monthly, on the fifth (5th)
day of
each month, from the date of such Advance until paid in full, at a floating
per
annum rate of interest (the “Floating
Rate”)
from
time to time which is fifty (50) basis points less that the Index. The interest
rate charged herein shall be adjusted monthly, effective on the first
(1st)
day of
each month, based upon the Index in effect on the last Business Day of the
then
prior month. As used herein, the term “Index” shall mean the independent index,
which is the Prime Rate as published from time to time in the Money Rates
Column
of The
Wall Street Journal.
If more
than one such prime rate or a range of prime rates is published, the highest
prime rate will be used when calculating the Index, and if The
Wall Street Journal
ceases
to publish the Prime Rate, Lender and Company will mutually and reasonably
agree
upon an independent, replacement source for determining the Prime Rate when
calculating the Index. All interest and transaction fees will be deducted
from
the proceeds remitted from an Investor, if any, to the Bank on each individual
Advance. In the event the total sum of the Advance plus such fees and interest
exceeds the remittance amount received from the Investor, the deficit amount
shall be deemed in arrears and will be payable to the Bank on the fifth day
of
each month. All payments hereunder shall be made in lawful money of the United
States and in immediately available funds.
Interest
will be billed monthly and will be due within ten (10) days of the issuance
of
the relevant monthly billing statement.
Interest
shall be computed on the basis of a 360-day year and applied to the actual
number of days in each interest calculation period.
If
any
payment required to be made by the Company hereunder becomes due and payable
on
a Saturday, Sunday or holiday, the due date thereof shall be extended to
the
next succeeding business day and interest hereon shall be payable at the
then
applicable rate during such extension. The holder of this Note is hereby
authorized to record the date and amount of each payment of principal and
interest, and applicable interest rates and other information with respect
thereto, on the schedules annexed to and constituting a part of this Note
and
any such recordation shall constitute prima facie evidence of the accuracy
of
the information so recorded; provided however, that the failure to make a
notation or the inaccuracy of any notation shall not limit or otherwise affect
the obligations of the Company hereunder.
Unless
otherwise required by law, payments may be applied by Bank to the interest
due
hereunder at the applicable rate set forth above, the principal of this Note,
and to any other amounts which may be due pursuant to any of the terms,
provisions, conditions, or covenants of this Note or of the Agreement in
such
order as Bank may determine from time to time at its sole
discretion.
1
This
Note
is the note referred to in the Agreement and has been issued under, is subject
to the terms, conditions and covenants thereof, including without limitation
the
requirement for monthly interest payments and mandatory payments of principal
as
described in the Agreement, and is entitled to the benefits thereof, provided,
however, reference to the Agreement does not affect or impair the absolute
and
unconditional obligation of the Company to pay the principal and interest
of
this Note when due. Capitalized terms used herein without definition shall
have
the meanings given them in said Agreement.
Upon
failure of the Company to pay any payment due hereunder in full when due
or upon
the occurrence of any Event of Default specified in the Agreement, the entire
unpaid principal balance hereof plus accrued and unpaid interest thereon
shall,
at the option of the Bank, mature and become immediately due and payable
all in
accordance with the terms of the Agreement.
This
Note
may be prepaid in whole or in part at any time without premium or
penalty.
The
Company hereby agrees to pay, in addition to all of the sums of money due
hereunder, all costs of collection and reasonable attorneys' fees; whether
suit
be brought or not, and all other amounts due under the Agreement, if this
Note
is not paid in full when due, whether at the stated maturity or by acceleration.
No provision hereof may be waived or modified orally, but all such waivers,
or
modifications shall be in writing.
The
Company hereby waives presentment-for payment, demand, protest, notice of
protest and notice of dishonor.
This
Note
shall be construed and enforced in accordance with the laws of the State
of
Ohio, without reference to its principles of conflicts of law. For any action
or
dispute arising under this Note or in connection herewith, the Company hereby
irrevocably submits to, consents to, and waives any objection to, the
jurisdiction of the courts of the State of Ohio or the United States Courts
for
the Northern District of Ohio.
In
the
event that any one or more of the provisions of this Note shall for any reason
be held to be invalid, illegal or unenforceable, in whole or in part, or
in any
respect, or in the event that any one or more of the provisions of this Note
shall operate, or would prospectively operate, to invalidate this Note, then,
and in any such event, such provision or provisions only shall be deemed
to be
null and void and of no force or effect and shall not affect any other provision
of this Note, and the remaining provisions of this Note shall remain operative
and in full force and effect and shall in no way be affected, prejudiced
or
disturbed thereby.
2
IN
WITNESS WHEREOF, the Company has executed this Note to be effective as of
the
day and year first above written.
|
FRANKLIN
CREDIT MANAGEMENT CORPORATION
|
|
|
By:
_______________________________
|
|
|
Printed Name:
|
|
|
Title:
|
3
EXHIBIT B
ADVANCE REQUEST FORM
See
attached form.
EXHIBIT C
PROCEDURES FOR RECIEPT AND REVIEW OF DOCUMENTS FOR WAREHOUSE RESIDENTIAL MORTGAGE LOANS
As
the
portfolios of loans are submitted to Franklin Credit Management Corporation
for
preliminary due diligence and indicative pricing, the following steps must
occur:
|
1)
|
A
monthly pipeline or projections report must be submitted to Sky
Bank by
the 25th
of
each month detailing the anticipated fundings for the following
month.
Inclusive of this report shall be the number of anticipated proposals,
seller, loan files within each proposal, expected funding date,
conditional bid price and loan
characteristics.
|
|
2)
|
At
least three (3) Business days prior to anticipated funding, Franklin
must
provide to Sky, a due diligence review package consisting of
a loan
proposal, loan level detail, loan level detail and pricing updated
FICO
scores, independent BPO reviews as dictated by Franklin Policies
and
Procedures, loan-level due diligence sheets and other supplemental
information as deemed necessary by Sky
bank.
|
|
3)
|
Once
all information is compiled and submitted, Sky Bank shall be
responsible
for review according to internal policy guidelines. Funding approval
shall
be in the sole discretion of Sky Bank. Assuming approval, funding
will
take place within three (3) Business days of receipt of the entire
due
diligence package as described above.
|
Upon
the
request of the Bank, for any Mortgage Loan for which the Bank has a reasonable
concern regarding the underwriting thereof, the Company will provide, and
Sky
Bank or Custodian shall receive, the following pre-closing documents in a
time
deemed satisfactory by both the Bank and Company:
Approved
Loan Proposal
|
·
|
Certified
copy of the Mortgage
|
|
·
|
Faxed
copy of the executed note
|
|
·
|
Preliminary
title commitment, where applicable
|
|
·
|
Application
- 1003
|
|
·
|
Loan
Summary - 1008
|
|
·
|
Credit
Report along with three corresponding FICO
scores
|
|
·
|
Verified
collateral insurance
|
|
·
|
Appraisal
|
|
·
|
Flood
Determination
|
|
·
|
Flood
insurance (if necessary)
|
|
·
|
VOE,
where applicable
|
|
·
|
VOM,
where applicable
|
|
·
|
VOD,
where applicable
|
|
·
|
Assignment
of Mortgage to Company and all intervening assignments, where
applicable
|
With
respect to each Pledged Mortgage Loan, the Collateral Documents shall include
each of the following items, which shall be available for inspection by the
Bank
and which shall be delivered to the Bank or the Custodian within three (3)
business days of funding:
(a)
a
lost note affidavit in a form acceptable to the Bank; or the original Mortgage
Note bearing all intervening endorsements evidencing a complete chain of
assignment from the originator to the last endorsee, endorsed “Pay to the order
of _________, without recourse” and signed in the name of the last endorsee by
an authorized officer. To the extent that there is no room on the face of
the
Mortgage Notes for endorsements, the endorsement may be contained on an allonge,
if state law so allows and the Custodian is so advised by the Company that
state
law so allows;
(b)
the
original of any guarantee executed in connection with the Mortgage
Note;
(c)
the
original Mortgage with evidence of recording thereon. If in connection with
any
Mortgage Loan, the Company cannot deliver or cause to be delivered the original
Mortgage with evidence of recording thereon on or prior to the Closing Date
because of a delay caused by the public recording office where such Mortgage
has
been delivered for recordation or because such Mortgage has been lost or
because
such public recording office retains the original recorded Mortgage, the
Company
shall deliver or cause to be delivered to the Custodian, a photocopy of such
Mortgage, together with (i) in the case of a Mortgage where a public recording
office retains the original recorded Mortgage or in the case where a Mortgage
is
lost after recordation in a public recording office, a copy of such Mortgage
certified by such public recording office to be a true and complete copy
of the
original recorded Mortgage;
(d)
the
originals or certified copy of all assumption, modification, consolidation
or
extension agreements, if any, with evidence of recording thereon;
(e)
the
original assignment of Mortgage for each Mortgage Loan, in form and substance
acceptable for recording. The assignment of Mortgage shall be delivered in
blank;
(f)
the
originals of all intervening assignments of mortgage, evidencing a complete
chain of assignment from the originator to the last endorsee, with evidence
of
recording thereon, or if any such intervening assignment has not been returned
from the applicable recording office or has been lost or if such public
recording office retains the original recorded assignments of mortgage, the
Company shall deliver or cause to be delivered to the Custodian, a photocopy
of
such intervening assignment. In the case of an intervening assignment where
a
public recording office retains the original recorded intervening assignment
or
in the case where an intervening assignment is lost after recordation in
a
public recording office, a copy of such intervening assignment certified
by such
public recording office to be a true and complete copy of the original recorded
intervening assignment shall be included;
(g)
(i)
for first mortgage financing, the original mortgagee policy of title insurance
or, for up to a reasonable period of time following the recordation of the
mortgage, a marked up title commitment for a mortgagee title insurance policy,
and (ii) for second mortgage financing, one of the following: (w) an
original mortgagee title insurance policy or marked up commitment, as described
in clause (i) above, (x) a mortgagee title insurance policy insuring the
first
mortgage but not the second mortgage, but showing the second mortgage of
record,
(y) a title commitment showing no matters not satisfactory to the Bank, or
(z)
other evidence of the title satisfactory to the Bank in its discretion. In
a situation where a mortgagee title insurance policy is required but
unavailable, a copy of the policy certified as true and complete by the title
insurance company shall suffice.
(h)
security agreement, chattel mortgage or equivalent document executed in
connection with the Mortgage, if any; and
(i)
where
applicable, the Mortgage Identification Number (“MIN”) for each Mortgage Loan
registered on the MERS® System to track the transfer of ownership and/or
servicing rights to the Company
From
time
to time, the Company shall cause to be forwarded to the Custodian additional
original documents, additional documents evidencing an assumption, modification,
consolidation or extension of a Mortgage Loan. All such mortgage documents
held
by the Custodian as to each Mortgage Loan shall constitute the “Collateral
Documents”
EXHIBIT D
BAILEE LETTER
__________________,
2006
NOTICE
OF
BAILMENT
__________________
__________________
__________________
__________________
Re:
Franklin Credit Management Corporation Flow Transaction Loans-
Ladies
and Gentlemen:
You
are
hereby notified that the enclosed original promissory notes with respect
to the
referenced loan together with certain other documents comprising the related
file with respect to that loan (the “Mortgage Documents”) being hereby delivered
to you herewith are to be held by you as agent of Custodian and subject to
the
terms of the Bailee Letter, as defined herein.
Any
funds
wired by Takeout Investor in accordance with the Bailee Letter shall be
transmitted in immediately available funds to:
Sky
Bank
ABA:
▇▇▇▇▇▇▇▇▇
Account
#: 3000 ▇▇▇▇▇▇▇
Account
Name: Wire Clearing-Specialty Lending Group- Attn ▇▇▇▇▇▇ ▇▇▇▇▇▇
Any
Mortgage Documents (or portion thereof) being returned in accordance with
the
Bailee Letter shall be sent to the Custodian by overnight courier to: Sky
Bank;
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, no later than thirty
(30)
calendar days after the date hereof.
If
you
have any further questions, please feel free to call ▇▇▇▇▇▇ ▇▇▇▇▇▇ at
▇▇▇-▇▇▇-▇▇▇▇ .
Sincerely,
▇▇▇▇▇
▇.
▇▇▇▇▇▇▇▇
Vice
President, Specialty Lending Group
Sky
Bank
A-1
EXHIBIT E
POWER OF ATTORNEY
Franklin
Credit Management Corporation ("Company") hereby appoints Sky Bank ("Bank")
as
its true and lawful attorney-in-fact to act in the name, place and stead
of
Company for the purposes set forth below. This Power of Attorney is given
pursuant to a certain Warehouse Credit and Security Agreement (Amended and
Restated) by and between the Company and Bank dated August 11, 2006, (the
"Agreement") to which reference is made for the definition of all capitalized
terms herein.
Now,
therefore, Company does hereby constitute and appoint Bank the true and lawful
attorney-in-fact of Company in Company's name, place and stead with respect
to
each Mortgage Loan purchased pursuant to the Agreement for the following,
and
only the following, purposes:
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1.
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To
execute, acknowledge, seal and deliver deed of trust/mortgage note
endorsements, assignments of deed of trust/mortgage and other recorded
documents, satisfactions/releases/reconveyances of deeds of
trust/mortgages, tax authority notifications and declaration, deeds,
bills
of sale, and other instruments of sale, conveyance and transfer,
appropriately completed, with all ordinary or necessary endorsements,
acknowledgments, affidavits, and supporting documents as may be
necessary
and proper to effect its execution, delivery, conveyance, and recordation
of filing.
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2.
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To
execute and deliver affidavits of debt, substitutions of trustee,
substitutions of counsel, non-military affidavits, notices of recession,
foreclosure deeds, transfer tax affidavit, affidavits of merit,
verifications of complaint, notices to quit, bankruptcy declarations
for
the purpose of filing motions to lift stays and other documents
or notice
filings on behalf of Company in connection with foreclosure, bankruptcy
and eviction actions.
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3.
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To
endorse and/or assign any borrower or mortgagor's check or negotiable
instrument received by Bank as a payment under a Mortgage
Loan.
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Company
intends that this Power of Attorney be coupled with an interest and is not
revocable.
Company
further grants to its attorney-in-fact full authority to act in any manner
both
proper and necessary to exercise the foregoing powers, and ratifies every
act
that Bank may lawfully perform in exercising those powers by virtue
hereof.
Company
further grants to its attorney-in-fact the power of substitution and revocation
of another party for the purpose and only the purpose of endorsing or assigning
notes or security instruments in Company’s name, and Company hereby ratifies and
confirms all that the attorney-in-fact, or substitute or substitutes, shall
lawfully do or cause to be done by virtue of this power of attorney and its
rights and powers.
Bank
shall indemnify, defend and hold harmless Company, its successors and assigns,
from and against any and all losses, costs, expenses (including, without
limitation, reasonable attorneys' fees), damages, liabilities, demand or
claims
of any kind whatsoever ("Claims") arising out of, related to, or in connection
with (i) any act taken by Bank pursuant to this Limited Power of Attorney,
which
act results in a claim solely by virtue of the unlawful use of this Limited
Power of Attorney (and not as a result of a claim related to the underlying
instrument with respect to which this Limited Power of Attorney has been
used),
or (ii) any use or misuse of this Limited Power of Attorney in any manner
or by
any person not expressly authorized hereby.
IN
WITNESS WHEREOF, Company has executed this Power of Attorney this 11th
day of
August
2006.
Company:
Franklin Credit Management Corporation
______________________________
By:
___________________________
Title:__________________________
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STATE
OF
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):ss.
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COUNTY
OF
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On
this_____ day of _________, ____, before me, a notary public, the undersigned
officer, personally appeared ______________________________ who acknowledged
himself/herself to be the ________________________________ of
___________________________, a __________________ corporation, and that he/she
as such officer, being authorized to do so, executed the foregoing instrument
for the purposes therein contained by signing the name of the corporation
by
himself/herself as such officer.
IN
WITNESS WHEREOF, I have hereunto set my hand and official seal.
________________________________________
Notary
Public
My
commission expires on ___________________________.
EXHIBIT
F
LOCK
BOX
TERMS
A. Lockbox
Service.
The
lockbox service (the “Service”) will operate through a U.S. Postal Service box
in the Company’s name (the “Lockbox”) and Company’s demand deposit accounts at
Bank (the “Accounts”) which are designated herein below, and which Accounts are
subject to Bank’s standard deposit account agreements. Company authorizes Bank
and its employees, representatives or authorized agents to (i) pick up and
transport from the Post Office mail addressed to the Lockbox, and (ii) open
such
mail and process its contents according to the Lockbox processing procedures
which will be agreed to by Bank and the Company.
B. Company’s
Obligations.
Company
agrees to provide Bank, its employees, representatives or authorized agents
with
unrestricted and exclusive access to the Lockbox. Company agrees to follow
the
recommendations and specifications outlined in the Processing Procedures
relating, without limitation, to document specifications for the remittance
documents to be submitted to the Lockbox. Insofar as the performance of Services
under this Agreement by Bank requires data, documents, information or materials
of any nature to be furnished by Company, or for Bank personnel, Company
hereby
agrees to furnish all data, documents, information, and materials and to
perform
all such acts and to make appropriate personnel, records and facilities
available to Bank, within such time and in such form or manner as may reasonably
be necessary in order to enable Bank to perform the required Services promptly
and in a workmanlike manner.
C Deposits.
Bank
will deposit all items which comply with the processing procedures agreed
to by
Bank and Customer for credit to Company’s Account with Bank. Company authorizes
Bank to endorse checks and other payment instruments received (the
“Remittances”) and to deposit such instruments in the Accounts. If any payee is
a legal entity other than Company, Company represents and warrants to Bank
that
Company has the proper authorization from such payee to have such check endorsed
for deposit, and deposited into the Account, and Company agrees to indemnify
Bank against any losses, liabilities, damages, claims, demands, obligations,
actions, suits, judgments, penalties, costs or expenses, including, but not
limited to, attorneys’ fees (collectively “Losses and Liabilities”), suffered or
incurred by Bank as a result of, or in connection with, Company’s failure to
have such authorization. Further, the Bank may accept checks and other
instruments for deposit to the Account without endorsement. Company represents
and warrants to Bank that the endorsements of all items received through
this
Service are proper and valid and that Company has a right to receive such
items
for deposit to the Account. Company agrees to notify Bank no later than ten
(10)
calendar days after Company receives an advice of deposit, if there is any
error
in such advice, and no later than thirty (30) calendar days after Company
receives a bank statement on the Account, if such statement contains an error
or
fails to show a deposit that should have been made during the time period
covered by such statement.
D. Account
Documentation.
Company
understands that this Agreement covers Lockbox
Services as described herein and does not cover the handling of the Accounts
and
the processing of checks drawn on the Account or the availability of the
deposits made to the Accounts. The Accounts will be subject to, and Bank’s
operation of the Accounts will be in accordance with, the terms and provisions
of Bank’s deposit account agreements and the account rules and regulations
governing the Accounts (collectively the “Account Agreements”), copies of which
Company acknowledges having received, and shall be subject to the Master
Credit
Agreement to which this Lock Box Terms agreement is attached.
E. Reasonable
Care. As to property of Company in Bank’s possession Bank shall be liable only
for the exercise of reasonable care in safekeeping the same and restricting
access to authorized persons of information relating to Company’s business or
the business of any of Company’s customers which may be received in the course
of rendering the Service hereunder.
F. Mail
Collection.
Bank
shall collect the mail from the Lockbox in accordance with Bank’s post office
schedule, as such schedule may change from time to time.
G.
Limitation
of Liability,
Indemnity.
The
Bank will only be liable for damages arising
from the Bank’s intentional misconduct or negligence in the performance of this
Service. The Bank will not be responsible for any loss, delay, costs or
liability which arise, directly or indirectly, in whole or part, from, Company’s
actions or omissions, negligence or breach of any agreement with Bank; any
ambiguity, inaccuracy or omission in any instruction or information provided
to
Bank; accidents, strikes, labor disputes, civil unrest, fire, flood, water
damage (e.g., from fire suppression systems), or acts of God; or the actions
of
others or causes that are beyond Bank’s reasonable control. The Bank will not be
responsible under any circumstances for special, indirect, or consequential
damages, which the Company incurs as a result of the Bank’s actions or
omissions, even if the Bank is aware of the possibility for such damage.
Any
claim, action or proceeding by the Company to enforce the terms of this
Agreement or to recover for any Service-related loss or for any losses or
liabilities, must be commenced within one year from the date that the event
giving rise to the claim, action, or proceeding first occurs. The Company
agrees
to cooperate with the Bank in any loss recovery effort the Bank undertakes
to
reduce any loss or liability that arises in connection with the Bank’s Services.
Company agrees to indemnify, defend, hold Bank harmless from and against
any
claim, damage, loss, liability and cost (including, without limitation,
reasonable attorneys’ fees) of any kind whatsoever which results directly or
indirectly, in whole or in part from: (a) Bank’s actions or omissions, if they
are in accordance with the Company’s instructions or the terms of this
Agreement; or (b) the actions or omissions of the Company, its agents or
employees. This clause shall survive the termination of this
Agreement.
Account
Information:
Depository
Account Number: ▇▇▇▇▇▇▇▇▇▇
Other:
Any
correspondence between the Company and the Bank concerning normal operations
of
the Payments Processing and Control service shall be addressed as
follows:
Account
Name: FCMC General Depository Account
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Address:
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PMT
Processing and Control Service, C/O ▇▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇
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