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EXHIBIT 10.2
FIRST AMENDED AND RESTATED
WAREHOUSING CREDIT AND SECURITY AGREEMENT
(SINGLE-FAMILY MORTGAGE LOANS)
BETWEEN
U.S. HOME MORTGAGE CORPORATION,
a Florida corporation
AND
RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation
Dated as of August 31, 1995
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TABLE OF CONTENTS
PAGE
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions. . . . . . . . . . . . 12
2. THE CREDIT. . . . . . . . . . . . . . . . . . . . . . . . 12
2.1 The Commitment . . . . . . . . . . . . . . . . . . . 12
2.2 Procedures for Obtaining Advances. . . . . . . . . . 14
2.3 Notes. . . . . . . . . . . . . . . . . . . . . . . . 16
2.4 Interest . . . . . . . . . . . . . . . . . . . . . . 16
2.5 Principal Payments . . . . . . . . . . . . . . . . . 18
2.6 Expiration of Commitment . . . . . . . . . . . . . . 21
2.7 Method of Making Payments. . . . . . . . . . . . . . 21
2.8 Commitment and Usage Fees. . . . . . . . . . . . . . 22
2.9 Warehousing Fees . . . . . . . . . . . . . . . . . . 23
2.10 Miscellaneous Charges. . . . . . . . . . . . . . . . 23
2.11 Interest Limitation. . . . . . . . . . . . . . . . . 23
2.12 Increased Costs; Capital Requirements. . . . . . . . 24
3. COLLATERAL. . . . . . . . . . . . . . . . . . . . . . . . 25
3.1 Grant of Security Interest . . . . . . . . . . . . . 25
3.2 Release of Security Interest in Collateral . . . . . 26
3.3 Delivery of Additional Collateral or Mandatory
Prepayment 28
3.4 Release of Collateral. . . . . . . . . . . . . . . . 29
3.5 Collection and Servicing Rights. . . . . . . . . . . 29
3.6 Return of Collateral at End of Commitment. . . . . . 29
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4. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . 30
4.1 Initial Advance. . . . . . . . . . . . . . . . . . . 30
4.2 Each Advance . . . . . . . . . . . . . . . . . . . . 32
5. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . 33
5.1 Organization; Good Standing; Subsidiaries. . . . . . 33
5.2 Authorization and Enforceability . . . . . . . . . . 34
5.3 Approvals. . . . . . . . . . . . . . . . . . . . . . 34
5.4 Financial Condition. . . . . . . . . . . . . . . . . 34
5.5 Litigation . . . . . . . . . . . . . . . . . . . . . 35
5.6 Compliance with Laws . . . . . . . . . . . . . . . . 35
5.7 Regulations G and U. . . . . . . . . . . . . . . . . 35
5.8 Investment Company Act . . . . . . . . . . . . . . . 36
5.9 Payment of Taxes . . . . . . . . . . . . . . . . . . 36
5.10 Agreements . . . . . . . . . . . . . . . . . . . . . 36
5.11 Title to Properties. . . . . . . . . . . . . . . . . 37
5.12 ERISA. . . . . . . . . . . . . . . . . . . . . . . . 37
5.13 Eligibility. . . . . . . . . . . . . . . . . . . . . 37
5.14 Place of Business. . . . . . . . . . . . . . . . . . 38
5.15 Special Representations Concerning Collateral. . . . 38
5.16 Servicing. . . . . . . . . . . . . . . . . . . . . . 40
5.17 Special Representations Concerning Construction
Advances 40
6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . 42
6.1 Payment of Note. . . . . . . . . . . . . . . . . . . 42
6.2 Financial Statements and Other Reports . . . . . . . 42
6.3 Maintenance of Existence; Conduct of Business. . . . 44
6.4 Compliance with Applicable Laws. . . . . . . . . . . 44
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6.5 Inspection of Properties and Books . . . . . . . . . 44
6.6 Notice . . . . . . . . . . . . . . . . . . . . . . . 45
6.7 Payment of Debt, Taxes, etc. . . . . . . . . . . . . 45
6.8 Insurance. . . . . . . . . . . . . . . . . . . . . . 46
6.9 Closing Instructions . . . . . . . . . . . . . . . . 46
6.10 Subordination of Certain Indebtedness. . . . . . . . 46
6.11 Other Loan Obligations . . . . . . . . . . . . . . . 46
6.12 Use of Proceeds of Advances. . . . . . . . . . . . . 47
6.13 Special Affirmative Covenants Concerning Collateral. 47
6.14 Special Affirmative Covenants Concerning
Construction Advances 48
7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . 48
7.1 Contingent Liabilities . . . . . . . . . . . . . . . 49
7.2 Sale or Pledge of Servicing Contracts. . . . . . . . 49
7.3 Merger; Sale of Assets; Acquisitions . . . . . . . . 49
7.4 Deferral of Subordinated Debt. . . . . . . . . . . . 49
7.5 Loss of Eligibility. . . . . . . . . . . . . . . . . 49
7.6 Debt to Tangible Net Worth Ratio . . . . . . . . . . 49
7.7 Minimum Tangible Net Worth . . . . . . . . . . . . . 49
7.8 Acquisition of Recourse Servicing Contracts. . . . . 50
7.9 Gestation Facilities . . . . . . . . . . . . . . . . 50
7.10 Special Negative Covenants Concerning Collateral . . 50
8. DEFAULTS; REMEDIES. . . . . . . . . . . . . . . . . . . . 50
8.1 Events of Default. . . . . . . . . . . . . . . . . . 50
8.2 Remedies . . . . . . . . . . . . . . . . . . . . . . 54
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8.3 Application of Proceeds. . . . . . . . . . . . . . . 58
8.4 Lender Appointed Attorney-in-Fact. . . . . . . . . . 58
8.5 Right of Set-Off . . . . . . . . . . . . . . . . . . 59
9. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . 59
10. REIMBURSEMENT OF EXPENSES; INDEMNITY. . . . . . . . . . . 60
11. FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . 61
12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 61
12.1 Terms Binding Upon Successors; Survival of
Representations 61
12.2 Assignment . . . . . . . . . . . . . . . . . . . . . 61
12.3 Amendments . . . . . . . . . . . . . . . . . . . . . 61
12.4 Governing Law. . . . . . . . . . . . . . . . . . . . 61
12.5 Participations . . . . . . . . . . . . . . . . . . . 61
12.6 Relationship of the Parties. . . . . . . . . . . . . 62
12.7 Severability . . . . . . . . . . . . . . . . . . . . 62
12.8 Operational Reviews. . . . . . . . . . . . . . . . . 62
12.9 Consent to Credit References . . . . . . . . . . . . 63
12.10 Consent to Jurisdiction . . . . . . . . . . . . . . 63
12.11 Counterparts. . . . . . . . . . . . . . . . . . . . 63
12.12 Entire Agreement. . . . . . . . . . . . . . . . . . 63
12.13 Waiver of Jury Trial. . . . . . . . . . . . . . . . 63
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EXHIBITS
Exhibit A-1 Warehousing Promissory Note
Exhibit A-2 Construction Promissory Note
Exhibit B (Intentionally Omitted)
Exhibit C-SF Request for Advance Against Single
Family Mortgage Loans
Exhibit C-SF/CONSTRUCTION Request for Advance Against Single-Family
Construction/Perm Mortgage Loans
Exhibit D-SF Procedures and Documentation for
Warehousing Single Family Mortgage
Loans
Exhibit D-SF/CONSTRUCTION Procedures and Documentation for
Warehousing Single Family
Construction/Perm Mortgage Loans
Exhibit E Schedule of Servicing Contracts
Exhibit F Subordination of Debt Agreement
Exhibit G Subsidiaries
Exhibit H Legal Opinion
Exhibit I-SF Officer's Certificate
Exhibit J Schedule of Existing Warehouse Lines
Exhibit K-1 Funding Bank Agreement (Wire)
Exhibit K-2 Funding Bank Agreement (Checks)
Exhibit L Commitment Summary Report
Exhibit M Bailee Pledge Agreement
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THIS FIRST AMENDED AND RESTATED WAREHOUSING CREDIT AND SECURITY
AGREEMENT (SINGLE-FAMILY MORTGAGE LOANS), dated as of August 31, 1995 (as
supplemented, modified or amended from time to time, this "Agreement"),
between U.S. HOME MORTGAGE CORPORATION, a Florida corporation (the
"Company"), having its principal office at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇.▇.
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and RESIDENTIAL FUNDING CORPORATION, a
Delaware corporation (the "Lender"), having its principal office at ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
WHEREAS, the Company and the Lender have entered into a Warehousing
Credit and Security Agreement (Single-family Mortgage Loans) dated April
15, 1992, and amended by the First Amendment to Warehousing Credit and
Security Agreement dated as of June 1, 1992, the Second Amendment to
Warehousing Credit and Security Agreement dated as of June 11, 1992, the
Third Amendment to Warehousing Credit and Security Agreement dated as of
October 21, 1992, the Fourth Amendment to Warehousing Credit and Security
Agreement dated as of May 28, 1993, the Fifth Amendment to Warehousing
Credit and Security Agreement dated as of June 15, 1993, the Sixth
Amendment to Warehousing Credit and Security Agreement dated as of
September 15, 1993, the Seventh Amendment to Warehousing Credit and
Security Agreement dated as of July 1, 1994, the Eighth Amendment to
Warehousing Credit and Security Agreement dated as of October 1, 1994, the
Ninth Amendment to Warehousing Credit and Security Agreement dated as of
January 1, 1995, the Tenth Amendment to Warehousing Credit and Security
Agreement dated as of June 1, 1995; and the Eleventh Amendment to
Warehousing Credit and Security Agreement dated as of July 24, 1995;
WHEREAS, the Company and the Lender desire to amended and restate the
Original Agreement and to set forth herein the terms and conditions upon
which the Lender shall provide warehouse financing to the Company;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. DEFINITIONS.
1.1 Defined Terms. Capitalized terms defined below or
elsewhere in this Agreement (including the Exhibits hereto)
shall have the following meanings:
"Adjustable Rate Mortgage Loan" means a Single-family Mortgage
Loan that bears interest at a fluctuating rate and that is eligible
for purchase by an Investor.
"Adjusted Servicing Portfolio" means, for any Person, the
Servicing Portfolio of such Person, but excluding the principal
balance of Mortgage Loans included in the Servicing Portfolio
at such date (a) which are past due for principal or
interest for sixty (60) days or more, (b) with respect to
119
which such Person is obligated to repurchase or indemnify the holder
of the Mortgage Loans as a result of defaults on the Mortgage Loans at
any time during the term of such Mortgage Loans, (c) for which the
Servicing Contracts are not owned by such Person free and clear of all
Liens (other than in favor of the Lender), or (d) which are serviced
by the Company for others under subservicing arrangements.
"Adjusted Tangible Net Worth" means with respect to any Person at
any date, the Tangible Net Worth of such Person at such date,
excluding capitalized excess servicing fees and capitalized servicing
rights, plus one percent (1%) of the Adjusted Servicing Portfolio and
deferred taxes arising from excess capitalized servicing fees.
"Advance" means a disbursement by the Lender under the Commitment
pursuant to Article 2 of this Agreement, including, without
limitation, Ordinary Warehousing Advances, Wet Settlement Advances,
Construction Advances, Nonconforming Advances and readvances of funds
previously advanced to the
Company and repaid to the Lender.
"Advance Request" has the meaning set forth in Section
2.2(a) hereof.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.
"Agreement" has the meaning set forth in the first
paragraph hereto.
"Approved Custodian" means First Commonwealth Savings Bank, or
other Person which is deemed acceptable to the Lender from time to
time in its sole discretion.
"As Completed Appraised Value" means, with respect to a
Construction/Perm Mortgage Loan, the value given by a state certified
appraiser prior to the beginning of any construction to the real
property and improvements thereto to be financed by such
Construction/Perm Mortgage Loan (i) as of the completion of
construction and (ii) based on the Total Costs and plans and
specifications for such real property and improvements.
"Bailee Pledge Agreement" has the meaning set forth in
Section 2.2(b) hereof.
"Business Day" means any day excluding Saturday or Sunday and
excluding any day on which national banking associations are closed
for business.
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"Buydown" has the meaning set forth in Section 2.5(h)
hereof.
"Cash Collateral Account" means a demand deposit account
maintained at the Funding Bank in the name of the Lender and
designated for receipt of the proceeds of the sale or other
disposition of the Collateral.
"Closing Date" means August 31, 1995.
"Collateral" has the meaning set forth in Section 3.1
hereof.
"Collateral Documents" has the meaning set forth in
Section 2.2(a) hereof.
"Collateral Value" means (a) with respect to any Mortgage Loan as
of the date of determination, the lesser of (i) the amount of any
Advance made against such Mortgage Loan under Section 2.1(c) hereof;
or (ii) the Fair Market Value of such Mortgage Loan; or (b) in the
event Pledged Mortgages have been exchanged for Pledged Securities,
the aggregate Fair Market Value of the Mortgage Loans backing such
Pledged Securities.
"Commitment" has the meaning set forth in Section 2.1(a)
hereof.
"Commitment Amount" means Thirty-Five Million Dollars
($35,000,000).
"Commitment Fee" means a fee payable by the Company in
consideration of the Lender's issuance of the Commitment. The amount
of the Commitment Fee, if any, is set forth in Section 2.8(a) hereof.
"Commitment Summary Report" has the meaning set forth in
Section 6.2(d) hereof.
"Committed Purchase Price" means for a Mortgage Loan the product
of the Mortgage Note Amount multiplied by (a) the price (expressed as
a percentage) as set forth in a Purchase Commitment for such Mortgage
Loan or (b) in the event such Mortgage Loan is to be used to back a
Mortgage-backed Security, the price (expressed as a percentage) as set
forth in a Purchase Commitment for such Mortgage-backed Security.
"Company" has the meaning set forth in the first
paragraph of this Agreement.
"Conforming Mortgage Loan" means a First Mortgage Loan
which is an FHA insured or VA guaranteed Mortgage Loan or a
Conventional Mortgage Loan which is underwritten substantially
121
in accordance with FNMA or FHLMC underwriting standards, and the
principal amount of which is less than or equal to the maximum amount
eligible for purchase by FNMA or FHLMC.
"Construction Advance" means an Advance made against a
Construction/Perm Mortgage Loan and readvances of funds previously
advanced to the Company and repaid to the Lender.
"Construction Advance Amount" means the amount of Total Costs to
be reimbursed to the Company pursuant to a Construction Advance
Request.
"Construction Advance Request" has the meaning set forth
in Section 2.2(a) hereof.
"Construction/Perm Mortgage Loan" means a First Mortgage Loan in
a principal amount not to exceed Six Hundred Thousand Dollars
($600,000), made for financing the purchase of real property and the
construction of improvements on such real property by the Parent, and
which is converted to a Permanent Mortgage Loan at the completion of
the improvements.
"Construction Promissory Note" means the promissory note
evidencing the Company's Obligations with respect to Construction
Advances in the form of Exhibit A-2 attached hereto.
"Construction Rate" means a floating rate of interest per annum
equal to two percent (2.00%) over LIBOR. The Construction Rate shall
be adjusted on and as of the effective date of any change in LIBOR.
The Lender's determination of the Construction Rate as of any date of
determination shall be conclusive and binding, absent manifest error.
"Conventional Mortgage Loan" means a First Mortgage Loan, other
than an FHA insured or VA guaranteed Mortgage Loan.
"Cost Breakdown" means a list of the costs and expenses to be
financed by Advances under a Construction/Perm Mortgage Loan,
including, without limitation, real property acquisition costs, hard
and soft construction costs, architectural fees and any other costs
and expenses budgeted to construct and complete the improvements.
"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;
and (b) all indebtedness or other obligations of such Person for borrowed
money or for the deferred purchase price of property or services;
provided that for purposes of this Agreement, there shall be excluded
122
from Debt at any date loan loss reserves, Subordinated Debt not due
within one year of such date, and deferred taxes arising from
capitalized excess servicing fees.
"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.
"Depository Benefit" shall mean the compensation received by the
Lender, directly or indirectly, as a result of the Company's
maintenance of Eligible Balances with a Designated Bank.
"Designated Bank" means any bank(s) designated from time to time
by the Lender to be a Designated Bank with whom the Lender has an
agreement under which the Lender can receive a Depository Benefit.
"Eligible Balances" means all funds of or maintained by the
Company and its Subsidiaries in accounts at a Designated Bank, less
balances to support fees, interest or other amounts that would
otherwise be payable to the Designated Bank, float, reserve
requirements, Federal Deposit Insurance Corporation insurance premiums
and such other reductions as may be imposed by governmental
authorities from time to time.
"Eligible Mortgage Pool" means a Mortgage Pool for which (a) an
Approved Custodian has issued its initial certification (on the basis
of which a Pledged Security is to be issued), (b) there exists a
Purchase Commitment covering such Pledged Security, and (c) such
Pledged Security will be delivered to the Lender.
"ERISA" means the Employee Retirement Income Security Act of 1974
and all rules and regulations promulgated thereunder, as amended from
time to time and any successor statute.
"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.
"Fair Market Value" means at any date with respect to any
Mortgage Loan covered by a valid Purchase Commitment, the Committed
Purchase Price, or in the absence of a valid Purchase Commitment for a
Mortgage Loan or the related Mortgage-backed Security (if such
Mortgage Loan is to be used to back a Mortgage-backed Security), the
market price (expressed as a percentage of the outstanding principal
balance) for thirty (30) day mandatory future delivery of such
Mortgage Loan or Mortgage-backed Security published by
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▇▇▇▇▇▇-▇▇▇▇▇▇, Inc. on its MoneyCenter system or, if not so published,
the average bid price (expressed as a percentage of the outstanding
principal balance) quoted in writing to the Lender as of the
computation date by any two nationally recognized dealers selected by
the Lender who at the time are making a market in similar Mortgage
Loans or Mortgage-backed Securities, multiplied, in the case of
Mortgage Loans, by the outstanding principal balance thereof and, in
the case of Mortgage-backed Securities, by the product of the pool
factor of such Mortgage-backed Security times the face amount of such
Mortgage-backed Security.
"FHA" means the Federal Housing Administration and any
successor thereto.
"FHLMC" means the Federal Home Loan Mortgage Corporation
and any successor thereto.
"FICA" means the Federal Insurance Contributions Act.
"FIRREA" means the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, as amended from time to time, and the
regulations promulgated and rulings issued thereunder.
"FNMA" means the Federal National Mortgage Association
and any successor thereto.
"Funding Bank" means The First National Bank of Chicago or any
other bank designated from time to time by the Lender.
"Funding Bank Agreement" means the letter agreement substantially
in the form of Exhibit K hereto.
"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.
"Gestation Agreement" means an agreement under which the Company
agrees to sell or finance (a) a Pledged Mortgage prior to the date of
purchase by an Investor, or (b) a Mortgage Pool prior to the date the
Mortgage-backed Security is issued.
"GNMA" means the Government National Mortgage Association
and any successor thereto.
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"Home Equity Loan" means an open-ended revolving line of credit
that is a Mortgage Loan secured by a Mortgage.
"HUD" means the Department of Housing and Urban
Development and any successor thereto.
"Indemnified Liabilities" has the meaning set forth in
Article 10 hereof.
"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 FNMA, FHLMC or a financially responsible private
institution which is deemed acceptable by the Lender from time to time
in its sole discretion.
"Jumbo Mortgage Loan" means a Conventional Mortgage Loan which is
underwritten substantially in accordance with FNMA or FHLMC
underwriting standards, but the principal amount of which is in excess
of the maximum amount eligible for purchase by FNMA or FHLMC, and
which meets all eligibility requirements for purchase by an Investor.
"Lender" has the meaning set forth in the first paragraph
of this Agreement.
"LIBOR" means, for each calendar week, the rate of interest per
annum which is equal to the arithmetic mean of the U.S. Dollar London
Interbank Offered Rates for one (1) month periods as of 11:00 a.m.
London time on the first Business Day of each week on which the London
Interbank market is open, as published by ▇▇▇▇▇▇-▇▇▇▇▇▇, Inc. on its
MoneyCenter system. LIBOR shall be rounded, if necessary, to the next
higher one sixteenth of one percent (1/16%). If such U.S. dollar LIBOR
rates are not so offered or published for any period, then during such
period LIBOR shall mean the London Interbank Offered Rate for one (1)
month periods published on the first Business Day of each week on
which the London Interbank market is open, in the Wall Street Journal
in its regular column entitled "Money Rates."
"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).
"Loan Documents" means this Agreement, the Note, any agreement of
the Company relating to Subordinated Debt, and each other document,
instrument or agreement executed by the Company in connection herewith
or therewith, as any of the same may be amended, restated, renewed or
replaced from time to time.
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"Margin Stock" has the meaning assigned to that term in
Regulations G and U of the Board of Governors of the Federal Reserve
System as in effect from time to time.
"Maturity Date" shall mean the earlier of: (a) the close of
business on August 31, 1996 as such date may be extended from time to
time in writing by the Lender, in its sole discretion, on which date
the Commitment shall expire of its own term, and without the necessity
of action by the Lender, and (b) the date the obligation of the Lender
to make further Advances hereunder is terminated pursuant to Section
8.1 below.
"Miscellaneous Charges" has the meaning set forth in
Section 2.10 hereof.
"Mortgage" means a First mortgage or First deed of trust on
improved real property.
"Mortgage-backed Securities" means GNMA, FNMA or FHLMC securities
that are backed by Mortgage Loans.
"Mortgage Loan" means any loan evidenced by a Mortgage
Note.
"Mortgage Note" means a promissory note secured by a
Mortgage.
"Mortgage Note Amount" means, as of the date of determination,
the then outstanding unpaid principal amount of a Mortgage Note.
"Mortgage Pool" means a pool of one or more Pledged Mortgages on
the basis of which there is to be issued a Mortgage-backed Security.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is maintained for employees of the
Company or a Subsidiary of the Company.
"Nonconforming Advance" means an Advance made against a
Nonconforming Mortgage Loan.
"Nonconforming Mortgage Loan" means a Conventional Mortgage Loan
which is not a Conforming Mortgage Loan or a Jumbo Mortgage Loan, and
which is underwritten and approved by an Investor prior to funding if
its original principal amount exceeds Six Hundred Thousand Dollars
($600,000).
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"Nonconforming Rate" means a floating rate of interest per annum
equal to one and one-half percent (1.50%) over LIBOR. The
Nonconforming Rate shall be adjusted on and as of the effective date
of each weekly change in LIBOR. The Lender's determination of the
Nonconforming Rate as of any date of determination shall be conclusive
and binding, absent manifest error.
"Note" has the meaning set forth in Section 2.3 hereof.
"Notices" has the meaning set forth in Article 9 hereof.
"Obligations" means any and all indebtedness, obligations and
liabilities of the Company to the Lender (whether now existing or
hereafter arising, voluntary or involuntary, whether or not jointly
owed with others, direct or indirect, absolute or contingent,
liquidated or unliquidated, and whether or not from time to time
decreased or extinguished and later increased, created or incurred),
arising out of or related to the Loan Documents.
"Officer's Certificate" means a certificate executed on behalf of
the Company by its chief financial officer or its treasurer or by such
other officer as may be designated herein and substantially in the
form of Exhibit I-SF attached hereto.
"Operating Account" has the meaning set forth in the
Funding Bank Agreement.
"Ordinary Warehousing Advance" means an Advance made
against a Conforming Mortgage Loan or a Jumbo Mortgage Loan.
"Ordinary Warehousing Rate" means a floating rate of interest per
annum equal to nine-tenths percent (0.90%) over LIBOR. The Ordinary
Warehousing Rate shall be adjusted on and as of the effective date of
each weekly change in LIBOR. The Lender's determination of the
Ordinary Warehousing Rate as of any date of determination shall be
conclusive and binding, absent manifest error.
"Original Agreement" has the meaning set forth in the
first recital hereto.
"Parent" shall mean U.S. Home Corporation.
"Participant" has the meaning set forth in Section 12.5
hereof.
"Permanent Mortgage Loan" means a Construction/Permanent Mortgage
Loan after the construction or rehabilitation on the premises related
to such Mortgage Loan has been completed and such Mortgage Loan has
been converted to an amortizing permanent Mortgage Loan by the
modification or replacement of the Mortgage Note.
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"Person" means and includes natural persons, corporations,
limited partnerships, general partnerships, joint stock companies,
joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations,
whether or not legal entities, and governments and agencies and
political subdivisions thereof.
"Plans" has the meaning set forth in Section 5.12 hereof.
"Pledged Mortgages" has the meaning set forth in Section
3.1(a) hereof.
"Pledged Securities" has the meaning set forth in Section
3.1(b) hereof.
"Purchase Commitment" means a written commitment, in form and
substance satisfactory to the Lender, issued in favor of the Company
by an Investor pursuant to which that Investor commits to purchase
Mortgage Loans or Mortgage-backed Securities.
"Release Amount" has the meaning set forth in Section
3.2(g) hereof.
"RFC" means Residential Funding Corporation, a Delaware
corporation, and any successor thereto.
"Servicing Contract" means, with respect to any Person, the
arrangement, whether or not in writing, pursuant to which such Person
has the right to service Mortgage Loans.
"Servicing Portfolio" means, as to any Person, the unpaid
principal balance of Mortgage Loans whose Servicing Contracts are
owned by such Person.
"Single-family Mortgage Loan" means a Mortgage Loan secured by a
Mortgage covering improved real property containing one to four family
residences.
"Statement Date" means the date of the most recent financial
statements of the Company (and, if applicable, its Subsidiaries, on a
consolidated basis) delivered to the Lender under the terms of this
Agreement.
"Subordinated Debt" means all indebtedness of the Company, for
borrowed money, which is, by its terms (which terms shall have been
approved by the Lender), effectively subordinated in right of payment
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to all other present and future Obligations, solely for purposes of
Section 7.4 hereof, and all indebtedness of the Company which is
required to be subordinated by Section 4.1(b) or Section 6.10 hereof.
"Subsidiary" means any corporation, association or other business
entity in which more than fifty percent (50%) of the total voting
power or shares of stock entitled to vote in the election of
directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more of
the other Subsidiaries of that Person or a combination thereof.
Notwithstanding the above, for the purposes hereof, C.M. Corp. is
excluded from the definition of Subsidiary.
"Tangible Net Worth" means with respect to any Person at any
date, the excess of the total assets over total liabilities of such
Person on such date, each to be determined in accordance with GAAP
consistent with those applied in the preparation of the financial
statements referred to in Section 4.1(a)(5) hereof, plus loan loss
reserves and that portion of Subordinated Debt not due within one year
of such date, provided that, for purposes of this Agreement, there
shall be excluded from total assets advances or loans to shareholders,
officers or Affiliates, investments in Affiliates, assets pledged to
secure any liabilities not included in the Debt of such Person,
intangible assets, those other assets which would be deemed by HUD to
be non-acceptable in calculating adjusted net worth in accordance with
its requirements in effect as of such date, as such requirements
appear in the "Audit Guide for Audit of Approved Non-Supervised
Mortgagees" and other assets deemed unacceptable by the Lender in its
sole discretion.
"Total Costs" means the total of the costs and expenses
listed on the Cost Breakdown.
"Trust Receipt" means a trust receipt in a form approved by and
pursuant to which the Lender may deliver any document relating to the
Collateral to the Company for correction or completion.
"Used Portion" has the meaning set forth in Section
2.8(b) hereof.
"Usage Fee" has the meaning set forth in Section 2.8(b)
hereof.
"VA" means the U.S. Department of Veterans Affairs and
any successor thereto.
"Warehousing Fee" has the meaning set forth in Section
2.9 hereof.
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"Warehousing Promissory Note" means the promissory note
evidencing the Company's Obligations with respect to Ordinary
Warehousing Advances in the form of Exhibit A-1 attached hereto.
"Weighted Average Purchase Commitment Price" shall mean the
weighted average of the Committed Purchase Prices of the unfilled
Purchase Commitments (expressed as a percentage) for Mortgage Loans or
Mortgage-backed Securities of the same type, interest rate and term.
"Wet Settlement Advance" means an Advance pursuant to Section
2.2(b) of this Agreement, in respect of the closing or settlement of a
Mortgage Loan, based upon delivery to the Lender of the Bailee Pledge
Agreement, pending subsequent delivery of the Collateral Documents as
provided in such Section.
1.2 Other Definitional Provisions.
(a) Accounting terms not otherwise defined herein shall have
the meanings given the terms under GAAP.
(b) Defined terms may be used in the singular or
the plural, as the context requires.
(c) All references to time of day shall mean the then
applicable time in Chicago, Illinois, unless expressly provided
to the contrary.
2. THE CREDIT.
2.1 The Commitment.
(a) Subject to the terms and conditions of this Agreement
and provided no Default or Event of Default has occurred and is
continuing, the Lender agrees from time to time during the period
from the Closing Date, to, but not including, the Maturity Date,
to make Advances to the Company, provided the total aggregate
principal amount outstanding at any one time of all such Advances
shall not exceed the Commitment Amount. The obligation of the
Lender to make Advances hereunder up to such limit, is
hereinafter referred to as the "Commitment." Within the
Commitment, the Company may borrow, repay and reborrow. Effective
as of the date of this Agreement, all outstanding loans made
pursuant to the Original Agreement shall for all purposes be
deemed to be Advances made under this Agreement. 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 the Obligations.
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(b) Advances shall be used by the Company solely for the
purpose of (i) funding the acquisition or origination of Mortgage
Loans or (ii) reimbursing the Company for its funding the
acquisition or origination of Mortgage Loans, and shall be made
at the request of the Company, in the manner hereinafter provided
in Section 2.2 hereof, against the pledge of such Mortgage Loans
as Collateral therefor. The following limitations on the use of
Advances shall be applicable:
(1) No Advance shall be made against a Mortgage Loan
other than a Single-family Mortgage Loan and no Construction
Advance shall be made against a Construction/Perm Mortgage
Loan which is not a single-family detached dwelling.
(2) No Advance shall be made against a Mortgage Loan
which is not covered by a Purchase Commitment.
(3) No Advance shall be made against a Home Equity
Mortgage Loan.
(4) The aggregate amount of Wet Settlement Advances
outstanding at any one time shall not exceed thirty-five
percent (35%) of the Commitment Amount.
(5) The aggregate amount of Construction Advances
outstanding at any one time shall not exceed Five Million
Dollars ($5,000,000).
(6) The aggregate amount of Nonconforming Advances
outstanding at any one time shall not exceed One Million
Dollars ($1,000,000).
(7) No Ordinary Warehousing Advance (other than a
Construction/Permanent Mortgage Loan) shall be made against
any Mortgage Loan which was closed more than ninety (90)
days prior to the date of the requested Advance.
2.1 (c) No Advance shall exceed the following amount applicable
to the type of Collateral at the time it is pledged:
(1) For a Conforming Mortgage Loan or a Jumbo Mortgage
Loan pledged hereunder, ninety-eight percent (98%) of the
lesser of (i) the Mortgage
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Note Amount or (ii) in the case of a Conforming Mortgage
Loan or a Jumbo Mortgage Loan which has been committed to an
Investor at the time of the Advance, the Committed Purchase
Price, or the product of the weekly Weighted Average
Purchase Commitment Price at the time of the Advance
multiplied by the Mortgage Note Amount for all other such
Mortgage Loans.
(2) For a Nonconforming Mortgage Loan pledged
hereunder, ninety-seven percent (97%) of the lesser of (i)
the Mortgage Note Amount or (ii) in the case of a
Nonconforming Mortgage Loan which has been committed to an
Investor at the time of the Advance, the Committed Purchase
Price, or the product of the weekly Weighted Average
Purchase Commitment Price at the time of the Advance
multiplied by the Mortgage Note Amount for all such Mortgage
Loans.
(3) For a Construction/Perm Mortgage Loan pledged
hereunder, eighty percent (80%) of the lesser of (i) the
Total Costs, or (ii) the As Completed Appraised Value.
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 and
4.2 hereof, upon compliance with the procedures set forth in this
Section 2.2 and in Exhibit D-SF with respect to Ordinary
Warehousing Advances and Nonconforming Advances and Exhibit
D-SF/CONSTRUCTION with respect to Construction Advances, attached
hereto and made a part hereof including the delivery of all
documents listed in Exhibit D-SF and Exhibit D-SF/CONSTRUCTION
(the "Collateral Documents") to the Lender. Requests for Advances
(other than Construction Advances) shall be initiated by the
Company by delivering to the Lender, no later than one (1)
Business Day prior to any Business Day that the Company desires
to borrow hereunder, a completed and signed request for an
Advance (an "Advance Request") on the then current form approved
by the Lender. Requests for Construction Advances shall be
initiated by the Company by delivering to the Lender, no later
than two (2) Business Days prior to any Business Day that the
Company desires to borrower hereunder, a completed and signed
request for a Construction Advance (a "Construction Advance
Request"). The current forms in use by the Lender are Exhibit
C-SF for Ordinary Warehousing Advances and Nonconforming Advances
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and Exhibit C-SF/CONSTRUCTION for Construction Advances, attached
hereto and made a part hereof. The Lender shall have the right,
on not less than three (3) Business Days' prior Notice to the
Company, to modify any of said Exhibits to conform to current
legal requirements or Lender practices, and, as so modified,
said Exhibits shall be deemed a part hereof.
(b) In the case of any Wet Settlement Advances, the Company
shall follow the procedures and, at or prior to the Lender's
making of such Wet Settlement Advance, shall deliver to the
Lender the documents set forth in Exhibit D-SF or Exhibit
D-SF/CONSTRUCTION hereto, as the case may be, together with a
completed and executed Bailee Pledge Agreement in the form of
Exhibit M hereto. In the case of a Mortgage Loan financed through
a Wet Settlement Advance, the Company shall cause all Collateral
Documents required to be delivered to the Lender pursuant to
Exhibit D-SF or Exhibit D-SF/CONSTRUCTION, as the case may be,
within five (5) Business Days after the date of the Wet
Settlement Advance relating thereto.
(c) Before funding, the Lender shall have a reasonable time
(one (1) Business Day under ordinary circumstances) to examine
such Advance Request and the Collateral Documents to be delivered
prior to such requested Advance, as set forth in the applicable
Exhibit hereto, and may reject such of them as do not meet the
requirements of this Agreement or of the related Purchase
Commitment.
(d) The Company shall hold in trust for the Lender, and the
Company shall deliver to the Lender promptly upon request, or
within one hundred twenty (120) days from the date an Advance was
made against such Pledged Mortgage and the Pledged Mortgage is
not being held by an Investor for purchase or has not been
redeemed from pledge, the following: (1) the originals of the
Collateral Documents for which copies are required to be
delivered to the Lender pursuant to Exhibit D-SF or Exhibit
D-SF/CONSTRUCTION, as the case may be, (2) the original lender's
ALTA Policy of Title Insurance or an equivalent thereto, and (3)
any other documents relating to a Pledged Mortgage which the
Lender may request, including, without limitation, documentation
evidencing the FHA Commitment to Insure or the VA Guaranty of any
Pledged Mortgage which is either FHA insured or VA guaranteed,
the appraisal, Private Mortgage Insurance Certificate, if
applicable, the Regulation Z Statement, certificates of casualty
or hazard insurance, credit information on the maker of each such
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Mortgage Note, a copy of a HUD-1 or corresponding purchase advice
and other documents of all kinds which are customarily desired
for inspection or transfer incidental to the purchase of any
Mortgage Note by an Investor and any additional documents which
are customarily executed by the seller of a Mortgage Note to an
Investor.
(e) To make an Advance, the Lender shall cause the Funding
Bank to credit an account of the Company with the Funding Bank,
which account shall be under the exclusive control of the Lender,
upon compliance by the Company with the terms of this Agreement.
(f) If, pursuant to the authorization given by the Company
in the Funding Bank Agreement, for the purpose of financing a
Mortgage Loan against which the Lender has made an Advance in
accordance with a Request for Advance (i) the Lender debits the
Company's Operating Account at the Funding Bank to the extent
necessary to cover a wire to be initiated by the Lender, or (ii)
the Lender directs the Funding Bank to honor a check drawn by the
Company on its Check Disbursement Account at the Funding Bank,
and such debit or direction results in an overdraft, the Lender
may make an additional Advance to fund such overdraft.
2.3 Notes. The Company's Obligations in respect of Ordinary
Warehousing Advances and Nonconforming Advances shall be evidenced by
a Warehousing Promissory Note of the Company substantially in the form
of Exhibit A-1 attached hereto, and the Company's Obligations in
respect of Construction Advances shall be evidenced by a Construction
Promissory Note of the Company substantially in the form of Exhibit
A-2 attached hereto. Each note is dated as of the date hereof
(Warehousing Promissory Note and Construction Promissory Note are
collectively referred to as the "Notes"). The terms "Warehousing
Promissory Note", "Construction Promissory Note," "Note" or "Notes"
shall include all extensions, renewals and modifications of the Notes
and all substitutions therefor. All terms and provisions of the Notes
are hereby incorporated herein.
2.4 Interest.
(a) Prior to the occurrence of an Event of Default, the
unpaid amount of each Ordinary Warehousing Advance (net of
applicable Buydown) shall bear interest, from the date of such
Ordinary Warehousing Advance until paid in full, at the Ordinary
Warehousing Rate.
(b) Prior to the occurrence of an Event of Default, the
unpaid principal balance of each Nonconforming Advance (net of
applicable Buydown) shall bear interest, from the date such
Nonconforming Advance until paid in full, at the Nonconforming
Rate.
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(c) Prior to the occurrence of an Event of Default, the
unpaid amount of each Construction Advance (net of applicable
Buydown) shall bear interest, from the date of such Construction
Advance until paid in full, at the Construction Rate.
(d) The Company is entitled to receive a benefit in the form
of an "Earnings Credit" on the portion of the Eligible Balances
maintained in time deposit accounts with a Designated Bank, and
the Company is entitled to receive a benefit in the form of an
"Earnings Allowance" on the portion of the Eligible Balances
maintained in demand deposit accounts with a Designated Bank. Any
Earnings Allowance shall be used first and any Earnings Credit
shall be used second as a credit against accrued Miscellaneous
Charges and fees, including, but not limited to Commitment Fees
and Warehousing Fees, and may be used, at the Lender's option, to
reduce accrued interest. Any Earnings Allowance not used during
the month in which the benefit was received shall be accumulated
for use and must be used during the calendar year in which the
benefit was received. Any Earnings Credit not used during the
month in which the benefit was received shall be used to provide
a cash benefit to the Company. The Lender's determination of the
Earnings Credit and the Earnings Allowance for any month shall be
determined by the Lender in its sole discretion and shall be
conclusive and binding absent manifest error. In no event shall
the sum of the Earnings Credit and the Earnings Allowance for any
month exceed the Depository Benefit for such month.
Either party hereto may terminate the benefits provided for
in this Section effective immediately upon Notice to the other
party, if the terminating party shall have determined (which
determination shall be conclusive and binding absent manifest
error) at any time that any applicable law, rule, regulation,
order or decree or any interpretation or administration thereof
by any governmental authority charged with the interpretation or
administration thereof, or compliance by such party with any
request or directive (whether or not having the force of law) of
any such authority, shall make it unlawful or impossible for such
party to continue to offer or receive the benefits provided for
in this Section.
(e) Interest shall be computed on the basis of a 360-day
year and applied to the actual number of days elapsed in each
interest calculation period and shall be payable monthly in
arrears, on the first day of each month, commencing with the
first month following the Closing Date and on the Maturity Date.
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(f) If, for any reason, no interest is due on an Advance,
the Company agrees to pay to the Lender an administrative fee
equal to one day of interest on such Advance at the rate
applicable to such Advances under the applicable section hereof,
as in effect on the date of such Advance. Administrative and
other fees shall be due and payable in the same manner as
interest is due and payable hereunder.
(g) Upon and after the occurrence and during the
continuation of an Event of Default hereunder, the unpaid amount
of each Advance shall bear interest, until paid in full, at a
rate of interest (the "Default Rate") equal to four percent (4%)
per annum over the applicable rate provided in the applicable
subsection of this Section 2.4 or, if no rate is applicable, the
highest rate then applicable to any outstanding Advance.
2.5 Principal Payments.
(a) The outstanding principal amount of all Advances shall
be payable in full on the Maturity Date.
(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.
(c) All payments of outstanding Advances from the proceeds
of the sale or other disposition of Pledged Mortgages and Pledged
Securities shall be paid directly by the Investor to the Cash
Collateral Account to be applied against the Obligations.
(d) The Company shall be obligated to pay to the Lender,
without the necessity of prior demand or notice from the Lender,
and the Company authorizes the Lender to cause the Funding Bank
to charge the Company's account for, the amount of any
outstanding Advance against a specific Pledged Mortgage, upon the
earliest occurrence of any of the following events:
(1) For a Mortgage Loan, other than a Construction/Perm
Mortgage Loan, one hundred twenty (120) days elapse from the
date of the initial Advance made by the Lender against such
Pledged Mortgage, whether or not such Pledged Mortgage is
included in an Eligible Mortgage Pool.
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(2) Forty-five (45) days elapse from the date the
Pledged Mortgage was delivered to an Investor for
examination and purchase, without the purchase being made,
or upon rejection of the Pledged Mortgage as unsatisfactory
by an Investor.
(3) One (1) Business Day elapses from the date a Wet
Settlement Advance was made and the Pledged Mortgage which
was to have been funded by such Wet Settlement Advance is
not closed and funded.
(4) Seven (7) Business Days elapse from the date a Wet
Settlement Advance was made without receipt by the Lender of
all Collateral Documents relating to such Pledged Mortgage,
or such Collateral Documents, upon examination by the
Lender, are found not to be in compliance with the
requirements of this Agreement or the related Purchase
Commitment.
(5) Ten (10) Business Days elapse from the date a
Collateral Document was delivered to the Company for
correction or completion under a Trust Receipt, without
being returned to the Lender.
(6) The Mortgage Loan is defaulted and remains in
default for a period of sixty (60) days or more.
(7) One hundred twenty (120) days elapse from the date
an Advance was made against a Pledged Mortgage without
receipt of the items required in Sections 2.2(d) hereof, or
such items, upon examination by the Lender, are found not to
be in compliance with the requirements of this Agreement or
the related Purchase Commitment.
(8) If the outstanding Advances against Pledged
Mortgages of a specific Mortgage Loan type exceed the
aggregate Purchase Commitments for such Mortgage Loan type.
(9) Three (3) Business Days after the mandatory
delivery date of the related Purchase Commitment and the
specific Pledged Mortgage was not delivered under the
Purchase Commitment prior to such mandatory delivery date,
or the Purchase Commitment is terminated; unless in each
case, such Pledged Mortgage is eligible for delivery to an
Investor under a comparable Purchase Commitment acceptable
to the Lender.
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(10) Upon sale or other disposition of the
Pledged Mortgage.
(11) For a Construction/Perm Mortgage Loan two hundred
seventy (270) days elapse from the date of the initial
Construction Advance made by the Lender against such Pledged
Mortgage, without such Construction/Perm Mortgage Loan being
converted to a Permanent Mortgage Loan. Notwithstanding the
above, the Company may request and the Lender may approve a
ninety (90) day extension of the construction period for any
Construction/Perm Mortgage Loan. Within fifteen (15) days
after the final Construction Advance, a Construction/Perm
Mortgage Loan shall be converted to a Permanent Mortgage
Loan and the date of such final Construction Advance shall
be deemed to be the initial Advance date of the Permanent
Mortgage Loan and the provisions of Section 2.5(d)(1) shall
apply to such Permanent Mortgage Loan.
(12) For a Construction/Perm Mortgage Loan, a lien is
filed against the premises and not removed within fifteen
(15) days of the filing, or an inspection report indicates
that the improvements to the premises encumbered by the
Pledged Mortgage are not being constructed in accordance
with the approved plans and specifications.
(13) If the Pledged Mortgage is included in a Mortgage
Pool, then, if the Mortgage Pool is an Eligible Mortgage
Pool, upon sale of the Mortgage-backed Security, or if the
Mortgage Pool is not an Eligible Mortgage Pool, within two
(2) Business Days after delivery of the Pledged Mortgages to
the pool custodian.
(e) The outstanding amount of any Advance made pursuant to
Section 2.2(f) shall be payable in full within one (1) Business
Day after the date of such Advance.
(f) In addition to the payments required pursuant to Section
2.5(d), the Company shall be obligated to pay to the Lender,
without the necessity of prior demand or notice from the Lender,
and the Company authorizes the Lender to cause the Funding Bank
to charge the Company's account if the principal amount of any
Pledged Mortgage is prepaid in whole or in part while an Advance
is outstanding against such Pledged Mortgage, for the amount of
such prepayment, to be applied to such Advance.
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(g) The Company shall give Notice to the Lender
(telephonically, to be followed by written notice) of the Pledged
Mortgages or Pledged Securities for which proceeds have been
received. Upon receipt of such Notice the Advances against such
Pledged Mortgages or Pledged Securities shall be repaid and such
Pledged Mortgages or Pledged Securities shall be considered to
have been redeemed from pledge. The Lender is entitled to rely
upon the Company's affirmation that deposits in the Cash
Collateral Account represent payment from Investors or the
Company for the purchase or prepayment pursuant to Section 2.5(d)
of Pledged Mortgages or Pledged Securities as specified by the
Company. In the event that the payment from an Investor for the
purchase of Pledged Mortgages or Pledged Securities is less than
the outstanding Advances against such Pledged Mortgages or the
Mortgage Loans backing Pledged Securities, the Lender is
authorized to cause the Funding Bank to charge the Company's
account for an amount equal to such deficiency. Provided no
Default or Event of Default exists, the Lender shall return any
excess payment from an Investor for Pledged Mortgages or Pledged
Securities to the Company.
(h) The Company may, from time to time, prepay a
portion of the Advances pursuant to this Section 2.5(h)
(any such prepayment is hereafter referred to as a "Buydown"). A
Buydown shall not , except as set forth below, be deemed a
prepayment of any particular Advances, and shall not entitle the
Company to the release of any Collateral. All or any portion of a
Buydown may be reborrowed hereunder, provided no Default or Event
of Default has occurred and is continuing, upon written notice to
the Lender no later than 9:30 a.m. on the Business Day that the
Company desires to reborrow such amount. In the event the Lender
receives a payment of Advances that would, as a result of the
Buydown, reduce the outstanding principal balance of the Advances
to an amount less than zero, the Buydowns, or a portion thereof
equal to such excess, shall be re-advanced to the Company. The
Lender shall use its best efforts to apply Buydown to reduce the
interest on Advances in the following order: first, Construction
Advances, second, Nonconforming Advances and third, Ordinary
Warehousing Advances.
2.6 Expiration of Commitment. The Commitment shall
expire on the Maturity Date.
2.7 Method of Making Payments.
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(a) Except as otherwise specifically provided herein, all
payments hereunder shall be made to the Lender not later than the
close of business on the date when due unless such date is a
non-Business Day, in which case, such payment shall be due on
the first Business Day thereafter, and shall be made in lawful
money of the United States of America in immediately available
funds transferred via wire to accounts designated by the Lender
from time to time.
(b) Upon an Event of Default, and without the necessity of
prior demand or notice from the Lender, the Company authorizes
the Lender to cause the Funding Bank to charge the Company's
account for any Obligations due and owing the Lender.
2.8 Commitment and Usage Fees.
(a) The Company agrees to pay to the Lender a Commitment Fee
in the amount of one-tenth of one percent (1/10%) per annum of
the lesser of Fifteen Million Dollars ($15,000,000) or the amount
of the Commitment, which Commitment Fee shall be paid quarterly
in advance and shall be computed on the basis of a 365-day year
and applied to the actual number of days elapsed in such calendar
quarter. The Company shall make quarterly payments of the
Commitment Fee on the first (1st) day of each calendar quarter.
If the expiration date of the Commitment is other than the last
day of a calendar quarter, the Company shall pay the prorated
portion of the quarterly Commitment Fee due from the beginning of
the then current calendar quarter to and including the expiration
date. For the purposes hereof, calendar quarters shall be defined
as the three (3) month periods beginning on each April 1, July 1,
October 1 and January 1. The Company shall not be entitled to a
reduction in the amount of the Commitment Fee, in the event the
amount of the Commitment is reduced or in the event that the
Commitment is terminated prior to its stated expiration date. If
the Commitment terminates prior to its stated expiration date,
the unpaid balance of the Commitment Fee shall be due and payable
in full on the date of such termination.
(b) At the end of each calendar quarter during the term
hereof, the Lender shall determine the three month average usage
of the portion of the Commitment (net of Buydown) in excess of
Fifteen Million Dollars ($15,000,000) by calculating the
arithmetic daily average of the Advances outstanding during each
such calendar quarter. To the extent the quarterly average usage
(net of Buydown) (the "Used Portion") exceeds Fifteen Million
Dollars ($15,000,000), the Company shall pay in arrears, within
thirty (30) days after the end of each calendar quarter, a fee
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(the "Usage Fee"), equal to one-tenth of one percent (1/10%)
per annum on the total amount by which the Used Portion of the
Commitment exceeds Fifteen Million Dollars ($15,000,000) during
such calendar quarter. If the expiration date of the
Commitment is other than the first (1st) day of a
quarter, the Company shall pay the prorated portion of the
quarterly Usage Fee due from the beginning of the then current
quarter to and including the expiration date. For the purposes
hereof, quarters shall be defined as beginning April 1, July 1,
October 1 and January 1. In the absence of manifest error, the
calculation by the Lender of the amount of any Usage Fee shall be
conclusive.
2.9 Warehousing Fees. The Company agrees, at the time of each
Advance, to pay to the Lender a Warehousing Fee in the amount of Ten
Dollars ($10.00) for each Mortgage Loan pledged as Collateral for such
Advance. Notwithstanding the foregoing, if the arithmetic daily
average of the Advances (net of Buydown) outstanding in any month
exceeds Fifteen Million Dollars ($15,000,000), no Warehousing Fee
shall be payable for such month. Warehousing Fees are due when
incurred, but shall not be delinquent if paid within fifteen (15) days
after receipt of an invoice or an account analysis statement from the
Lender.
2.10 Miscellaneous Charges. The Company agrees to reimburse the
Lender for miscellaneous charges and expenses (collectively,
"Miscellaneous Charges") incurred by or on behalf of the Lender in
connection with the handling and administration of Advances, and to
reimburse the Lender for Miscellaneous Charges incurred by or on
behalf of the Lender in connection with the handling and
administration of the Collateral. For the purposes hereof,
Miscellaneous Charges shall include, but not be limited to, charges
for wire transfers, charges for security delivery fees, charges for
overnight delivery of Collateral to Investors, Funding Bank's service
charges and Designated Bank's service charges. Miscellaneous Charges
are due when incurred, but shall not be delinquent if paid within
fifteen (15) days after receipt of an invoice or an account analysis
statement from the Lender.
2.11 Interest Limitation. All agreements between the Company and
the Lender are hereby expressly limited so that in no contingency or
event whatsoever, whether by reason of acceleration of maturity of
this Agreement or the Note or otherwise, shall the amount paid or
agreed to be paid to the Lender for the use, forbearance, loaning or
retention of the Advances secured by this Agreement exceed the maximum
permissible under applicable law. If from any circumstances
whatsoever, fulfillment of any provisions hereof or of the Note, or
any other document securing this Agreement at any time given shall
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involve transcending the limit of validity prescribed by law, then,
the obligation to be fulfilled shall automatically be reduced to
the limit of such validity, and if from any circumstances the Lender
should ever receive as interest an amount which would exceed the
highest lawful rate of interest, such amount which would be in
excess of interest shall be applied to the reduction of the principal
balance secured by the Note and not to the payment of
interest thereunder. This provision shall control every other
provision of all agreements between the Company and Lender and shall
also be binding upon and available to any subsequent holder of the
Note.
2.12 Increased Costs; Capital Requirements. In the event any
applicable law, order, regulation or directive issued by any
governmental or monetary authority, or any change therein or in the
governmental or judicial interpretation or application thereof, or
compliance by the Lender with any request or directive (whether or not
having the force of law) by any governmental or monetary authority:
(a) Does or shall subject the Lender to any tax of any kind
whatsoever with respect to this Agreement or any Advances made
hereunder, or change the basis of taxation on payments to the
Lender of principal, fees, interest or any other amount payable
hereunder (except for change in the rate of tax on the overall
gross or net income of the Lender by the jurisdictions in which
the Lender's principal office is located);
(b) Does or shall impose, modify or hold applicable any
reserve, capital requirement, special deposit, compulsory loan or
similar requirement against assets held by, or deposits or other
liabilities in or for the account of, advances or loans by, or
other credit extended by, or any other acquisition of funds by,
any office of the Lender which are not otherwise included in the
determination of the interest rate as calculated hereunder; and
the result of any of the foregoing is to increase the cost to the
Lender of making, renewing or maintaining any Advance or to
reduce any amount receivable in respect thereof or to reduce the
rate of return on the capital of the Lender or any Person
controlling the Lender as it relates to credit facilities in the
nature of that evidenced by this Agreement, then, in any such
case, the Company shall promptly pay any additional amounts
necessary to compensate the Lender for such additional cost or
reduced amounts receivable or reduced rate of return as
determined by the Lender with respect to this Agreement or
Advances made hereunder. If the Lender becomes entitled to claim
any additional amounts pursuant to this Section, it shall
notify the Company of the event by reason of
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which it has become so entitled and the Company shall pay such
amount within fifteen (15) days thereafter. A certificate as to
any additional amount payable pursuant to the foregoing sentence
containing the calculation thereof in reasonable detail submitted
by the Lender to the Company shall be conclusive in the absence
of manifest error. The obligations of the Company under this
Section shall survive the payment of all other Obligations and
the termination of this Agreement.
3. COLLATERAL.
3.1 Grant of Security Interest. As security for the payment of
the Notes and for the performance of all of the Company's Obligations,
the Company hereby assigns and transfers to the Lender all right,
title and interest in and to and grants a security interest to the
Lender in the following described property (the "Collateral"):
(a) All Mortgage Loans, including all Mortgage Notes and
Mortgages evidencing such Mortgage Loans, which from time to time
are delivered or caused to be delivered to the Lender (including
delivery to a third party on behalf of the Lender), come into the
possession, custody or control of the Lender for the purpose of
assignment or pledge or in respect of which an Advance has been
made by the Lender hereunder, including without limitation all
Mortgage Loans in respect of which Wet Settlement Advances have
been made by the Lender (the "Pledged Mortgages").
(b) All Mortgage-backed Securities which are from time to
time created in whole or in part on the basis of the Pledged
Mortgages or are delivered or caused to be delivered to, or are
otherwise in the possession of the Lender or its agent, bailee or
custodian as assignee, or pledged to the Lender, or for such
purpose are registered by book-entry in the name of the Lender
(including delivery to or registration in the name of a third
party on behalf of the Lender) hereunder or in respect of which
from time to time an Advance has been made by the Lender
hereunder (the "Pledged Securities").
(c) All private mortgage insurance and all commitments
issued by the FHA or VA to insure or guarantee any Mortgage Loans
included in the Pledged Mortgages; all Purchase Commitments held
by the Company covering the Pledged Mortgages or the Pledged
Securities and all proceeds resulting from the sale thereof to
Investors pursuant thereto; and all personal property, contract
rights, servicing and servicing fees and income or other
proceeds, amounts and payments payable to the
Company as compensation or reimbursement, accounts and
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general intangibles of whatsoever kind relating to the Pledged
Mortgages, the Pledged Securities, said FHA commitments or VA
commitments and the Purchase Commitments, and all other documents
or instruments relating to the Pledged Mortgages and the Pledged
Securities, including, without limitation, any interest of the
Company in any fire, casualty or hazard insurance policies and
any awards made by any public body or decreed by any court of
competent jurisdiction for a taking or for degradation of value
in any eminent domain proceeding as the same relate to the
Pledged Mortgages.
(d) All right, title and interest of the Company in and to
all escrow accounts, documents, instruments, files, surveys,
certificates, correspondence, appraisals, computer programs,
tapes, discs, cards, accounting records (including all
information, records, tapes, data, programs, discs and cards
necessary or helpful in the administration or servicing of the
Collateral) and other information and data of the Company
relating to the Collateral.
(e) All now existing or hereafter acquired cash delivered to
or otherwise in the possession of the Lender or its agent, bailee
or custodian or designated on the books and records of the
Company as assigned and pledged to the Lender.
(f) All cash and non-cash proceeds of the Collateral,
including all dividends, distributions and other rights in
connection with, and all additions to, modifications of and
replacements for, the Collateral, and all products and proceeds
of the Collateral, together with whatever is receivable or
received when the Collateral or proceeds thereof are sold,
collected, exchanged or otherwise disposed of, whether such
disposition is voluntary or involuntary, including, without
limitation, all rights to payment with respect to any cause of
action affecting or relating to the Collateral or proceeds
thereof.
(g) All right, title and interest of the Company in and to
all building loan agreements, construction contracts, plans and
specifications, building permits, governmental approvals and
licenses, lender's policies of title insurance, "all risk"
builder's insurance or workers' compensation insurance as the
same relate to the Pledged Mortgages.
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3.2 Release of Security Interest in Collateral.
(a) Pledged Mortgages shall be released from the Lender's
security interest only against payment to the Lender of the
Release Amount in connection with such Pledged Mortgages.
(b) If Pledged Mortgages are to be transferred to a pool
custodian or to FHLMC or FNMA for inclusion in a Mortgage Pool,
the Lender's security interest in such Pledged Mortgages shall be
released only against payment to the Lender of the Release Amount
in connection with such Pledged Mortgages. If the Lender's
security interest in the Pledged Mortgages comprising the
Mortgage Pool is not released prior to the issuance of the
Mortgage-backed Security, then the Mortgage-backed Security, when
issued, shall be a Pledged Security. The Lender's security
interest shall continue in such Pledged Mortgages and the Pledged
Security. The Lender shall be entitled to possession of such
Pledged Security in the manner provided below.
(c) If Pledged Mortgages are transferred to an Approved
Custodian and included in an Eligible Mortgage Pool, the Lender's
security interest in the Pledged Mortgages comprising the
Eligible Mortgage Pool shall be released upon the issuance of the
Mortgage-backed Security, which shall be a Pledged Security. The
Lender's security interest in such Pledged Security shall be
released only against payment to the Lender of the Release Amount
in connection with the Pledged Mortgages backing such Pledged
Security. The Lender shall be entitled to possession of such
Pledged Security in the manner provided below.
(d) The Lender shall have the exclusive right to the
possession of the Pledged Securities or, if the Pledged
Securities are not to be issued in certificated form or are to be
issued in certificated form and registered exclusively in the
name of, and held by, a clearing agency or its nominee, shall
have the right to have the book entries for the Pledged
Securities issued in the Lender's name or the name or names of
its designees, and the Lender shall have the right to cause
delivery of the Pledged Securities to be made to the Investor or
the book entries registered in the name of the Investor or the
Investor's designee only against payment therefor. The Company
acknowledges that the Lender may enter into one or more standing
arrangements with other financial institutions for the issuance
of Pledged Securities in book entry form in the name of such
other financial institutions, as agent or financial
145
intermediary for the Lender, and the Company agrees upon request
of the Lender, to execute and deliver to such other financial
institutions the Company's written concurrence in any such
standing arrangements.
(e) Prior to the occurrence of an Event of Default, the
Company may redeem a Pledged Mortgage or Pledged Security from
the Lender's security interest by notifying the Lender of its
intention to redeem such Pledged Mortgage or Pledged Security
from pledge and either (a) paying, or causing an Investor to pay,
to the Lender, for application to prepayment of the principal
balance of the Note, the Release Amount in connection with such
Pledged Mortgage or Pledged Security, or (b) delivering
substitute Collateral which, in addition to being acceptable to
the Lender in its sole discretion will, when included with the
Collateral, result in a Collateral Value of all Collateral held
by the Lender which is at least equal to the aggregate
outstanding Advances.
(f) Following the occurrence of a Default or Event of
Default, the Lender may, with no liability to the Company or any
Person, continue to release its security interest in any Pledged
Mortgage or Pledged Security against payment of the Release
Amount in connection with such Pledged Mortgage or Pledged
Security.
(g) The Release Amount in connection with any Pledged
Mortgage shall be (i) prior to the occurrence of an Event of
Default, the principal amount of the Advances made against such
Pledged Mortgage, and (ii) from and after the occurrence and
during the continuance of an Event of Default, the Committed
Purchase Price of such Pledged Mortgage or, if there is no
Purchase Commitment therefor, the amount paid to the Lender in a
commercially reasonable disposition thereof.
3.3 Delivery of Additional Collateral or Mandatory Prepayment. At
any time that the aggregate Collateral Value of the Pledged Mortgages
and Pledged Securities then pledged hereunder is less than the
aggregate amount of the Advances then outstanding hereunder, the
Lender may request, and the Company shall within two (2) Business Days
after Notice by the Lender (a) deliver to the Lender for pledge
hereunder additional Mortgage Loans and/or cash, with a Collateral
Value sufficient to cover the difference between the Collateral Value
of the Pledged Mortgages and Pledged Securities pledged and the
aggregate amount of Advances outstanding hereunder, or (b) repay the
Advances in an amount sufficient to reduce the aggregate balance
thereof outstanding to or below the Collateral Value of the Pledged
Mortgages and Pledged Securities pledged hereunder.
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3.4 Release of Collateral.
(a) The Lender may deliver documents relating to the
Collateral to the Company for correction or completion pursuant
to a Trust Receipt.
(b) Prior to the occurrence of a Default or Event of
Default, upon delivery by the Company to the Lender of shipping
instructions pursuant to Exhibit D-SF, the Lender will transmit
Pledged Mortgages or Pledged Securities and all related loan
documents or pool documents to the applicable Investor, Approved
Custodian or other party.
(c) Upon receipt of Notice from the Company under Section
2.5(g) hereof, and repayment of the Release Amount with respect
to a Pledged Mortgage identified by the Company, any Collateral
Documents relating to the redeemed Pledged Mortgage or Mortgage
Loan backing a Pledged Security which have not been delivered to
an Investor or Approved Custodian shall be released by the Lender
to the Company.
3.5 Collection and Servicing Rights. So long as no Event of
Default shall have occurred and be continuing, the Company shall be
entitled to service and receive and collect directly all sums payable
to the Company in respect of the Collateral other than proceeds of any
Purchase Commitment or proceeds of the sale of any Collateral.
Following the occurrence of any Event of Default, the Lender or its
designee shall thereafter be entitled to service and receive and
collect all sums payable to the Company in respect of the Collateral,
and in such case (a) the Lender or its designee in its discretion may,
in its own name, 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, (b) the Company shall, if the
Lender so requests, hold in trust for the benefit of the Lender and
forthwith pay to the Lender at its office designated by Notice
hereunder, all amounts thereafter received by the Company upon or in
respect of any of the Collateral, advising the Lender as to the source
of such funds, and (c) all amounts so received and collected by the
Lender shall be held by it as part of the Collateral.
3.6 Return of Collateral at End of Commitment. If (a)
the Commitment shall have expired or been terminated, and (b)
no Advances, interest or other Obligations shall be
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outstanding and unpaid, the Lender shall deliver or release its
security interest and shall deliver all Collateral in its possession
to the Company at the Company's expense. 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, and the Lender shall
thereafter be discharged from any liability or responsibility
therefor.
4. CONDITIONS PRECEDENT.
4.1 Initial Advance. The obligation of the Lender to make the
initial Advance under this Agreement is subject to the satisfaction,
in the sole discretion of the Lender, on or before the date thereof of
the following conditions precedent:
(a) The Lender shall have received the following, all of
which must be satisfactory in form and content to the Lender, in
its sole discretion:
(1) The Notes and this Agreement duly
executed by the Company.
(2) The Company's articles of incorporation as
certified by the Secretary of State of the Company's
incorporation, bylaws certified by the corporate secretary
of the Company, or a Certificate of the Company stating that
there has been no change in either the articles of
incorporation or bylaws since those delivered in connection
with that certain Warehousing Credit and Security Agreement
dated April 15, 1992, and certificates of good standing
dated no less recently than ninety (90) days prior to the
date of this Agreement.
(3) An original resolution of the board of directors of
the Company, certified as of the date of this Agreement by
its corporate secretary, authorizing the execution, delivery
and performance of this Agreement and the other Loan
Documents, and all other instruments or documents to be
delivered by the Company pursuant to this Agreement.
(4) A certificate of the Company's corporate secretary
as to the incumbency and authenticity of the signatures of
the officers of the Company executing this Agreement and the
other Loan Documents and each Advance Request and all other
instruments or documents to be delivered pursuant hereto
(the Lender being entitled to rely thereon until a new such
certificate has been furnished to the Lender).
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(5) Financial statements of the Company (and, if
applicable, its Subsidiaries, on a consolidated basis)
containing a balance sheet as of December 31, 1994, and
related statements of income, changes in stockholders'
equity and cash flows for the period ended on such date, all
prepared in accordance with GAAP applied on a basis
consistent with prior periods and audited by independent
certified public accountants of recognized standing
acceptable to the Lender.
(6) Financial statements of the Company (and, if
applicable, its Subsidiaries, on a consolidated basis)
containing a balance sheet as of June 30, 1995, related
statements of income and changes in stockholders' equity for
the period ended on such date prepared, except as disclosed
on the financial statements, in accordance with GAAP applied
on a basis consistent with the Company's most recent audited
financial statements.
(7) A favorable written opinion of counsel to the
Company, dated as of the date of this Agreement
substantially in the form of Exhibit H attached hereto,
addressed to the Lender.
(8) In the state of incorporation of the Company, a
tax, lien and judgment search of the appropriate public
records for the Company, including a search of Uniform
Commercial Code financing statements, which search shall not
have disclosed the existence of any prior Lien on the
Collateral other than in favor of the Lender or as permitted
hereunder.
(9) Copies of the certificates, documents or other
written instruments which evidence the Company's eligibility
described in Section 5.13 hereof or a certificate from the
Company stating there has been no change in such eligibility
since those delivered in connection with the Original
Agreement, all in form and substance satisfactory to the
Lender.
(10) Certificate from the Company stating its errors
and omissions insurance policy or mortgage impairment
insurance policy and blanket bond coverage policy are in
compliance as of the date of this Agreement with the related
provisions of Section 6.8 hereof.
149
(11) Executed amendments to the financing statements in
recordable form covering the Collateral and ready for filing
in all jurisdictions required by the Lender.
(12) Receipt by the Lender of the Commitment
Fee due on the date hereof, if any.
(13) Evidence that all accounts necessary into which
Advances will be funded have been established at the Funding
Bank and receipt of a fully executed Funding Bank Agreement.
(b) All directors, officers and shareholders of the Company,
all Affiliates of the Company or of any Subsidiary of the
Company, to whom or to any of whom the Company shall be indebted
as of the date of this Agreement, shall have subordinated such
indebtedness to the Obligations, by executing a Subordination of
Debt Agreement, in the form of Exhibit F hereto; provided,
however, that earned salaries and bonuses and expense
reimbursements owed to officers of the Company shall be excluded
from this requirement; and the Lender shall have received an
executed copy of any such Subordination of Debt Agreement,
certified by the corporate secretary of the Company to be true
and complete and in full force and effect as of the date of the
Advance. Unsecured indebtedness of the Company to its Affiliates
for warehousing purposes and unclaimed bondholder funds held and
administered by the Company for its Subsidiaries are not required
to be subordinated under the terms of this Section.
4.2 Each Advance. The obligation of the Lender to make the
initial and each subsequent Advance under this Agreement is subject to
the satisfaction, in the sole discretion of the Lender, as of the date
of each such Advance, of the following additional conditions
precedent:
(a) The Company shall have delivered to the Lender the
Advance Request, Collateral Documents, and documents relating to
Wet Settlement Advances, called for under, and shall have
satisfied the procedures set forth in, Section 2.2 hereof and the
applicable Exhibits hereto described in that Section, according
to the type of the requested Advance. All items delivered to the
Lender shall be satisfactory to the Lender in form and content,
and the Lender may reject such of them as do not meet the
requirements of this Agreement or of the related Purchase
Commitment.
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(b) The Lender shall have received evidence satisfactory to
it as to the making and/or continuation of any book entry or the
due filing and recording in all appropriate offices of all
financing statements and other instruments as may be necessary to
perfect the security interest of the Lender in the Collateral
under the Uniform Commercial Code of Minnesota or other
applicable law.
(c) The representations and warranties of the Company
contained in Article 5 hereof shall be accurate and complete in
all material respects as if made on and as of the date of each
Advance.
(d) The Company shall have performed all agreements to be
performed by it hereunder, and after giving effect to the
requested Advance, there shall exist no Default or Event of
Default hereunder.
(e) The Company shall not have incurred any material
liabilities, direct or contingent, other than in the ordinary
course of its business, since the Statement Date.
(f) The Lender shall have received from counsel for the
Company, if requested by the Lender in its sole discretion, an
updated opinion, in form and substance satisfactory to the
Lender, addressed to the Lender and dated as of the date of such
Advance, covering such of the matters as the Lender may
reasonably request.
Delivery of an Advance Request by the Company shall be deemed a
representation by the Company that all conditions set forth in this
Section 4.2 shall have been satisfied as of the date of such Advance.
5. REPRESENTATIONS AND WARRANTIES.
The Company hereby represents and warrants to the Lender, as of
the date of this Agreement and as of the date of each Advance Request
and the making of each Advance, that:
5.1 Organization; Good Standing; Subsidiaries. The Company and
each Subsidiary of the Company is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation, 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
151
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 or any such Subsidiary. For the
purposes hereof, good standing shall include qualification for any
and all licenses and payment of any and all taxes required in the
jurisdiction of its incorporation and in each jurisdiction in which
the Company transacts business. The Company has no Subsidiaries
except as set forth on Exhibit G hereto. Exhibit G sets forth with
respect to each such Subsidiary, its name, address, place of
incorporation, each state in which it is qualified as a foreign
corporation, and the percentage ownership of its capital stock by the
Company.
5.2 Authorization and Enforceability. The Company has the power
and authority to execute, deliver and perform this Agreement, the Note
and all other Loan Documents to which the Company is party and to make
the borrowings hereunder. The execution, delivery and performance by
the Company of this Agreement, the Note and all other Loan Documents
to which the Company is party and the making of the borrowings
hereunder and thereunder, have been duly and validly authorized by all
necessary corporate action on the part of the Company (none of which
actions has been modified or rescinded, and all of which actions are
in full force and effect) and do not and will not conflict with or
violate any provision of law, of any judgments binding upon the
Company, or of the articles of incorporation or by-laws 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 the Lien on
the Collateral granted hereunder, 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 Loan 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 such laws affecting the
enforcement of creditors' rights.
5.3 Approvals. The execution and delivery of this Agreement, the
Note and all other Loan Documents and the performance of the Company's
obligations hereunder and thereunder and the validity and
enforceability hereof and thereof do not require any license, consent,
approval or other action of any state or federal agency or
governmental or regulatory authority other than those which have been
obtained and remain in full force and effect.
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5.4 Financial Condition. The balance sheet of the Company (and,
if applicable, its Subsidiaries, on a consolidated basis) as at the
Statement Date, and the related statements of income and changes in
stockholders' equity for the fiscal period ended on the Statement
Date, heretofore furnished to the Lender, fairly present the financial
condition of the Company (and its Subsidiaries) 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
material 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, and at the present time
there are no material unrealized or anticipated losses from any loans,
advances or other commitments of the Company except as heretofore
disclosed to the Lender in writing. Except as disclosed in the interim
financial statements, said 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 (and its Subsidiaries), 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.
5.5 Litigation. There are no actions, claims, suits or
proceedings pending or, to the knowledge of the Company, threatened or
reasonably anticipated against or affecting the Company or any
Subsidiary of 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 or financial condition of the Company as
a whole, or which would affect the validity or enforceability of this
Agreement, the Notes or any other Loan Document.
5.6 Compliance with Laws. Neither the Company nor any Subsidiary
of the Company is 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 as a whole or which would affect
the validity or enforceability of this Agreement, the Notes or any
other Loan Document.
5.7 Regulations G and U. The Company is not engaged
principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or
153
carrying Margin Stock, and 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.
5.8 Investment Company Act. The Company is not an
"investment company" or controlled by an "investment company"
within the meaning of the Investment Company Act of 1940, as
amended.
5.9 Payment of Taxes. The Company, through the Parent, 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 and its Subsidiaries which are required to be filed (except
such taxes, if any, as are being contested in good faith and for which
adequate reserves have been provided), all such returns are true and
correct, and the Company, through the Parent, 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, including, but not limited to,
all FICA payments and withholding taxes, if appropriate. The amounts
reserved, if any, as a liability for income and other taxes payable,
in the financial statements described in Section 5.4 hereof are
sufficient for payment of all unpaid federal, state and local income,
excise, property and other taxes, whether or not disputed, of the
Company and its Subsidiaries accrued for or applicable to the period
and on the dates of such financial statements and all years and
periods prior thereto and for which the Company and its Subsidiaries
may be liable in their own right or as transferee of the assets of, or
as successor to, any other person or entity. The Company and its
Subsidiaries are included in the consolidated federal income tax
return filed by the Parent. The Company's income tax provisions, if
any, are recorded on a separate entity basis and are in accordance
with a tax allocation agreement with the Parent.
5.10 Agreements. Neither the Company nor any Subsidiary of the
Company is a party to any agreement, instrument or indenture or
subject to any restriction materially and adversely affecting its
business, operations, assets or financial condition, except as
disclosed in the financial statements described in Section 5.4 hereof.
Neither the Company nor any Subsidiary of the Company is 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
as a whole. No holder of any indebtedness of the Company or of any of
its Subsidiaries (except as set forth below) has given notice
of any asserted default thereunder, and no liquidation or
154
dissolution of the Company or of any of its Subsidiaries and no
receivership, insolvency, bankruptcy, reorganization or other similar
proceedings relative to the Company or of any of its Subsidiaries or
any of its properties is pending, or to the knowledge of the Company,
threatened.
The trustee ("Trustee") under the indenture for mortgage-backed bonds
issued by a Subsidiary of the Company, C.M. Corp. (formerly known as
U.S. Home Finance Corporation) ("Issuer") has notified the Company
that an event of default ("C.M. Corp Default") had occurred and
declared the outstanding principal balance of all of the remaining
mortgage-backed bonds to be immediately due and payable.
5.11 Title to Properties. The Company and each Subsidiary of the
Company has good, valid, insurable (in the case of real property) and
marketable title to all of its properties and assets (whether real or
personal, tangible or intangible) reflected on the financial
statements described in Section 5.4 hereof, except for such properties
and assets as have been disposed of since the date of such financial
statements as no longer used or useful in the conduct of its business
or as have been disposed of in the ordinary course of business, and
all such properties and assets are free and clear of all Liens except
as disclosed in such financial statements.
5.12 ERISA. All plans ("Plans") of a type described in Section
3(3) of ERISA in respect of which the Company or any Subsidiary of the
Company is an "Employer," as defined in Section 3(5) of ERISA, are in
substantial compliance with ERISA, and none of such Plans is insolvent
or in reorganization, has an accumulated or waived funding deficiency
within the meaning of Section 412 of the Internal Revenue Code, and
neither the Company nor any Subsidiary of the Company has incurred any
material liability (including any material contingent liability) to or
on account of any such Plan pursuant to Sections 4062, 4063, 4064,
4201 or 4204 of ERISA; and no proceedings have been instituted to
terminate any such Plan, and no condition exists which presents a
material risk to the Company or a Subsidiary of the Company of
incurring a liability to or on account of any such Plan pursuant to
any of the foregoing Sections of ERISA. No Plan or trust forming a
part thereof has been terminated since September 1, 1974.
5.13 Eligibility. The Company is approved and qualified and in
good standing as a lender or seller/servicer, as set forth below, and
meets all requirements applicable to its status as such:
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(a) GNMA approved seller/servicer of Mortgage Loans and
issuer of Mortgage-backed Securities guaranteed by GNMA.
(b) FNMA approved seller/servicer of Mortgage Loans,
eligible to originate, purchase, hold, sell, and service Mortgage
Loans to be sold to FNMA.
(c) FHLMC approved seller/servicer of Mortgage Loans,
eligible to originate, purchase, hold, sell and service Mortgage
Loans to be sold to FHLMC.
(d) Lender in good standing under the VA loan guarantee
program eligible to originate, purchase, hold, sell and service
VA-guaranteed Mortgage Loans.
(e) FHA approved mortgagee, eligible to originate, purchase,
hold, sell and service FHA fully insured Mortgage Loans.
5.14 Place of Business. The principal place of business
of the Company is ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
5.15 Special Representations Concerning Collateral. The Company
hereby represents and warrants to the Lender, as of the date of this
Agreement and as of the date of each Advance Request and the making of
each Advance, that:
(a) The Company is the legal and equitable owner and holder,
free and clear of all Liens (other than Liens granted hereunder),
of the Pledged Mortgages and the Pledged Securities. All Pledged
Mortgages, Pledged Securities and Purchase Commitments have been
duly authorized and validly issued to the Company, and all of the
foregoing items of Collateral comply with all of the requirements
of this Agreement, and have been and will continue to be validly
pledged or assigned to the Lender, subject to no other Liens.
(b) The Company has, and will continue to have, the full
right, power and authority to pledge the Collateral pledged and
to be pledged by it hereunder.
(c) Any Mortgage Loan and any related document included in
the Pledged Mortgages (1) other than a Construction/Perm Mortgage
Loan, has been duly executed and delivered by the parties thereto
at a closing held not more than ninety (90) days prior to the
date of the Advance Request for such Mortgage Loan, (2) has been
made in compliance with all requirements of the Real Estate
Settlement Procedures Act, Equal Credit Opportunity Act,
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the federal Truth-In-Lending Act and all other applicable laws
and regulations, (3) is and will continue to be valid and
enforceable in accordance with its terms, without defense or
offset, (4) has not been modified or amended except in writing,
which writing is part of the Collateral Documents, nor any
requirements thereof waived, (5) has been evaluated or appraised
in accordance with Title XI of FIRREA, and (6) complies and will
continue to comply with the terms of this Agreement and, if
applicable, with the related Purchase Commitment held by the
Company. Each Mortgage Loan, other than a Construction/Perm
Mortgage Loan, has been fully advanced in the face amount thereof
and each First Mortgage is a first Lien on the premises described
therein, and has or will have a title insurance policy, in
American Land Title Association form or equivalent thereof, from
a recognized title insurance company, insuring the priority of
the Lien of the Mortgage and meeting the usual requirements of
Investors purchasing such Mortgage Loans.
(d) No default has occurred and is continuing for more than
sixty (60) days under any Mortgage Loan included in the Pledged
Mortgages without the Advance against such Pledged Mortgage
having been repaid in accordance with Section 2.5(d)(6) hereof,
provided, however, that with respect to Pledged Mortgages which
have already been pledged as Collateral hereunder, if any default
has occurred, the Company will promptly notify the Lender.
(e) The Company has complied and will continue to comply
with all laws, rules and regulations in respect of the FHA
insurance or VA guaranty of each Mortgage Loan included in the
Pledged Mortgages designated by the Company as an FHA insured or
VA guaranteed Mortgage Loan, and such insurance or guarantee is
and will continue to be in full force and effect. All such FHA
insured and VA guaranteed Mortgage Loans comply and will continue
to comply in all respects with all applicable requirements for
purchase under the FNMA standard form of selling contract for FHA
insured and VA guaranteed loans and any supplement thereto then
in effect.
(f) All fire and casualty policies covering the premises
encumbered by each Mortgage included in the Pledged Mortgages (1)
name and will continue to name the Company and its successors and
assigns as the insured under a standard mortgagee clause, (2) are
and will continue to be in full force and effect, and (3) afford
and will continue to afford insurance against fire and such other
risks as are usually insured against in the broad form of
extended coverage insurance from time to time available.
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(g) Pledged Mortgages secured by premises located in a
special flood hazard area designated as such by the Director of
the Federal Emergency Management Agency are and shall continue to
be covered by special flood insurance under the National Flood
Insurance Program.
(h) Each FHA insured Mortgage Loan pledged hereunder meets
all applicable governmental requirements for such insurance. Each
Pledged Mortgage, against which an Advance is made on the basis
of a Purchase Commitment, meets all requirements of such Purchase
Commitment. The Company shall assure that Pledged Mortgages which
are intended to be used in the formation of Mortgage-backed
Securities shall comply or, prior to the formation of any such
Mortgage-backed Security, shall comply with the requirements of
the governmental instrumentality, department or agency
guaranteeing such Mortgage-backed Security.
(i) For Pledged Mortgages which will be pooled and used by
the Company to back GNMA Mortgage-backed Securities, the Company
has received from GNMA a Confirmation Notice or Confirmation
Notices for Request Additional Commitment Authority and for
Request Pool Numbers, and there remains available thereunder a
commitment on the part of GNMA sufficient to permit the issuance
of GNMA Mortgage-backed Securities in an amount at least equal to
the amount of such Pledged Mortgages designated by the Company as
the Mortgage Loans to be used to back such GNMA Mortgage-backed
Securities; each such Confirmation Notice is in full force and
effect; each of such Pledged Mortgages has been assigned by the
Company to one of such Pool Numbers and a portion of the
available GNMA Commitment has been allocated thereto by the
Company, in an amount at least equal to such Pledged Mortgages;
and each such assignment and allocation has been reflected in the
books and records of the Company.
5.16 Servicing. Attached hereto as Exhibit E is a true and
complete list of the Company's Servicing Portfolio. All of the
Company's Servicing Contracts are in full force and effect and, except
as otherwise indicated, are unencumbered by Liens. No default or event
which, with notice or lapse of time or both, would become a default,
exists under any such Servicing Contract, except that the Company has
not reimbursed the Trustee for certain costs and expenses relating to
the C.M. Corp Default or the Trustee's administration services which
were not reimbursed by the Issuer.
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5.17 Special Representations Concerning Construction
Advances. The Company hereby represents and warrants to the
Lender, as of the date of this Agreement and as of the date of
each Advance Request, that:
(a) Each Construction/Perm Mortgage Loan included in the
Pledged Mortgages (1) has an American Land Title Association
Lender's construction loan policy or equivalent thereto with
mechanics' lien coverage, (2) has an Assignment of Plan and
Specifications, and an Assignment of General Construction
Contract, that inure to the benefit of the Company's successors
and assigns, (3) has "all risk" builder's insurance and workers'
compensation insurance that name and will continue to name the
Company and its successors and assigns as the insured under a
standard mortgagee clause, (4) has a certification of no
hazardous materials, (5) has a survey prepared and certified by a
duly registered surveyor showing no encroachments of the
improvements or the proposed improvements to be constructed on
the premises encumbered by the Pledged Mortgage on to other lands
or easements or restrictions, unless such encroachments have been
insured over or are acceptable to the Investor, (6) has building
permits and all necessary licenses and approvals for the
construction of the improvements on the premises encumbered by
the Pledged Mortgage, (7) has a "as completed" appraisal giving
an As Completed Appraised Value, (8) has a fixed price General
Contract issued by a licensed contractor, and (9) has all
necessary utilities available to the premises encumbered by the
Pledged Mortgage.
(b) Prior to the initial Construction Advance against a
Pledged Mortgage, the Company shall have received (1) a Cost
Breakdown and (2) a draw schedule.
(c) Prior to each Construction Advance, the Company shall
have received (1) a report of the stage of completion of the
improvements as set forth in the construction accounting system
of the Parent confirming completion of the work for which the
Construction Advance is being requested and (2) a title insurance
updated endorsement for such Construction Advance if the title
insurance policy has a "pending disbursements clause" requiring
an endorsement to the title insurance policy to insure each
Construction Advance after the closing of the Construction/Perm
Mortgage Loan.
(d) Prior to the final Construction Advance, the Company
shall have received (1) a final appraiser inspection report
confirming completion of all work in accordance with the plans
and specifications and (2) a final "as built" survey.
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(e) If applicable, within fifteen (15) days after the final
Construction Advance the Company shall receive any Mortgage Note
modification or modified Mortgage Note delivered in connection
with a Construction/Perm Mortgage Loan and a title insurance
policy update endorsement for modification of the construction
Mortgage Loan to the permanent Mortgage Loan.
6. AFFIRMATIVE COVENANTS.
The Company hereby covenants and agrees that, so long as the
Commitment is outstanding or there remain any Obligations to be paid
or performed under this Agreement or under any other Loan Document,
the Company shall:
6.1 Payment of Note. Punctually pay or cause to be paid all
Obligations payable hereunder and under the Note in accordance with
the terms hereof and thereof.
6.2 Financial Statements and Other Reports. Deliver to
the Lender:
(a) As soon as available and in any event within thirty (30)
days after the end of each calendar month of the Company,
statements of income and changes in stockholders' equity of the
Company (and, if applicable, its Subsidiaries, on a consolidated
basis) for the immediately preceding month and for the period
from the beginning of the fiscal year to the end of such calendar
month, and the related balance sheet as at the end of the
immediately preceding month, all in reasonable detail and
certified as to the fairness of presentation by the chief
financial officer of the Company, subject, however, to year-end
audit adjustments.
(b) As soon as available and in any event within ninety (90)
days after the close of each fiscal year of the Company,
statements of income, changes in stockholders' equity and cash
flow of the Company (and, if applicable, its Subsidiaries, on a
consolidated basis) for such year, and the related balance sheet
as at the end of such year (setting forth in comparative form the
corresponding figures for the preceding fiscal year), all in
reasonable detail and accompanied by an opinion in form and
substance satisfactory to the Lender and prepared by an
accounting firm reasonably satisfactory to the Lender, or other
independent certified public accountants of recognized standing
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selected by the Company and acceptable to the Lender, as to
said financial statements and a certificate signed by the
chief financial officer of the Company stating that said
financial statements fairly present the financial condition and
results of operations of the Company (and, if applicable, its
Subsidiaries) as at the end of, and for, such year.
(c) Together with each delivery of financial statements
required in this Section 6.2, an Officer's Certificate
substantially in the form of Exhibit I-SF hereto: (1) setting
forth in reasonable detail all calculations necessary to show
that the Company is in compliance with the requirements of
Sections 7.6 and 7.7 hereof as of the end of such month or year
(or, if the Company is not in compliance, showing the extent of
non-compliance and specifying the period of non-compliance and
what actions the Company has taken, is taking or proposes to take
with respect thereto); (2) certifying that the Company was, as of
the end of the period, in compliance and in good standing with
applicable HUD, GNMA, or Investor net worth requirements; and (3)
stating that the signers have reviewed the terms of this
Agreement and have made, or caused to be made under their
supervision, a review in reasonable detail of the transactions
and conditions of the Company (and, if applicable, its
Subsidiaries) during the accounting period covered by such
financial statements and that such review has not disclosed the
existence during or at the end of such accounting period, and
that the signers do not have knowledge of the existence as of the
date of the Officer's Certificate, of any Default or Event of
Default, or if any Default or Event of Default existed or exists,
specifying the nature and period of the existence thereof and
what action the Company has taken, is taking and proposes to take
with respect thereto.
(d) Weekly or more frequently as the Lender may from time to
time request, a commitment summary and pipeline report
substantially in the form of Exhibit L (the "Commitment Summary
Report") dated as of the close of business on the last Business
Day of each week and provided to the Lender by facsimile by the
end of the next succeeding Business Day of the following week.
(e) Reports in respect of the Pledged Mortgages and Pledged
Securities, in such detail and at such times as the Lender in its
discretion may reasonably request at any time or from time to
time.
(f) Copies of all regular or periodic financial and
other reports, if any, which the Company shall file with
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the Securities and Exchange Commission or any governmental agency
successor thereto, copies of any audits completed by GNMA, FNMA
or FHLMC and copies of the Mortgage Bankers' Financial Reporting
Forms (FHLMC Form 1055/FNMA Form 1002) which the Company shall
have filed with FNMA or FHLMC.
(g) From time to time, with reasonable promptness, such
further information regarding the business, operations,
properties or financial condition of the Company as the Lender
may reasonably request.
(h) With each Officer's Certificate, a monthly status report
on each Construction/Perm Mortgage Loan, including, without
limitation, the loan number, mortgagor name(s), property address,
general contractor name, completion status (percent completed or
staged draw no. and brief description), estimated completion
date, date of last on-site inspection, and Pledged Mortgage
payment status.
6.3 Maintenance of Existence; Conduct of Business. Preserve and
maintain its corporate existence in good standing and all of its
rights, privileges, licenses and franchises necessary or desirable in
the normal conduct of its business, including, without limitation, its
eligibility as lender, seller/servicer and issuer described under
Section 5.13 hereof; conduct its business in an orderly and efficient
manner; maintain a net worth of acceptable assets as required by FHA,
GNMA, FNMA or FHLMC at any and all times for maintaining the Company's
status as a FHA, FNMA, FHLMC approved mortgagee or GNMA issuer; and
make no change in the nature or character of its business or engage in
any business other than mortgage lending or related ancillary services
in which it was not engaged on the date of this Agreement.
6.4 Compliance with Applicable Laws. Comply with the requirements
of all applicable laws, rules, regulations and orders of any
governmental authority, a breach of which could materially adversely
affect its business, operations, assets, or financial condition,
except where contested in good faith and by appropriate proceedings.
6.5 Inspection of Properties and Books. Permit authorized
representatives of the Lender or any Participant to discuss the
business, operations, assets and financial condition of the Company
and its Subsidiaries with its officers and employees and to examine
its books of account and make copies or extracts thereof, all at such
reasonable times as the Lender or any Participant may request. The
Company will provide its accountants with a copy of this Agreement
promptly after the execution hereof and will instruct its
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accountants to answer candidly any and all questions that the officers
of the Lender or any Participant or any authorized representatives of
the Lender or any Participant may address to them in reference to the
financial condition or affairs of the Company and its Subsidiaries.
The Company may have its representatives in attendance at any meetings
between the officers or other representatives of the Lender or any
Participant and the Company accountants held in accordance with this
authorization.
6.6 Notice. Give prompt written notice to the Lender of (a) any
action, suit or proceeding instituted by or against the Company or any
of its Subsidiaries in any federal or state court or before any
commission or other regulatory body (federal, state or local, domestic
or foreign) which action, suit or proceeding has at issue in excess of
Two Hundred Fifty Thousand Dollars ($250,000), or any such proceedings
threatened against the Company or any of its Subsidiaries in a writing
containing the details thereof, (b) the filing, recording or
assessment of any federal, state or local tax Lien against the
Company, or any of its assets or any of its Subsidiaries, (c) the
occurrence of any Event of Default hereunder or the occurrence of any
Default and continuation thereof for five (5) days, (d) the
suspension, revocation or termination of the Company's eligibility, in
any respect, as approved lender, seller/servicer or issuer as
described under Section 5.13 hereof, (e) the transfer, loss or
termination of any Servicing Contract to which the Company is a party,
or which is held for the benefit of the Company, and the reason for
such transfer, loss or termination, if known to the Company, and (f)
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 and its Subsidiaries or
which, with or without notice or lapse of time or both, would
constitute a default under any other agreement, instrument or
indenture to which the Company or any of its Subsidiaries is a party
or to which the Company or any of its Subsidiaries, its properties, or
assets may be subject.
6.7 Payment of Debt, Taxes, etc. Pay and perform all obligations
and indebtedness of the Company, and cause to be paid and performed
all obligations and indebtedness of its Subsidiaries (to the extent
the Company is legally obligated to so pay or perform for its
Subsidiaries and, except for reimbursement of Trustee costs which were
not reimbursed to the Trustee C.M. Corp.), 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 its Subsidiaries or upon their
respective income, receipts or properties before the same
shall become past due, as well as all lawful claims
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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 and its Subsidiaries shall not be
required to pay taxes, assessments or governmental charges or levies
or claims for labor, materials or supplies for which the Company or
its Subsidiaries 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 and for
which proper reserves have been created.
6.8 Insurance. Maintain (a) errors and omissions insurance or
mortgage impairment insurance and blanket bond coverage, with such
companies and in such amounts as satisfy prevailing FNMA, FHLMC and
GNMA requirements applicable to a qualified mortgage originating
institution, and (b) liability insurance and fire and other hazard
insurance on its properties, with responsible insurance companies
approved by the Lender, 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 Notice from the
Lender, obtain such additional insurance as the Lender shall
reasonably require, all at the sole expense of the Company. Copies of
such policies shall be furnished to the Lender without charge upon
request of the Lender.
6.9 Closing Instructions. Indemnify and hold the Lender harmless
from and against any loss, including reasonable attorneys' fees and
costs, attributable to the failure of a title insurance company, agent
or approved attorney to comply with the disbursement or instruction
letter or letters of the Company relating to any Mortgage Loan. The
Lender shall have the right to pre-approve the closing instructions of
the Company to the title insurance company, agent or attorney in any
case where the Mortgage Loan to be created at settlement is intended
to be warehoused by the Company to be included as Collateral pursuant
hereto.
6.10 Subordination of Certain Indebtedness. Except as qualified
in Section 4.1(b) hereof, cause any indebtedness of the Company,
incurred after the date of this Agreement, to any shareholder,
director or officer of the Company, or to any Affiliate of the Company
or of any Subsidiary of the Company, to be subordinated to all
Obligations by the execution of a Subordination of Debt Agreement in
the form of Exhibit F hereto and deliver to the Lender an executed
copy of said Agreement, certified by the corporate secretary of the
Company to be true and complete and in full force and effect.
6.11 Other Loan Obligations. Perform all material
obligations under the terms of each loan agreement, note,
mortgage, security agreement or debt instrument by which the
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Company is bound or to which any of its property is subject, and
promptly notify the Lender in writing of a declared default under or
the termination, cancellation, reduction or nonrenewal of any of its
other lines of credit or agreements with any other lender. Exhibit J
hereto is a true and complete list of all such lines of credit or
agreements as of the date hereof and the Company hereby agrees to give
the Lender at least thirty (30) days Notice before entering into any
additional lines of credit or agreements.
6.12 Use of Proceeds of Advances. Use the proceeds of each
Advance solely for the purpose set forth in Section 2.1(b) for
Advances of that type.
6.13 Special Affirmative Covenants Concerning
Collateral.
(a) Warrant and defend the right, title and interest of the
Lender in and to the Collateral against the claims and demands of
all Persons whomsoever.
(b) Service or cause to be serviced all Mortgage Loans in
accordance with the standard requirements of the issuers of
Purchase Commitments covering the same and all applicable FHA and
VA requirements, including without limitation taking all actions
necessary to enforce the obligations of the obligors under such
Mortgage Loans. The Company shall service or cause to be serviced
all Mortgage Loans backing Pledged Securities in accordance with
applicable governmental requirements and requirements of issuers
of Purchase Commitments covering the same. The Company shall hold
all escrow funds collected in respect of Pledged Mortgages and
Mortgage Loans backing Pledged Securities in trust, without
commingling the same with non-custodial funds, and apply the same
for the purposes for which such funds were collected.
(c) Execute and deliver to the Lender such Uniform
Commercial Code financing statements with respect to the
Collateral as the Lender may request. The Company shall also
execute and deliver to the Lender such further instruments of
sale, pledge or assignment or transfer, and such powers of
attorney, as required by the Lender, 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
Lender under this Agreement. The Lender shall have all the rights
and remedies of a secured party under the Uniform Commercial Code
of Minnesota, or any other applicable law, in addition to all
rights provided for herein.
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(d) Notify the Lender within two (2) Business Days of any
default under, or of the termination of, any Purchase Commitment
relating to any Pledged Mortgage, Eligible Mortgage Pool or
Pledged Security.
(e) Promptly comply in all respects with the terms and
conditions of all Purchase Commitments, and all extensions,
renewals and modifications or substitutions thereof or thereto.
The Company will cause to be delivered to the Investor the
Pledged Mortgages and Pledged Securities to be sold under each
Purchase Commitment not later than three (3) Business Days prior
to the mandatory delivery date thereof.
(f) Maintain, at its principal office or in a regional
office approved by the Lender, or in the office of a computer
service bureau engaged by the Company and approved by the Lender,
and, upon request, make available to the Lender the originals, or
copies in any case where the originals have been delivered to the
Lender or to an Investor, of its Mortgage Notes and Mortgages
included in Pledged Mortgages, Mortgage-backed Securities
delivered to the Lender as Pledged Securities, Purchase
Commitments, and all related 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.
6.14 Special Affirmative Covenants Concerning
Construction Advances.
(a) Use the proceeds of each Construction Advance solely for
the purposes of funding Total Costs for a Construction/Perm
Mortgage Loan.
(b) Notify the Lender within two (2) Business Days of the
following events: (1) upon knowledge of the Company, construction
ceasing for more than fifteen (15) days on the improvements to
the premises encumbered by a Pledged Mortgage, (2) a lien filed
against premises encumbered by a Pledged Mortgage and not removed
within fifteen (15) days of the filing, and (3) any damage or
destruction of the premises encumbered by a Pledged Mortgage.
7. NEGATIVE COVENANTS.
The Company hereby covenants and agrees that, so long as the
Commitment is outstanding or there remain any Obligations to be paid
or performed, the Company shall not, either directly or indirectly,
without the prior written consent of the Lender:
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7.1 Contingent Liabilities. Assume, guarantee, endorse, or
otherwise become contingently liable for the obligation of any Person
except by endorsement of negotiable instruments for deposit or
collection in the ordinary course of business and except for
obligations resulting from representations, warranties and covenants
customarily made in connection with non-recourse sales of Mortgage
Loans.
7.2 Sale or Pledge of Servicing Contracts. Sell, pledge or grant
a security interest in any existing or future Servicing Contracts of
the Company other than to the Lender, except as otherwise expressly
permitted in this Agreement, or omit to take any action required to
keep all such Servicing Contracts in full force and effect; provided,
however, that if no Default or Event of Default has occurred and is
continuing, servicing on individual Mortgage Loans may be sold
concurrently with and incidental to the sale of such Mortgage Loans
(with servicing released) in the ordinary course of the Company's
business.
7.3 Merger; Sale of Assets; Acquisitions. Liquidate, dissolve,
consolidate or merge or sell any substantial part of its assets, or
acquire substantially all of the assets of another, except the sale of
Mortgage Loans in the ordinary course of business or the purchase
and/or redemption of the mortgage-backed notes issued by the Company's
Subsidiary, U.S.H. II Corporation.
7.4 Deferral of Subordinated Debt. Pay in advance of the stated
maturity thereof any Subordinated Debt of the Company or, if a Default
or Event of Default hereunder shall have occurred, make any payment of
any kind thereafter on such Subordinated Debt until all Obligations
have been paid and performed in full and any applicable preference
period has expired.
7.5 Loss of Eligibility. Take any action that would cause the
Company to lose all or any part of its status as an eligible lender,
seller/servicer and issuer as described under Section 5.13 hereof.
7.6 Debt to Tangible Net Worth Ratio. Permit the ratio of Debt to
Tangible Net Worth of the Company (and its Subsidiaries, on a
consolidated basis) at any time to exceed 10 to 1.
7.7 Minimum Tangible Net Worth. Permit Tangible Net
Worth of the Company (and its Subsidiaries, on a consolidated
basis) at any time to be less than Five Million Dollars
($5,000,000).
167
7.8 Acquisition of Recourse Servicing Contracts. Acquire
Servicing Contracts under which the Company is obligated to repurchase
or indemnify the holder of the Mortgage Loans as a result of defaults
on the Mortgage Loans at any time during the term of such Mortgage
Loans.
7.9 Gestation Facilities. Directly or indirectly sell
or finance Pledged Mortgages under any Gestation Agreements.
The Lender's consent shall not be unreasonably withheld.
7.10 Special Negative Covenants Concerning Collateral.
(a) The Company shall not amend or modify, or waive any of
the terms and conditions of, or settle or compromise any claim in
respect of, any Pledged Mortgages or Pledged Securities.
(b) The Company shall not sell, assign, transfer or
otherwise dispose of, or grant any option with respect to, or
pledge or otherwise encumber (except pursuant to this Agreement
or as permitted herein) any of the Collateral or any interest
therein.
(c) The Company shall not make any compromise, adjustment or
settlement in respect of any of the Collateral or accept other
than cash in payment or liquidation of the Collateral.
8. DEFAULTS; REMEDIES.
8.1 Events of Default. The occurrence of any of the
following conditions or events shall be an event of default
("Event of Default"):
(a) Failure to pay the principal of any Advance when due,
whether at stated maturity, by acceleration, or otherwise; or
failure to pay any installment of interest on any Advance or any
other amount due under this Agreement within ten (10) days after
the due date; or failure to pay, within any applicable grace
period, the principal or interest on any other indebtedness of
the Company due the Lender; or
(b) Failure of the Company or any of its Subsidiaries to
pay, or any default in the payment of any principal or interest
on, any other indebtedness in excess of Two Hundred and Fifty
Thousand Dollars ($250,000) or in the payment of any contingent
obligation in excess of Two Hundred and Fifty Thousand Dollars
168
($250,000) beyond any period of grace provided and such default
shall not be waived or cured unless the Company shall be
diligently contesting such obligation in good faith and such
contesting shall not impair or affect any of the Collateral or
the Lender's security interest in the Collateral; or breach or
default with respect to any other material term of any other
indebtedness or of any loan agreement, mortgage, indenture or
other agreement relating thereto, if the effect of such failure,
default or breach is to cause, or to permit the holder or holders
thereof (or a trustee on behalf of such holder or holders) to
cause, indebtedness of the Company or its Subsidiaries in the
aggregate amount of Fifty Thousand Dollars ($50,000) or more to
become or be declared due prior to its stated maturity (upon the
giving or receiving of notice, lapse of time, both, or
otherwise). Notwithstanding the above, it shall not be an Event
of Default if C.M. Corp. fails to pay any indebtedness for which
it has a legal obligation to pay and for which the Company has no
legal obligation to pay (except for the unreimbursed Trustee
Costs of C.M. Corp.); or
(c) Failure of the Company to perform or comply with any
term or condition applicable to it contained in Sections 6.3,
6.12 and 6.13 or in any Section of Article 7 of this Agreement;
or
(d) Any of the Company's representations or warranties made
or deemed made herein or in any other Loan Document, or in any
statement or certificate at any time given by the Company in
writing pursuant hereto or thereto shall be inaccurate or
incomplete in any material respect on the date as of which made
or deemed made; or
(e) The Company shall default in the performance of or
compliance with any term contained in this Agreement or any other
Loan Document other than those referred to above in Subsections
8.1(a), 8.1(c) or 8.1(d) and such default shall not have been
remedied or waived within thirty (30) days after the earliest of
(i) receipt by the Company of Notice from the Lender of such
default, (ii) receipt by the Lender of Notice from the Company of
such default, or (iii) the date the Company should have notified
the Lender of such default pursuant to Section 6.6(c); or
(f) (1) A court having jurisdiction shall enter a
decree or order for relief in respect of the Company, any
Subsidiary of the Company in an involuntary case under any
applicable bankruptcy, insolvency or other similar law in
respect of the Company, any Subsidiary of the Company
now or hereafter in effect, which decree or order
169
is not stayed; the Company, any Subsidiary of the Company shall
consent to the entry of any such decree or order; or a filing of
a voluntary case under any applicable bankruptcy, insolvency or
other similar law in respect of the Company, any Subsidiary of
the Company has occurred; or any other similar relief shall be
granted under any applicable federal or state law; or (2) the
filing of an involuntary case in respect of the Company, any
Subsidiary of the Company under any applicable bankruptcy,
insolvency or other similar 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, any Subsidiary of the
Company, or over all or a substantial part of their respective
property, shall have been entered; or the involuntary appointment
of an interim or permanent receiver, trustee or other custodian
of the Company, any Subsidiary of the Company for all or a
substantial part of their respective property; or the issuance of
a warrant of attachment, execution or similar process against any
substantial part of the property of the Company, any Subsidiary
of the Company, and the continuance of any such events in
Subsection (2) above for sixty (60) days unless dismissed, bonded
off or discharged; or
(g) The Company, any Subsidiary of the Company 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, any Subsidiary of the Company of any
assignment for the benefit of creditors; or the inability or
failure of the Company, any Subsidiary of the Company, or the
admission by the Company, any Subsidiary of the Company in
writing of its inability, to pay its debts as such debts become
due; or
(h) Failure of the Company to perform any contractual
obligations which it may have to repurchase Mortgage Loans, if
such obligations in the aggregate exceed One Million Dollars
($1,000,000); or
(i) Any money judgment, writ or warrant of attachment, or
similar process involving in any case an amount in excess of Two
Hundred Fifty Thousand Dollars ($250,000) shall be entered or
filed against the Company or any of its Subsidiaries or any of
their respective assets and shall remain undischarged, unvacated,
unbonded or unstayed for a period of thirty (30) days or in any
event later than five (5) days prior to the date of any proposed
sale thereunder; or
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(j) Any order, judgment or decree shall be entered against
the Company decreeing the dissolution or split up of the Company
and such order shall remain undischarged or unstayed for a period
in excess of twenty (20) days; or
(k) Any Plan maintained by the Company or any of its
Subsidiaries shall be terminated within the meaning of Title IV
of ERISA or a trustee shall be appointed by an appropriate United
States district court to administer any Plan, or the Pension
Benefit Guaranty Corporation (or any successor thereto) shall
institute proceedings to terminate any Plan or to appoint a
trustee to administer any Plan if as of the date thereof the
Company's liability or any such Subsidiary's liability (after
giving effect to the tax consequences thereof) to the Pension
Benefit Guaranty Corporation (or any successor thereto) for
unfunded guaranteed vested benefits under the Plan exceeds the
then current value of assets accumulated in such Plan by more
than Twenty-Five Thousand Dollars ($25,000) (or in the case of a
termination involving the Company or any of its Subsidiaries as a
"substantial employer" (as defined in Section 4001(a)(2) of
ERISA) the withdrawing employer's proportionate share of such
excess shall exceed such amount); or
(l) The Company or any of its Subsidiaries as employer under
a Multiemployer Plan shall have made a complete or partial
withdrawal from such Multiemployer Plan and the plan sponsor of
such Multiemployer Plan shall have notified such withdrawing
employer that such employer has incurred a withdrawal liability
in an annual amount exceeding Twenty-Five Thousand Dollars
($25,000); or
(m) The Company shall purport to disavow its obligations
hereunder or shall contest the validity or enforceability hereof;
or the Lender's security interest on any portion of the
Collateral shall become unenforceable or otherwise impaired;
provided that, subject to the Lender's approval, no Event of
Default shall occur as a result of such impairment if all
Advances made against any such Collateral shall be paid in full
within ten (10) days of the date of such impairment; or
(n) (a) The Parent shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to the Parent
or of or relating to all or substantially all
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of its property, or (b) a decree or order of a court or agency or
supervisory authority having jurisdiction over the Parent for the
appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or the winding up or
liquidation of its affairs, shall have been entered against the
Parent, or (c) the Parent shall admit in writing its inability to
pay its debts generally as they become due, file a petition to
take advantage of any applicable insolvency or reorganization
statute, make any assignment for the benefit of its creditors or
voluntarily suspend payment of its obligations; or
(o) The Parent shall cease owning, directly or
indirectly, all of the capital stock of the Company; or
(q) There shall be a material adverse change in the
financial condition, business or operations of the Company.
8.2 Remedies.
(a) Upon the occurrence of any Event of Default described in
Sections 8.1(f) or 8.1(g), the Commitment shall be terminated and
the unpaid principal amount of and accrued interest on the Note
and all other Obligations 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.
(b) Upon the occurrence of any Event of Default, other than
those described in Sections 8.1(f) and 8.1(g), the Lender may, by
Notice to the Company, terminate the Commitment and/or declare
all Obligations to be immediately due and payable, whereupon the
same shall forthwith become due and payable, together with all
accrued interest thereon, and the obligation of the Lender to
make any Advances shall thereupon terminate.
(c) Upon the occurrence of any Event of Default,
the Lender may also do any of the following:
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(1) Foreclose upon or otherwise enforce its security
interest in and Lien on the Collateral to secure all
payments and performance of the Obligations in any manner
permitted by law or provided for hereunder.
(2) Notify all obligors in respect of Collateral that
the Collateral has been assigned to the Lender and that all
payments thereon are to be made directly to the Lender or
such other party as may be designated by the Lender; settle,
compromise, or release, in whole or in part, any amounts
owing on the Collateral, any such obligor or any Investor or
any portion of the Collateral, on terms acceptable to the
Lender; 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 without judicial process and sell
property acquired as a result of any such foreclosure.
(3) Act, or contract with a third party to act, as
servicer or subservicer of each item of Collateral requiring
servicing and perform all obligations required in connection
with Servicing Contracts and Purchase Commitments, such
third party's fees to be paid by the Company.
(4) Require the Company to assemble the Collateral
and/or books and records relating thereto and make such
available to the Lender at a place to be designated by the
Lender.
(5) Enter onto property where any Collateral or books
and records relating thereto are located and take possession
thereof with or without judicial process.
(6) Prior to the disposition of the Collateral, prepare
it for disposition in any manner and to the extent the
Lender deems appropriate.
(7) Exercise all rights and remedies of a secured
creditor under the Uniform Commercial Code of Minnesota or
other applicable law, including, but not limited to, selling
or otherwise disposing of the Collateral, or any part
thereof, at one or more public or private sales, whether or
not such Collateral is present at the place of sale, for
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cash or credit or future delivery, on such terms and in such
manner as the Lender may determine, including, without
limitation, sale pursuant to any applicable Purchase
Commitment. If notice is required under such applicable law,
the Lender will give the Company not less than ten (10)
days' notice of any such public sale or of the date after
which any private sale may be held. The Company agrees that
ten (10) days' notice shall be reasonable notice. The Lender
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
Lender until the selling price is paid by the purchaser
thereof, but the Lender 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
Lender 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 the Collateral
or to foreclose the pledge of and sell the Collateral or any
portion thereof under a judgment or decree of a court or
courts of competent jurisdiction, or both.
(8) Proceed against the Company on the Notes.
(9) Make additional Construction Advances to be added
to the Obligations of the Company, without the request of
the Company, for the purposes of completing the improvements
to be funded by a Construction/Perm Mortgage Loan pledged
hereunder and employ inspectors to provide inspection
reports at the sole cost and expense of the Company.
(d) The Lender shall incur no liability as a result of the
sale or other disposition of the Collateral, or any part thereof,
at any public or private sale or disposition. The Company hereby
waives (to the extent permitted by law) any claims it may have
against the Lender arising by reason of the fact that the price
at which the Collateral may have been sold at such private sale
was less than the price which might have been
obtained at a public sale or was less than the aggregate
amount of the outstanding Advances and the unpaid
174
interest accrued thereon, even if the Lender accepts the first
offer received and does not offer the Collateral to more than one
offeree. Any sale of Collateral pursuant to the terms of a
Purchase Commitment shall be deemed to have been made in a
commercially reasonable manner.
(e) The Company acknowledges that Mortgage Loans and
Mortgage-backed Securities are collateral of a type which is
customarily sold on a recognized market. The Company waives any
right it may have to prior notice of the sale of any Pledged
Mortgage or Pledged Security.
(f) The Company specifically waives and releases (to the
extent permitted by law) any equity or right of redemption, all
rights of redemption, stay or appraisal which the Company has or
may have under any rule of law or statute now existing or
hereafter adopted, and any right to require the Lender to (1)
proceed against any Person, (2) proceed against or exhaust any of
the Collateral or pursue its rights and remedies as against the
Collateral in any particular order, or (3) pursue any other
remedy in its power. The Lender 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.
(g) The Lender 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 Lender in exercising any right, power or remedy
conferred by this Agreement, or in the enforcement hereof,
together with interest thereon, at the Default Rate, from the
time of payment until repaid, shall become a part of the
principal balance outstanding hereunder and under the Notes.
(h) No failure on the part of the Lender 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 Lender 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. Without intending to
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limit the foregoing, all defenses based on the statute of
limitations are hereby waived by the Company to the extent
permitted by law. The remedies herein provided are cumulative and
are not exclusive of any remedies provided at law or in equity.
8.3 Application of Proceeds. The proceeds of any sale,
disposition or other enforcement of the Lender's security interest in
all or any part of the Collateral shall be applied by the Lender:
First, to the payment of the costs and expenses of such sale or
enforcement, including reasonable compensation to the Lender's agents
and counsel, and all expenses, liabilities and advances made or
incurred by or on behalf of the Lender in connection therewith;
Second, to the payment of any other Obligations due (other than
principal and interest) under the this Agreement and the Loan
Documents;
Third, to the payment of interest accrued and unpaid on
the Notes;
Fourth, to the payment of the outstanding principal
balance of the Notes; and
Finally, 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, disposition or other
enforcement are insufficient to cover the costs and expenses of such
sale, as aforesaid, and the payment in full of all Obligations, the
Company shall remain liable for any deficiency.
8.4 Lender Appointed Attorney-in-Fact. The Lender is hereby
appointed the attorney-in-fact of the Company, with full power of
substitution, for the purpose of carrying out the provisions hereof
and taking any action and executing any instruments which the Lender
may deem necessary or advisable to accomplish the purposes hereof,
which appointment as attorney-in-fact is irrevocable and coupled with
an interest. Without limiting the generality of the foregoing, the
Lender 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, to endorse all Pledged Mortgages or
Pledged Securities payable to the order of the Company, to change or
cause to be changed the book-entry registration or
name of subscriber or Investor on any Pledged Security,
or to receive, endorse and collect all checks made
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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 Mortgages or Pledged Securities and to give
full discharge for the same.
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 Lender
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 property or
indebtedness of any kind at any time held or owing by the Lender to or
for the credit or the account of the Company against and on account of
the Obligations of the Company under the Notes and this Agreement,
irrespective of whether or not the Lender shall have made any demand
hereunder and whether or not said Obligations shall have matured.
9. 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 telecopied or mailed,
first class or delivered by overnight courier, return receipt
requested, postage prepaid, 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, by telecopy or
by overnight courier, or if mailed, on the date of receipt as noted on
the return receipt, addressed as follows:
if to the Company: U.S. Home Mortgage Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇, SVP & CFO
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: U.S. Home Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Director, Legal
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
177
if to the Lender: Residential Funding Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇, Vice President
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Residential Funding Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
10. REIMBURSEMENT OF EXPENSES; INDEMNITY.
The Company shall: (a) pay a documentation production fee of One
Thousand Five Hundred Dollars ($1,500) in connection with the preparation
and negotiation of this Agreement; (b) pay such additional documentation
production fees, as the Lender may require and all out-of-pocket costs and
expenses of the Lender, including, without limitation, reasonable fees and
disbursements of counsel (including allocated costs of internal counsel),
in connection with the amendment, enforcement and administration of this
Agreement, the Notes, and other Loan Documents and the making and repayment
of the Advances and the payment of interest thereon; (c) indemnify, pay,
and hold harmless the Lender and any holder of the Notes from and against,
any and all present and future stamp, documentary and other similar taxes
with respect to the foregoing matters and save the Lender and the holder or
holders of the Notes harmless from and against any and all liabilities with
respect to or resulting from any delay or omission to pay such taxes; and
(d) indemnify, pay and hold harmless the Lender and any of its officers,
directors, employees or agents and any subsequent holder of the Notes
(collectively called the "Indemnitees") from and against any and all
liabilities, obligations, losses, damages, penalties, judgments, suits,
costs, expenses and disbursements of any kind or nature whatsoever
(including without limitation, the reasonable fees and disbursements of
counsel of the Indemnitees (including allocated costs of internal counsel)
in connection with any investigative, administrative or judicial
proceeding, whether or not such Indemnitees shall be designated a party
thereto) which may be imposed upon, incurred by or asserted against such
Indemnitees in any manner relating to or arising out of this Agreement, the
Notes, or any other Loan Document or any of the transactions contemplated
hereby or thereby (the "Indemnified Liabilities"); provided, however, that
the Company shall have no obligation hereunder with respect to Indemnified
Liabilities arising from the gross negligence or willful misconduct of any
such Indemnitees. To the extent that the undertaking to indemnify, pay and
hold harmless as set forth in the preceding sentence may be unenforceable
because it is violative of any law or public policy, the Company shall
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contribute the maximum portion which it is permitted to pay and satisfy
under applicable law, to the payment and satisfaction of all Indemnified
Liabilities incurred by the Indemnitees or any of them. The agreement of
the Company contained in this Subsection (d) shall survive the expiration
or termination of this Agreement and the payment in full of the Notes.
Attorneys' fees and disbursements incurred in enforcing, or on appeal from,
a judgment pursuant hereto shall be recoverable separately from and in
addition to any other amount included in such judgment, and this clause is
intended to be severable from the other provisions of this Agreement and to
survive and not be merged into such judgment.
11. FINANCIAL INFORMATION.
All financial statements and reports furnished to the Lender
hereunder shall be prepared in accordance with GAAP (except as
disclosed on the interim financial statements), applied on a basis
consistent with that applied in preparing the financial statements as
at the end of and for the last fiscal year ended (except to the extent
otherwise required to conform to good accounting practice).
12. MISCELLANEOUS.
12.1 Terms Binding Upon Successors; Survival of Representations.
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 Notes, and shall be
effective so long as the Commitment is outstanding hereunder or there
remain any Obligations to be paid or performed.
12.2 Assignment. This Agreement may not be assigned by the
Company. This Agreement and the Notes, along with the Lender'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 Lender, and
any assignee thereof may enforce this Agreement, the Notes and such
security interest.
12.3 Amendments. Except as otherwise provided in this Agreement,
this Agreement may not be amended, modified or supplemented unless
such amendment, modification or supplement is set forth in a writing
signed by the parties hereto.
12.4 Governing Law. This Agreement and the other Loan
Documents shall be governed by the laws of the State of
Minnesota, without reference to its principles of conflicts of
laws.
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12.5 Participations. The Lender may at any time sell, assign or
grant participations in, or otherwise transfer to any other Person (a
"Participant"), all or part of the Obligations. Without limitation of
the exclusive right of the Lender to collect and enforce such
Obligations, the Company agrees that each disposition will give rise
to a debtor-creditor relationship of the Company to the Participant,
and the Company authorizes each Participant, upon the occurrence of an
Event of Default, to proceed directly by right of setoff, banker's
lien, or otherwise, against any assets of the Company which may be in
the hands of such Participant. The Company authorizes the Lender to
disclose to any prospective Participant and any Participant any and
all information in the Lender's possession concerning the Company,
this Agreement and the Collateral.
12.6 Relationship of the Parties. This Agreement provides for the
making of Advances by the Lender, in its capacity as a lender, to the
Company, in its capacity as a borrower, and for the payment of
interest, repayment of principal by the Company to the Lender, and for
the payment of certain fees by the Company to the Lender. The
relationship between the Lender and the Company is limited to that of
creditor/secured party, on the one hand, and debtor, on the other
hand. The provisions herein for compliance with financial covenants
and delivery of financial statements are intended solely for the
benefit of the Lender to protect its interests as lender in assuring
payments of interest and repayment of principal and payment of certain
fees, and nothing contained in this Agreement shall be construed as
permitting or obligating the Lender to act as a financial or business
advisor or consultant to the Company, as permitting or obligating the
Lender to control the Company or to conduct the Company's operations,
as creating any fiduciary obligation on the part of the Lender to the
Company, or as creating any joint venture, agency, or other
relationship between the parties hereto 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 decisions to apply to
the Lender for credit and to execute and deliver this Agreement.
12.7 Severability. If any provision of this Agreement shall be
declared to be illegal or unenforceable in any respect, such illegal
or unenforceable provision shall be and become absolutely null and
void and of no force and effect as though such provision were not in
fact set forth herein, but all other covenants, terms, conditions
and provisions hereof shall nevertheless continue to be valid and
enforceable.
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12.8 Operational Reviews. From time to time upon request, the
Company shall permit the Lender or its representative access to its
premises and records, for the purpose of conducting a review of the
Company's general mortgage business methods, policies, and procedures,
auditing loan files and reviewing financial and operational aspects of
the Company's business.
12.9 Consent to Credit References. The Company hereby consents to
the disclosure of information regarding the Company and its
relationships with the Lender to Persons making credit inquiries to
the Lender. This consent is revocable by the Company at any time upon
Notice to the Lender as provided in Section 9 hereof.
12.10 Consent to Jurisdiction. The Company hereby agrees that any
action or proceeding under the Loan Documents, the Notes or any
document delivered pursuant hereto may be commenced against it in any
court of competent jurisdiction within the State of Minnesota, by
service of process upon the Company by first class registered or
certified mail, return receipt requested, addressed to the Company at
its address last known to the Lender. The Company agrees that any such
suit, action or proceeding arising out of or relating to this
Agreement or any other such document may be instituted in the Hennepin
County State District Court or in the United States District Court for
the District of Minnesota at the option of the Lender; and the Company
hereby waives any objection to the jurisdiction or venue of any such
court with respect to, or the convenience of any court as a forum for,
any such suit, action or proceeding. Nothing herein shall affect the
right of the Lender to accomplish service of process in any other
manner permitted by law or to commence legal proceedings or otherwise
proceed against the Company in any other jurisdiction or court.
12.11 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all
such counterparts shall together constitute but one and the same
instrument.
12.12 Entire Agreement. This Agreement, the Notes and the other
Loan Documents represent the final agreement among the parties hereto
and thereto with respect to the subject matter hereof and thereof, and
may not be contradicted by evidence of prior or contemporaneous oral
agreements among such parties. There are no oral agreements among the
parties with respect to the subject matter hereof and thereof.
181
12.13 WAIVER OF JURY TRIAL. THE COMPANY AND THE LENDER EACH
HEREBY (a) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY
ISSUE TRIABLE OF RIGHT BY A JURY, AND (b) WAIVES ANY RIGHT TO TRIAL BY
JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN,
KNOWINGLY AND VOLUNTARILY, BY THE COMPANY AND THE LENDER, AND THIS
WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH
ISSUE AS TO WHICH THE RIGHT OF A JURY TRIAL WOULD OTHERWISE ACCRUE.
THE LENDER AND THE COMPANY IS EACH HEREBY AUTHORIZED AND REQUESTED TO
SUBMIT THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE
SUBJECT MATTER AND THE PARTIES HERETO, SO AS TO SERVE AS CONCLUSIVE
EVIDENCE OF THE FOREGOING WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER,
THE COMPANY AND THE LENDER EACH HEREBY CERTIFIES THAT NO
REPRESENTATIVE OR AGENT OF THE OTHER PARTY, INCLUDING THE OTHER
PARTY'S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO ANY OF
ITS REPRESENTATIVES OR AGENTS THAT THE OTHER PARTY WILL NOT SEEK TO
ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
U.S. HOME MORTGAGE CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: Vice President
RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
Its: Vice President
▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇)
) ▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇)
▇▇ August 31, 1995 before me, a Notary Public, personally appeared
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇., the Vice President of U.S. HOME MORTGAGE CORPORATION,
a Florida corporation, personally known to me (or proved to me on the basis
of satisfactory evidence) to be the person whose name is subscribed to the
within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by his/her signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Notary Public
(SEAL) My Commission Expires: 6/21/96
STATE OF Florida)
) ss
COUNTY OF Broward)
On September 1, 1995 before me, a Notary Public, personally appeared
▇▇▇▇▇ ▇. ▇▇▇▇, the Director of RESIDENTIAL FUNDING CORPORATION, a Delaware
corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the
within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by his/her signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Notary Public
(SEAL) My Commission Expires: 9-15-98
183
EXHIBIT A-1
WAREHOUSING PROMISSORY NOTE
$35,000,000 Date: August 31, 1995
FOR VALUE RECEIVED, the undersigned, U.S. HOME MORTGAGE CORPORATION, a
Florida corporation, (herein called the "Company"), hereby promises to pay
to the order of RESIDENTIAL FUNDING CORPORATION, a Delaware corporation
(the "Lender" or, together with its successors and assigns, the "Holder")
whose principal place of business is ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place as the Holder may
designate from time to time, the principal sum of Thirty-Five Million
Dollars ($35,000,000) or so much thereof as may be outstanding from time to
time pursuant to the Warehousing Credit and Security Agreement described
below, and to pay interest on said principal sum or such part thereof as
shall remain unpaid from time to time, from the date of each Advance until
repaid in full, and all other fees and charges due under the Agreement, at
the rate and at the times set forth in the Agreement. All payments
hereunder shall be made in lawful money of the United States and in
immediately available funds.
This Note is given to evidence an actual warehouse line of credit in
the above amount and is the Warehousing Promissory Note referred to in that
certain First Amended and Restated Warehousing Credit and Security
Agreement (Single-family Mortgage Loans) dated the date hereof between the
Company and the Lender (as the same may be amended or supplemented from
time to time, the "Agreement"), and is entitled to the benefits thereof.
Reference is hereby made to the Agreement (which is incorporated herein by
reference as fully and with the same effect as if set forth herein at
length) for a description of the Collateral, a statement of the covenants
and agreements, a statement of the rights and remedies and securities
afforded thereby and other matters contained therein. Capitalized terms
used herein, unless otherwise defined herein, shall have the meanings given
them in the Agreement.
This Note is given in replacement for, and not in satisfaction of,
that certain Fourth Amended and Restated Promissory Note dated June 15,
1993, and issued by the Company to evidence its obligations under the
Original Agreement (the "Existing Note"). All amounts owed by the Company
under the Existing Note (including, without limitation, the unpaid
principal thereunder, interest accrued thereon and fees accrued under the
Original Agreement, whether or not yet due and owing) as of the date
hereof, shall be owed hereunder.
184
This Note may be prepaid in whole or in part at any time without
premium or penalty.
Should this Note be placed in the hands of attorneys for collection,
the Company agrees to pay, in addition to principal and interest, fees and
charges due under the Agreement, any and all costs of collecting this Note,
including reasonable attorneys' fees and expenses.
The Company hereby waives demand, notice, protest and presentment.
This Note shall be construed and enforced in accordance with the laws
of the State of Minnesota, without reference to its principles of conflicts
of law.
IN WITNESS WHEREOF, the Company has executed this Note as of the day
and year first above written.
U.S. HOME MORTGAGE CORPORATION
By:
Its:
STATE OF _______________ )
) ss
COUNTY OF ______________ )
On , 1995, before me, a Notary Public,
personally appeared , the
of U.S. HOME MORTGAGE CORPORATION, a Florida corporation,
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
Notary Public
(SEAL) My Commission Expires:
185
EXHIBIT A-2
CONSTRUCTION PROMISSORY NOTE
$5,000,000 Date: August 31, 1995
FOR VALUE RECEIVED, the undersigned, U.S. HOME MORTGAGE CORPORATION, a
Florida corporation, (herein called the "Company"), hereby promises to pay
to the order of RESIDENTIAL FUNDING CORPORATION, a Delaware corporation
(the "Lender" or, together with its successors and assigns, the "Holder")
whose principal place of business is ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place as the Holder may
designate from time to time, the principal sum of Five Million Dollars
($5,000,000) or so much thereof as may be outstanding from time to time
pursuant to the Warehousing Credit and Security Agreement described below,
and to pay interest on said principal sum or such part thereof as shall
remain unpaid from time to time, from the date of each Advance until repaid
in full, and all other fees and charges due under the Agreement, at the
rate and at the times set forth in the Agreement. All payments hereunder
shall be made in lawful money of the United States and in immediately
available funds.
This Note is given to evidence an actual warehouse line of credit in
the above amount and is the Construction Promissory Note referred to in
that certain First Amended and Restated Warehousing Credit and Security
Agreement (Single-Family Mortgage Loans) dated the date hereof between the
Company and the Lender (as the same may be amended or supplemented from
time to time, the "Agreement"), and is entitled to the benefits thereof.
Reference is hereby made to the Agreement (which is incorporated herein by
reference as fully and with the same effect as if set forth herein at
length) for a description of the Collateral, a statement of the covenants
and agreements, a statement of the rights and remedies and securities
afforded thereby and other matters contained therein. Capitalized terms
used herein, unless otherwise defined herein, shall have the meanings given
them in the Agreement.
This Note may be prepaid in whole or in part at any time without
premium or penalty.
Should this Note be placed in the hands of attorneys for collection,
the Company agrees to pay, in addition to principal and interest, fees and
charges due under the Agreement, any and all costs of collecting this Note,
including reasonable attorneys' fees and expenses.
186
The Company hereby waives demand, notice, protest and presentment.
This Note shall be construed and enforced in accordance with the laws
of the State of Minnesota, without reference to its principles of conflicts
of law.
IN WITNESS WHEREOF, the Company has executed this Note as of the day
and year first above written.
U.S. HOME MORTGAGE CORPORATION
By:
Its:
STATE OF _______________ )
) ss
COUNTY OF ______________ )
On , 1995, before me, a Notary Public,
personally appeared , the
of U.S. HOME MORTGAGE CORPORATION, a Florida corporation,
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
Notary Public
(SEAL) My Commission Expires:
