EXHIBIT 10.9
REVOLVING CREDIT AND SECURITY AGREEMENT
Dated as of March ___, 1997
Between
PREFERRED CREDIT CORPORATION
and
LA SALLE NATIONAL BANK
REVOLVING CREDIT AND SECURITY AGREEMENT
THIS REVOLVING CREDIT AND SECURITY AGREEMENT (the "Agreement"), dated as of
March ___, 1997, is by and between Preferred Credit Corporation, a California
corporation, formerly known as T.A.R. Preferred Mortgage Corporation, having its
principal office at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the
"Company"), and LA SALLE NATIONAL BANK, having an office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Lender").
The Company has requested that Lender make available this secured,
revolving credit facility to permit the Company to originate single family
mortgage loans and hold such loans prior to their sale to investors (the
"Facility"). The Facility will be secured by the Mortgage Loans (as hereinafter
defined) which are funded with proceeds of the Facility and all related
collateral held by the Lender or a custodian acting on Lender's behalf.
Accordingly, the Company and the Lender hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms.
-------------
Capitalized terms defined below or elsewhere in this Agreement (including
the Exhibits and Schedules hereto) shall have the following meanings:
"Adjusted Tangible Net Worth" means with respect to any Person at any date,
---------------------------
the Tangible Net Worth of such person at such date less the value of all
----
deferred excess servicing fees plus that portion of Subordinated Debt not due
----
within one year of such date plus, but only to the extent not already included
----
in Tangible Net Worth, one percent (1.0%) of the then-current aggregate
outstanding principal balance of the Mortgage Loans then being serviced by the
Company pursuant to Servicing Contracts.
"Advance" means a disbursement by the Lender under the Facility, including
-------
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" means any Person (as defined herein) under common control or
---------
having common shareholders owning at least ten percent (10%) thereof, whether
such common control be direct or indirect. With respect to the Company, and
notwithstanding the foregoing, all of Company's officers, shareholders,
directors, parent and subsidiary
corporations, joint venturers, and partners (whether general or limited) shall
be deemed Company's Affiliates for purposes of this Agreement and the other
Credit Documents.
"Agreement" means this Revolving Credit and Security Agreement, as it may
---------
from time to time be supplemented, modified or amended.
"Assignment" means a duly executed assignment to the Lender of a Pledged
----------
Mortgage, of the indebtedness secured thereby, and of all documents and rights
related to the related Mortgage Loan.
"Business Day" means any day excluding Saturday, Sunday and any day which
------------
is a legal holiday under the laws of the State of Illinois.
"Collateral" shall mean and include:
----------
(a) (1) All Mortgage Loans, including all Mortgage Notes and
Mortgages evidencing such Mortgage Loans and the related Mortgage Loan
Documents, for which an Advance has been made by the Lender hereunder
and not repaid in full, and (2) all Mortgage Loans, including all
Mortgage Notes and Mortgages evidencing such Mortgage Loans and the
related Mortgage Loan Documents, 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) as additional
security for the payment of the Note and for the performance of all of
the Company's obligations hereunder;
(b) All mortgage insurance and all commitments issued by Insurers
to insure or guaranty any Mortgage Loans included in the Pledged
Mortgages; all Purchase Commitments held by the Company covering the
Pledged Mortgages and all proceeds resulting from the sale thereof to
Investors pursuant thereto; all personal property, contract rights,
servicing and servicing fees and income, accounts and general
intangibles of whatsoever kind relating to the Pledged Mortgages, said
Insurer commitments and the Purchase Commitments, including, without
limitation, the right to receive all insurance proceeds and
condemnation awards which may be payable in respect of the premises
encumbered by any Mortgage; and all other documents or instruments
delivered to the Lender in respect of the Pledged Mortgages.
(c) All right, title and interest of the Company in and to all
files, surveys, certificates, correspondence, appraisals, computer
programs, tapes, discs, cards, accounting records, and other
information and data of the Company relating to the Collateral;
(d) All rights (but not any liabilities) of the Company with
respect to the Investors;
(e) All property of the Company, in any form or capacity now or
at any time hereafter in the possession or control of the Lender; and
2
(f) All products and proceeds of any and all of the foregoing.
"Collateral Documents" shall mean and include:
--------------------
(1) Note shipping instructions, in form and content satisfactory
to Lender;
(2) An original executed Mortgage Note, endorsed by the Company
in blank, without recourse;
(3) A certified copy of the Mortgage;
(4) An original Assignment to Lender, in recordable form, with
legal description; and
(5) Such other documents which may be required by Lender with
respect to any Advance pursuant to its procedures and documentation
set forth on Exhibit B hereto.
---------
"Collateral Value" means with respect to any Mortgage Loan the lesser of
----------------
(i) the Mortgage Note Amount of such Mortgage Loan or (ii) ninety-eight percent
(98%) of the committed purchase price set forth in the Purchase Commitment for
the Mortgage Loan.
"Commitment" has the meaning set forth in Section 2.1(a) hereof.
---------- --------------
"Company" has the meaning set forth in the preamble to this Agreement.
-------
"Conventional Mortgage Loan" means a Mortgage Loan other than a FHA-insured
--------------------------
or VA-guaranteed Mortgage Loan, which meets all the requirements for sale to
FNMA or FHLMC.
"Credit Application" means that certain Warehouse Line Application
------------------
submitted by Company to Lender and dated __________ ___, 1997.
"Credit Documents" this Agreement, the Note, the Guaranty, any and all
----------------
agreements pursuant to which the Debt of the Company has been subordinated to
the Facility, and all other documents and instruments evidencing or securing the
Facility, as the same may from time to time be supplemented, modified or
amended.
"Debt" means, with respect to any Person, as of any date of determination
----
thereof, without duplication, (i) all obligations of such Person for borrowed
money, including but not limited to money borrowed from any parent, subsidiary
or affiliate of such Person, whether or not evidenced by a promissory note, (ii)
all obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all obligations of such Person to pay the deferred
purchase price of property or services, (iv) all obligations of such Person as
lessee under capital leases, (v) all Debt of others secured by a Lien on any
asset of such Person, whether or not such Debt is assumed by such Person, (vi)
all Debt of others Guaranteed by such Person, and (vii) all indebtedness for
borrowed money or for the
3
deferred purchase price of property or services secured by a Lien on any
property owned or being purchased by such Person (even though such Person has
not assumed or otherwise become liable for the payment of such indebtedness) to
the extent that such indebtedness would not be otherwise counted as a liability
for purposes of determining the Tangible Net Worth of such Person and to the
extent that such indebtedness does not exceed the net book value for such
property.
"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.
"ERISA" means the Employee Retirement Income Security Act of 1974, 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.
-----------
"Facility Fee" has the meaning set forth in Section 2.9 hereof.
------------ -----------
"FHA" means The Federal Housing Administration of the United States
---
Department of Housing and Urban Development and any successor thereto.
"FHLMC" means The Federal Home Loan Mortgage Corporation and any successor
-----
thereto.
"FICA" means the Federal Insurance Contributions Act.
----
"FNMA" means The Federal National Mortgage Association and any successor
----
thereto.
"GAAP" means generally accepted accounting principles set forth in the
----
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"GNMA" means Government National Mortgage Association or any successor
----
thereto.
"Guarantee" means, with respect to any Person, any obligation, contingent
---------
or otherwise, of such Person directly or indirectly guaranteeing any Debt of any
other Person or in any manner providing for the payment of any Debt of any other
Person or otherwise protecting the holder of such Debt against loss (whether by
agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay or otherwise), provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business or
customary contingent repurchase or other obligations with respect to Mortgage
Loans sold by the Company. The term "Guarantee" used as a verb has a
correlative meaning.
4
"Guarantor" means ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, III. "Guarantors"
---------
shall collectively refer to each Guarantor.
"Guaranty" has the meaning set forth in Section 4.1.
-------- -----------
"HUD" means the United States Department of Housing and Urban Development
---
or any successor thereto.
"Indemnified Liabilities" has the meaning set forth in Article 10 hereof.
----------------------- ----------
"Ineligible Mortgage Loan" shall mean any Mortgage Loan which (a) has a
------------------------
Mortgage Note dated more than forty-five (45) days prior to the date of the
Advance made by Lender with respect thereto, unless otherwise approved in
advance in writing by Lender, in its sole discretion, on a case by case basis,
(b) was pledged as Collateral for a prior Advance which has since been repaid,
or (c) was collateral for another warehouse line or previously pledged to
another creditor of the Company.
"Insurer" means FHA, VA or a private mortgage insurer, as applicable.
-------
"Internal Revenue Code" means the Internal Revenue Code of 1986, or any
---------------------
subsequent federal income tax law or laws, as any of the foregoing have been or
may from time to time be amended.
"Investor" means FNMA, FHLMC or GNMA or a financially responsible
--------
institution (which is deemed acceptable by the Lender in its sole discretion)
purchasing (whether through a gestation repurchase facility or otherwise) or
refinancing Mortgage Loans from the Company pursuant to a Purchase Commitment.
"Lender" has the meaning set forth in the preamble to this Agreement.
------
"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).
"Margin Stock" has the meaning assigned to that term in Regulation U of the
------------
Board of Governors of the Federal Reserve System as in effect from time to time.
"Mortgage" means a first or second lien mortgage, deed of trust, security
--------
deed or similar instrument on improved real property.
"Mortgage Loan" means any loan evidenced by a Mortgage Note, having a
-------------
stated maturity of ten (10) to twenty (20) years and secured by a Mortgage
covering improved real property containing a one-to-four family residence.
"Mortgage Loan Documents" means the Mortgage, Mortgage Note, credit and
-----------------------
closing packages, disclosures, and all other files, records and documents
necessary to establish the eligibility of the Mortgage Loans for mortgage
insurance or guarantee by an Insurer or for purchase by an Investor.
5
"Mortgage Note" means a note secured by a Mortgage and evidencing a
-------------
Mortgage Loan.
"Mortgage Note Amount" means the outstanding unpaid principal amount of a
--------------------
Mortgage Note at the time such Mortgage Note is pledged to the Lender.
"Mortgaged Property" means, with respect to any Mortgage, the real
------------------
property, personal property (tangible and intangible) and fixtures which are
encumbered by the lien and security interests of such Mortgage.
"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.
"Note" has the meaning set forth in Section 2.3 hereof.
---- -----------
"Notices" has the meaning set forth in Article 9 hereof.
------- ---------
"Officer's Certificate" means a certificate executed on behalf of the
---------------------
Company by its chief financial officer or its treasurer.
"Person" means and includes natural persons, corporations, limited
------
partnerships, general partnerships, limited liability companies, 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 Mortgage" means a Mortgage Loan, including the Mortgage Note and
----------------
Mortgage evidencing such Mortgage Loan and the related Mortgage Loan Document,
which has been pledged as Collateral hereunder and not released to an Investor
or the Company.
"Purchase Commitment" means a written commitment (including a gestation
-------------------
repurchase agreement), 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 or refinance one or more Mortgage Loans by repaying the Advance(s)
made in connection with such Mortgage Loan(s), together with all related
documents and instruments by and between the Company and the Investor, in form
and substance satisfactory to the Lender, governing the terms and conditions of
any such purchases or refinancings. To the extent any such commitment does not
establish a purchase price, or establishes a variable purchase price based on
changes in interest rates generally prior to the purchase (or refinancing) date,
the Lender will not deem such commitment to be unsatisfactory so long as the
Company has a hedging program, satisfactory to Lender in its sole discretion,
protecting the Company against the interest rate risk associated with holding
such Mortgage Loans pending sale or refinancing.
"Redemption Amount" has the meaning set forth in Section 3.3 hereof.
----------------- -----------
6
"Restricted Reserve Account" has the meaning set forth in Section 3.5.
-------------------------- -----------
"Restricted Reserve Account Required Balance" shall mean, for each calendar
-------------------------------------------
month, an amount equal to the aggregate amount of accrued interest, as of the
last day of the preceding calendar month, on all Advances which, as of the last
day of such preceding calendar month, had been outstanding for more than thirty
(30) days.
"Servicing Contracts" means the rights and obligations of the Company, as
-------------------
servicer, pursuant to the Servicing Contracts identified on Schedule 1.1
------------
attached hereto or made part hereof, as the same may be revised from time to
time, or such other servicing contracts to which Company is or may be a party,
to administer, collect the payments for the reduction of principal and
application of interest, pay taxes and insurance, remit collected payments,
provide foreclosure services, provide full escrow administration and any other
obligations required by any Investor or Insurer in, of or for the Mortgage Loans
pursuant to the Servicing Contracts, together with the right to receive the
servicing fee and any ancillary fees arising from or connected to the Mortgage
Loans.
"Statement Date" has the meaning set forth in Section 4.1(a)(7) hereof.
-------------- ---------
"Subordinated Debt" means Debt of the Company which has been subordinated
-----------------
as provided in Sections 4.1(b) or 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.
"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 5.4 hereof,
-----------
less the sum of the following (without duplication): (a) the book value of all
----
investments in non-consolidated subsidiaries, and (b) any other assets of the
Company and consolidated subsidiaries which would be treated as intangibles
under GAAP including, without limitation, good-will, research and development
costs, trademarks, trade names, copyrights, patents, rights to refunds and
indemnification, and unamortized debt discount and expenses; provided further
that, to the extent not already excluded, there shall be excluded from Tangible
Net Worth, those assets of any Person which, if such Person were a HUD
mortgagee, 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 Use by Independent Public
Accountants in Audits of HUD-Approved Nonsupervised Mortgagees, Loan
Correspondents, and Coinsuring Mortgagee" or any successor or replacement audit
guide published by HUD.
"VA" means the Department of Veterans Affairs and any successor thereto.
--
"Wet Settlement" means a closing or settlement of a Mortgage Loan wherein
--------------
the Lender is requested by the Company to make an Advance for the Company to a
closing
7
agent based upon delivery of the Collateral Documents to a third person as agent
for or on behalf of the Lender, but prior to examination or receipt of the
Collateral Documents by the Lender.
1.2 Other Definitional Provisions.
-----------------------------
(a) Accounting terms not otherwise defined herein shall have the meanings
given them under GAAP.
(b) Defined terms may be used in the singular or the plural, as the context
requires.
ARTICLE 2
THE CREDIT
2.1 The Commitment.
--------------
(a) Subject to the terms and conditions of this Agreement and provided no
Default has occurred and is continuing, the Lender agrees, from time to time
during the period from the date hereof to the expiration date (unless such
period is earlier determined pursuant hereto) make Advances to the Company,
provided the total aggregate principal amount which is outstanding at any one
time of all such Advances shall not exceed Fifteen Million Dollars
($15,000,000). The obligation of the Lender to make Advances hereunder up to
such limit or the amount to which such limit may be reduced pursuant to Section
-------
2.7(b) hereof, is hereinafter referred to as the "Commitment". Within the
------
Commitment, the Company may borrow, repay and reborrow.
(b) Advances shall be used by the Company solely for the purpose of funding
the origination and/or purchase of Mortgage Loans and shall be made at the
request of the Company, in the manner hereinafter provided in Section 2.2,
-----------
against the pledge of such Mortgage Loans. No Advance shall be made against any
Mortgage Loan which is not covered by a Purchase Commitment. Such Purchase
Commitment shall include a direction by the Company to the Investor of such
Mortgage Loan to pay the purchase price of such Mortgage Loan to the Lender.
(c) Each Advance shall cover only one Mortgage Loan. No Advance shall
exceed the Collateral Value of the related Mortgage Loan for which the Advance
is made, unless such excess is collateralized by cash in a restricted cash and
collateral account with the Lender.
(d) The aggregate amount of all outstanding Advances funded through Wet
Settlements shall not, at any time, exceed $3,000,000.
2.2 Procedures for 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
8
set forth in this Section 2.2. Requests for Advances shall be initiated by the
-----------
Company by delivering to the Lender a completed and signed request for an
Advance (an "Advance Request") in the form attached hereto as Exhibit A. The
---------
Lender shall have the right to revise or supplement the form of Advance Request
(Exhibit A hereto) by giving notice thereof to the Company.
---------
(b) The procedures to be followed by the Company in making an Advance
Request and shall consist of those set forth in Exhibit B attached hereto. The
---------
Collateral Documents to be delivered to the Lender shall consist of those
identified in the definition of Collateral Documents herein together with any
additional required documents identified in Exhibit B attached hereto. The
---------
Lender shall have the right to modify said Exhibit B to conform to current legal
---------
requirements or Lender practices, and, as so modified, said Exhibit B shall be
---------
deemed part hereof.
(c) Before funding any Advance, the Lender shall have not less than one (1)
Business Day (or such greater period as Lender may require) to examine each
Advance Request and the Collateral Documents to be delivered to the Lender with
respect to the Advance; provided, however, with respect to any Wet Settlement,
the Borrower may deliver those Collateral Documents identified below in this
subsection (c) after the funding of the Advance, but within the time period set
--------------
forth below. The Lender may reject any documents which do not meet the
requirements of this Agreement or of the related Purchase commitment. With
respect to any Wet Settlement, within two (2) Business Days (or such longer
period as Lender may permit, in its sole discretion) after the date of the Wet
Settlement, the following Collateral Documents shall be delivered to the Lender:
(i) note shipping instructions, in form and content satisfactory to Lender; (ii)
an original executed Mortgage Note, endorsed by the Company in blank, without
recourse; (iii) a certified copy of the Mortgage; and (iv) an original
Assignment to Lender, in recordable form, with legal description.
(d) To make an Advance, the Lender shall wire funds to the closing agent
(for Wet Settlements) or authorize payment of the Company's draft upon
compliance by the Company with the terms of this Agreement.
(e) All Advances under this Agreement shall constitute a single
indebtedness and all of the Collateral shall be security for the Note and for
the performance of all obligations of the Company to the Lender.
2.3 Note. The Company's obligation to pay the principal of, and interest
----
on, all Advances made by the Lender is evidenced by the secured promissory note
(the "Note") of the Company dated as of the date hereof. The term "Note" shall
include all extensions, renewals and modifications of the Note and all
substitutions therefor. All terms and provisions of the Note are incorporated
herein.
2.4 Interest & Transaction Fees.
---------------------------
(a) The unpaid amount of each Advance shall bear interest at the applicable
rate of interest set forth in the Note.
9
(b) The Company shall pay the Lender a transaction fee equal to twenty-five
dollars ($25) for each Advance processed under the terms of this Agreement.
(c) All accrued interest and transaction fees for each Advance shall be due
and payable on the earlier of (i) demand or (ii) except as otherwise provided
for in this subsection (c), at the time the outstanding principal amount of the
--------------
Advance is payable under Section 2.5 below. In the case of clause (ii),
-----------
interest and accrued transaction fees will be deducted from the proceeds
remitted from the applicable Investor to the Lender with respect to the related
Mortgage Loan. In the event the total sum of the Advance plus such fees and
interest exceeds the remittance amount received from the applicable Investor,
the Company shall immediately pay to Lender any shortfall without notice or
demand; Lender may also withdraw the amount of such shortfall from the
Restricted Reserve Account and apply the same to repay the Advance and pay the
fees and interest.
2.5 Principal Payments.
------------------
(a) The outstanding principal amount of each Advance shall be payable in
full upon the earliest to occur of (i) demand, (ii) the occurrence of any event
described in Section 2.5(b) hereof with respect to such Advance or (iii)
--------------
expiration or termination of the Commitment.
(b) 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 charge its account(s) for, the amount of any outstanding Advance
against a specific Mortgage Loan, upon the occurrence of any of the following
events:
(1) Sixty (60) days elapse from the date the Mortgage Loan (with
respect to which the Advance was made) was delivered to an Investor for
examination and purchase, without the purchase being made unless an
extension is granted by the Lender in its sole discretion;
(2) Ninety (90) days (or such longer period as Lender may permit, in
its sole discretion) elapse from the date the Advance was made;
(3) The Investor rejects for purchase the Mortgage Loan with respect
to which the Advance was made;
(4) Ten (10) Business Days elapse from the date a Collateral Document
was delivered to the Company for correction or completion, without being
returned to the Lender;
(5) One of the Collateral Documents for such Advance requires
correction or completion and the aggregate outstanding balance of all
Advances for which a related Collateral Document has been delivered to the
Company for correction or completion, without being returned to the Lender,
then exceeds, or would exceed, with the delivery of such Collateral
Document for correction or completion, $500,000;
10
(6) With respect to any Advance which was funded through a Wet
Settlement, the Company fails to deliver to the Lender the Collateral
Documents identified in Section 2.4(c) above (relating to the Mortgage Loan
--------------
against which the Advance was made) within two (2) Business Days (or such
longer period as Lender may permit, in its sole discretion), 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;
(7) A default occurs under the Mortgage Loan with respect to which
such Advance was made and remains uncured for a period of thirty (30) days;
(8) Lender determines, in its sole judgment, that the related Mortgage
Loan against which the Advance is made is an Ineligible Mortgage Loan; and
(9) Upon sale of the Mortgage Loan with respect to which such Advance
was made.
Upon making such payment to the Lender, the Company shall be deemed to have
redeemed such Mortgage Loan from pledge, and the Collateral Documents relating
thereto shall be released by the Lender to the Company or to the Investor.
2.6 Expiration and/or Termination of Commitment.
-------------------------------------------
(a) Unless terminated earlier as permitted hereunder, the Commitment shall
expire of its own terms, and without the necessity of action by the Lender, on
the date which is 364 days from the date of this Agreement.
(b) The Lender shall have the right, without cause, at any time to
terminate the Commitment on not less than sixty (60) days' notice to the
Company.
(c) The Lender shall have the right to terminate the Commitment upon any
adverse material change in the Company's financial condition, as determined by
the Lender in its sole discretion. Without limiting the generality of the
foregoing, the occurrence of any one or more of the events listed in Section 6.6
-----------
hereto shall be deemed an adverse material change in the Company's financial
condition.
(d) The Lender shall have the right from time to time and in its sole
discretion, to extend the term of the Commitment. The length of any such
extension shall also be determined in the Lender's sole discretion. Such
extension may be made subject to the renegotiation of the terms hereunder and to
any other such conditions as the Lender may deem necessary. Under no
circumstances shall such an extension by the Lender be interpreted or construed
as the Lender's forfeiture of any of its rights, entitlements or interest
created hereunder. The Company acknowledges and understands that the Lender is
under no obligation whatsoever to extend the term of the Commitment beyond its
expiration date as originally stated in Section 2.6(a) above.
--------------
11
2.7 Method of Making Payments; Reductions in Commitment.
---------------------------------------------------
(a) Except as otherwise specifically provided herein, all payments
hereunder shall be received by the Lender on the date when due and shall be made
in lawful money of the United States of America in immediately available funds
at the office of the Lender, at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇, or at such other place as the Lender from time to time shall designate.
Whenever any payment to be made hereunder or under the Note shall be stated to
be due on a day which is not a Business Day, the due date thereof shall be
extended to the next succeeding Business Day, and, with respect to payments of
principal, the interest thereon shall be payable at the applicable rate during
such extension. Funds received by the Lender after 12:00 noon (Chicago,
Illinois time) on a Business Day shall be deemed to have been paid by the
Company on the next succeeding Business Day.
(b) The Company shall have the right, at any time and from time to time,
effective as of the first day of any calendar month, to terminate in whole or
permanently reduce in part, without premium or penalty, the amount of the
Commitment in excess of the then outstanding principal amount of all Advances
hereunder. The Company shall give written notice to the Lender designating the
date of such termination or reduction not less than five (5) Business Days'
prior to the date such termination or reduction is to take effect, and the
amount of any partial reduction of the Commitment shall be in an aggregate
minimum amount of One Million Dollars ($1,000,000) or integral multiples of One
Hundred Thousand Dollars ($100,000) in excess of that amount.
2.8 Late Payment Fees. In the event the Company fails to make any payment
-----------------
(whether of principal, interest or any other sum) on the date such payment is
due and payable hereunder or under the Note, and such failure continues for more
than five (5) days, the Company shall pay to the Lender, upon demand therefor, a
late payment fee equal to five percent (5%) of the amount of such payment.
2.9 Facility Fee. As a condition to obtaining the Commitment, the Company
------------
agrees to pay to the Lender quarterly, in advance, commencing April 1, 1997 and
on the first day of each subsequent calendar quarter, a Facility Fee equal to
one-eighth percent (0.125%) per annum of the total Commitment; provided,
however, no Facility Fee shall be payable with respect to the period from the
date of the first Advance under this Facility through and until the date which
is thirty (30) days from the date of the first Advance under this Facility.
With respect to any calendar quarter during which the Commitment is only
outstanding for a portion thereof or during which the Facility Fee is only
payable for a portion thereof, the Facility Fee shall be prorated based upon the
number of days the Commitment will be outstanding or the number of days for
which the Facility Fee is payable, as applicable, to the number of days in the
calendar quarter. The Facility Fee shall be deemed earned when paid.
2.10 Net Payments; Reduced Return.
----------------------------
(a) All payments with respect to any Advance shall be made in such amounts
as may be necessary in order that all such payments after withholding for or on
account of any present or future taxes, levies, imports, duties or other similar
charges of whatsoever nature imposed by any government or any political
subdivision or taxing authority hereof, other than any taxes on or measured by
the net income of the Lender pursuant to the state, federal
12
and local tax laws of the jurisdiction where the Lender's principal office or
offices or lending office or offices are located, compensate Lender for any
additional cost or reduced amount receivable of making or maintaining advances
as a result of such taxes, imports, duties or other charges.
(b) If, after the date hereof, the Lender shall have determined that the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by the Lender
with any request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable agency, has
or would have the effect of reducing the rate or return on the Lender's capital
as a consequence of its obligations hereunder to a level below that which the
Lender could have achieved but for such adoption, change or compliance (taking
into consideration the Lender's policies with respect to capital adequacy) by an
amount deemed by the Lender to be material, then from time to time, within
thirty (30) days after demand by the Lender the Company shall pay to the Lender
such additional amount or amounts as will compensate the Lender for such
reduction. In determining such amount, the Lender may use any reasonable
averaging and attribution methods.
ARTICLE 3
COLLATERAL
3.1 Assignments and Grant of Security Interest. As security for the
------------------------------------------
payment of the Note and for the performance of all of the Company's obligations
hereunder, the Company hereby grants to the Lender a security interest in all
rights and interest of the Company in and to all Collateral whether presently
existing or hereafter arising. Upon the request of the Lender, the Company
shall execute any further document or instrument requested by the Lender to
further evidence or effectuate the assignments set forth in this Section.
3.2 Delivery of Additional Collateral or Mandatory Prepayment. In the
---------------------------------------------------------
event that the Lender shall determine, in its sole discretion, at any time that
the Collateral Value of the Pledged Mortgages (such value being determined at
such time as if then being pledged under Section 3.1 hereof) is less than the
-----------
aggregate amount of the Advances then outstanding hereunder, the Company shall
immediately (a) deliver to the Lender for pledge hereunder additional Mortgage
Loans satisfactory to the Lender and/or cash, in aggregate amounts sufficient to
cover the difference between the Collateral Value of the then existing Pledged
Mortgages and the aggregate amount of Advances outstanding hereunder, or (b)
repay the Advances in an amount sufficient to reduce the aggregate outstanding
balance thereof to or below the Collateral Value of the Pledged Mortgages.
3.3 Right of Redemption from Pledge. Provided no Default has occurred and
-------------------------------
is continuing, the Company may redeem a Mortgage Loan from pledge, by either (i)
paying, or causing an Investor to pay, to the Lender, for application to
prepayment of the principal balance of the Note, an amount (the "Redemption
Amount") equal to the Collateral Value of the Mortgage Loan to be released, but
in no event less than the amount of the Advance made
13
with respect to such Mortgage Loan, or (ii) delivering to the Lender for pledge
hereunder additional Mortgage Loans satisfactory to the Lender and/or cash, in
aggregate amounts sufficient to cover the amount by which the aggregate amount
of Advances then outstanding hereunder exceeds Collateral Value of the Pledged
Mortgages (excluding the Mortgage Loan(s) to be released).
3.4 Collection and Servicing Rights. So long as no Event of Default shall
-------------------------------
have occurred, the Company shall be entitled to service, receive and collect
directly all sums payable to the Company in respect of the Collateral, except
amounts payable to the Company for the purchase by any Investor under a Purchase
Commitment of any Mortgage Loans which are funded in whole or in part with the
proceeds of any Advance, which amounts shall be paid directly to the Lender.
The Company shall direct each Investor to pay the amounts payable for the
purchase of such Mortgage Loans directly to the Lender. Following the
occurrence of any Event of Default, the Lender shall thereafter be entitled to
service, receive and collect all sums payable to the Company in respect of the
Collateral, and in such case (a) the Lender in its discretion may, in its own
name or in the name of the Company or otherwise, demand, ▇▇▇ for, collect or
receive any money or property at any time payable or receivable on account of or
in exchange for any of the Collateral, but shall be under no obligation to do
so, (b) the Company shall, if the Lender so requests, forthwith pay to the
Lender at its principal office or such other place as the Lender may designate
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.
3.5 Restricted Reserve Account. (a) On or prior to the date hereof, the
--------------------------
Company shall establish with the Lender an account ("Restricted Reserve
Account"). The Company hereby assigns and grants to the Lender a security
interest in, and pledge of, the Restricted Reserve Account and any funds held
therein from time to time. The Company agrees to execute and deliver (or cause
to be executed and delivered) all documents requested by the Lender to confirm
and perfect such security interest and pledge upon the Lender's reasonable
request from time to time.
(b) On the fifth (5th) day of each calendar month following the date
hereof, the Company shall deposit into the Restricted Reserve Account that
amount of funds necessary to establish and maintain a balance therein which is
not less than the Restricted Reserve Account Required Balance (for such month).
Provided there is no then existing Default, upon written request by the Company,
the Lender shall promptly pay over to the Company, upon its written request,
that amount of funds, if any, held in the Restricted Reserve Account which
exceeds the Restricted Reserve Account Required Balance for such calendar month.
(c) Without limiting the remedies of the Lender under this Agreement, if an
Event of Default shall exist hereunder, the Lender may (but shall not be
obligated to) apply any cash Collateral held in the Restricted Reserve Account
to any of the obligations and indebtedness of the Company hereunder and under
the other Credit Documents in such order as the Lender may elect.
3.6 Return of Collateral at End of Commitment. If (i) the Commitment
-----------------------------------------
shall have expired or been terminated, and (ii) no Advances, interest or other
amounts evidenced by the
14
Note or due under this Agreement shall be outstanding and unpaid, the Lender
shall deliver or release all Collateral, including, without limitation, and
funds held in the Restricted Reserve Account, in its possession to the Company.
The receipt of the Company for any Collateral released or delivered to the
Company pursuant to any provision of this Agreement shall be a complete and full
acquittance for the Collateral so returned, and the Lender shall hereafter be
discharged from any liability or responsibility therefor.
ARTICLE 4
CONDITIONS PRECEDENT
Section 4.1 Initial Advance. The obligation of the Lender to make the
---------------
initial Advance hereunder is subject to the satisfaction, as determined by the
Lender in its sole discretion, 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 Note duly executed by the Company;
(2) A guaranty from each of the Guarantors (collectively, the
"Guaranty");
(3) Certified copies of the Company's articles of incorporation and
bylaws and a certificate of good standing dated no less recently than one
(1) month prior to the date hereof;
(4) A written opinion of counsel to the Company and each of the
Guarantors, in form and content satisfactory to the Lender in its sole
discretion, dated as of the date hereof;
(5) An original resolution of the board of directors of the Company,
certified as of the date hereof by its corporate secretary, authorizing the
execution, delivery and performance of this Agreement and the Note, and all
other instruments or documents to be delivered by the Company pursuant to
this Agreement;
(6) 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 Note 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);
(7) Original independently audited financial statements of the Company
(and its Subsidiaries, on a consolidated basis) for the most recent fiscal
year end (the "Statement Date"), containing a balance sheet and related
statements of income and retained earnings and changes in financial
position for the period ended on the Statement Date, all prepared in
accordance with GAAP, applied on a basis consistent with prior periods, and
otherwise acceptable to the Lender;
15
(8) Financial statements of each of the Guarantors, signed by them,
dated no less recently than three (3) months prior to the date of the
initial Advance;
(9) Copies of the certificates, documents or other written instruments
which evidence the Company's eligibility described in Section 5.13 hereof,
------------
all in form and substance satisfactory to the Lender;
(10) Copies Purchase Commitments with Investors which have sufficient
availability, in Lender's sole discretion, together with and certificates,
documents or other written instruments related thereto;
(11) Copies of the Company's errors and omissions insurance policy or
mortgage impairment insurance policy and blanket bond coverage policy, or
certificates in lieu of policies, all in form and content satisfactory to
the Lender, showing compliance by the Company with the related provisions
of Section 6.8 hereof;
-----------
(12) Copies of the Company's licenses, permits and approvals to
operate each place of business; and
(13) An interlender agreement executed by each of the Company's
creditors providing warehouse lines of credit to the Company; provided,
however, if Borrower is unable to deliver the interlender agreement on or
prior to the date of this Agreement, Borrower shall deliver the same within
two (2) weeks of the date of this Agreement and if Lender makes any Advance
hereunder prior to receipt of an interlender agreement, such action shall
not be deemed a waiver of the requirement that Borrower furnish the
interlender agreement.
(b) The Lender shall have received evidence satisfactory to it as to the
due filing and recording in all appropriate offices of all financing statements
and other instruments as may be necessary to perfect the security interest of
the Lender in the Collateral under the Uniform Commercial Code of the State of
Illinois or other applicable law.
(c) The Company shall furnish to Lender an executed subordination
agreement, in form and substance satisfactory to Lender in its sole discretion,
from each Guarantor and each Subsidiary and each Affiliate of the Company which,
as of the date of this Agreement, is a creditor of the Company. Each such
subordination agreement shall, among other thing, subordinate Company's
obligations to such Person to the repayment in full of the Facility and the
security interests granted hereunder and under the other Credit Documents.
(d) The Company shall have established the Restricted Reserve Account.
4.2 Each Advance. The obligation of the Lender to make the initial and
------------
each subsequent Advance is subject to the satisfaction, as determined by the
Lender in its sole discretion, of the following additional conditions precedent:
(a) The Company shall have delivered to the Lender the Advance Request, and
Collateral Documents called for under, and shall have satisfied the procedures
set forth in,
16
Section 2.2 hereof and the applicable Exhibits hereto described in that Section.
-----------
All items delivered to the Lender must 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.
(b) Not later than 12:00 p.m. on the day of an Advance, the Lender shall
have received:
(1) An original Advance Request, signed by an authorized officer of
the Company;
(2) An inventory control sheet, signed by an authorized officer of
the Company, identifying each mortgagor, the amount of the
Mortgage Loan for each Advance, and the total amount of all
Advances requested for the day;
(3) a copy of irrevocable instructions to the Investor stating that
payment for the Mortgage Loan will be remitted to the Lender,
such instructions to be in the form of Exhibit C; and
---------
(4) For each Mortgage Loan which exceeds $500,000, a copy of pre-
underwriting approval from an Investor or evidence of mortgage
insurance.
(c) The representations and warranties of the Company contained in Article
-------
5 hereof shall be true and correct in all material respects as if made on and as
-
of the date of each Advance.
(d) The Company and each of the Guarantors shall have performed all
agreements to be performed by them hereunder and under the Guaranty,
respectively, and after giving effect to the requested Advance, there shall
exist no Default hereunder.
(e) The Company shall not have (i) incurred any material liabilities,
direct or contingent, other than in the ordinary course of its business, since
the dates of the Company's most recent financial statements theretofore
delivered to the Lender or (ii) experienced any other material adverse change in
its business or operations.
(f) If requested by the Lender in its sole discretion, the Lender shall
have received from counsel to the Company an updated opinion, in form and
substance satisfactory to the Lender in its sole discretion, covering such of
the matters set forth in Section 4.1(a)(4) hereto as the Lender may request.
-----------------
Acceptance of the proceeds of the requested Advance by the Company shall be
deemed a representation by the Company that all conditions set forth in this
Section 4.2 shall have been satisfied as of the date of such Advance.
-----------
17
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and make
each Advance, 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:
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 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. The Company has no Subsidiaries except as set
forth on Schedule 5.1 hereto. Schedule 5.1 sets forth the name of each such
------------ ------------
Subsidiary, place of incorporation, each state in which qualified as a foreign
corporation and the percentage ownership of the capital stock of each such
Subsidiary 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
documents contemplated hereby or thereby. The Guarantors each have the power
and capacity to execute, deliver and perform the Guaranty. The execution,
delivery and performance by the Company of this Agreement, the Note and all
other documents contemplated hereby or thereby and the making of the borrowing
hereunder and thereunder, have been duly and validly authorized by all necessary
corporate action on the part of the Company (none of which actions have been
modified or rescinded, and all of which actions are in full force and effect)
and do not and will not (i) conflict with or violate any provision of law or of
the articles of incorporation or by-laws of the Company, (ii) conflict with or
result in a breach of or constitute a default or require any consent under, 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, or (iii)
result in the creation of any Lien upon any property or assets of the Company.
This Agreement, the Note and all other documents contemplated hereby or thereby
and the Guaranty constitute legal, valid, and binding obligations of the Company
or of the Guarantors, respectively, 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 documents contemplated hereby or thereby and the performance
of the Company's obligations hereunder and thereunder do not require any
license, consent, approval or other action of any state or federal agency or
governmental or regulatory authority.
5.4 Financial Condition. The balance sheet of the Company (and, if
-------------------
applicable, its Subsidiaries, on a consolidated basis) as of the Statement Date,
and the related statements of income and changes in shareholders' equity for the
fiscal year ended on the Statement Date,
18
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 liabilities, direct or indirect, fixed or
contingent, matured or unmatured, known or unknown, 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. 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, licenses, qualifications or financial condition of
the Company (and its Subsidiaries) as a whole.
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 (and
its Subsidiaries) as a whole.
5.7 Regulation U. The Company is not engaged principally, or as one
------------
of its major activities, in the business of extending credit for the purpose of
purchasing or 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 a company controlled by an "investment company," within the meaning
of the Investment Company Act of 1940, as amended.
5.9 Payment of Taxes. The Company has filed or caused to be filed
----------------
all federal, state and local income, excise, property and other tax returns with
respect to the operations of the Company and its Subsidiaries which are required
to be filed, all such returns are true and correct, and the Company has paid or
caused to be paid all taxes as shown on such returns or on any assessment, to
the extent that such taxes have become due.
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
19
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 has given notice of any asserted default
thereunder, and no liquidation or 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.
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(8) 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 has all state and local permits,
-----------
licenses, approvals, registrations and qualifications which it is required to
have in order to make, purchase, sell or service the Mortgage Loans. The
Company is qualified and in good standing as a lender or seller/servicer, and
meets all requirements applicable to its status as a:
(a) HUD approved lender, eligible to originate, purchase, hold and sell
FHA-insured Mortgage Loans (and to participate in HUD's Direct
Endorsement Mortgage Insurance Program).
(b) Lender in good standing under the VA loan guarantee program eligible
to originate (on an "prior approval" basis), purchase, hold and sell
VA-guaranteed Mortgage Loans.
20
If at any time after the date hereof the Company becomes a GNMA approved
issuer of Mortgage Loans guaranteed by GNMA, the Company shall thereafter remain
qualified, in good standing, and meet all requirements applicable to its status
as a GNMA approved issuer of Mortgage Loans guaranteed by GNMA.
If at any time after the date hereof the Company becomes a FNMA or FHLMC
approved seller of Mortgage Loans, eligible to originate, purchase, hold and
sell Mortgage Loans to be sold to FNMA or FHLMC, respectively, the Company shall
thereafter remain qualified, in good standing, and meet all requirements
applicable to its status as a FNMA or FHLMC approved seller of Mortgage Loans,
eligible to originate, purchase, hold and sell Mortgage Loans to be sold to FNMA
or FHLMC, as the case may be.
If at any time after the date hereof the Company becomes a GNMA, FNMA or
FHLMC approved servicer of Mortgage Loans, the Company shall thereafter remain
qualified, in good standing, and meet all requirements applicable to its status
as a GNMA, FNMA or FHLMC approved servicer of Mortgage Loans, as the case may
be.
5.14 Principal Place of Business; Other Identity; Absence of Bankruptcies.
--------------------------------------------------------------------
The principal office and place of business of the Company for purposes of
Section 9-103 of the Uniform Commercial Code is located at the address set forth
at the front of this Agreement. The Company shall provide the Lender written
notice at least thirty (30) days in advance of any change in the Company's
principal office or place of business. Except for "Preferred Mortgage
Corporation", "T.A.R. Preferred Mortgage Corporation" and "Direct Capital", the
Company has no trade name. During the preceding five years, the Company has not
been known by or done business under any other name, corporate or fictitious,
and has not filed or had filed against it any bankruptcy receivership or similar
petitions nor has it made any assignments for the benefit of creditors.
5.15 Accuracy of Information. All written information supplied by the
-----------------------
Company to the Lender relating to the Company and its Subsidiaries, including,
without limitation, all information set forth in the Credit Application, is
true, accurate and complete. was true, complete and accurate in all material
respects when made, and there has been no material adverse change in the
condition, financial or otherwise, of the Company and its Subsidiaries from the
time such information was provided to the Lender.
5.16 Perfected Liens. This Agreement, together with possession of the
---------------
Mortgage Notes and a duly filed financing statement, creates a valid and
perfected first priority security interest in the Collateral, securing the
payment of the Obligations, and all filings and other actions necessary or
desirable to perfect and protect such security interest have been duly taken or
shall be taken at the time of the initial Advance hereunder.
5.17 No Adverse Liens. The Company owns the Collateral free and clear of
----------------
any lien, security interest, charge or encumbrance except for the security
interest created by this Agreement. No effective financing statement or other
instrument similar in effect covering all or any part of the Collateral is on
file in any recording office, except such as may have been filed in favor of
Lender relating to this Agreement.
21
5.18 No Approvals. No authorization, approval or other action by, and no
------------
notice to or filing with, any governmental authority or regulatory body is
required (and has not been obtained, delivered or filed, as applicable) either
(i) for the grant by the Company of the security interest granted hereby or for
the execution, delivery or performance of this Agreement by the Company or (ii)
for the perfection of or the exercise by Lender of its rights and remedies
hereunder, other than the filing of a financing statement which has been duly
executed by the Company and delivered to Lender for filing.
5.19 Terminated Credit Facilities. The Company's former credit facilities
----------------------------
with Southern Pacific Thrift and Loan Association, Associates Commercial
Corporation (d/b/a First Collateral Services) and Pacific Southwest Bank
(collectively, the "Prior Creditors") have terminated and the Company has fully
paid and performed all obligations under such terminated facilities. The
Company has no existing borrowing arrangement with any of the Prior Creditors
and the Company shall, within 30 days of the date of this Agreement, cause to be
terminated of record the financing statements filed by each of the Prior
Creditors.
5.20 Special Representations and Warranties 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, that:
(a) Each Mortgage Loan is covered by a Purchase Commitment, does not exceed
the availability under such Purchase Commitment (taking into consideration
Mortgage Loans which have been purchased by the respective Investor under the
Purchase Commitment and Mortgage Loans which the Company has identified to the
Lender as being covered by such Purchase Commitment) and conforms to the
requirements and the specifications set forth in such Purchase Commitment and
the related regulations, rules, requirements and/or handbooks of the applicable
Investor and is eligible for sale to and insurance or guaranty by, respectively,
the applicable Investor and the applicable insurer.
(b) The Mortgage Loan Documents have been duly executed and delivered by
the mortgagor and create valid and legally binding obligations of the mortgagor,
enforceable in accordance with their terms, except as may be limited by
bankruptcy or other laws affecting the enforcement of creditors' rights
generally, and there are no rights of rescission, set-offs, counterclaims or
other defenses with respect thereto. The full original principal amount of each
Mortgage Loan (net of any discounts) has been fully advanced or disbursed to the
mortgagor named therein. There is no requirement for future advances and any
and all requirements as to completion of any on-site or off-site improvements
and as to disbursements of any escrow funds therefor have been satisfied. To
Company's knowledge and except as disclosed to Lender, there is no default,
breach, violation or event of acceleration existing under the Mortgage or the
related Mortgage Note, and no event has occurred which, with the passage of time
or with notice and the expiration of any grace or cure period, would constitute
a default, breach, violation or event of acceleration; and the Company has not
waived any default, breach, violation or event of acceleration. The terms of
the Mortgage Loan have in no way been waived, impaired, changed or modified. To
Company's knowledge and except as disclosed to Lender, all tax identifications
and property descriptions are legally sufficient; tax segregation, where
required, has been completed. All taxes, governmental assessments, insurance
premiums, water, sewer and municipal charges, leasehold payments or ground rents
which previously became due and owing have been paid,
22
or an escrow of funds has been established in an amount sufficient to pay for
every such item which remains unpaid. The Pledged Mortgage has been duly
recorded and complies with all applicable state or local recording, registration
and filing laws and regulations.
(c) The Company has in its possession all Mortgage Loan Documents other
than those documents and instruments which are in the possession of the Lender
or in the possession of an Investor to whom delivery was made pursuant to a
bailee letter substantially in the form attached hereto as Exhibit D.
---------
(d) Each of the Mortgage Loans has been originated, made and serviced in
material compliance with all industry standards, applicable Investor and Insurer
requirements and all applicable federal, state and local statutes, regulations
and rules, including, without limitation, the Federal Truth-in-Lending Act of
1968, as amended, and Regulation Z thereunder, the Federal Fair Credit Reporting
Act, the Federal Equal Credit Opportunity Act, the Federal Real Estate
Settlement Procedures Act of 1974, as amended, and Regulation X thereunder, and
all applicable usury, licensing, real property, consumer protection and other
laws.
(e) Each Conventional Mortgage Loan is insured as to payment defaults by a
policy of primary mortgage guaranty insurance in the amount required where
applicable, and by an insurer approved, by the applicable Investor and all
provisions of such primary mortgage guaranty insurance policy have been and are
being complied with, such policy is in full force and effect, and all premiums
due thereunder have been paid. Each Mortgage Loan which is represented by the
Company to have, or to be eligible for, FHA insurance is insured, or eligible to
be insured, pursuant to the National Housing Act. Each Mortgage Loan which is
represented by the Company to be guaranteed, or to be eligible for guaranty, by
the VA is guaranteed, or eligible to be guaranteed, under the provisions of
Chapter 37 of Title 38 of the United States Code. As to each FHA insurance
certificate or each VA guaranty certificate, the Company has complied with
applicable provisions of the insurance for guaranty contract and federal
statutes and regulations, all premiums or other charges due in connection with
such insurance or guarantee have been paid, there has been no act or omission
which would or may invalidate any such insurance or guaranty, and the insurance
or guaranty is, or when issued, will be, in full force and effect with respect
to each Mortgage Loan. There are no defenses, counterclaims, or rights of
setoff affecting the Mortgage Loans or affecting the validity or enforceability
of any private mortgage insurance or FHA insurance applicable to the Mortgage
Loans or any VA guaranty with respect to the Mortgage Loans.
(f) (1) With respect to each Mortgage Loan which is secured by a first
lien on the Mortgaged Property: Each of the Mortgage Loans presently is covered
by a policy of hazard insurance (and flood insurance and insurance against other
insurable risks and hazards as required by the applicable Investor and the
agreements applicable to such Mortgage Loans), in amounts not less than
outstanding principal balance of the Mortgage Loans or such maximum lesser
amount as permitted by applicable law, all in a form usual and customary in the
industry and which is in full force and effect, and all amounts required to have
been paid under any such policy have been paid prior; and all taxes,
assessments, ground rents or other applicable charges or fees due and payable as
to each Mortgage Loan
23
have been paid. Each Loan is covered by a valid and assignable, full fee, life
of loan tax service contract, in full force and effect.
(2) With respect to each Mortgage Loan which is secured by a second
lien on the Mortgaged Property: Pursuant to the terms of the Mortgage, the
Mortgaged Property is subject to fire and casualty insurance with a standard
mortgagee clause and extended coverage which provides guaranteed replacement
value of the improvements securing such Mortgage Loan, or coverage in the amount
of the full replacement value of the improvements securing such Mortgage Loan or
the amount of the unpaid principal balance of the Mortgage Loan (plus the unpaid
principal balance of the first mortgage), whichever is less. The fire and
casualty insurance is standard in the industry for property similar (in terms of
the property type, value and location) to the Mortgaged Property. If the
Mortgaged Property is in an area identified in the Federal Registered by the
Federal Emergency Management Agency as having special flood hazards (and such
flood insurance has been made available), a flood insurance policy is in effect
with respect to the Mortgaged Property meeting the requirements of the current
guidelines of the Federal Insurance Administration with a generally acceptable
insurance carrier, in an amount representing coverage not less than the least of
(i) the unpaid principal balance of the Mortgage Loan (plus the unpaid principal
balance of the first mortgage), (ii) the full insurable value of the Mortgaged
Property, or (iii) the maximum amount of insurance available under the Flood
Disaster Protection Act of 1973. To the best of the Company's knowledge, all
such insurance policies (collectively, the "hazard insurance policy") meet the
requirements of the current guidelines of the Federal Insurance Administration,
conform to the requirements for the FNMA Sellers' Guide and the FNMA Services'
Guide, and a standard policy of insurance for the locale where the Mortgaged
Property is located. Such insurance is with insurers approved by the applicable
Investor and that no earthquake or other additional insurance is to be required
of any mortgagor thereunder or to be maintained on property acquired in respect
of a defaulted loan, other than pursuant to such applicable laws and regulations
as shall at any time be in force and as shall require such additional insurance.
The hazard insurance policy names (and will name) the mortgagor as the insured
and contains a standard mortgage loss payable clause in favor of the Company,
and its successors and assigns. The Company has caused and will cause to be
performed any and all acts required to be performed to preserve the rights and
remedies of the Company in any hazard insurance policies applicable to the
Mortgage Loans including, without limitation, any necessary notifications of
insurers and assignments of policies or interests therein.
(g) (1) With respect to each Mortgage Loan which is secured by a first
lien on the Mortgaged Property: A valid and enforceable title policy currently
in full force and effect has been issued for each such Mortgage Loan in an
amount not less than the original principal amount of such Mortgage Loan, which
title policy insures that the Mortgage relating thereto is a valid first lien on
the property therein described and that the mortgaged property is free and clear
of all encumbrances and liens having priority over the lien of the Mortgage, and
otherwise in compliance with the requirements of the applicable Investor. All
taxes, assessments, ground rents or other applicable charges or fees due and
payable as to each Mortgage Loan have been paid.
(2) With respect to each Mortgage Loan which is secured by a second
lien on the Mortgaged Property: Each Mortgage Loan is covered by a limited
liability lender's title
24
insurance policy or other generally acceptable form of policy of insurance (i)
issued by a title insurer qualified to do business in the jurisdiction where the
Mortgaged Property is located, insuring the Company, its successors and assigns,
as to the priority of its lien of the Mortgage in the original principal amount
of the Mortgage Loan and that the mortgaged property is free and clear of all
encumbrances and liens having priority over the lien of the Mortgage (other than
a first lien mortgage if the Mortgage Loan is a second mortgage) and (ii) in
compliance with the requirements of the applicable Investor. The Company and
its successors and assigns are the sole insureds of such lender's title
insurance policy. Such lender's title insurance policy is in full force and
effect, no claims have been made under such lender's title insurance policy and
no prior holder of the Mortgage, including the Company, has done, by act or
omission, anything which would impair the coverage of such lender's title
insurance policy. All taxes, assessments, ground rents or other applicable
charges or fees due and payable as to each Mortgage Loan have been paid.
(h) All escrow/custodial accounts have been established in accordance with
the requirements of FHA, VA and the applicable Investor and Insurer and all
other applicable laws and by the terms of the related Mortgages.
(i) There are no accrued liabilities of the Company with respect to the
Mortgage Loans.
(j) The Company, all prior servicers and, if different, the originating
mortgagee, have performed all obligations required of them to be performed under
or pursuant to each of the Servicing Contracts and related requirements of the
applicable Investor and Insurer and each other document or agreement relating to
the Mortgage Loans by which the Company is bound, and no event has occurred and
is continuing which, under the provisions of any such Servicing Contracts and
related requirements of the applicable Investor or other document or agreement,
but for the passage of time or the giving of notice, or both, would constitute
an event of default thereunder.
(k) The books, records, accounts and reports of the Company with respect to
the Mortgage Loans and Servicing Contracts have been prepared and maintained in
accordance with all applicable Investor and Insurer requirements.
(l) Each Mortgage Loan has been correctly described in the Advance Request
submitted to the Lender in respect of such Mortgage Loan. No Mortgage Loan for
which an Advance has been made hereunder is an Ineligible Mortgage Loan.
(m) Each Assignment (i) has been duly authorized by all necessary corporate
action by the Company, duly executed and delivered by the Company and is the
legal, valid and binding obligation of the Company enforceable in accordance
with its terms, and (ii) complies with all applicable laws including all
applicable recording, filing and registration laws and regulations and is
adequate and legally sufficient for the purpose intended to be accomplished
thereby, including, without limitation, the assignment of all of the rights,
powers and benefits of the Company as mortgagee.
(n) Upon the recordation of each Assignment, if Lender elects to do so, and
assuming the possession of the related Mortgage Note by the Lender, the Lender
will have a
25
valid and perfected first or second priority security interest in such Pledged
Mortgage and all proceeds, products and profits derived therefrom, including,
without limitation, all moneys, goods, insurance proceeds and other tangible or
intangible property received upon liquidation thereof, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting the
enforcement of creditors' rights generally and to general principles of equity.
ARTICLE 6
AFFIRMATIVE COVENANTS
The Company agrees that so long as the Commitment is outstanding or there
remain any obligations of the Company to be paid or performed under this
Agreement or under the Note, the Company shall:
6.1 Payment of Note. Punctually pay or cause to be paid the principal
---------------
and interest on and all other amounts due and payable hereunder and under the
Note in accordance with the terms hereof and thereof.
6.2 Financial Statements and Other Reports. Deliver to the Lender:
--------------------------------------
(a) Upon request by the Lender, statements of income and changes in
shareholders' equity of the Company (and, if applicable, its Subsidiaries, on a
consolidated basis) for the immediately preceding month, and related balance
sheet as of the end of the immediately preceding month, all in reasonable detail
and certified 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 sixty (60) days after the
close of each of the first three fiscal quarters of the Company in each fiscal
year: statements of income and changes in shareholders' equity of the Company
(and, if applicable, its Subsidiaries, on a consolidated basis) for the period
from the beginning of such fiscal year to the end of such fiscal quarter, and
the related balance sheet as at the end of such fiscal quarter, all in
reasonable detail and certified by the chief financial officer of the Company,
subject, however, to year-end audit adjustments.
(c) As soon as available and in any event within ninety (90) days after the
close of each fiscal year: audited financial statements of the Company,
including, a statement of income and changes in shareholders' equity 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 of an independent accounting
firm reasonably satisfactory to the Lender 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 of the end of, and for, such year.
(d) Together with each delivery of financial statements pursuant to
Sections 6.2(b) and 6.2(c) hereof, an Officer's Certificate stating that the
---------------------------------
signatory or signatories thereto
26
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 signatory or signatories thereto do not have knowledge of the existence
as of the date of the Officer's Certificate, of any Default, or if any 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.
(e) As soon as available and in any event within ninety (90) days after the
close of each fiscal year of the Company, current financial statements of each
of the Guarantors, signed by each of them, and dated not more than ninety (90)
days prior to the date of required delivery to the Lender hereunder.
(f) Such other reports in respect of the Mortgage Loans, in such detail and
at such times as the Lender in its discretion may request at any time or from
time to time.
(g) Copies of all regular or periodic financial and other reports, if any,
which the Company shall file with the Securities and Exchange Commission or any
governmental agency successor thereto.
(h) Copies of all audits, examinations and reports concerning the
operations of the Company from any Investor, Insurer or licensing authority.
(i) Any and all changes to the information set forth in the Credit
Application to assure that the same continues to be true, accurate and complete.
(j) 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.
All financial statements and reports furnished to the Lender hereunder
shall be prepared in accordance with GAAP, applied on a basis consistent with
that applied in preparing the financial statements as of, and for the period
ended on, the Statement Date (except to the extent otherwise required to conform
to good accounting practice).
6.3 Maintenance of Existence; Conduct of Business. Preserve and maintain
---------------------------------------------
its corporate existence in good standing and all of its rights, privileges,
licenses, qualifications and franchises necessary or desirable in the normal
conduct of its business, including, without limitation, its eligibility as an
approved lender and issuer as described under Section 5.13 hereof; conduct its
------------
business in an orderly and efficient manner; continuously maintain a net worth
of acceptable assets as required by its Investors for maintaining the Company's
status as a FHA approved lender; and make no change in the nature or character
of its business or engage in any business in which it was not engaged on the
date of this Agreement.
6.4 Compliance with Applicable Laws. Comply with the requirements of all
-------------------------------
applicable laws, rules, regulations and orders of any governmental authority and
prudent
27
industry standards, a breach of which could materially adversely affect its
business, operations, assets, or financial condition or which could materially
adversely impair the ability of Company to perform its obligation hereunder,
except where contested in good faith and by appropriate proceedings.
6.5 Inspection of Properties and Books. Permit authorized representatives
----------------------------------
of the Lender to discuss the business, operations, assets and financial
condition of the Company and its Subsidiaries with their officers and employees
and to examine their books of account and make copies or extracts thereof, all
at such reasonable times as the Lender may request. The Company will provide
its accountants with a copy of this Agreement promptly after the execution
hereof and will instruct its accountants to answer candidly and fully any and
all questions that the officers of the Lender or any authorized representatives
of the Lender 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 and the Company accountants held in accordance
with this authorization.
6.6 Notice. Give prompt written notice, in reasonable detail, to the
------
Lender of (a) any material 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), or any such material action, suit or proceeding threatened against the
Company or any of its Subsidiaries, (b) the filing, recording or assessment of
any federal, state or local tax lien against it, 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
actual or threatened suspension, revocation or termination of the Company's
eligibility, in any respect, as an approved lender and issuer as described under
Section 5.13 hereof, (e) the suspension, revocation or termination of any
------------
existing credit or investor relationship made to the Company to facilitate the
sale and/or origination of residential mortgages, (f) the transfer or loss 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 or loss, if known to
the Company, (g) any demand by any Investor or Insurer for either the repurchase
of a mortgage loan or indemnification, and (h) 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 is a party or to which the Company, its properties or assets
may be subject.
6.7 Payment of Debt, Taxes, etc. Pay and perform all obligations of the
---------------------------
Company, and cause to be paid and performed all obligations of its Subsidiaries,
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 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
28
adequate bond or adequate insurance or which are being contested in good faith
and by proper proceedings which are being reasonably and diligently pursued.
6.8 Insurance. Will 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, GNMA or FHLMC 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 and otherwise
acceptable to the Lender; and (c) within thirty (30) days after notice from the
Lender, such additional insurance as the Lender shall reasonably require, all at
the sole expense of the Company. Copies of all such policies shall be furnished
to the Lender, without charge, upon request of the Lender.
6.9 Insured Closings. Except when prohibited by applicable law, if
----------------
required by Lender, will obtain and maintain in effect at all times an insured
closing letter from each title insurance company from which mortgagee title
insurance is procured, indemnifying and holding the Company harmless from and
against the failure of the agents and approved title attorneys of such title
insurance companies to comply with the written closing instructions of the
Company as to the Mortgage Loans pledged hereunder and will provide the Lender
with evidence of the same from time to time upon request; provided, however, an
insured closing letter shall not be required in connection with any advance on a
Mortgage Loan secured by a second lien on the Mortgaged Property. The Company
agrees to indemnify and hold the Lender harmless from and against any loss,
including reasonable attorneys' fees and costs, attributable to the failure of
such title insurance company, agent or approved attorney to comply with the
disbursement or instruction letter or letters of the Company or of the Lender
relating to such 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 pursuant hereto.
6.10 Subordination of Certain Indebtedness. Will cause any indebtedness of
-------------------------------------
the Company, incurred after the date of this Agreement, to any Guarantor or to
any Subsidiary or Affiliate of the Company to be subordinated to all obligations
of the Company under this Agreement and the Note, by the execution of a
subordination agreement, in form and substance satisfactory to the Lender in its
sole discretion.
6.11 Other Loan Obligations. Will perform all obligations under the terms
----------------------
of each loan agreement, note, mortgage, security agreement or debt instrument by
which the Company is bound or to which any of its property is subject, and will
promptly notify the Lender in writing of any default under, or the cancellation
or reduction of, any of its other mortgage warehousing lines of credit or
agreements with any other lender. The Company shall, within 30 days of the date
of this Agreement, cause to be terminated of record the financing statements
filed by each of the Prior Creditors.
6.12 Use of Proceeds of Advances. Will use the proceeds of each Advance
---------------------------
solely for the purpose of financing related Mortgage Loans.
29
6.13 Special Affirmative Covenants Concerning Collateral.
----------------------------------------------------
(a) The Company warrants and will defend the right, title and interest of
the Lender in and to the Mortgage Loans against the claims and demands of all
persons whomsoever.
(b) The Company shall service or cause to be serviced all Mortgage Loans in
accordance with the standard requirements of the Investors under the respective
Purchase Commitments covering the same and all applicable governmental
requirements, including, without limitation, taking all actions necessary to
enforce the obligations of the obligors under such Mortgage Loans. The Company
shall hold all escrow funds collected in respect of Mortgage Loans in trust,
without commingling the same with non-custodial funds, and apply the same for
the purposes for which such funds were collected.
(c) The Company shall execute and deliver to the 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 the State of Illinois, or any other applicable law, in
addition to all rights provided for herein.
(d) The Company shall immediately notify the Lender of any default under,
or of the termination of, or the rejection for purchase under, any Purchase
Commitment relating to any Mortgage Loan.
(e) The Company will 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. Not later than the earlier
of the expiration of a Purchase Commitment or the deadline for acquisition of
any Mortgage Loan by the Investor thereunder, the Company will cause to be
delivered to the Investor and/or the Company, as applicable, all forms, letters,
documents, instruments, authorizations, releases, schedules and other materials
which may be required by the applicable Investor and/or the Lender, as
applicable, in connection with the acquisition of the Mortgage Loan by the
Investor.
(f) The Company shall 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, shall make
available to the Lender the copies of all Mortgage Notes and Mortgages included
in Mortgage Loans, 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.
30
ARTICLE 7
NEGATIVE COVENANTS
The Company agrees that so long as the Commitment is outstanding or
there remains any obligation of the Company to be paid or performed hereunder or
under the Note, the Company shall not, either directly or indirectly, without
the prior written consent of the Lender:
7.1 Contingent Liabilities. Assume, guarantee, endorse, or otherwise
----------------------
become liable for the obligation of any person or entity except by endorsement
of negotiable instruments for deposit or collection in the ordinary course of
business.
7.2 Sale or Pledge of Servicing Contracts. Sell, pledge or grant a
-------------------------------------
security interest in any existing or future Servicing Contracts, or omit to take
any action required to keep all such Servicing Contracts in full force and
effect.
7.3 Merger; Sale of Assets; Acquisitions; Change in Control; Change
------------------------------------ --------------------------
of Senior Management. Liquidate, dissolve, consolidate or merge or sell,
--------------------
transfer or otherwise dispose of, any substantial part of its assets, nor
acquire substantially all of the assets of another, nor permit a change in any
of the following: (i) either ownership beneficially or of record of more than
ten percent (10%) of the voting stock of Company, (ii) either ownership
beneficially or of record of more than ten percent (10%) of the voting stock of
any Person which controls the Company, or (iii) senior management of the Company
or of any Person which controls the Company.
7.4 Deferral of Subordinated Debt. Pay in advance of the stated
-----------------------------
maturity thereof any Subordinated Debt of the Company or, if an Event of Default
hereunder shall have occurred, make any payment of any kind thereafter on such
Subordinated Debt until all obligations of the Company hereunder and under the
Note have been paid and performed in full.
7.5 Loss of Eligibility. Take, or fail to take, any action that
-------------------
would cause the Company to lose all or any part of its status as an eligible
lender, as described under Section 5.13 hereof.
------------
7.6 Debt to Adjusted Tangible Net Worth Ratio. Permit the ratio of
-----------------------------------------
Debt to Adjusted Tangible Net Worth of the Company (and its Subsidiaries, on a
consolidated basis) at any time to exceed 12 to 1 (12:1).
7.7 Minimum Tangible Net Worth. Permit Adjusted Tangible Net Worth
--------------------------
of the Company (and its Subsidiaries, on a consolidated basis) at any time to be
less than Four Million Two Hundred Thousand Dollars ($4,200,000).
7.8 Loans to Officers, Employees and Shareholders. Make any personal
---------------------------------------------
loans or advances to any officers, employees or shareholders.
7.9 Distributions. Declare any dividend or incur any liability to
-------------
make any other payment or distribution of cash or other property or assets to
the holders of the Company's
31
stock (a) which exceeds, in any calendar year, in the aggregate, fifty percent
(50%) of the prior year's net income (as determined in accordance with GAAP),
(b) if an Event of Default exists and is continuing, or (c) if such declaration
or incurrence of liability would cause a Default to exist.
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 Mortgage
Loan pledged hereunder.
(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) 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.
ARTICLE 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 when due; 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
or in the payment of any contingent obligation beyond any period of grace
provided; or breach or default with respect to any other material term of any
other indebtedness or of any loan agreement, note, mortgage, security agreement,
indenture or other agreement relating thereto, if the effect of such failure,
default or breach is to cause, or to permit the holder or holders thereof (or a
trustee on behalf of such holder or holders) to cause, indebtedness of the
Company or its Subsidiaries in the aggregate amount of $100,000 or more to
become or be declared due prior to its stated maturity (upon the giving or
receiving of notice, lapse of time, both, or otherwise); or
(c) Failure of the Company to perform or comply with any term or
condition applicable to it contained in Section 2.9, Sections 6.1 through 6.13,
----------- -------------------------
inclusive, or Sections 7.1 through 7.8, inclusive, of this Agreement; or
------------------------
(d) Any of the Company's representations or warranties made herein or
in any statement or certificate at any time given by the Company in writing
pursuant hereto or in connection herewith shall be false in any material respect
on the date as of which made; or
32
(e) The Company shall default in the performance of or compliance with
any term contained in this Agreement other than those referred to above in
subsections 8.1(a), (c) or (d) and such default shall not have been remedied or
------------------------------
waived within thirty (30) days after receipt of notice from the Lender of such
default; or
(f) (1) A court having jurisdiction shall enter a decree or order for
relief in respect of the Company or any of its Subsidiaries or of any Guarantor
in an involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, which decree or order is not stayed; or
(2) any other similar relief shall be granted under any applicable federal or
state law; or a decree or order of a court having jurisdiction for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or other
officer having similar powers over the Company or any of its Subsidiaries or of
any Guarantor, or over all or a substantial part of their respective property,
shall have been entered; or the involuntary appointment of an interim receiver,
trustee or other custodian of the Company or any of its Subsidiaries or of any
Guarantor 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 or any of its Subsidiaries or of
any Guarantor, and the continuance of any such events in this clause (2) for
sixty (60) days unless dismissed, bonded off or discharged; or
(g) The Company or any of its Subsidiaries or any Guarantor shall have
an order for relief entered with respect to it or commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or shall consent to the entry of an order for relief in an
involuntary case, or to the conversion to an involuntary case, under any such
law, or shall consent to the appointment of or taking possession by a receiver,
trustee or other custodian for all or a substantial part of its property; the
making by the Company or any of its Subsidiaries or any Guarantor of any
assignment for the benefit of creditors; or the inability or failure of the
Company or any of its Subsidiaries or of any Guarantor, or the admission by the
Company or any of its Subsidiaries or any Guarantor in writing of its inability
to pay its debts as such debts become due; or
(h) Any money judgment, writ or warrant of attachment, or similar
process involving in any case an amount in excess of $25,000 shall be entered or
filed against the Company or any of its Subsidiaries or any Guarantor 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
(i) Any order, judgment or decree shall be entered against the Company
decreeing the dissolution, liquidation or split up of the Company and such
order shall remain undischarged or unstayed for a period in excess of twenty
(20) days; or
(j) 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
33
guaranteed vested benefits under the Plan exceeds the then current value of
assets accumulated in such Plan by more than $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
(k) 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 $25,000; or
(l) Any default shall occur (and shall continue beyond the applicable
cure period therefor, if any) under the terms of any note, loan or credit
agreement, mortgage, pledge, guaranty, indemnity or other instrument which
evidences obligations or other indebtedness of the Company; or
(m) The Company shall purport to disavow its obligations hereunder or
shall contest the validity or enforceability of this Agreement or Lender's
security interest in any Collateral; or the Lender's security interest in any
portion of the Collateral shall become unenforceable or otherwise impaired.
8.2 Remedies.
--------
(a) Upon the occurrence of any Event of Default described in Section
-------
8.1(f) or (g) the unpaid principal amount of and accrued interest on the Note
-------------
shall automatically become due and payable, without presentment, demand or other
requirements of any kind, all of which are hereby expressly waived by the
Company.
(b) Upon the occurrence of any Event of Default (other than those
described in Section 8.1(f) or (g)), the Lender may, by written notice to the
---------------------
Company declare all or any portion of the Advances to be due and payable
whereupon the same shall forthwith become due and payable, together with all
accrued interest thereon, and the obligation of the Lender to make Advances
shall thereupon terminate.
(c) Upon the occurrence of any Event of Default, the Lender may also
do any one or more or all of the following:
(1) Foreclose upon or otherwise enforce its security interest in and
Lien on all of the Collateral or on any portion thereof to secure all
payments and performance of obligations owed by the Company under this
Agreement.
(2) Notify all obligors of Collateral or on any portion thereof that
the Collateral has been assigned to the 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 Investor or
any portion of the Collateral, on terms acceptable to the Lender; enforce
payment and prosecute any action or proceeding with respect to and any and
all Collateral; and where any such Collateral is in default,
34
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 of all or
any item of Collateral requiring servicing and perform all obligations
required in connection with Purchase Commitments, such third party's fees
to be paid by the Company.
(4) Exercise all rights and remedies of a secured creditor under the
Uniform Commercial Code of the State of Illinois or the state in which the
Collateral is located, including but not limited to selling the Collateral
at public or private sale. The Lender shall give the Company not less than
ten (10) days' notice of any such public sale or of the date after which
private sale may be held. The Company agrees that ten (10) days' notice
shall be reasonable notice. At any such sale the Collateral may be sold as
an entirety or in separate parts, as the Lender may determine. 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. Lender shall have the right upon any such public sale or
sales, and, to the extent permitted by law, upon any such private sale or
sales, to purchase the whole or any part of said Collateral so sold, free
of any right or equity of redemption, which equity of redemption the
Company hereby releases. 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 all or any portion of the
Collateral or to foreclose the pledge and sell all or any portion of the
Collateral under a judgment or decree of a court or courts of competent
jurisdiction, or both.
(5) Proceed against the Company on the Note or against the Guarantors
under the Guaranty or both.
(6) Pursue any rights and/or remedies available at law or in equity
against the Company or the Guarantors or both.
(d) The Lender shall incur no liability as a result of the sale of the
Collateral, or any part thereof, at any private sale. The Company hereby waives
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 interest accrued
thereon, even if the Lender accepts the first offer received and does not offer
the Collateral, or any part thereof, to more than one offeree.
(e) The Company waives any right to require the Lender to (1) proceed
against any Person, (2) proceed against or exhaust all or any of the Collateral
or pursue its rights
35
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.
(f) 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 rate of
interest specified in the Note, from the time of payment until repaid, shall
become a part of principal balance outstanding under the Note.
(g) 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 limit the foregoing, all defenses
based on the statute of limitations are hereby waived by the Company. 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 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 amounts due (other than principal
------
and interest) under the Note or this Agreement;
Third, to the payment of interest accrued and unpaid on the Note;
-----
Fourth, to the payment of the outstanding principal balance of the
------
Note; 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 are
insufficient to cover the costs and expenses of such sale, as aforesaid,
and the payment in full of the Note and all other amounts due hereunder,
the Company shall remain liable for any deficiency.
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
36
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 Mortgage Loans payable to the order of the Company, or to
receive, endorse and collect all checks made payable to the order of the Company
representing any payment on account of the principal of or interest on, or the
proceeds of sale of, any of the Mortgage Loans or 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 deposits of money or property or any other indebtedness at any time
held or owing by the Lender to or for the credit of the account of the Company
against and on account of the obligations and liabilities of the Company under
the Note and this Agreement, irrespective of whether or not the Lender shall
have made any demand hereunder and whether or not said obligations and
liabilities shall have matured, provided, however, that the aforesaid right of
set-off shall not apply to any deposits of escrow monies being held on behalf of
the mortgagors under Mortgage Loans or other third parties.
8.6 Reasonable Assurances. If, at any time during the term of the
---------------------
Agreement, Lender has reason to believe that Company is not conducting its
business in accordance with, or otherwise is not satisfying: (i) all applicable
statutes, regulations, rules, and notices of federal, state, or local
governmental agencies or instrumentalities, all applicable requirements of
Investors and Insurers and prudent industry standards or (ii) all applicable
requirements of Lender, as set forth in this Agreement, then, Lender shall have
the right to demand, pursuant to written notice from Lender to Company
specifying with particularity the alleged act, error or omission in question,
reasonable assurances from Company that such a belief is in fact unfounded, and
any failure of Company to provide to Lender such reasonable assurances in form
and substance reasonably satisfactory to Lender, within the time frame specified
in such written notice, shall itself constitute an Event of Default hereunder.
Company hereby authorizes Lender to take such actions as may be necessary or
appropriate to confirm the continued eligibility of Company for Advances
hereunder, including without limitation (i) ordering credit reports and (ii)
contacting mortgagors, licensing authorities and Investors or Insurers.
ARTICLE 9
REIMBURSEMENT OF EXPENSES; INDEMNITY
The Company shall:
9.1 Cost of Enforcement. Pay all out-of-pocket costs and expenses of the
-------------------
Lender, including reasonable attorney's fees, in connection with the enforcement
and administration
37
of this Agreement, the Note, and other documents and instruments related hereto
and the making and repayment of the Advances and the payment of interest
thereon.
9.2 Payments of Taxes. Pay, and hold the Lender and any holder of the
-----------------
Note harmless from and against, any and all present and future stamp,
documentary and other similar taxes with respect to the foregoing matters and
save the Lender and the holder or holders of the Note harmless from and against
any and all liabilities with respect to or resulting from any delay or omission
to pay such taxes.
9.3 Indemnification. Indemnify, pay and hold harmless the Lender and any
---------------
of its officers, directors, employees or agents and any subsequent holder of the
Note from and against any and all liabilities, obligations, losses, damages,
penalties, judgments, suits, costs, expenses and disbursements of any kind
whatsoever (the "Indemnified Liabilities") which may be imposed upon, incurred
by or asserted against the Lender or such holder in any way relating to or
arising out of this Agreement, the Note, or any other document referred to
herein or any of the transactions contemplated hereby or thereby, except for
liabilities, losses and damages solely resulting from the gross negligence or
wilful misconduct of the Lender.
ARTICLE 10
DELIVERIES OF COLLATERAL DOCUMENTS
The Lender exclusively shall deliver Pledged Mortgages to the Investor
under the Purchase Commitment with respect thereto for its examination and
purchase, against a bailee letter substantially in the form attached hereto as
Exhibit D. The Lender may deliver any document relating to the Collateral to
---------
the Company for correction or completion against a properly executed trust
receipt in the form approved by the Lender with instructions to the Company to
either return the corrected document to the Lender within ten (10) Business Days
after such delivery or redeem the Mortgage Loan from pledge. In the case of
deliveries of Pledged Mortgages by the Lender, the Company shall deliver to the
Lender a letter, to accompany the delivery, confirming the security interest of
the Lender and designating the Lender as payee under any Purchase Commitment.
ARTICLE 11
MISCELLANEOUS
11.1 Relationship of Parties. The relationship between Lender and the
-----------------------
Company is limited to that of creditor/secured party, on the one hand, and
borrower, on the other hand. The provisions herein for compliance with
financial covenants and delivery of financial statements, are intended solely
for the benefit of Lender to protect its interests as lender in assuring
performance of the obligations hereunder, and nothing contained in this
Agreement shall be construed as permitting or obligating 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 joint venture, agency, fiduciary, trustee, or other
relationship between the parties other than as explicitly and specifically
stated in this Agreement. The Company acknowledges that it has had the
opportunity to obtain the advice of experienced counsel of its own choosing in
connection with the
38
negotiation and execution of this Agreement and to obtain the advice of such
counsel with respect to all matters contained herein. The Company further
acknowledges that it is experienced with respect to financial and credit matters
and has made its own independent decision to execute and deliver this Agreement.
11.2 Recourse. The Company acknowledges and agrees that it is fully liable
--------
for repayment of all Advances and all sums due hereunder or under the Note and
for performance of all obligations contained in this Agreement.
11.3 Notices. All notices, demands, consents, requests and other
-------
communications required or permitted to be given or made hereunder
(collectively, "Notices") shall be in writing and shall be mailed (first class,
return receipt requested and postage prepaid) or delivered in person or by
overnight delivery service or by facsimile, addressed to the respective parties
hereto at their respective addresses set forth below or, as to any such party,
at such other address as may be designated by it in a Notice to the other:
If to the Company:
Preferred Credit Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, CEO
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
_________________________
_________________________
_________________________
Attention: _______________
Facsimile No. _______________
If to the Lender:
LaSalle National Bank
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
All Notices shall be conclusively deemed to have been properly given or made
when duly delivered, if delivered in person or by overnight delivery service or
by facsimile, or on the third (3rd) Business Day after being deposited in the
mail, if mailed in accordance herewith.
39
11.4 Terms Binding Upon Successors; Survival. The terms and provisions of
---------------------------------------
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. All representations,
warranties, covenants and agreements herein contained on the part of the Company
shall survive the making of any Advance and the execution of the Note, and shall
be effective so long as the Commitment is outstanding or there remains any
obligation of the Company hereunder or under the Note to be paid or performed.
11.5 Assignment. This Agreement may not be assigned by the Company. This
----------
Agreement and the Note, 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 such transferee or assignee thereof may enforce
this Agreement, the Note and such security interest.
11.6 Amendments. This Agreement and the Exhibits hereto may be modified or
----------
amended by the Lender at any time upon thirty (30) days notice to the Company.
Such modification or amendment will not take effect if, within fifteen (15) days
from the date of such notice, the Lender receives a written objection to such
modification or amendment from the Company. If no such objection is received by
the Lender such modification or amendment will automatically become effective
upon the thirtieth (30th) day from the date of such notice by the Lender.
Notwithstanding the foregoing, Lender may at any time, upon written notice to
the Company, modify any funding procedures, documentation or times set forth
herein or in any exhibit hereto and the Company hereby consents to any such
modifications.
11.7 No Waiver; Remedies Cumulative. No failure or delay on the part of
------------------------------
the Company or the Lender or any holder of the Note in exercising any right,
power or privilege hereunder and no course of dealing between the Company and
the Lender or the holder of the Note shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege hereunder
or under the Note preclude any other or further exercise thereof or the exercise
of any other right, power or privilege hereunder. The rights and remedies
herein expressly provided are cumulative and not exclusive of any rights or
remedies which the Company or the Lender or the holder of the Note would
otherwise have. No notice to or demand on the Company in any case shall entitle
the Company to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Lender or the holder
of the Note to any other or further action in any circumstances without notice
or demand.
11.8 Invalidity. In case any one or more of the provisions contained in
----------
this Agreement shall for any reason be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions hereof, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had not been
included.
11.9 Participations. The Lender may from time to time sell or otherwise
--------------
grant participations in the Commitment and the Note, and the holder of any such
participation, if the participation agreement so provides, (i) shall, with
respect to its participation, be entitled to all of the rights of the Lender and
(ii) may exercise any and all rights of setoff or banker's
40
lien with respect thereto, in each case as fully as though the Company were
directly indebted to the holder of such participation in the amount of such
participation; provided, however, that the Company shall not be required to send
or deliver to any of the participants other than the Lender any of the materials
or notices required to be sent or delivered by it under the terms of this
Agreement, nor shall it have to act except in compliance with the instructions
of the Lender.
11.10 Integration. This Agreement, together with the Note, and other
-----------
documents executed pursuant to the terms hereof, constitute the entire agreement
between the parties hereto, with respect to the subject matter hereof.
11.11 Additional Instruments, etc. The Company shall execute and deliver
---------------------------
such further instruments and shall do and perform all matters and things
necessary or expedient to be done or observed for the purpose of effectively
creating, maintaining and preserving the security and benefits intended to be
afforded by this Agreement.
11.12 Governing Law. This Agreement and the rights and obligations of the
-------------
parties hereunder and under the Note shall be construed in accordance with and
governed by the laws of the State of Illinois.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
41
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
COMPANY: PREFERRED CREDIT CORPORATION, a California
corporation
By:
-----------------------------------------
Name:
---------------------------------------
Its:
----------------------------------------
LENDER: LA SALLE NATIONAL BANK
By:
-----------------------------------------
Name:
---------------------------------------
Its:
----------------------------------------
42
EXHIBITS
Exhibit A - Form of Advance Request
Exhibit B - Procedures and Documentation
Exhibit C - Form of Investor Instructions
Exhibit D - Form of Bailee Letter
SCHEDULES
Schedule 1.1 - List of Servicing Contracts
Schedule 5.1 - List of Subsidiaries
43
EXHIBIT A
---------
FORM OF ADVANCE REQUEST
-----------------------
44
EXHIBIT B
---------
PROCEDURES AND DOCUMENTATION
----------------------------
45
EXHIBIT C
---------
FORM OF INVESTOR INSTRUCTIONS
-----------------------------
46
EXHIBIT D
---------
FORM OF BAILEE LETTER
---------------------
[Investor Name & Address]
-----------------------
Re: SECURITY INTEREST OF LA SALLE NATIONAL BANK IN MORTGAGE NOTES
Dear Sir or Madam:
Pursuant to the purchase contracts entered and to be entered into between
you and Preferred Credit Corporation ("the Company"), formerly known as T.A.R.
Preferred Mortgage Corporation, the enclosed mortgage note and related documents
("Mortgage Collateral") are being sent to you for purchase. Security interests
in the Mortgage Collateral have been granted by the Company to LaSalle National
Bank (the "Lender"), to secure the Company's warehouse borrowings. The Mortgage
Collateral constitutes collateral for such warehouse borrowings.
The Mortgage Collateral is being sent to you on the understanding that you
will hold it for the Lender, as its agent and bailee, subject to the direction
and control of only the Lender, in order to preserve the Lender's security
interests in the Mortgage Collateral until it is purchased by you or returned to
the Lender. Further, you may not take any orders or directions from the Company
with respect to the Mortgage Collateral or take any action with respect to the
Mortgage Collateral that may be inconsistent with the terms of this letter
without the prior written consent of the Lender.
By your receipt of the Mortgage Collateral, you agree that you will hold
the Mortgage Collateral sent to you only as the agent and bailee of the Lender,
and as such will take no action with respect to the Mortgage Collateral other
than to hold it for examination for no longer than thirty (30) days from the
date it is sent to you. Prior to the expiration of such 30-day period, you
agree to (i) remit the purchase price, without set-off or deduction, to the
Lender in the manner described below immediately upon settlement or (ii) return
the Mortgage Collateral to the Lender immediately upon your determination that
you will not be purchasing such Mortgage Collateral. Prior to remitting payment
for the Mortgage Collateral, you agree not surrender or transfer any the
Mortgage Collateral to any party other than the Lender. Further, upon receipt
of a written notice from the Lender prior to settlement of your purchase, you
agree to return to the Lender, or such other person as the Lender designates in
the notice, all Mortgage Collateral then held by you.
Upon receipt of Mortgage Collateral sent to you for purchase pursuant to
the terms of the purchase contracts and this letter, you may purchase such
Mortgage Collateral only by forwarding the purchase price, without set-off or
deduction, in immediately available funds by wire transfer to LaSalle National
Bank, Attention: ____________________ for the account of Preferred Credit
Corporation, referring to the specific Mortgage Collateral.
47
Any Mortgage Collateral that does not conform to your requirements should
be immediately returned to Lender at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: ____________________, referring to Preferred Credit
Corporation.
The express terms of this letter will not be altered by any prior dealings
or course of conduct. If the Lender must institute legal action against you to
recover the Mortgage Collateral or the proceeds thereof as a result of your
failure to comply with the terms of this letter, the Lender shall be entitled to
recover all attorneys' fees and costs and expenses incurred in connection
therewith.
PLEASE CONFIRM YOUR AGREEMENT TO THE TERMS OF THIS LETTER BY SIGNING
AND RETURNING A COPY OF THIS LETTER TO THE LENDER. YOUR FAILURE TO DO SO WILL
NOT IN ANY WAY REDUCE YOUR OBLIGATIONS WITH RESPECT TO THE MORTGAGE COLLATERAL
AS STATED HEREIN.
Very truly yours,
LA SALLE NATIONAL BANK
By:
-----------------------------------------
Name:
---------------------------------------
Its:
----------------------------------------
ACKNOWLEDGEMENT
---------------
The undersigned hereby agrees to the terms and conditions set forth in the
above letter.
[Investor Name]
By:
-----------------------------------------
Name:
---------------------------------------
Its:
----------------------------------------
48
SCHEDULE 1.1
------------
LIST OF SERVICING CONTRACTS
---------------------------
49
SCHEDULE 5.1
------------
LIST OF SUBSIDIARIES
--------------------
50