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CWT Draft December 29, 1998
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AMENDED AND RESTATED
MASTER LOAN AND SECURITY AGREEMENT
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DATED AS OF JANUARY 8, 1999
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HANOVER CAPITAL MORTGAGE HOLDINGS, INC.
AS BORROWER
AND
HANOVER CAPITAL PARTNERS, LTD
AS BORROWER
AND
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MORTGAGE CAPITAL INC.
AS LENDER
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TABLE OF CONTENTS
RECITALS 1
SECTION 1. DEFINITIONS AND ACCOUNTING MATTERS 1
1.01 CERTAIN DEFINED TERMS 1
1.02 ACCOUNTING TERMS AND DETERMINATIONS 10
SECTION 2. LOANS, NOTE AND PREPAYMENTS 10
2.01 LOANS 10
2.02 AMENDED AND RESTATED NOTE 10
2.03 PROCEDURE FOR BORROWING 11
2.04 LIMITATION ON TYPES OF LOANS; ILLEGALITY 12
2.05 REPAYMENT OF LOANS; INTEREST 12
2.06 MANDATORY PREPAYMENTS OR PLEDGE 12
2.07 OPTIONAL PREPAYMENTS 13
2.08 INDEMNITY 13
2.09 EXTENSION OF TERMINATION DATE 13
SECTION 3. PAYMENTS; COMPUTATIONS; ETC. 14
3.01 PAYMENTS 14
3.02 COMPUTATIONS 14
3.03 REQUIREMENTS OF LAW 14
3.04 COMMITMENT FEE 15
3.05 EXIT FEE 15
SECTION 4. COLLATERAL SECURITY 16
4.01 COLLATERAL; SECURITY INTEREST 16
4.02 FURTHER DOCUMENTATION 17
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4.03 CHANGES IN LOCATIONS, NAME, ETC. 17
4.04. LENDER'S APPOINTMENT AS ATTORNEY-IN-FACT 17
4.05. PERFORMANCE BY LENDER OF BORROWERS' OBLIGATIONS 18
4.06. PROCEEDS 18
4.07. REMEDIES 19
4.08. LIMITATION ON DUTIES REGARDING PRESERVATION OF COLLATERAL 20
4.09. POWERS COUPLED WITH AN INTEREST 20
4.10 RELEASE OF SECURITY INTEREST 20
SECTION 5. CONDITIONS PRECEDENT 20
5.01 INITIAL LOAN 20
5.02 INITIAL AND SUBSEQUENT LOANS 21
SECTION 6. REPRESENTATIONS AND WARRANTIES 22
6.01 EXISTENCE 23
6.02 FINANCIAL CONDITION 23
6.03 LITIGATION 23
6.04 NO BREACH 23
6.05 ACTION 24
6.06 APPROVALS 24
6.07 MARGIN REGULATIONS 24
6.08 TAXES 24
6.09 INVESTMENT COMPANY ACT 24
6.10 COLLATERAL; COLLATERAL SECURITY 24
6.11 CHIEF EXECUTIVE OFFICE 25
6.12 LOCATION OF BOOKS AND RECORDS 25
6.13 HEDGING 25
6.14 TRUE AND COMPLETE DISCLOSURE 25
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6.15 TANGIBLE NET WORTH 25
6.16 ERISA 25
6.17 PERCENTAGE OWNERSHIP 26
SECTION 7. COVENANTS OF THE BORROWERS 26
7.01 FINANCIAL STATEMENTS 26
7.02 LITIGATION 28
7.03 EXISTENCE, ETC. 28
7.04 PROHIBITION OF FUNDAMENTAL CHANGES 29
7.05 BORROWING BASE DEFICIENCY 29
7.06 NOTICES 29
7.07 HEDGING 29
7.08 REPORTS 29
7.09 UNDERWRITING GUIDELINES 30
7.10 TRANSACTIONS WITH AFFILIATES 30
7.11 LIMITATION ON LIENS 30
7.12 LIMITATION ON GUARANTEES 30
7.13 LIMITATION ON DISTRIBUTIONS 30
7.14 MAINTENANCE OF TANGIBLE NET WORTH 30
7.15 MAINTENANCE OF RATIO OF TOTAL INDEBTEDNESS TO TANGIBLE NET WORTH 30
7.16 MAINTENANCE OF PROFITABILITY 31
7.17 SERVICING TAPE 31
7.18 MAINTENANCE OF LIQUIDITY 31
7.19 REQUIRED FILINGS 31
7.20 NO ADVERSE SELECTION 31
7.21 LIMITATION ON SUBSIDIARY FORMATION 31
SECTION 8. EVENTS OF DEFAULT 31
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SECTION 9. REMEDIES UPON DEFAULT 33
SECTION 10. NO DUTY OF LENDER 34
SECTION 11. MISCELLANEOUS 34
11.01 WAIVER 34
11.02 NOTICES 34
11.03 INDEMNIFICATION AND EXPENSES 34
11.04 AMENDMENTS 35
11.05 SUCCESSORS AND ASSIGNS 35
11.06 SURVIVAL 35
11.07 CAPTIONS 35
11.08 COUNTERPARTS 36
11.09 LOAN AGREEMENT CONSTITUTES SECURITY AGREEMENT; GOVERNING LAW 36
11.10 SUBMISSION TO JURISDICTION; WAIVERS 36
11.11 WAIVER OF JURY TRIAL 36
11.12 ACKNOWLEDGMENTS 37
11.13 HYPOTHECATION OR PLEDGE OF LOANS 37
11.14 SERVICING 37
11.15 PERIODIC DUE DILIGENCE REVIEW 38
11.16 SET-OFF 38
11.17 INTENT 39
11.18 INTENT 39
SCHEDULES
SCHEDULE 1 Representations and Warranties re: Mortgage Loans
SCHEDULE 2 Filing Jurisdictions and Offices
EXHIBITS
EXHIBIT A Form of Promissory Note EXHIBIT B Form of Custodial Agreement
EXHIBIT C Form of Opinion of Counsel to Borrower
EXHIBIT D Form of Request for Borrowing
EXHIBIT E-1 Form of Borrower's Release Letter
EXHIBIT E-2 Form of Warehouse Lender's Release Letter
EXHIBIT F Underwriting Guidelines
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EXHIBIT G Form of Blocked Account Agreement
EXHIBIT H Form of Servicer Notice
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AMENDED AND RESTATED MASTER LOAN AND SECURITY AGREEMENT
AMENDED AND RESTATED MASTER LOAN AND SECURITY AGREEMENT, dated as of
January 8, 1999, between HANOVER CAPITAL MORTGAGE HOLDINGS, INC., ("HCMH"); a
Maryland corporation, HANOVER CAPITAL PARTNERS, LTD, a New York corporation
("HCP", together with HCMH, the "BORROWERS"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MORTGAGE
CAPITAL INC., a Delaware corporation (the "LENDER").
RECITALS
The Borrowers have requested that the Lender from time to time make
revolving credit loans to it to finance certain residential mortgage loans owned
by the Borrowers, and the Lender is prepared to make such loans upon the terms
and conditions hereof. Accordingly, the parties hereto agree as follows:
Hanover Capital Mortgage Holdings, Inc. entered into that certain Master
Loan and Security Agreement, dated December 8, 1997 (the "EXISTING AGREEMENT")
with the Lender to finance certain mortgage loans on the terms and conditions as
set forth in the Existing Agreement. Pursuant to that certain Amendment #3 and
Joinder, dated as of September 21, 1998, Hanover Capital Mortgage Holdings, Inc.
and the Lender agreed to add Hanover Capital Partners, LTD as an additional
Borrower. The Borrowers and the Lender desire to amend and restate the Existing
Agreement to provide terms and conditions under which the Lender is prepared to
make further loans to the Borrowers from and after the date hereof.
NOW, THEREFORE, the Existing Agreement is hereby amended and restated in
its entirety, as provided in the heading and recitals hereto, to read in its
entirety as follows:
Section 1. DEFINITIONS AND ACCOUNTING MATTERS.
1.01 CERTAIN DEFINED TERMS. As used herein, the following terms shall have
the following meanings (all terms defined in this Section 1.01 or in other
provisions of this Loan Agreement in the singular to have the same meanings when
used in the plural and VICE VERSA):
"AFFILIATE" shall mean with respect to any Person, any "affiliate" of such
Person, as such term is defined in the Bankruptcy Code.
"AMENDED AND RESTATED NOTE" shall mean the promissory note provided for by
Section 2.02(a) hereof for Loans and any promissory note delivered in
substitution or exchange therefor, in each case as the same shall be modified
and supplemented and in effect from time to time.
"APPLICABLE COLLATERAL PERCENTAGE" shall mean (a) with respect to all
Eligible Mortgage Loans other than Second Lien Mortgage Loans and Delinquent
Mortgage Loans, 96%, (b) with respect to all Eligible Mortgage Loans that are
Second Lien Mortgage Loans, 90%, (c) with respect to all Eligible Mortgage Loans
that are 30 Day Delinquent Mortgage Loans, 85% and (d) with respect to all
Eligible Mortgage Loans that are 60 Day Delinquent Mortgage Loans, 80%.
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"APPLICABLE MARGIN" shall mean (a) with respect to all Eligible Mortgage
Loans that are not Delinquent Mortgage Loans, 100 basis points (1.00%) and (b)
with respect to all Eligible Mortgage Loans that are Delinquent Mortgage Loans,
150 basis points (1.50%).
"APPRAISED VALUE" shall mean the value set forth in an appraisal made in
connection with the origination of the related Mortgage Loan as the value of the
Mortgaged Property.
"ASSIGNMENT OF MORTGAGE" means, with respect to any mortgage, an assignment
of the mortgage, notice of transfer or equivalent instrument in recordable form,
sufficient under the laws of the jurisdiction wherein the related mortgaged
property is located to reflect the assignment and pledge of the mortgage.
"BANKRUPTCY CODE" shall mean the United States Bankruptcy Code of 1978, as
amended from time to time.
"BLOCKED ACCOUNT AGREEMENT" shall mean an agreement between the Servicer,
the Borrowers and the Lender, substantially in the form of EXHIBIT G hereto, as
the same may be amended, supplemented or otherwise modified from time to time,
in which the Servicer acknowledges the Lender's lien on the Collection Account,
and agrees that, in the event that it receives notice that an Event of Default
hereunder has occurred and until such notice is rescinded by the Lender, the
Servicer shall only withdraw funds from the Collection Account on instruction
from the Lender.
"BORROWER" shall have the meaning provided in the heading hereof.
"BORROWING BASE" shall mean the aggregate Collateral Value of all Eligible
Mortgage Loans.
"BORROWING BASE DEFICIENCY" shall have the meaning provided in Section 2.06
hereof.
"BUSINESS DAY" shall mean any day other than (i) a Saturday or Sunday or
(ii) a day on which the New York Stock Exchange, the Federal Reserve Bank of New
York or the Custodian is authorized or obligated by law or executive order to be
closed.
"CAPITAL LEASE OBLIGATIONS" shall mean, for any Person, all obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) Property to the extent such obligations are required
to be classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP, and, for purposes of this Loan Agreement, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP.
"CASH EQUIVALENTS" shall mean (a) securities with maturities of 90 days or
less from the date of acquisition issued or fully guaranteed or insured by the
United States Government or any agency thereof, (b) certificates of deposit and
eurodollar time deposits with maturities of 90 days or less from the date of
acquisition and overnight bank deposits of any commercial bank having capital
and surplus in excess of $1,000,000,000, (c) repurchase obligations of any
commercial bank satisfying the requirements of clause (b) of this definition,
having a term of not more than seven days with respect to securities issued or
fully guaranteed or insured by the United States Government, (d) commercial
paper of a domestic issuer rated at least A-1 or the equivalent thereof by S&P
or P-1 or the equivalent thereof by Moody's and in either case maturing within
90 days after the day of acquisition, (e) securities with maturities of 90 days
or less from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States, by any political subdivision or
taxing authority of any
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such state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political subdivision,
taxing authority or foreign government (as the case may be) are rated at least A
by S&P or A by Moody's, (f) securities with maturities of 90 days or less from
the date of acquisition backed by standby letters of credit issued by any
commercial bank satisfying the requirements of clause (b) of this definition, or
(g) shares of money market, mutual or similar funds which invest exclusively in
assets satisfying the requirements of clauses (a) through (f) of this
definition.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"COLLATERAL" shall have the meaning provided in Section 4.01(b) hereof.
"COLLATERAL VALUE" shall mean, with respect to each Eligible Mortgage Loan,
the lesser of (a) the Applicable Collateral Percentage of the Market Value of
such Mortgage Loan, and (b) 96% of the outstanding principal balance of such
Mortgage Loan; provided that the following additional limitations on Collateral
Value shall apply:
(a) the Collateral Value shall be deemed to be zero with respect to each
Mortgage Loan (1) in respect of which there is a breach of a representation and
warranty set forth on SCHEDULE 1 (assuming each representation and warranty is
made as of the date Collateral Value is determined), (2) which is an Eligible
Mortgage Loan which remains pledged to the Lender hereunder later than 180 days
after the date on which it is first included in the Collateral (other than
Outstanding Mortgage Loans) or (3) which is an Outstanding Mortgage Loan which
remains pledged to the Lender hereunder later than 180 days after the date
hereof, unless waived by the Lender in its sole discretion; provided the
additional limitations on Collateral Value set forth herein shall apply, (4) in
respect of which there is a delinquency in the payment of principal and/or
interest which continues for a period of 90 days or more (without regard to any
applicable grace periods), or (5) which has been released from the possession of
the Custodian under the Custodial Agreement to a Borrower for a period in excess
of 14 days;
(b) the aggregate Collateral Value of Eligible Mortgage Loans which are
Second Lien Mortgage Loans may not exceed 4% of the aggregate principal amount
outstanding under the Loans;
(c) the aggregate Collateral Value of Eligible Mortgage Loans which are 30
Day Delinquent Mortgage Loans may not exceed 7% of the aggregate principal
amount outstanding under the Loans; and
(d) the aggregate Collateral Value of Eligible Mortgage Loans which are 60
Day Delinquent Mortgage Loans may not exceed 3% of the aggregate principal
amount outstanding under the Loans.
"COLLECTION ACCOUNT" shall mean one or more accounts established by the
Borrowers with the Servicer subject to a security interest in favor of the
Lender and to the Blocked Account Agreement, into which all Collections shall be
deposited by the Servicer.
"COLLECTIONS" shall mean, collectively, all Principal Collections, all Sale
Proceeds and other collections and proceeds on or in respect of the Mortgage
Loans, excluding collections required to be paid to the Servicer or a mortgagor
on the Mortgage Loans.
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"COMBINED LTV" OR "CLTV" shall mean with respect to any Mortgage Loan, the
ratio of (a) the outstanding principal balance as of the related date of
origination of such Mortgage Loan of (i) the Mortgage Loan plus (ii) the
mortgage loan constituting the first lien (if any) to (b) the Appraised Value of
the Mortgaged Property.
"CUSTODIAL AGREEMENT" shall mean the Amended and Restated Custodial
Agreement, dated as of the date hereof, among the Borrowers, the Custodian and
the Lender, substantially in the form of EXHIBIT B hereto, as the same shall be
modified and supplemented and in effect from time to time.
"CUSTODIAN" shall mean First Chicago National Processing Corp., as
custodian under the Custodial Agreement, and its successors and permitted
assigns thereunder.
"DEFAULT" shall mean an Event of Default or an event that with notice or
lapse of time or both would become an Event of Default.
"DELINQUENT MORTGAGE LOAN" shall mean a 30 Day Delinquent Mortgage Loan or
a 60 Day Delinquent Mortgage Loan, as applicable.
"DOLLARS" and "$" shall mean lawful money of the United States of America.
"DUE DILIGENCE REVIEW" shall mean the performance by the Lender of any or
all of the reviews permitted under Section 11.15 hereof with respect to any or
all of the Mortgage Loans, as desired by the Lender from time to time.
"EFFECTIVE DATE" shall mean the date upon which the conditions precedent
set forth in Section 5.01 shall have been satisfied.
"ELIGIBLE MORTGAGE LOAN" shall mean a Mortgage Loan secured by a first or
second mortgage lien on a one-to-four family residential property, as to which
the representations and warranties in Section 6.10 and Part I of Schedule 1
hereof are correct.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA AFFILIATE" shall mean any corporation or trade or business that is a
member of any group of organizations (i) described in Section 414(b) or (c) of
the Code of which a Borrower is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which a Borrower
is a member.
"EURODOLLAR RATE" shall mean, with respect to each day such Loan is
outstanding (or if such day is not a Business Day, the next succeeding Business
Day), the rate per annum equal to the rate appearing at page 5 of the Telerate
Screen as one-month LIBOR on the first day of such Interest Period, and if such
rate shall not be so quoted, the rate per annum at which the Lender is offered
Dollar deposits at or about 10:00 A.M., New York City time, on such date by
prime banks in the interbank eurodollar market where the eurodollar and foreign
currency and exchange operations in respect of its Loans are then being
conducted for delivery on such day for a period of thirty (30) days and in an
amount comparable to the amount of the Loans to be outstanding on such day.
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"EVENT OF DEFAULT" shall have the meaning provided in Section 8 hereof.
"FEDERAL FUNDS RATE" shall mean, for any day, the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the Lender from three
federal funds brokers of recognized standing selected by it.
"FIRST LIEN MORTGAGE LOAN" shall mean an Eligible Mortgage Loan secured by
the lien on the Mortgaged Property, subject to no prior liens on such Mortgaged
Property.
"FUNDING DATE" shall mean the date on which a Loan is made hereunder.
"GAAP" shall mean generally accepted accounting principles as in effect
from time to time in the United States.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state or
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government and any court or arbitrator having jurisdiction over the Borrower,
any of its Subsidiaries or any of its properties.
"GUARANTEE" shall mean, as to any Person, any obligation of such Person
directly or indirectly guaranteeing any Indebtedness of any other Person or in
any manner providing for the payment of any Indebtedness of any other Person or
otherwise protecting the holder of such Indebtedness against loss (whether by
virtue of partnership arrangements, by agreement to keep-well, to purchase
assets, goods, securities or services, or to take-or-pay or otherwise); provided
that the term "Guarantee" shall not include (i) endorsements for collection or
deposit in the ordinary course of business, or (ii) obligations to make
servicing advances for delinquent taxes and insurance or other obligations in
respect of a Mortgaged Property, to the extent required by the Lender. The
amount of any Guarantee of a Person shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Guarantee is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith. The terms "GUARANTEE" and "GUARANTEED" used as verbs shall have
correlative meanings.
"HCMH" shall have the meaning provided in the heading hereof.
"HCP" shall have the meaning provided in the heading hereof.
"INDEBTEDNESS" shall mean, for any Person: (a) obligations created, issued
or incurred by such Person for borrowed money (whether by loan, the issuance and
sale of debt securities or the sale of Property to another Person subject to an
understanding or agreement, contingent or otherwise, to repurchase such Property
from such Person); (b) obligations of such Person to pay the deferred purchase
or acquisition price of Property or services, other than trade accounts payable
(other than for borrowed money) arising, and accrued expenses incurred, in the
ordinary course of business so long as such trade accounts payable are payable
within 90 days of the date the respective goods are delivered or the respective
services are rendered; (c) Indebtedness of others secured by a Lien on the
Property of such Person, whether or not the respective Indebtedness so secured
has been assumed by such Person; (d) obligations (contingent or otherwise) of
such Person in respect of letters of credit or similar
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instruments issued or accepted by banks and other financial institutions for
account of such Person; (e) Capital Lease Obligations of such Person; (f)
obligations of such Person under repurchase agreements, sale/buy-back agreements
or like arrangements; (g) Indebtedness of others Guaranteed by such Person; (h)
all obligations of such Person incurred in connection with the acquisition or
carrying of fixed assets by such Person; and (i) Indebtedness of general
partnerships of which such Person is a general partner.
"INTEREST PERIOD" shall mean one month, except as otherwise provided in
this definition. Each such Interest Period shall (a) initially commence on the
Funding Date and continue to but excluding the first Payment Date; and (b)
thereafter, commence on a Payment Date and continue to but excluding the next
Payment Date. Notwithstanding the foregoing, no Interest Period may end after
the Termination Date.
"INTEREST RATE PROTECTION AGREEMENT" shall mean, with respect to any or all
of the Mortgage Loans, any short sale of US Treasury Security, or futures
contract, or mortgage related security or Eurodollar futures contract, or
options related contract, or interest rate swap, cap or collar agreement or
similar arrangements providing for protection against fluctuations in interest
rates or the exchange of nominal interest obligations, either generally or under
specific contingencies, entered into by the Borrower and reasonably acceptable
to the Lender.
"LENDER" shall have the meaning provided in the heading hereto.
"LIEN" shall mean any mortgage, lien, pledge, charge, security interest or
similar encumbrance.
"LOAN" shall have the meaning provided in Section 2.01(a) hereof.
"LOAN AGREEMENT" shall mean this Amended and Restated Master Loan and
Security Agreement, as the same may be amended, supplemented or otherwise
modified from time to time.
"LOAN DOCUMENTS" shall mean, collectively, this Loan Agreement, the Amended
and Restated Note, the Custodial Agreement, and the Blocked Account Agreement.
"MARKET VALUE" shall mean, as of any date in respect of an Eligible
Mortgage Loan, the price at which such Eligible Mortgage Loan could readily be
sold as determined in good faith by the Lender, which price may be determined to
be zero. The Lender's determination of Market Value shall be conclusive upon the
parties absent manifest error on the part of the Lender.
"MATERIAL ADVERSE EFFECT" shall mean, with respect to either Borrower, a
material adverse effect on (a) the Property, business, operations, financial
condition or prospects of such Borrower, (b) the ability of such Borrower to
perform its obligations under any of the Loan Documents to which it is a party,
(c) the validity or enforceability of any of the Loan Documents, (d) the rights
and remedies of the Lender under any of the Loan Documents, (e) the timely
payment of the principal of or interest on the Loans or other amounts payable in
connection therewith or (f) the Collateral.
"MAXIMUM CREDIT" shall mean $150,000,000.
"MOODY'S" shall mean ▇▇▇▇▇'▇ Investors Service.
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"MORTGAGE" shall mean the mortgage, deed of trust or other instrument
securing a Mortgage Note, which creates a first or second lien on the fee in
real property securing the Mortgage Note.
"MORTGAGE FILE" shall have the meaning assigned thereto in the Custodial
Agreement.
"MORTGAGE LOAN" shall mean a mortgage loan which the Custodian has been
instructed to hold for the Lender pursuant to the Custodial Agreement, and which
Mortgage Loan includes, without limitation, (i) a Mortgage Note and related
Mortgage and (ii) all right, title and interest of the applicable Borrower in
and to the Mortgaged Property covered by such Mortgage.
"MORTGAGE LOAN DOCUMENTS" shall mean, with respect to a Mortgage Loan, the
documents comprising the Mortgage File for such Mortgage Loan.
"MORTGAGE LOAN SCHEDULE" shall have the meaning assigned thereto in the
Custodial Agreement.
"MORTGAGE LOAN SCHEDULE AND EXCEPTION REPORT" shall mean the mortgage loan
schedule and exception report prepared by the Custodian pursuant to the
Custodial Agreement.
"MORTGAGE LOAN TAPE" shall mean a computer-readable magnetic tape updated
as of the close of business of the last business day of the preceding month
containing such fields as shall be mutually agreed upon by the Borrowers and the
Lender with respect to each Mortgage Loan to be delivered by the Borrowers to
the Lender pursuant to Section 2.03(a) hereof.
"MORTGAGE NOTE" shall mean the original executed promissory note or other
evidence of the indebtedness of a mortgagor/borrower with respect to a Mortgage
Loan.
"MORTGAGED PROPERTY" shall mean the real property (including all
improvements, buildings, fixtures, building equipment and personal property
thereon and all additions, alterations and replacements made at any time with
respect to the foregoing) and all other collateral securing repayment of the
debt evidenced by a Mortgage Note.
"MORTGAGOR" shall mean the obligor on a Mortgage Note.
"MS & CO." shall mean ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated, a registered
broker-dealer.
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been or are required to be
made by a Borrower or any ERISA Affiliate and that is covered by Title IV of
ERISA.
"NET INCOME" shall mean, for any period, the net income of the applicable
Borrower for such period as determined in accordance with GAAP.
"1934 ACT" shall mean the Securities and Exchange Act of 1934, as amended.
"OUTSTANDING MORTGAGE LOAN" shall mean a Mortgage Loan pledged to the
Lender prior to the date hereof which remains pledged to the Lender on the date
hereof.
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"PAYMENT DATE" shall mean (a) the first Business Day of each calendar
month, and (b) the Termination Date.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERSON" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, limited liability company, trust,
unincorporated association or government (or any agency, instrumentality or
political subdivision thereof).
"PLAN" shall mean an employee benefit or other plan established or
maintained by either Borrower or any ERISA Affiliate and covered by Title IV of
ERISA, other than a Multiemployer Plan.
"POST-DEFAULT RATE" shall mean, in respect of any principal of any Loan or
any other amount under this Loan Agreement, the Amended and Restated Note or any
other Loan Document that is not paid when due to the Lender (whether at stated
maturity, by acceleration, by optional or mandatory prepayment or otherwise), a
rate per annum during the period from and including the due date to but
excluding the date on which such amount is paid in full equal to 4% per annum
PLUS the Prime Rate.
"PRIME RATE" shall mean the prime rate announced to be in effect from time
to time, as published as the average rate in THE WALL STREET JOURNAL.
"PRINCIPAL COLLECTIONS" shall mean collections on the Mortgage Loans
attributable to principal payments thereon.
"PROPERTY" shall mean any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.
"REGULATIONS T, U AND X" shall mean Regulations T, U and X of the Board of
Governors of the Federal Reserve System (or any successor), as the same may be
modified and supplemented and in effect from time to time.
"REQUEST FOR BORROWING" shall have the meaning provided in Section 2.03(a).
"REQUIREMENT OF LAW" shall mean as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"RESPONSIBLE OFFICER" shall mean, as to any Person, the chief executive
officer or, with respect to financial matters, the chief financial officer of
such Person.
"S&P" shall mean Standard and Poor's Ratings Services.
"SALE PROCEEDS" shall mean (i) any proceeds of any sales, transfers or
dispositions of any Mortgage Loan, net of reasonable and customary costs,
including reasonable and necessary attorneys' fees, and (ii) any proceeds of any
sales, dispositions, condemnations, casualty insurance and
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other amounts from any disposition, taking, damage or destruction of all or any
portion of any real property acquired upon foreclosure (or deed in lieu of
foreclosure) of Mortgage Loans, net of reasonable and customary costs of
closing, including brokerage commissions, make-ready expenses, title insurance,
financing costs, recording fees, transfer taxes, tax certificates, title and
closing agent fees and pro-rated items.
"SECOND LIEN MORTGAGE LOAN" shall mean an Eligible Mortgage Loan secured by
the lien on the Mortgaged Property, subject to only one prior lien on such
Mortgaged Property.
"SECURED OBLIGATIONS" shall have the meaning provided in Section 4.01(c)
hereof.
"SERVICER" shall have the meaning provided in Section 11.14(c) hereof.
"SERVICING AGREEMENT" shall have the meaning provided in Section 11.14(c)
hereof.
"SERVICING RECORDS" shall have the meaning provided in Section 11.14(b)
hereof.
"60 DAY DELINQUENT MORTGAGE LOAN" shall mean an Eligible Mortgage Loan
which is at least 60 days, but not more than 89 days, delinquent with respect to
the payment of principal or interest (without regard to any applicable grace
period).
"SUBSIDIARY" shall mean, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.
"TANGIBLE NET WORTH" shall mean, as of a particular date,
(a) all amounts which would be included under capital on a balance
sheet of the HCMH at such date, determined in accordance with GAAP, LESS
(b) (i) amounts owing to HCMH from Affiliates and (ii) intangible
assets.
"TERMINATION DATE" shall mean July 8,1999 or such earlier date on which
this Loan Agreement shall terminate in accordance with the provisions hereof or
by operation of law.
"TEST PERIOD" shall have the meaning provided in Section 7.16 hereof.
"30 DAY DELINQUENT MORTGAGE LOAN" shall mean an Eligible Mortgage Loan
which is at least 30 days, but not more than 59 days, delinquent with respect to
the payment of principal or interest (without regard to any applicable grace
period).
"TOTAL INDEBTEDNESS" shall mean, for any period, the aggregate Indebtedness
of the applicable Borrower during such period LESS the amount of any nonspecific
balance sheet reserves maintained in accordance with GAAP.
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"UNDERWRITING GUIDELINES" shall mean the underwriting guidelines attached
as EXHIBIT F hereto.
"UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code as in
effect on the date hereof in the State of New York; provided that if by reason
of mandatory provisions of law, the perfection or the effect of perfection or
non-perfection of the security interest in any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than New York,
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection.
1.02 ACCOUNTING TERMS AND DETERMINATIONS. Except as otherwise expressly
provided herein, all accounting terms used herein shall be interpreted, and all
financial statements and certificates and reports as to financial matters
required to be delivered to the Lender hereunder shall be prepared, in
accordance with GAAP.
Section 2. LOANS, AMENDED AND RESTATED NOTE AND PREPAYMENTS.
2.01 LOANS.
(a) Subject to fulfillment of the conditions precedent set forth in
Sections 5.01 and 5.02 hereof, and provided that no Default shall have occurred
and be continuing hereunder, the Lender agrees from time to time, on the terms
and conditions of this Agreement, to make loans (each, a "LOAN") to the
Borrowers in Dollars, from and including the Effective Date to and including the
Termination Date in an aggregate principal amount at any one time outstanding up
to but not exceeding the Maximum Credit as in effect from time to time.
(b) Each existing loan outstanding as of the date hereof under the Existing
Loan Agreement (each, an "EXISTING LOAN") shall continue and be deemed a Loan
made under this Agreement, subject to all the provisions of this Agreement and
the outstanding principal amount of such Loans shall be counted against the
Maximum Credit. All collateral pledged to the Lender to secure the Existing
Loans under the Existing Loan Agreement shall continue to be pledged to the
Lender to secure the Loans hereunder and shall be Collateral under this
Agreement.
(c) Subject to the terms and conditions of this Loan Agreement, during such
period the Borrowers may borrow, repay and reborrow hereunder; PROVIDED that,
notwithstanding the foregoing, the Lender shall have no obligation to make Loans
to the Borrowers in excess of the then current Maximum Credit and, in the event
the obligation of the Lender to make Loans to the Borrowers is terminated as
permitted hereunder, the Lender shall have no further obligation to make
additional Loans hereunder.
(d) In no event shall a Loan be made when any Default or Event of Default
has occurred and is continuing.
2.02 AMENDED AND RESTATED NOTES.
(a) The Loans made by the Lender shall be evidenced by a single amended and
restated promissory note of the Borrowers substantially in the form of EXHIBIT A
hereto (the "AMENDED AND RESTATED NOTE"), dated the date hereof, payable to the
Lender in a principal amount equal to the amount of the Maximum Credit as
originally in effect and otherwise duly completed. The Lender shall
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have the right to have its Amended and Restated Note subdivided, by exchange for
promissory notes of lesser denominations or otherwise.
(b) The date, amount and interest rate of each Loan made by the Lender to
the Borrowers, and each payment made on account of the principal thereof, shall
be recorded by the Lender on its books and, prior to any transfer of the Amended
and Restated Note, endorsed by the Lender on the schedule attached to the Note
or any continuation thereof; PROVIDED that the failure of the Lender to make any
such recordation or endorsement shall not affect the obligations of the
Borrowers to make a payment when due of any amount owing hereunder or under the
Amended and Restated Note in respect of the Loans.
2.03 PROCEDURE FOR BORROWING.
(a) The Borrowers may request a borrowing hereunder, on any Business Day
during the period from and including the Effective Date to and including the
Termination Date, by delivering to the Lender, with a copy to the Custodian, an
irrevocable written request for borrowing, substantially in the form of EXHIBIT
D attached hereto (a "REQUEST FOR BORROWING"), which request must be received by
the Lender prior to 3:00 p.m., New York City time, one (l) Business Day prior to
the requested Funding Date. Such Request for Borrowing shall (i) attach a
schedule identifying the Eligible Mortgage Loans that the Borrowers propose to
pledge to the Lender and to be included in the Borrowing Base in connection with
such borrowing, (ii) the requested Funding Date, (iii) include a Mortgage Loan
Tape containing information with respect to the Eligible Mortgage Loans that the
Borrowers propose to pledge to the Lender and to be included in the Borrowing
Base in connection with such borrowing, and (iv) attach an officer's certificate
signed by a Responsible Officer of each of the Borrowers as required by Section
5.02(b) hereof.
(b) Upon the Borrowers' request for a borrowing pursuant to Section
2.03(a), the Lender shall, assuming all conditions precedent set forth in
Section 5.01 and 5.02 have been met and provided no Default shall have occurred
and be continuing, make a Loan to the Borrowers on the requested Funding Date,
in the amount so requested.
(c) The Borrowers shall release to the Custodian no later than 12:00 p.m.,
New York City time, two (2) Business Days prior to the requested Funding Date,
the Mortgage File pertaining to each Eligible Mortgage Loan to be pledged to the
Lender and included in the Borrowing Base on such requested Funding Date, so
long as there are no more than two hundred such Mortgage Files delivered on such
Business Day (if the number of Mortgage Files equals or exceeds two hundred, the
Borrowers shall deliver to the Custodian such Mortgage Files in as many Business
Days prior to the Funding Date as is reasonably acceptable to the Custodian), as
in accordance with the terms and conditions of the Custodial Agreement.
(d) Pursuant to the Custodial Agreement, the Custodian shall deliver to the
Lender and the Borrowers, no later than 11:00 a.m. on a Funding Date, a Trust
Receipt (as defined in the Custodial Agreement) in respect of all Mortgage Loans
pledged to the Lender on such Funding Date, and a Mortgage Loan Schedule and
Exception Report. Subject to Section 5 hereof, such borrowing will then be made
available to the Borrowers by the Lender transferring, via wire transfer, to the
account set forth in the applicable Request for Borrowing, in the aggregate
amount of such borrowing in funds immediately available to the Borrowers.
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2.04 LIMITATION ON TYPES OF LOANS; ILLEGALITY. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any Eurodollar
Rate:
(a) the Lender determines, which determination shall be conclusive,
that quotations of interest rates for the relevant deposits referred to in
the definition of "Eurodollar Rate" in Section 1.01 hereof are not being
provided in the relevant amounts or for the relevant maturities for
purposes of determining rates of interest for Loans as provided herein; or
(b) the Lender determines, which determination shall be conclusive,
that the relevant rate of interest referred to in the definition of
"Eurodollar Rate" in Section 1.01 hereof upon the basis of which the rate
of interest for Loans is to be determined is not likely adequately to cover
the cost to the Lender of making or maintaining Loans; or
(c) it becomes unlawful for the Lender to honor its obligation to make
or maintain Loans hereunder using a Eurodollar Rate;
then the Lender shall give the Borrowers prompt notice thereof and, so long as
such condition remains in effect, the Lender shall be under no obligation to
make additional Loans, and the Borrowers shall, either prepay all such Loans as
may be outstanding or pay interest on such Loans at a rate per annum equal to
the Federal Funds Rate plus 2.50%.
2.05 REPAYMENT OF LOANS; INTEREST.
(a) The Borrowers hereby promise to repay in full on the Termination Date
the then aggregate outstanding principal amount of the Loans.
(b) The Borrowers hereby promise to pay to the Lender interest on the
unpaid principal amount of each Loan for the period from and including the date
of such Loan to but excluding the date such Loan shall be paid in full, at a
rate per annum equal to the Eurodollar Rate PLUS the Applicable Margin.
Notwithstanding the foregoing, the Borrowers hereby promise to pay to the Lender
interest at the applicable Post-Default Rate on any principal of any Loan and on
any other amount payable by the Borrowers hereunder or under the Amended and
Restated Note that shall not be paid in full when due (whether at stated
maturity, by acceleration or by mandatory prepayment or otherwise) for the
period from and including the due date thereof to but excluding the date the
same is paid in full. Accrued interest on each Loan shall be payable monthly on
the first Business Day of each month following the month for which it accrues
and for the last month of the Loan Agreement on the first Business Day of such
last month and on the Termination Date, except that interest payable at the
Post-Default Rate shall accrue daily and shall be payable upon such accrual.
(c) It is understood and agreed that, unless and until a Default shall have
occurred and be continuing, the Borrowers shall be entitled to the proceeds of
the Mortgage Loans pledged to the Lender hereunder.
2.06 MANDATORY PREPAYMENTS; ADDITIONAL PLEDGE.
(a) The Borrowers shall prepay the principal of the Loans on each Payment
Date in an amount equal to all Principal Collections with respect to the
Mortgage Loans received during the calendar month ended most recently prior to
such Payment Date.
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(b) The Borrowers shall prepay the principal of the Loans on each Payment
Date in an amount equal to all Sale Proceeds with respect to the Mortgage Loans
received during the calendar month ended most recently prior to such Payment
Date.
(c) If at any time the aggregate outstanding principal amount of Loans
exceeds the Borrowing Base (a "BORROWING BASE DEFICIENCY"), as determined by the
Lender and notified to the Borrowers on any Business Day, the Borrowers shall no
later than one Business Day after receipt of such notice, either prepay the
Loans in part or in whole or pledge additional Eligible Mortgage Loans (which
Collateral shall be in all respects acceptable to the Lender) to the Lender,
such that after giving effect to such prepayment or pledge the aggregate
outstanding principal amount of the Loans does not exceed the Borrowing Base.
2.07 OPTIONAL PREPAYMENTS. The Loans are prepayable on any Payment Date
without premium or penalty, in whole or in part, and may be prepaid on any other
date subject to Section 2.08 hereof. Any amounts prepaid shall be applied to
repay the outstanding principal amount of any Loans (together with interest
thereon) until paid in full. Amounts repaid may be reborrowed in accordance with
the terms of this Loan Agreement. If the Borrowers intend to prepay a Loan in
whole or in part from a source other than the proceeds of the Mortgage Loans,
the Borrowers shall give three (3) Business Days' prior written notice thereof
to the Lender. If such notice is given, the amount specified in such notice
shall be due and payable on the date specified therein, together with accrued
interest to such date on the amount prepaid. Partial prepayments shall be in a
minimum aggregate principal amount of $1,000,000.
2.08 INDEMNITY
If the Borrowers make a prepayment of the Loans on any day which is not a
Payment Date, the Borrowers shall indemnify the Lender and hold the Lender
harmless from any actual loss or expense which the Lender may sustain or incur
arising from the reemployment of funds obtained by the Lender to maintain the
Loans hereunder or from fees payable to terminate any arrangements from which
such funds were obtained. This Section 2.08 shall survive termination of Loan
Agreement and payment of the Amended and Restated Note.
2.09 EXTENSION OF TERMINATION DATE
Commencing four months after the date hereof, the Lender shall carry out a
review for the purpose of determining, in its sole discretion, whether to extend
the then current Termination Date for a period to be determined by Lender in its
sole discretion. Within two weeks of initiating such review, the Lender shall
give written notice of any extension of the then current Termination Date. At
the time of such notice, Lender shall notify the Borrower of any further fees
which shall be payable in connection with any extension, including without
limitation, any additional Commitment Fee which the Lender may charge as a
condition to such extension. Any failure by the Lender to deliver such notice of
extension shall be deemed to be the Lender's determination not to extend the
then current Termination Date.
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Section 3. PAYMENTS; COMPUTATIONS; ETC.
3.01 PAYMENTS.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest and other amounts to be made by the Borrowers under this
Loan Agreement and the Amended and Restated Note, shall be made in Dollars, in
immediately available funds, without deduction, set-off or counterclaim, to the
Lender at the following account maintained by the Lender: Account No. ▇▇▇▇▇▇▇▇,
For the A/C of MSMCI, ABA# ▇▇▇▇▇▇▇▇▇, not later than 1:00 p.m., New York City
time, on the date on which such payment shall become due (and each such payment
made after such time on such due date shall be deemed to have been made on the
next succeeding Business Day). The Borrowers acknowledge that they have no
rights of withdrawal from the foregoing account.
(b) Except to the extent otherwise expressly provided herein, if the due
date of any payment under this Loan Agreement or the Amended and Restated Note
would otherwise fall on a day that is not a Business Day, such date shall be
extended to the next succeeding Business Day, and interest shall be payable for
any principal so extended for the period of such extension.
3.02 COMPUTATIONS. Interest on the Loans shall be computed in arrears on
the basis of a 360-day year for the actual days elapsed (including the first day
but excluding the last day) occurring in the period for which payable.
3.03 REQUIREMENTS OF LAW.
(a) If any Requirement of Law (other than with respect to any amendment
made to the Lender's certificate of incorporation and by-laws or other
organizational or governing documents) or any change in the interpretation or
application thereof or compliance by the Lender with any request or directive
(whether or not having the force of law) from any central bank or other
Governmental Authority made subsequent to the date hereof:
(i) shall subject the Lender to any tax of any kind whatsoever with respect
to this Loan Agreement, the Amended and Restated Note or any Loan made by
it (excluding net income taxes) or change the basis of taxation of payments
to the Lender in respect thereof;
(ii) shall impose, modify or hold applicable any reserve, special deposit,
compulsory Loan or similar requirement against assets held by, deposits or
other liabilities in or for the account of, advances, Loans or other
extensions of credit by, or any other acquisition of funds by, any office
of the Lender which is not otherwise included in the determination of the
Eurodollar Rate hereunder, or;
(iii) shall impose on the Lender any other condition;
and the result of any of the foregoing is to increase the cost to the Lender, by
an amount which the Lender deems to be material, of making, continuing or
maintaining any Loan or to reduce any amount due or owing hereunder in respect
thereof, then, in any such case, the Borrowers shall promptly pay the Lender
such additional amount or amounts as will compensate the Lender for such
increased cost or reduced amount receivable.
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(b) If the Lender shall have determined that the adoption of or any change
in any Requirement of Law (other than with respect to any amendment made to the
Lender's certificate of incorporation and by-laws or other organizational or
governing documents) regarding capital adequacy or in the interpretation or
application thereof or compliance by the Lender or any corporation controlling
the Lender with any request or directive regarding capital adequacy (whether or
not having the force of law) from any Governmental Authority made subsequent to
the date hereof shall have the effect of reducing the rate of return on the
Lender's or such corporation's capital as a consequence of its obligations
hereunder to a level below that which the Lender or such corporation could have
achieved but for such adoption, change or compliance (taking into consideration
the Lender's or such corporation's policies with respect to capital adequacy) by
an amount deemed by the Lender to be material, then from time to time, the
Borrowers shall promptly pay to the Lender such additional amount or amounts as
will compensate the Lender for such reduction.
(c) If the Lender becomes entitled to claim any additional amounts pursuant
to this Section, it shall promptly notify the Borrowers of the event by reason
of which it has become so entitled. A certificate as to any additional amounts
payable pursuant to this Section submitted by the Lender to the Borrowers shall
be conclusive in the absence of manifest error.
3.04 COMMITMENT FEE. The Borrowers agree to pay to the Lender a one-time
commitment fee equal to $75,000, such payment to be made in Dollars, in
immediately available funds, without deduction, set-off or counterclaim, to the
Lender upon the execution of the Loan Agreement and the Custodial Agreement. The
Lender may, in its sole discretion, net such commitment fee from the proceeds of
any Loan advanced to the Borrowers on the date of such execution.
3.05 EXIT FEE. The Borrowers agree to pay to the Lender an exit fee equal
to 0.25% (the "EXIT FEE") of the outstanding principal balance of each Mortgage
Loan pledged to the Lender, calculated as of the date the Mortgage Loan was
pledged to the Lender, for each Mortgage Loan which is no longer pledged to the
Lender hereunder (each such Mortgage Loan, a "SUBSEQUENTLY RELEASED MORTGAGE
LOAN"). The Exit Fee as adjusted for the Underwriting Fees (as defined below)
shall be due and payable on the Termination Date and payment shall be made in
Dollars, in immediately available funds, without deduction, set-off or
counterclaim, to the Lender at the account set forth in Section 3.01(a) hereof.
Without limiting the generality of the foregoing, any Exit Fee for any
Subsequently Released Mortgage Loan shall accrue upon any Borrower: (i) placing
such Subsequently Released Mortgage Loan in a transaction resulting in the
issuance of securities backed in whole or in part by such Subsequently Released
Mortgage Loan ; (ii) selling such Subsequently Released Mortgage Loan; (iii)
refinancing all or a portion of the Loans extended hereunder and secured in
whole or in part by such Subsequently Released Mortgage Loan; or (iv)
terminating the Loans or this Loan Agreement (whether due to an Event of
Default, the occurrence of the Termination Date or otherwise). The Exit Fee
payable on the Termination Date shall be reduced by the aggregate amount of
underwriting fees (net of expenses) received by Lender or Lender's Affiliates in
transactions where the Lender or Lender's Affiliate, acting as the lead or
co-lead underwriter or placement agent, placed Subsequently Released Mortgage
Loans in transactions resulting in the issuance of securities backed in whole or
in part by such Subsequently Released Mortgage Loans (the "UNDERWRITING FEES").
In the event that any Mortgage Loan becomes a Subsequently Released Mortgage
Loan solely because the Lender fails to extend the Termination Date in
accordance with Section 2.09 hereof, no Exit Fee shall be payable on account of
such Subsequently Released Mortgage Loans.
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Section 4. COLLATERAL SECURITY.
4.01 COLLATERAL; SECURITY INTEREST.
(a) Pursuant to the Custodial Agreement, the Custodian shall hold the
Mortgage Loan Documents as exclusive bailee and agent for the Lender pursuant to
terms of the Custodial Agreement and shall deliver to the Lender Trust Receipts
(as defined in the Custodial Agreement) each to the effect that it has reviewed
such Mortgage Loan Documents in the manner and to the extent required by the
Custodial Agreement and identifying any deficiencies in such Mortgage Loan
Documents as so reviewed.
(b) All of the Borrowers' right, title and interest in, to and under each
of the following items of property, whether now owned or hereafter acquired, now
existing or hereafter created and wherever located, is hereinafter referred to
as the "COLLATERAL":
(i) all Mortgage Loans;
(ii) all Mortgage Loan Documents, including without limitation all
promissory notes, and all Servicing Records (as defined in Section 11.14(b)
below), servicing agreements and any other collateral pledged or otherwise
relating to such Mortgage Loans, together with all files, documents,
instruments, surveys, certificates, correspondence, appraisals, computer
programs, computer storage media, accounting records and other books and
records relating thereto;
(iii) all mortgage guaranties and insurance (issued by governmental
agencies or otherwise) and any mortgage insurance certificate or other
document evidencing such mortgage guaranties or insurance relating to any
Mortgage Loan and all claims and payments thereunder;
(iv) all other insurance policies and insurance proceeds relating to
any Mortgage Loan or the related Mortgaged Property;
(v) all Interest Rate Protection Agreements, relating to or
constituting any and all of the foregoing;
(vi) the Collection Account and all monies from time to time on
deposit in the Collection Account;
(vii) all collateral, however defined, under any other agreement
between the Borrower or any of its Affiliates on the one hand and the
Lender or any of its Affiliates on the other hand;
(viii) all "general intangibles", "accounts" and "chattel paper" as
defined in the Uniform Commercial Code relating to or constituting any and
all of the foregoing; and
(ix) any and all replacements, substitutions, distributions on or
proceeds of any and all of the foregoing.
(c) The Borrowers hereby assign, pledge and grant a security interest in
all of their right, title and interest in, to and under the Collateral to the
Lender to secure the repayment of principal of and interest on all Loans and all
other amounts owing to the Lender hereunder, under the Amended
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and Restated Note and under the other Loan Documents (collectively, the "SECURED
OBLIGATIONS"). The Borrowers agree to ▇▇▇▇ their computer records and tapes to
evidence the interests granted to the Lender hereunder.
4.02 FURTHER DOCUMENTATION. At any time and from time to time, upon the
written request of the Lender, and at the sole expense of the Borrowers, the
Borrowers will promptly and duly execute and deliver, or will promptly cause to
be executed and delivered, such further instruments and documents and take such
further action as the Lender may reasonably request for the purpose of obtaining
or preserving the full benefits of this Loan Agreement and of the rights and
powers herein granted, including, without limitation, the filing of any
financing or continuation statements under the Uniform Commercial Code in effect
in any jurisdiction with respect to the Liens created hereby. The Borrowers also
hereby authorize the Lender to file any such financing or continuation statement
without the signature of the Borrowers to the extent permitted by applicable
law. A carbon, photographic or other reproduction of this Loan Agreement shall
be sufficient as a financing statement for filing in any jurisdiction.
4.03 CHANGES IN LOCATIONS, NAME, ETC. Neither Borrower shall (i) change the
location of its chief executive office/chief place of business from that
specified in Section 6 hereof or (ii) change its name, identity or corporate
structure (or the equivalent) or change the location where it maintains its
records with respect to the Collateral unless it shall have given the Lender at
least 30 days prior written notice thereof and shall have delivered to the
Lender all Uniform Commercial Code financing statements and amendments thereto
as the Lender shall request and taken all other actions deemed necessary by the
Lender to continue its perfected status in the Collateral with the same or
better priority.
4.04 LENDER'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) Each of the Borrowers hereby irrevocably constitutes and appoints the
Lender and any officer or agent thereof, with full power of substitution, as its
true and lawful attorney-in-fact with full irrevocable power and authority in
the place and stead of such Borrower and in the name of such Borrower or in its
own name, from time to time in the Lender's discretion, for the purpose of
carrying out the terms of this Loan Agreement, to take any and all appropriate
action and to execute any and all documents and instruments which may be
necessary or desirable to accomplish the purposes of this Loan Agreement, and,
without limiting the generality of the foregoing, such Borrower hereby gives the
Lender the power and right, on behalf of such Borrower, without assent by, but
with notice to, such Borrower, if an Event of Default shall have occurred and be
continuing, to do the following:
(i) in the name of such Borrower or its own name, or otherwise, to
take possession of and endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
mortgage insurance or with respect to any other Collateral and to file any
claim or to take any other action or proceeding in any court of law or
equity or otherwise deemed appropriate by the Lender for the purpose of
collecting any and all such moneys due under any such mortgage insurance or
with respect to any other Collateral whenever payable;
(ii) to pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral; and
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(iii) (A) to direct any party liable for any payment under any
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Lender or as the Lender shall direct; (B) to ask
or demand for, collect, receive payment of and receipt for, any and all
moneys, claims and other amounts due or to become due at any time in
respect of or arising out of any Collateral; (C) to sign and endorse any
invoices, assignments, verifications, notices and other documents in
connection with any of the Collateral; (D) to commence and prosecute any
suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any thereof and to enforce any
other right in respect of any Collateral; (E) to defend any suit, action or
proceeding brought against the Borrower with respect to any Collateral; (F)
to settle, compromise or adjust any suit, action or proceeding described in
clause (E) above and, in connection therewith, to give such discharges or
releases as the Lender may deem appropriate; and (G) generally, to sell,
transfer, pledge and make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though the Lender
were the absolute owner thereof for all purposes, and to do, at the
Lender's option and the Borrower's expense, at any time, and from time to
time, all acts and things which the Lender deems necessary to protect,
preserve or realize upon the Collateral and the Lender's Liens thereon and
to effect the intent of this Loan Agreement, all as fully and effectively
as the Borrower might do.
The Borrowers hereby ratify all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
(b) The Borrowers also authorize the Lender, at any time and from time to
time, to execute, in connection with any sale provided for in Section 4.07
hereof, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral.
(c) The powers conferred on the Lender are solely to protect the Lender's
interests in the Collateral and shall not impose any duty upon the Lender to
exercise any such powers. The Lender shall be accountable only for amounts that
it actually receives as a result of the exercise of such powers, and neither the
Lender nor any of its officers, directors, or employees shall be responsible to
the Borrowers for any act or failure to act hereunder, except for its own gross
negligence or willful misconduct.
4.05 PERFORMANCE BY LENDER OF BORROWERS' OBLIGATIONS. If either Borrower
fails to perform or comply with any of its agreements contained in the Loan
Documents and the Lender may itself perform or comply, or otherwise cause
performance or compliance, with such agreement, the expenses of the Lender
incurred in connection with such performance or compliance, together with
interest thereon at a rate per annum equal to the Post-Default Rate, shall be
payable by the Borrowers to the Lender on demand and shall constitute Secured
Obligations.
4.06 PROCEEDS. If an Event of Default shall occur and be continuing, (a)
all proceeds of Collateral received by the Borrowers consisting of cash, checks
and other near-cash items shall be held by the Borrowers in trust for the
Lender, segregated from other funds of the Borrowers, and shall forthwith upon
receipt by the Borrowers be turned over to the Lender in the exact form received
by the Borrowers (duly endorsed by the applicable Borrower to the Lender, if
required) and (b) any and all such proceeds received by the Lender (whether from
the Borrowers or otherwise) may, in the sole discretion of the Lender, be held
by the Lender as collateral security for, and/or then or at any time thereafter
may be applied by the Lender against, the Secured Obligations (whether matured
or unmatured), such application to be in such order as the Lender shall elect.
Any balance of such
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proceeds remaining after the Secured Obligations shall have been paid in full
and this Loan Agreement shall have been terminated shall be paid over to the
Borrowers or to whomsoever may be lawfully entitled to receive the same. For
purposes hereof, proceeds shall include, but not be limited to, all principal
and interest payments, all prepayments and payoffs, insurance claims,
condemnation awards, sale proceeds, real estate owned rents and any other income
and all other amounts received with respect to the Collateral.
4.07 REMEDIES. If a Default shall occur and be continuing, the Lender may,
at its option, enter into one or more Interest Rate Protection Agreements
covering all or a portion of the Mortgage Loans pledged to the Lender hereunder,
and the Borrowers shall be responsible for all damages, judgments, costs and
expenses of any kind which may be imposed on, incurred by or asserted against
the Lender relating to or arising out of such Interest Rate Protection
Agreements; including without limitation any losses resulting from such Interest
Rate Protection Agreements. If an Event of Default shall occur and be
continuing, the Lender may exercise, in addition to all other rights and
remedies granted to it in this Loan Agreement and in any other instrument or
agreement securing, evidencing or relating to the Secured Obligations, all
rights and remedies of a secured party under the Uniform Commercial Code.
Without limiting the generality of the foregoing, the Lender without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon the
Borrowers or any other Person (each and all of which demands, presentments,
protests, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels or as an entirety at public or private sale or sales, at any
exchange, broker's board or office of the Lender or elsewhere upon such terms
and conditions as it may deem advisable and at such prices as it may deem best,
for cash or on credit or for future delivery without assumption of any credit
risk. The Lender shall have the right upon any such public sale or sales, and,
to the extent permitted by law, upon any such private sale or sales, to purchase
the whole or any part of the Collateral so sold, free of any right or equity of
redemption in the Borrowers, which right or equity is hereby waived or released.
The Borrowers further agree, at the Lender's request, to assemble the Collateral
and make it available to the Lender at places which the Lender shall reasonably
select, whether at the Borrowers' premises or elsewhere. The Lender shall apply
the net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, after deducting all reasonable costs and expenses of every
kind incurred therein or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the Lender
hereunder, including without limitation reasonable attorneys' fees and
disbursements, to the payment in whole or in part of the Secured Obligations, in
such order as the Lender may elect, and only after such application and after
the payment by the Lender of any other amount required or permitted by any
provision of law, including without limitation Section 9-504(1)(c) of the
Uniform Commercial Code, need the Lender account for the surplus, if any, to the
Borrower. To the extent permitted by applicable law, the Borrowers waive all
claims, damages and demands they may acquire against the Lender arising out of
the exercise by the Lender of any of its rights hereunder, other than those
claims, damages and demands arising from the gross negligence or willful
misconduct of the Lender. If any notice of a proposed sale or other disposition
of Collateral shall be required by law, such notice shall be deemed reasonable
and proper if given at least 10 days before such sale or other disposition. The
Borrowers shall remain liable for any deficiency (plus accrued interest thereon
as contemplated pursuant to Section 2.05(b) hereof) if the proceeds of any sale
or other disposition of the Collateral are insufficient to pay the Secured
Obligations and the fees and disbursements of any attorneys employed by the
Lender to collect such deficiency.
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4.08 LIMITATION ON DUTIES REGARDING PRESERVATION OF COLLATERAL. The
Lender's duty with respect to the custody, safekeeping and physical preservation
of the Collateral in its possession, under Section 9-207 of the Uniform
Commercial Code or otherwise, shall be to deal with it in the same manner as the
Lender deals with similar property for its own account. Neither the Lender nor
any of its directors, officers or employees shall be liable for failure to
demand, collect or realize upon all or any part of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of the Borrowers or otherwise.
4.09 POWERS COUPLED WITH AN INTEREST. All authorizations and agencies
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
4.10 RELEASE OF SECURITY INTEREST. Upon termination of this Loan Agreement
and repayment to the Lender of all Secured Obligations and the performance of
all obligations under the Loan Documents the Lender shall release its security
interest in any remaining Collateral.
Section 5. CONDITIONS PRECEDENT.
5.01 INITIAL LOAN. The obligation of the Lender to make its initial Loan
hereunder is subject to the satisfaction, immediately prior to or concurrently
with the making of such Loan, of the condition precedent that the Lender shall
have received all of the following documents, each of which shall be
satisfactory to the Lender and its counsel in form and substance:
(a) LOAN DOCUMENTS.
(i) AMENDED AND RESTATED NOTE. The Amended and Restated Note, duly
completed and executed;
(ii) CUSTODIAL AGREEMENT. The Custodial Agreement, duly executed and
delivered by the Borrowers, the Lender and the Custodian. In addition, the
Borrowers shall have taken such other action as the Lender shall have
requested in order to perfect the security interests created pursuant to
the Loan Agreement;
(iii) BLOCKED ACCOUNT AGREEMENT. A Blocked Account Agreement, duly
executed by the parties thereto;
(b) ORGANIZATIONAL DOCUMENTS. A good standing certificate and
certified copies of the operating agreement and by-laws (or equivalent
documents) of the Borrowers and of all corporate or other authority for the
Borrowers with respect to the execution, delivery and performance of the
Loan Documents and each other document to be delivered by the Borrowers
from time to time in connection herewith (and the Lender may conclusively
rely on such certificate until it receives notice in writing from the
Borrowers to the contrary);
(c) LEGAL OPINION. A legal opinion of counsel to the Borrowers,
substantially in the form attached hereto as EXHIBIT C.
(d) TRUST RECEIPT AND MORTGAGE LOAN SCHEDULE AND EXCEPTION REPORT. A
Trust Receipt, substantially in the form of ANNEX 2 of the Custodial
Agreement, dated the Effective Date, from the Custodian, duly completed,
with a Mortgage Loan Schedule and Exception Report attached thereto;
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(e) SERVICING AGREEMENT(S). Any Servicing Agreement, certified as a true,
correct and complete copy of the original with a letter attached thereto
acknowledged by the applicable Servicer directing the Servicer to remit all
payments on account of the Mortgage Loans directly to the Lender upon receipt of
notice from the Lender of the occurrence of an Event of Default;
(f) SECURITIZATION LETTER. A letter agreement between the Borrowers and MS
& Co. granting MS & Co. the exclusive option to act as lead or co-lead
underwriter or placement agent in connection with any debt or equity offering
made by the Borrowers with respect to the Mortgage Loans, duly executed and
delivered by the Borrowers and MS & Co., which shall be satisfactory to the
Lender in form and substance, provided, that Borrower shall have the right to
employ an alternate lead or co-lead underwriter and pay an Exit Fee pursuant to
Section 3.05.
(g) OTHER DOCUMENTS. Such other documents as the Lender may reasonably
request; and
(h) PAYMENT OF COMMITMENT FEE. The Borrowers shall pay the commitment
fee pursuant to Section 3.04 hereof.
5.02 INITIAL AND SUBSEQUENT LOANS. The making of each Loan to the Borrowers
(including the initial Loan) on any Business Day is subject to the satisfaction
of the following further conditions precedent, both immediately prior to the
making of such Loan and also after giving effect thereto and to the intended use
thereof:
(a) no Default or Event of Default shall have occurred and be
continuing;
(b) both immediately prior to the making of such Loan and also after
giving effect thereto and to the intended use thereof, the representations
and warranties made by the Borrowers in Section 6 and Schedule 1 hereof,
and elsewhere in each of the Loan Documents, shall be true and complete on
and as of the date of the making of such Loan in all material respects (in
the case of the representations and warranties in Section 6.10 and Schedule
1, solely with respect to Mortgage Loans included in the Borrowing Base)
with the same force and effect as if made on and as of such date (or, if
any such representation or warranty is expressly stated to have been made
as of a specific date, as of such specific date). The Lender shall have
received an officer's certificate signed by a Responsible Officer of the
Borrowers certifying as to the truth and accuracy of the above, which
certificate shall specifically include a statement that the Borrowers are
in compliance with all governmental licenses and authorizations and is
qualified to do business and in good standing in all required
jurisdictions.
(c) the aggregate outstanding principal amount of the Loans shall not
exceed the Borrowing Base;
(d) subject to the Lender's right to perform one or more Due Diligence
Reviews pursuant to Section 11.15 hereof, the Lender shall have completed
its due diligence review of the Mortgage Loan Documents for each Loan and
such other documents, records, agreements, instruments, mortgaged
properties or information relating to such Loans as the Lender in its sole
discretion deems appropriate to review and such review shall be
satisfactory to the Lender in its sole discretion;
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(e) the Lender shall have received from the Custodian a Mortgage Loan
Schedule and Exception Report with Exceptions as are acceptable to the
Lender in its sole discretion in respect of Eligible Mortgage Loans to be
pledged hereunder on such Business Day;
(f) the Lender shall have received from the Borrower a Warehouse
Lender's Release Letter substantially in the form of EXHIBIT E-2 hereto (or
such other form acceptable to the Lender) or a Seller's Release Letter
substantially in the form of EXHIBIT E-1 hereto (or such other form
acceptable to the Lender) covering each Mortgage Loan to be pledged to the
Lender;
(g) none of the following shall have occurred and/or be continuing:
(i) an event or events shall have occurred resulting in the effective
absence of a "repo market" or comparable "lending market" for financing
debt obligations secured by mortgage loans or securities or an event or
events shall have occurred resulting in the Lender not being able to
finance any Loans through the "repo market" or "lending market" with
traditional counterparties at rates which would have been reasonable prior
to the occurrence of such event or events;
(ii) an event or events shall have occurred resulting in the effective
absence of a "securities market" for securities backed by mortgage loans or
an event or events shall have occurred resulting in the Lender not being
able to sell securities backed by mortgage loans at prices which would have
been reasonable prior to such event or events; or
(iii) there shall have occurred a material adverse change in the
financial condition of the Lender which effects (or can reasonably be
expected to effect) materially and adversely the ability of the Lender to
fund its obligations under this Loan Agreement.
Each request for a borrowing by the Borrowers hereunder shall constitute a
certification by the Borrowers that all the conditions set forth in this Section
5 have been satisfied (both as of the date of such notice, request or
confirmation and as of the date of such borrowing). In the event that the Lender
fails to make a Loan to the Borrowers due solely to any of the circumstances set
forth in Section 5.02(g) hereof, then, upon request of the Borrowers, the Lender
shall refund to the Borrower that portion of the commitment fee paid pursuant to
Section 3.04 hereof, pro-rated over the number of days (notwithstanding any
extension of the Termination Date pursuant to Section 2.09, such amount shall be
calculated based upon the original term of this Loan Agreement) during which the
Lender fails to make Loans requested by the Borrowers solely because of the
circumstances set forth in Section 5.02 (g) hereof.
Section 6. REPRESENTATIONS AND WARRANTIES. The Borrowers represent and
warrant to the Lender that throughout the term of this Loan Agreement:
6.01 EXISTENCE. Each of the Borrowers (a) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, (b) has all requisite corporate or other power, and has all
governmental licenses, authorizations, consents and approvals necessary to own
its assets and carry on its business as now being or as proposed to be
conducted, except where the lack of such licenses, authorizations, consents and
approvals would not be reasonably likely to have a Material Adverse Effect; and
(c) is qualified to do business and is in good standing in all other
jurisdictions in which the nature of the business conducted by it makes such
qualification
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necessary, except where failure so to qualify would not be reasonably likely
(either individually or in the aggregate) to have a Material Adverse Effect.
6.02 FINANCIAL CONDITION. HCMH has heretofore furnished to the Lender a
copy of (a) its consolidated balance sheet and the consolidated balance sheets
of its consolidated Subsidiaries for the fiscal year of HCMH ended December 31,
1997 and the related consolidated statements of income and retained earnings and
of cash flows for HCMH and its consolidated Subsidiaries for such fiscal year,
setting forth in each case in comparative form the figures for the previous
year, with the opinion thereon of a nationally recognized accounting firm and
(b) its consolidated balance sheet and the consolidated balance sheets of its
consolidated Subsidiaries for the quarterly fiscal periods of HCMH ended March
31, 1998, June 30, 1998 and September 30, 1998 and the related consolidated
statements of income and retained earnings and of cash flows for HCMH and its
consolidated Subsidiaries for such quarterly fiscal periods, setting forth in
each case in comparative form the figures for the previous year. All such
financial statements are complete and correct and fairly present, in all
material respects, the consolidated financial condition of HCMH and its
Subsidiaries and the consolidated results of their operations as at such dates
and for such fiscal periods, all in accordance with GAAP applied on a consistent
basis. Since September 30, 1998, there has been no material adverse change in
the consolidated business, operations or financial condition of HCMH and its
consolidated Subsidiaries taken as a whole from that set forth in said financial
statements.
6.03 LITIGATION. There are no actions, suits, arbitrations, investigations
(including, without limitation, any of the foregoing which are pending or
threatened) or other legal or arbitrable proceedings affecting either Borrower
or any of its Subsidiaries or affecting any of the Property of any of them
before any Governmental Authority that (i) questions or challenges the validity
or enforceability of any of the Loan Documents or any action to be taken in
connection with the transactions contemplated hereby, (ii) makes a claim or
claims in an aggregate amount greater than $1,000,000.00, (iii) which,
individually or in the aggregate, if adversely determined, could reasonably be
likely to have a Material Adverse Effect, or (iv) requires filing with the
Securities and Exchange Commission in accordance with the 1934 Act or any rules
thereunder.
6.04 NO BREACH. Neither (a) the execution and delivery of the Loan
Documents nor (b) the consummation of the transactions therein contemplated in
compliance with the terms and provisions thereof will conflict with or result in
a breach of the charter or by-laws of either Borrower, or any applicable law,
rule or regulation, or any order, writ, injunction or decree of any Governmental
Authority, or any Servicing Agreement or other material agreement or instrument
to which either Borrower or any of its Subsidiaries is a party or by which any
of them or any of their Property is bound or to which any of them is subject, or
constitute a default under any such material agreement or instrument or result
in the creation or imposition of any Lien (except for the Liens created pursuant
to this Loan Agreement) upon any Property of either Borrower or any of its
Subsidiaries pursuant to the terms of any such agreement or instrument.
6.05 ACTION. The Borrowers have all necessary corporate or other power,
authority and legal right to execute, deliver and perform their obligations
under each of the Loan Documents; the execution, delivery and performance by the
Borrowers of each of the Loan Documents has been duly authorized by all
necessary corporate or other action on their part; and each Loan Document has
been duly and validly executed and delivered by the Borrowers and constitutes a
legal, valid and binding obligation of the Borrowers, enforceable against the
Borrowers in accordance with its terms.
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6.06 APPROVALS. No authorizations, approvals or consents of, and no filings
or registrations with, any Governmental Authority or any securities exchange are
necessary for the execution, delivery or performance by the Borrowers of the
Loan Documents or for the legality, validity or enforceability thereof, except
for filings and recordings in respect of the Liens created pursuant to this Loan
Agreement.
6.07 MARGIN REGULATIONS. Neither the making of any Loan hereunder, nor the
use of the proceeds thereof, will violate or be inconsistent with the provisions
of Regulation T, U or X.
6.08 TAXES. The Borrowers have filed all Federal income tax returns and all
other material tax returns that are required to be filed by it and has paid all
taxes due pursuant to such returns or pursuant to any assessment received by it,
except for any such taxes as are being appropriately contested in good faith by
appropriate proceedings diligently conducted and with respect to which adequate
reserves have been provided. The charges, accruals and reserves on the books of
the Borrowers in respect of taxes and other governmental charges are, in the
opinion of the Borrowers, adequate.
6.09 INVESTMENT COMPANY ACT. Neither the Borrowers nor any of their
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
6.10 COLLATERAL; COLLATERAL SECURITY.
(a) The Borrowers have not assigned, pledged, or otherwise conveyed or
encumbered any Mortgage Loan to any other Person, and immediately prior to the
pledge of such Mortgage Loan to the Lender, the applicable Borrower was the sole
owner of such Mortgage Loan and had good and marketable title thereto, free and
clear of all Liens, in each case except for Liens to be released simultaneously
with the Liens granted in favor of the Lender hereunder. No Mortgage Loan
pledged to the Lender hereunder was acquired (by purchase or otherwise) by the
applicable Borrower from an Affiliate of the Borrower
(b) The provisions of this Loan Agreement are effective to create in favor
of the Lender a valid security interest in all right, title and interest of the
Borrowers in, to and under the Collateral.
(c) Upon receipt by the Custodian of each Mortgage Note, endorsed in blank
by a duly authorized officer of the applicable Borrower, the Lender shall have a
fully perfected first priority security interest therein, in the Mortgage Loan
evidenced thereby and in the Borrowers' interest in the related Mortgaged
Property.
(d) Upon the filing of financing statements on Form UCC-1 naming the Lender
as "Secured Party" and the Borrowers as "Debtor", and describing the Collateral,
in the jurisdictions and recording offices listed on Schedule 2 attached hereto,
the security interests granted hereunder in the Collateral will constitute fully
perfected first priority security interests under the Uniform Commercial Code in
all right, title and interest of the Borrowers in, to and under such Collateral
which can be perfected by filing under the Uniform Commercial Code.
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6.11 CHIEF EXECUTIVE OFFICE. On the Effective Date, and during the four
months immediately preceding the Effective Date, the Borrowers' chief executive
offices, are, and have been, located at ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇.
6.12 LOCATION OF BOOKS AND RECORDS. The location where the Borrowers keeps
their books and records, including all computer tapes and records relating to
the Collateral is their chief executive office.
6.13 HEDGING. The Borrowers have entered into Interest Rate Protection
Agreements, having a notional amount not less than 80% of the aggregate unpaid
principal amount of the fixed-rate Mortgage Loans having terms with respect to
protection against fluctuations in interest rates reasonably acceptable to the
Lender.
6.14 TRUE AND COMPLETE DISCLOSURE. The information, reports, financial
statements, exhibits and schedules furnished in writing by or on behalf of the
Borrowers to the Lender in connection with the negotiation, preparation or
delivery of this Loan Agreement and the other Loan Documents or included herein
or therein or delivered pursuant hereto or thereto, when taken as a whole, do
not contain any untrue statement of material fact or omit to state any material
fact necessary to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading. All written
information furnished after the date hereof by or on behalf of the Borrowers to
the Lender in connection with this Loan Agreement and the other Loan Documents
and the transactions contemplated hereby and thereby will be true, complete and
accurate in every material respect, or (in the case of projections) based on
reasonable estimates, on the date as of which such information is stated or
certified. There is no fact known to a Responsible Officer of the Borrowers,
after due inquiry, that could reasonably be expected to have a Material Adverse
Effect that has not been disclosed herein, in the other Loan Documents or in a
report, financial statement, exhibit, schedule, disclosure letter or other
writing furnished to the Lender for use in connection with the transactions
contemplated hereby or thereby.
6.15 TANGIBLE NET WORTH. On the Effective Date, the Tangible Net Worth of
HCMH is not less than $65,000,000.
6.16 ERISA. Each Plan to which the Borrowers or their Subsidiaries make
direct contributions, and, to the knowledge of the Borrowers, each other Plan
and each Multiemployer Plan, is in compliance in all material respects with, and
has been administered in all material respects in compliance with, the
applicable provisions of ERISA, the Code and any other Federal or State law. No
event or condition has occurred and is continuing as to which the Borrowers
would be under an obligation to furnish a report to the Lender under Section
7.01(d) hereof.
6.17 PERCENTAGE OWNERSHIP. No Person beneficially owns (directly or
indirectly) more than 49% of HCMH.
6.18 SOLVENCY. The actions taken by the Borrowers pursuant to this Loan
Agreement are not undertaken with the intent to hinder, delay or defraud the
Borrowers' creditors. The Borrowers are not insolvent within the meaning of 11
U.S.C. Section 101(32) and the consummation of the transactions contemplated
herein (a) will not cause the Borrowers to become insolvent, (b) will not result
in any property remaining with the Borrowers to be unreasonably small capital,
and (c) will not result in debts that would be beyond the Borrowers' ability to
pay as same mature. The Borrowers are
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receiving reasonably equivalent value in exchange for the transfer and pledge of
the Borrowers' interest in the Collateral made pursuant to this Loan Agreement.
Section 7. COVENANTS OF THE BORROWERS. The Borrowers covenant and agree
with the Lender that, so long as any Loan is outstanding and until payment in
full of all Secured Obligations:
7.01 FINANCIAL STATEMENTS. The Borrowers shall deliver to the Lender:
(a) as soon as available and in any event within 45 days after the end
of each of the first three quarterly fiscal periods of each fiscal year of
HCMH, the unaudited consolidated balance sheets of HCMH and its
consolidated Subsidiaries as at the end of such period and the related
unaudited consolidated statements of income and retained earnings and of
cash flows for HCMH and its consolidated Subsidiaries for such period and
the portion of the fiscal year through the end of such period, setting
forth in each case in comparative form the figures for the previous year,
accompanied by a certificate of a Responsible Officer of HCMH, which
certificate shall state that said consolidated financial statements fairly
present the consolidated financial condition and results of operations of
HCMH and its consolidated Subsidiaries in accordance with GAAP,
consistently applied, as at the end of, and for, such period (subject to
normal year-end audit adjustments);
(b) as soon as available and in any event within 90 days after the end
of each fiscal year of HCMH, the consolidated balance sheets of HCMH and
its consolidated Subsidiaries as at the end of such fiscal year and the
related consolidated statements of income and retained earnings and of cash
flows for HCMH and its consolidated Subsidiaries for such year, setting
forth in each case in comparative form the figures for the previous year,
accompanied by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall not be
qualified as to scope of audit or going concern and shall state that said
consolidated financial statements fairly present the consolidated financial
condition and results of operations of HCMH and its consolidated
Subsidiaries as at the end of, and for, such fiscal year in accordance with
GAAP, and a certificate of such accountants stating that, in making the
examination necessary for their opinion, they obtained no knowledge, except
as specifically stated, of any Default or Event of Default;
(c) from time to time such other information regarding the financial
condition, operations, or business of the Borrowers as the Lender may
reasonably request; and
(d) as soon as reasonably possible, and in any event within thirty
(30) days after a Responsible Officer of the Borrower knows, or with
respect to any Plan or Multiemployer Plan to which the Borrowers or any of
their Subsidiaries make direct contributions, has reason to believe, that
any of the events or conditions specified below with respect to any Plan or
Multiemployer Plan has occurred or exists, a statement signed by a senior
financial officer of the applicable Borrower setting forth details
respecting such event or condition and the action, if any, that the
applicable Borrower or its ERISA Affiliate proposes to take with respect
thereto (and a copy of any report or notice required to be filed with or
given to PBGC by such Borrower or an ERISA Affiliate with respect to such
event or condition):
(i) any reportable event, as defined in Section 4043(c) of ERISA
and the regulations issued thereunder, with respect to a Plan, as to
which PBGC has not by regulation waived the requirement of Section
4043(a) of ERISA that it be notified
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within thirty (30) days of the occurrence of such event (PROVIDED that
a failure to meet the minimum funding standard of Section 412 of the
Code or Section 302 of ERISA, including without limitation the failure
to make on or before its due date a required installment under Section
412(m) of the Code or Section 302(e) of ERISA, shall be a reportable
event regardless of the issuance of any waivers in accordance with
Section 412(d) of the Code); and any request for a waiver under
Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041(c) of ERISA of a notice
of intent to terminate any Plan or any action taken by a Borrower or
an ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section 4042
of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by a Borrower or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has
been taken by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer Plan
by a Borrower or any ERISA Affiliate that results in liability under
Section 4201 or 4204 of ERISA (including the obligation to satisfy
secondary liability as a result of a purchaser default) or the receipt
by a Borrower or any ERISA Affiliate of notice from a Multiemployer
Plan that it is in reorganization or insolvency pursuant to Section
4241 or 4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against a Borrower or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed within
30 days; and
(vi) the adoption of an amendment to any Plan that would result
in the loss of tax-exempt status of the trust of which such Plan is a
part if a Borrower or an ERISA Affiliate fails to provide timely
security to such Plan in accordance with the provisions of Section
401(a)(29) of the Code or Section 307 of ERISA.
HCMH will furnish to the Lender, at the time it furnishes each set of financial
statements pursuant to paragraphs (a) and (b) above, a certificate of a
Responsible Officer of HCMH to the effect that, to the best of such Responsible
Officer's knowledge, the Borrowers during such fiscal period or year have
observed or performed all of its covenants and other agreements, and satisfied
every condition, contained in this Loan Agreement and the other Loan Documents
to be observed, performed or satisfied by it, and that such Responsible Officer
has obtained no knowledge of any Default or Event of Default except as specified
in such certificate (and, if any Default or Event of Default has occurred and is
continuing, describing the same in reasonable detail and describing the action
the Borrower has taken or proposes to take with respect thereto).
7.02 LITIGATION. The Borrowers will promptly, and in any event within 10
days after service of process on any of the following, give to the Lender notice
of all litigation, actions, suits, arbitrations, investigations (including,
without limitation, any of the foregoing which are pending or threatened) or
other legal or arbitrable proceedings affecting either Borrower or any of its
Subsidiaries or affecting any of the Property of any of them before any
Governmental Authority that (i) questions or
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challenges the validity or enforceability of any of the Loan Documents or any
action to be taken in connection with the transactions contemplated hereby, (ii)
makes a claim or claims in an aggregate amount greater than $1,000,000.00, (iii)
which, individually or in the aggregate, if adversely determined, could be
reasonably likely to have a Material Adverse Effect, or (iv) requires filing
with the Securities and Exchange Commission in accordance with the 1934 Act and
any rules thereunder.
7.03 EXISTENCE, ETC. The Borrowers will:
(a) preserve and maintain their legal existence and all of their
material rights, privileges, licenses and franchises (provided that nothing
in this Section 7.03(a) shall prohibit any transaction expressly permitted
under Section 7.04 hereof);
(b) comply with the requirements of all applicable laws, rules,
regulations and orders of Governmental Authorities (including, without
limitation, all environmental laws) if failure to comply with such
requirements would be reasonably likely (either individually or in the
aggregate) to have a Material Adverse Effect;
(c) keep adequate records and books of account, in which complete
entries will be made in accordance with GAAP consistently applied;
(d) not move their chief executive office from the address referred to
in Section 6.11 unless they shall have provided the Lender 30 days' prior
written notice of such change;
(e) pay and discharge all taxes, assessments and governmental charges
or levies imposed on it or on its income or profits or on any of their
Property prior to the date on which penalties attach thereto, except for
any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which
adequate reserves are being maintained; and
(f) permit representatives of the Lender, during normal business
hours, to examine, copy and make extracts from their books and records, to
inspect any of their Properties, and to discuss their business and affairs
with their officers, all to the extent reasonably requested by the Lender.
7.04 PROHIBITION OF FUNDAMENTAL CHANGES. The Borrowers shall not enter into
any transaction of merger or consolidation or amalgamation, or liquidate, wind
up or dissolve themselves (or suffer any liquidation, winding up or dissolution)
or sell all or substantially all of their assets; PROVIDED, that the Borrowers
may merge or consolidate with (a) any wholly owned subsidiary of HCMH, or (b)
any other Person if the respective Borrower is the surviving corporation; and
PROVIDED FURTHER, that if after giving effect thereto, no Default would exist
hereunder.
7.05 BORROWING BASE DEFICIENCY. If at any time there exists a Borrowing
Base Deficiency the Borrowers shall cure same in accordance with Section 2.06
hereof.
7.06 NOTICES. The Borrowers shall give notice to the Lender:
(a) promptly upon receipt of notice or knowledge of the occurrence of
any Default or Event of Default;
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(b) with respect to any Mortgage Loan pledged to the Lender hereunder,
immediately upon receipt of any principal prepayment (in full or partial)
of such pledged Mortgage Loan;
(c) with respect to any Mortgage Loan pledged to the Lender hereunder,
immediately upon receipt of notice or knowledge that the underlying
Mortgaged Property has been damaged by waste, fire, earthquake or earth
movement, windstorm, flood, tornado or other casualty, or otherwise damaged
so as to affect adversely the Collateral Value of such pledged Mortgage
Loan; and
(d) promptly upon receipt of notice or knowledge of (i) any default
related to any Collateral, (ii) any Lien or security interest (other than
security interests created hereby or by the other Loan Documents) on, or
claim asserted against, any of the Collateral or (iii) any event or change
in circumstances which could reasonably be expected to have a Material
Adverse Effect.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer of the Borrowers setting forth details of the occurrence
referred to therein and stating what action the Borrowers have taken or propose
to take with respect thereto.
7.07 HEDGING. The Borrowers shall at all times maintain Interest Rate
Protection Agreements, having a notional amount not less than [80%] of the
aggregate outstanding principal balance of all fixed-rate Mortgage Loans having
terms with respect to protection against fluctuations in interest rates
reasonably acceptable to the Lender. The Borrowers shall deliver to the Lender
monthly a written summary of the notional amount of all outstanding Interest
Rate Protection Agreements.
7.08 REPORTS. The Borrowers shall provide the Lender with a quarterly
report, which report shall include, among other items, (a) a summary of the
Borrowers' delinquency and loss experience with respect to mortgage loans
serviced by the Borrowers, any Servicer or any designee of either, plus any such
additional reports as the Lender may reasonably request with respect to the
Borrowers' or any Servicer's servicing portfolio and (b) a ▇▇▇▇ to market
summary of any residual securities held by the Borrowers or any of their
Subsidiaries.
7.09 UNDERWRITING GUIDELINES. Without the prior written consent of the
Lender, the Borrowers shall not amend or otherwise modify the Underwriting
Guidelines. Notwithstanding the preceding sentence, in the event that the
Borrowers make any amendment or modification to the Underwriting Guidelines, the
Borrowers shall promptly deliver to the Lender a complete copy of the amended or
modified Underwriting Guidelines.
7.10 TRANSACTIONS WITH AFFILIATES. Neither Borrower will enter into any
transaction, including without limitation any purchase, sale, lease or exchange
of property or the rendering of any service, with any Affiliate unless such
transaction is (a) otherwise permitted under this Loan Agreement, (b) in the
ordinary course of such Borrower's business and (c) upon fair and reasonable
terms no less favorable to such Borrower than it would obtain in a comparable
arm's length transaction with a Person which is not an Affiliate, or make a
payment that is not otherwise permitted by this Section 7.10 to any Affiliate.
In no event shall the Borrowers pledge to the Lender hereunder any Mortgage Loan
acquired by any Borrower from an Affiliate of such Borrower (other than a
co-Borrower).
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7.11 LIMITATION ON LIENS. The Borrowers will defend the Collateral against,
and will take such other action as is necessary to remove, any Lien, security
interest or claim on or to the Collateral, other than the security interests
created under this Loan Agreement, and the Borrowers will defend the right,
title and interest of the Lenders in and to any of the Collateral against the
claims and demands of all persons whomsoever.
7.12 LIMITATION ON GUARANTEES. The Borrowers shall not create, incur,
assume or suffer to exist any Guarantees, except with respect to those
Guarantees previously disclosed to and approved by the Lender guaranteeing
Indebtedness in amounts previously disclosed to and approved by the Lender to
Hanover Capital Partners, Ltd.
7.13 LIMITATION ON DISTRIBUTIONS. After the occurrence and during the
continuation of any Default, the Borrowers shall not make any payment on account
of, or set apart assets for, a sinking or other analogous fund for the purchase,
redemption, defeasance, retirement or other acquisition of any equity or
partnership interest of the Borrowers, whether now or hereafter outstanding, or
make any other distribution in respect of any of the foregoing or to any
shareholder or equity owner of the Borrowers, either directly or indirectly,
whether in cash or property or in obligations of the Borrowers or any of the
Borrowers' consolidated Subsidiaries.
7.14 MAINTENANCE OF TANGIBLE NET WORTH. HCMH shall not permit Tangible Net
Worth at any time to be less than the sum of (i) $60,000,000 plus (ii) an amount
equal to 75% of the aggregate or positive Net Income (without deduction for
quarterly losses).
7.15 MAINTENANCE OF RATIO OF TOTAL INDEBTEDNESS TO TANGIBLE NET WORTH. HCMH
shall not permit the ratio of Total Indebtedness to Tangible Net Worth at any
time to be greater than 10:1.
7.16 MAINTENANCE OF PROFITABILITY. The Borrowers shall not permit, for any
period of three consecutive fiscal quarters (each such period, a "TEST PERIOD"),
Net Income for such Test Period, before income taxes for such Test Period and
distributions made during such Test Period, to be less than $1.00.
7.17 SERVICING TAPE. The Borrowers shall provide to the Lender on the fifth
Business Day of each month a computer readable file containing servicing
information updated as of the close of business of the last business day of the
preceding month, including without limitation those fields specified by the
Lender from time to time, on a loan-by-loan basis and in the aggregate, with
respect to the Mortgage Loans serviced hereunder by the Borrowers or any
Servicer. The Borrowers shall not cause the Mortgage Loans to be serviced by any
servicer other than a servicer expressly approved in writing by the Lender.
7.18 MAINTENANCE OF LIQUIDITY. HCMH shall ensure that, as of the end of
each calendar month, it has unencumbered Cash Equivalents in an amount of not
less than $4,000,000.
7.19 REQUIRED FILINGS. The Borrowers shall promptly provide the Lender with
copies of all documents which the Borrowers or any Affiliate of the Borrowers is
required to file with the Securities and Exchange Commission in accordance with
the 1934 Act or any rules thereunder.
7.20 NO ADVERSE SELECTION. The Borrowers have not selected the Collateral
in a manner so as to adversely affect the Lender's interests.
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7.21 LIMITATION ON SUBSIDIARY FORMATION. Except with respect to those
Subsidiaries formed solely for the purpose of issuing collateralized mortgage
obligations, the Borrowers shall not form any Subsidiaries.
Section 8. EVENTS OF DEFAULT. Each of the following events shall constitute
an event of default (an "EVENT OF DEFAULT") hereunder:
(a) the Borrowers shall default in the payment of any principal of or
interest on any Loan when due (whether at stated maturity, upon
acceleration or at mandatory prepayment); or
(b) the Borrowers shall default in the payment of any other amount
payable by it hereunder or under any other Loan Document after notification
by the Lender of such default, and such default shall have continued
unremedied for five Business Days; or
(c) any representation, warranty or certification made or deemed made
herein or in any other Loan Document by the Borrowers or any certificate
furnished to the Lender pursuant to the provisions hereof or thereof shall
prove to have been false or misleading in any material respect as of the
time made or furnished (other than the representations and warranties set
forth in Schedule 1, which shall be considered solely for the purpose of
determining the Collateral Value of the Mortgage Loans; unless (i) the
Borrowers shall have made any such representations and warranties with
knowledge that they were materially false or misleading at the time made or
(ii) any such representations and warranties have been determined by the
Lender in its sole discretion to be materially false or misleading on a
regular basis); or
(d) either Borrower shall fail to comply with the requirements of
Section 7.03(a), Section 7.04, Section 7.05, Section 7.06, or Sections 7.09
through 7.22 hereof; or the Borrower shall otherwise fail to comply with
the requirements of Section 7.03 hereof and such default shall continue
unremedied for a period of five Business Days; or either Borrower shall
fail to observe or perform any other covenant or agreement contained in
this Loan Agreement or any other Loan Document and such failure to observe
or perform shall continue unremedied for a period of seven Business Days;
or
(e) a final judgment or judgments for the payment of money in excess
of $5,000,000 in the aggregate shall be rendered against any Borrower or
any of its Affiliates by one or more courts, administrative tribunals or
other bodies having jurisdiction and the same shall not be satisfied,
discharged (or provision shall not be made for such discharge) or bonded,
or a stay of execution thereof shall not be procured, within 30 days from
the date of entry thereof, and such Borrower or any such Affiliate shall
not, within said period of 30 days, or such longer period during which
execution of the same shall have been stayed or bonded, appeal therefrom
and cause the execution thereof to be stayed during such appeal; or
(f) either Borrower shall admit in writing its inability to pay its
debts as such debts become due; or
(g) either Borrower or any of its Affiliates shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee, examiner or liquidator or the like of itself or of all
or a substantial part of its property, (ii) make a general assignment for
the benefit of its creditors, (iii) commence a voluntary case under the
Bankruptcy Code, (iv) file a petition seeking to take advantage of any
other law relating to
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bankruptcy, insolvency, reorganization, liquidation, dissolution,
arrangement or winding-up, or composition or readjustment of debts, (v)
fail to controvert in a timely and appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case under the
Bankruptcy Code or (vi) take any corporate or other action for the purpose
of effecting any of the foregoing; or
(h) a proceeding or case shall be commenced, without the application
or consent of either Borrower or any of its Affiliates, in any court of
competent jurisdiction, seeking (i) its reorganization, liquidation,
dissolution, arrangement or winding-up, or the composition or readjustment
of its debts, (ii) the appointment of, or the taking of possession by, a
receiver, custodian, trustee, examiner, liquidator or the like of such
Borrower or any such Affiliate or of all or any substantial part of its
property, or (iii) similar relief in respect of such Borrower or any such
Affiliate under any law relating to bankruptcy, insolvency, reorganization,
liquidation, dissolution, arrangement or winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of
the foregoing shall be entered and continue unstayed and in effect, for a
period of 30 or more days; or an order for relief against such Borrower or
any such Affiliate shall be entered in an involuntary case under the
Bankruptcy Code; or
(i) the Custodial Agreement or any Loan Document shall for whatever
reason be terminated or cease to be in full force and effect, or the
enforceability thereof shall be contested by either Borrower; or
(j) either Borrower shall grant, or suffer to exist, any Lien on any
Collateral except the Liens contemplated hereby; or the Liens contemplated
hereby shall cease to be first priority perfected Liens on the Collateral
in favor of the Lender or shall be Liens in favor of any Person other than
the Lender; or
(k) either Borrower or any of such Borrower's Affiliates shall be in
default under any note, indenture, loan agreement, guaranty, swap agreement
or any other contract to which it is a party, which default (i) involves
the failure to pay a matured obligation, or (ii) permits the acceleration
of the maturity of obligations by any other party to or beneficiary of such
note, indenture, loan agreement, guaranty, swap agreement or other
contract; or
(l) any materially adverse change in the Property, business, financial
condition or prospects of either Borrower or any of its Affiliates shall
occur, in each case as determined by the Lender in its sole discretion, or
any other condition shall exist which, in the Lender's sole discretion,
constitutes a material impairment of either Borrower's ability to perform
its obligations under this Loan Agreement, the Amended and Restated Note or
any other Loan Document; or
(m) any person shall beneficially own (directly or indirectly) more
than 49% of HCMH; or
(n) either Borrower or any Affiliate of such Borrower shall default
under any other agreement with the Lender or an Affiliate of the Lender.
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Section 9. REMEDIES UPON DEFAULT.
(a) An Event of Default shall be deemed to be continuing unless expressly
waived by the Lender in writing. Upon the occurrence of one or more Events of
Default hereunder, the Lender's obligation to make additional Loans to the
Borrowers shall automatically terminate without further action by any Person.
Upon the occurrence of one or more Events of Default other than those referred
to in Section 8(g) or (h), the Lender may immediately declare the principal
amount of the Loans then outstanding under the Amended and Restated Note to be
immediately due and payable, together with all interest thereon and fees and
expenses accruing under this Loan Agreement. Upon the occurrence of an Event of
Default referred to in Sections 8(g) or (h), such amounts shall immediately and
automatically become due and payable without any further action by any Person.
Upon such declaration or such automatic acceleration, the balance then
outstanding on the Amended and Restated Note shall become immediately due and
payable, without presentment, demand, protest or other formalities of any kind,
all of which are hereby expressly waived by the Borrowers.
(b) Upon the occurrence of one or more Events of Default, the Lender shall
have the right to obtain physical possession of the Servicing Records and all
other files of the Borrowers relating to the Collateral and all documents
relating to the Collateral which are then or may thereafter come in to the
possession of the Borrowers or any third party acting for the Borrowers and the
Borrowers shall deliver to the Lender such assignments as the Lender shall
request. The Lender shall be entitled to specific performance of all agreements
of the Borrowers contained in this Loan Agreement.
Section 10. NO DUTY OF LENDER. The powers conferred on the Lender hereunder
are solely to protect the Lender's interests in the Collateral and shall not
impose any duty upon it to exercise any such powers. The Lender shall be
accountable only for amounts that it actually receives as a result of the
exercise of such powers, and neither it nor any of its officers, directors,
employees or agents shall be responsible to the Borrowers for any act or failure
to act hereunder, except for its or their own gross negligence or willful
misconduct.
Section 11. MISCELLANEOUS.
11.01 WAIVER. No failure on the part of the Lender to exercise and no delay
in exercising, and no course of dealing with respect to, any right, power or
privilege under any Loan Document shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or privilege under any Loan
Document preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
11.02 NOTICES. Except as otherwise expressly permitted by this Loan
Agreement, all notices, requests and other communications provided for herein
and under the Custodial Agreement (including without limitation any
modifications of, or waivers, requests or consents under, this Loan Agreement)
shall be given or made in writing (including without limitation by telex or
telecopy) delivered to the intended recipient at the "Address for Notices"
specified below its name on the signature pages hereof or thereof); or, as to
any party, at such other address as shall be designated by such party in a
written notice to each other party. Except as otherwise provided in this Loan
Agreement and except for notices given under Section 2 (which shall be effective
only on receipt), all such communications shall be deemed to have been duly
given when transmitted by telex or telecopy or personally delivered or, in the
case of a mailed notice, upon receipt, in each case given or addressed as
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aforesaid. Any notice delivered to either Borrower shall be deemed to have been
delivered notice to both Borrowers.
11.03 INDEMNIFICATION AND EXPENSES.
(a) The Borrowers agree to hold the Lender, and its Affiliates and their
officers, directors, employees, agents and advisors (each an "INDEMNIFIED
PARTY") harmless from and indemnify any Indemnified Party against all
liabilities, losses, damages, judgments, costs and expenses of any kind which
may be imposed on, incurred by or asserted against such Indemnified Party
(collectively, the "COSTS") relating to or arising out of this Loan Agreement,
the Amended and Restated Note, any other Loan Document or any transaction
contemplated hereby or thereby, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Loan Agreement, the
Amended and Restated Note, any other Loan Document or any transaction
contemplated hereby or thereby, that, in each case, results from anything other
than such Indemnified Party's gross negligence or willful misconduct. Without
limiting the generality of the foregoing, the Borrowers agree to hold any
Indemnified Party harmless from and indemnify such Indemnified Party against all
Costs with respect to all Mortgage Loans relating to or arising out of any
violation or alleged violation of any environmental law, rule or regulation or
any consumer credit laws, including without limitation the Truth in Lending Act
and/or the Real Estate Settlement Procedures Act, that, in each case, results
from anything other than such Indemnified Party's gross negligence or willful
misconduct. In any suit, proceeding or action brought by an Indemnified Party in
connection with any Mortgage Loan for any sum owing thereunder, or to enforce
any provisions of any Mortgage Loan, the Borrowers will save, indemnify and hold
such Indemnified Party harmless from and against all expense, loss or damage
suffered by reason of any defense, set-off, counterclaim, recoupment or
reduction or liability whatsoever of the account debtor or obligor thereunder,
arising out of a breach by the Borrowers of any obligation thereunder or arising
out of any other agreement, indebtedness or liability at any time owing to or in
favor of such account debtor or obligor or its successors from the Borrowers The
Borrowers also agree to reimburse an Indemnified Party as and when billed by
such Indemnified Party for all such Indemnified Party's costs and expenses
incurred in connection with the enforcement or the preservation of such
Indemnified Party's rights under this Loan Agreement, the Amended and Restated
Note, any other Loan Document or any transaction contemplated hereby or thereby,
including without limitation the reasonable fees and disbursements of its
counsel. The Borrowers hereby acknowledges that, notwithstanding the fact that
the Note is secured by the Collateral, the obligations of the Borrowers under
the Amended and Restated Note are recourse obligations of the Borrowers.
(b) The Borrowers agree to pay as and when billed by the Lender all of the
out-of-pocket costs and expenses incurred by the Lender in connection with the
development, preparation and execution of, and any amendment, supplement or
modification to, this Loan Agreement, the Amended and Restated Note, any other
Loan Document or any other documents prepared in connection herewith or
therewith. The Borrowers agree to pay as and when billed by the Lender all of
the out-of-pocket costs and expenses incurred in connection with the
consummation and administration of the transactions contemplated hereby and
thereby including without limitation (i) all the reasonable fees, disbursements
and expenses of counsel to the Lender and (ii) all the due diligence,
inspection, testing and review costs and expenses incurred by the Lender with
respect to Collateral under this Loan Agreement, including, but not limited to,
those costs and expenses incurred by the Lender pursuant to Sections 11.03(a),
11.14 and 11.15 hereof.
11.04 AMENDMENTS. Except as otherwise expressly provided in this Loan
Agreement, any provision of this Loan Agreement may be modified or supplemented
only by an instrument in
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writing signed by the Borrowers and the Lender and any provision of this Loan
Agreement may be waived by the Lender.
11.05 SUCCESSORS AND ASSIGNS. This Loan Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
11.06 SURVIVAL. The obligations of the Borrowers under Sections 3.03 and
11.03 hereof shall survive the repayment of the Loans and the termination of
this Loan Agreement. In addition, each representation and warranty made or
deemed to be made by a request for a borrowing, herein or pursuant hereto shall
survive the making of such representation and warranty, and the Lender shall not
be deemed to have waived, by reason of making any Loan, any Default that may
arise because any such representation or warranty shall have proved to be false
or misleading, notwithstanding that the Lender may have had notice or knowledge
or reason to believe that such representation or warranty was false or
misleading at the time such Loan was made.
11.07 CAPTIONS. The table of contents and captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Loan Agreement.
11.08 COUNTERPARTS. This Loan Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Loan Agreement by
signing any such counterpart.
11.09 LOAN AGREEMENT CONSTITUTES SECURITY AGREEMENT; GOVERNING LAW. This
Loan Agreement shall be governed by New York law without reference to choice of
law doctrine, and shall constitute a security agreement within the meaning of
the Uniform Commercial Code.
11.10 SUBMISSION TO JURISDICTION; WAIVERS. EACH BORROWER HEREBY IRREVOCABLY
AND UNCONDITIONALLY:
(A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS LOAN AGREEMENT, THE AMENDED AND RESTATED NOTE
AND THE OTHER LOAN DOCUMENTS, OR FOR RECOGNITION AND ENFORCEMENT OF ANY
JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF
THE COURTS OF THE STATE OF NEW YORK, THE FEDERAL COURTS OF THE UNITED
STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE
COURTS FROM ANY THEREOF;
(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH
COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT
MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN
ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN
INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
(C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING
MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL
(OR ANY SUBSTANTIALLY SIMILAR FORM
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OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH UNDER ITS SIGNATURE
BELOW OR AT SUCH OTHER ADDRESS OF WHICH THE LENDER SHALL HAVE BEEN
NOTIFIED; AND
(D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT TO ▇▇▇ IN ANY OTHER JURISDICTION.
11.11 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS AND THE LENDER HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS LOAN AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
11.12 ACKNOWLEDGMENTS. Each Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Loan Agreement, the Amended and Restated Note and the
other Loan Documents;
(b) the Lender has no fiduciary relationship to the Borrower, and the
relationship between such Borrower and the Lender is solely that of debtor
and creditor; and
(c) no joint venture exists between the Lender and such Borrower.
11.13 HYPOTHECATION OR PLEDGE OF LOANS. The Lender shall have free and
unrestricted use of all Collateral and nothing in this Loan Agreement shall
preclude the Lender from engaging in repurchase transactions with the Collateral
or otherwise pledging, repledging, transferring, hypothecating, or
rehypothecating the Collateral. Nothing contained in this Loan Agreement shall
obligate the Lender to segregate any Collateral delivered to the Lender by the
Borrowers.
11.14 SERVICING.
(a) The Borrowers covenant to maintain or cause the servicing of the
Mortgage Loans to be maintained in conformity with accepted and prudent
servicing practices in the industry for the same type of mortgage loans as the
Mortgage Loans and in a manner at least equal in quality to the servicing the
Borrowers provide for mortgage loans which they own. In the event that the
preceding language is interpreted as constituting one or more servicing
contracts, each such servicing contract shall terminate automatically upon the
earliest of (i) an Event of Default, (ii) the date on which all the Secured
Obligations have been paid in full or (iii) the transfer of servicing approved
by the Borrowers.
(b) If the Mortgage Loans are serviced by a Borrower, (i) the Borrower
agrees that the Lender is the collateral assignee of all servicing records,
including but not limited to any and all servicing agreements, files, documents,
records, data bases, computer tapes, copies of computer tapes, proof of
insurance coverage, insurance policies, appraisals, other closing documentation,
payment history records, and any other records relating to or evidencing the
servicing of Mortgage Loans (the "SERVICING RECORDS"), and (ii) the Borrower
grants the Lender a security interest in all servicing fees and rights relating
to the Mortgage Loans and all Servicing Records to secure the obligation of the
Borrower or its designee to service in conformity with this Section and any
other obligation of the
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Borrower to the Lender. The Borrower covenants to safeguard such Servicing
Records and to deliver them promptly to the Lender or its designee (including
the Custodian) at the Lender's request.
(c) If the Mortgage Loans are serviced by a third party servicer (such
third party servicer, the "SERVICER"), the Borrowers (i) shall provide a copy of
the servicing agreement to the Lender, which shall be in form and substance
acceptable to the Lender (the "SERVICING AGREEMENT"); (ii) shall provide a
Servicer Notice to the Servicer substantially in the form of EXHIBIT H hereto,
and (iii) hereby irrevocably assigns to the Lender and the Lender's successors
and assigns all right, title, interest of the Borrowers in, to and under, and
the benefits of, any Servicing Agreement with respect to the Mortgage Loans. Any
successor to the Servicer shall be approved in writing by the Lender prior to
such successor's assumption of servicing obligations with respect to the
Mortgage Loans.
(d) If the servicer of the Mortgage Loans is a Borrower or the Servicer is
an Affiliate of the Borrower, such Borrower shall provide to the Lender a letter
from such Borrower or the Servicer, as the case may be, to the effect that upon
the occurrence of an Event of Default, the Lender may terminate any Servicing
Agreement and transfer servicing to its designee, at no cost or expense to the
Lender, it being agreed that such Borrower will pay any and all fees required to
terminate the Servicing Agreement and to effectuate the transfer of servicing to
the designee of the Lender.
(e) After the Funding Date, until the pledge of any Mortgage Loan is
relinquished by the Custodian, the Borrowers will have no right to modify or
alter the terms of such Mortgage Loan and the Borrowers will have no obligation
or right to repossess such Mortgage Loan or substitute another Mortgage Loan,
except as provided in the Custodial Agreement.
(f) In the event a Borrower or its Affiliate is servicing the Mortgage
Loans, such Borrower shall permit the Lender to inspect such Borrower's or its
Affiliate's servicing facilities, as the case may be, for the purpose of
satisfying the Lender that such Borrower or its Affiliate, as the case may be,
has the ability to service the Mortgage Loans as provided in this Loan
Agreement.
11.15 PERIODIC DUE DILIGENCE REVIEW. The Borrowers acknowledge that the
Lender has the right to perform continuing due diligence reviews with respect to
the Mortgage Loans, for purposes of verifying compliance with the
representations, warranties and specifications made hereunder, or otherwise, and
the Borrowers agree that upon reasonable (but no less than two (2) Business
Days') prior notice, unless an Event of Default shall have occurred and is
continuing, in which case no notice is required, to the Borrowers, the Lender or
its authorized representatives will be permitted during normal business hours to
examine, inspect, and make copies and extracts of, the Mortgage Files and any
and all documents, records, agreements, instruments or information relating to
such Mortgage Loans in the possession or under the control of the Borrowers
and/or the Custodian. The Borrowers also shall make available to the Lender a
knowledgeable financial or accounting officer for the purpose of answering
questions respecting the Mortgage Files and the Mortgage Loans. Without limiting
the generality of the foregoing, the Borrowers acknowledge that the Lender may
make Loans to the Borrowers based solely upon the information provided by the
Borrowers to the Lender in the Mortgage Loan Tape and the representations,
warranties and covenants contained herein, and that the Lender, at its option,
has the right at any time to conduct a partial or complete due diligence review
on some or all of the Mortgage Loans securing such Loan, including without
limitation ordering new credit reports and new appraisals on the related
Mortgaged Properties and otherwise re-generating the information used to
originate such Mortgage Loan. The Lender may underwrite such Mortgage Loans
itself or engage a mutually agreed upon third party underwriter to perform such
underwriting. The
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Borrowers agree to cooperate with the Lender and any third party underwriter in
connection with such underwriting, including, but not limited to, providing the
Lender and any third party underwriter with access to any and all documents,
records, agreements, instruments or information relating to such Mortgage Loans
in the possession, or under the control, of the Borrowers. The Borrowers further
agree that the Borrowers shall reimburse the Lender for any and all
out-of-pocket costs and expenses incurred by the Lender in connection with the
Lender's activities pursuant to this Section 11.15 ("DUE DILIGENCE COSTS");
provided that such Due Diligence Costs shall not exceed $20,000 per annum (the
"DUE DILIGENCE CAP") unless a Default shall have occurred and be continuing, in
which case, no Due Diligence Cap shall apply.
11.16 SET-OFF. In addition to any rights and remedies of the Lender
provided by this Loan Agreement and by law, the Lender shall have the right,
without prior notice to the Borrowers, any such notice being expressly waived by
the Borrowers to the extent permitted by applicable law, upon any amount
becoming due and payable by the Borrowers hereunder (whether at the stated
maturity, by acceleration or otherwise) to set-off and appropriate and apply
against such amount any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by the Lender or any
Affiliate thereof to or for the credit or the account of the Borrowers. The
Lender agrees promptly to notify the Borrowers after any such set-off and
application made by the Lender; PROVIDED that the failure to give such notice
shall not affect the validity of such set-off and application.
11.17 INTENT. The parties recognize that each Loan is a "securities
contract" as that term is defined in Section 741 of Title 11 of the United
States Code, as amended.
11.18 JOINT AND SEVERAL LIABILITY. Each Borrower hereby acknowledges and
agrees that such Borrower shall be jointly and severally liable for all
representations, warranties, covenants, obligations and indemnities of the
Borrowers hereunder.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to
be duly executed and delivered as of the day and year first above written.
BORROWER
--------
HANOVER CAPITAL MORTGAGE HOLDINGS,
INC.
By________________________________
Title:
ADDRESS FOR NOTICES:
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▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
BORROWER
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HANOVER CAPITAL PARTNERS, LTD
By________________________________
Title:
ADDRESS FOR NOTICES:
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
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LENDER
------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MORTGAGE
CAPITAL INC.
By________________________________
Title:
ADDRESS FOR NOTICES:
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
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SCHEDULE 1
REPRESENTATIONS AND WARRANTIES RE: MORTGAGE LOANS
Part I. ELIGIBLE MORTGAGE LOANS
As to each Mortgage Loan included in the Borrowing Base on a Funding Date
(and the related Mortgage, Mortgage Note, Assignment of Mortgage and Mortgaged
Property), the applicable Borrower shall be deemed to make the following
representations and warranties to the Lender as of such date and as of each date
Collateral Value is determined (certain defined terms used herein and not
otherwise defined in the Loan Agreement appearing in Part II to this Schedule
1):
(a) MORTGAGE LOANS AS DESCRIBED. The information set forth in the Mortgage
Loan Schedule with respect to the Mortgage Loan is complete, true and correct in
all material respects.
(b) PAYMENTS CURRENT. Except with respect to 30 Day Delinquent Mortgage
Loans and 60 Day Delinquent Mortgage Loans, all payments required to be made up
to the Funding Date for the Mortgage Loan under the terms of the Mortgage Note
have been made and credited. No payment required under the Mortgage Loan is
delinquent in excess of 89 days. The first Monthly Payment shall be made, or
shall have been made, with respect to the Mortgage Loan on its Due Date or
within the grace period, all in accordance with the terms of the related
Mortgage Note.
(c) NO OUTSTANDING CHARGES. There are no defaults in complying with the
terms of the Mortgage securing the Mortgage Loan, and all taxes, governmental
assessments, insurance premiums, water, sewer and municipal charges, leasehold
payments or ground rents which previously became due and owing have been paid,
or an escrow of funds has been established in an amount sufficient to pay for
every such item which remains unpaid and which has been assessed but is not yet
due and payable. Neither the Borrower nor the Qualified Originator from which
the Borrower acquired the Mortgage Loan has advanced funds, or induced,
solicited or knowingly received any advance of funds by a party other than the
Mortgagor, directly or indirectly, for the payment of any amount required under
the Mortgage Loan, except for interest accruing from the date of the Mortgage
Note or date of disbursement of the proceeds of the Mortgage Loan, whichever is
earlier, to the day which precedes by one month the Due Date of the first
installment of principal and interest thereunder.
(d) ORIGINAL TERMS UNMODIFIED. The terms of the Mortgage Note and Mortgage
have not been impaired, waived, altered or modified in any respect, from the
date of origination; except by a written instrument which has been recorded, if
necessary to protect the interests of the Lender, and which has been delivered
to the Custodian and the terms of which are reflected in the Mortgage Loan
Schedule. The substance of any such waiver, alteration or modification has been
approved by the title insurer, to the extent required, and its terms are
reflected on the Mortgage Loan Schedule. No Mortgagor in respect of the Mortgage
Loan has been released, in whole or in part, except in connection with an
assumption agreement approved by the title insurer, to the extent required by
such policy, and which assumption agreement is part of the Mortgage File
delivered to the Custodian and the terms of which are reflected in the Mortgage
Loan Schedule.
Schedule 1-1
48
(e) NO DEFENSES. The Mortgage Loan is not subject to any right of
rescission, set-off, counterclaim or defense, including without limitation the
defense of usury, nor will the operation of any of the terms of the Mortgage
Note or the Mortgage, or the exercise of any right thereunder, render either the
Mortgage Note or the Mortgage unenforceable, in whole or in part and no such
right of rescission, set-off, counterclaim or defense has been asserted with
respect thereto, and no Mortgagor in respect of the Mortgage Loan was a debtor
in any state or Federal bankruptcy or insolvency proceeding at the time the
Mortgage Loan was originated. The Borrower has no knowledge nor has it received
any notice that any Mortgagor in respect of the Mortgage Loan is a debtor in any
state or federal bankruptcy or insolvency proceeding.
(f) HAZARD INSURANCE. The Mortgaged Property is insured by a fire and
extended perils insurance policy, issued by a Qualified Insurer, and such other
hazards as are customary in the area where the Mortgaged Property is located,
and to the extent required by the Borrower as of the date of origination
consistent with the Underwriting Guidelines, against earthquake and other risks
insured against by Persons operating like properties in the locality of the
Mortgaged Property, in an amount not less than the greatest of (i) 100% of the
replacement cost of all improvements to the Mortgaged Property, (ii) either (A)
the outstanding principal balance of the Mortgage Loan with respect to each
First Lien Mortgage Loan (as identified on the Mortgage Loan Tape) or (B) with
respect to each Second Lien Mortgage Loan (as identified on the Mortgage Loan
Tape), the sum of the outstanding principal balance of the First Lien Mortgage
Loan and the outstanding principal balance of the Second Lien Mortgage Loan, or
(iii) the amount necessary to avoid the operation of any co-insurance provisions
with respect to the Mortgaged Property, and consistent with the amount that
would have been required as of the date of origination in accordance with the
Underwriting Guidelines. If any portion of the Mortgaged Property is in an area
identified by any federal Governmental Authority as having special flood
hazards, and flood insurance is available, a flood insurance policy meeting the
current guidelines of the Federal Emergency Management Agency is in effect with
a generally acceptable insurance carrier, in an amount representing coverage not
less than the least of (1) the outstanding principal balance of the Mortgage
Loan, (2) the full insurable value of the Mortgaged Property, and (3) the
maximum amount of insurance available under the National Flood Insurance Act of
1968, as amended by the Flood Disaster Protection Act of 1974. All such
insurance policies (collectively, the "hazard insurance policy") contain a
standard mortgagee clause naming the Borrower, its successors and assigns
(including without limitation, subsequent owners of the Mortgage Loan), as
mortgagee, and may not be reduced, terminated or canceled without 30 days' prior
written notice to the mortgagee. No such notice has been received by the
Borrower. All premiums on such insurance policy have been paid. The related
Mortgage obligates the Mortgagor to maintain all such insurance and, at such
Mortgagor's failure to do so, authorizes the mortgagee to maintain such
insurance at the Mortgagor's cost and expense and to seek reimbursement therefor
from such Mortgagor. Where required by state law or regulation, the Mortgagor
has been given an opportunity to choose the carrier of the required hazard
insurance, provided the policy is not a "master" or "blanket" hazard insurance
policy covering a condominium, or any hazard insurance policy covering the
common facilities of a planned unit development. The hazard insurance policy is
the valid and binding obligation of the insurer and is in full force and effect.
The Borrower has not engaged in, and has no knowledge of the Mortgagor's having
engaged in, any act or omission which would impair the coverage of any such
policy, the benefits of the endorsement provided for herein, or the validity and
binding effect of either including, without limitation, no unlawful fee,
commission, kickback or other unlawful compensation or value of any kind has
been or will be received, retained or realized by any attorney, firm or other
Person, and no such unlawful items have been received, retained or realized by
the Borrower.
Schedule 1-2
49
(g) COMPLIANCE WITH APPLICABLE LAWS. Any and all requirements of any
federal, state or local law including, without limitation, usury,
truth-in-lending, real estate settlement procedures, consumer credit protection,
equal credit opportunity or disclosure laws applicable to the Mortgage Loan have
been complied with, the consummation of the transactions contemplated hereby
will not involve the violation of any such laws or regulations, and the Borrower
shall maintain or shall cause its agent to maintain in its possession, available
for the inspection of the Lender, and shall deliver to the Lender, upon demand,
evidence of compliance with all such requirements.
(h) NO SATISFACTION OF MORTGAGE. The Mortgage has not been satisfied,
canceled, subordinated or rescinded, in whole or in part, and the Mortgaged
Property has not been released from the lien of the Mortgage, in whole or in
part, nor has any instrument been executed that would effect any such release,
cancellation, subordination or rescission. The Borrower has not waived the
performance by the Mortgagor of any action, if the Mortgagor's failure to
perform such action would cause the Mortgage Loan to be in default, nor has the
Borrower waived any default resulting from any action or inaction by the
Mortgagor.
(i) LOCATION AND TYPE OF MORTGAGED PROPERTY. The Mortgaged Property is
located in an Acceptable State as identified in the Mortgage Loan Schedule and
consists of a single parcel of real property with a detached single family
residence erected thereon, or a two- to four-family dwelling, or an individual
condominium unit in a low-rise condominium project, or an individual unit in a
planned unit development or a de minimis planned unit development, provided,
however, that any condominium unit or planned unit development shall conform
with the applicable FNMA and FHLMC requirements regarding such dwellings and
that no residence or dwelling is a mobile home or a manufactured dwelling. No
portion of the Mortgaged Property is used for commercial purposes.
(j) VALID LIEN. The Mortgage is a valid, subsisting, enforceable and
perfected (A) first lien and first priority security interest with respect to
each Mortgage Loan which is indicated by such Borrower to be a First Lien
Mortgage Loan (as reflected on the Mortgage Loan Tape), or (B) second lien and
second priority security interest with respect to each Mortgage Loan which is
indicated by such Borrower to be a Second Lien Mortgage Loan (as reflected on
the Mortgage Loan Tape), in either case, on the real property included in the
Mortgaged Property, including all buildings on the Mortgaged Property and all
installations and mechanical, electrical, plumbing, heating and air conditioning
systems located in or annexed to such buildings, and all additions, alterations
and replacements made at any time with respect to the foregoing. The lien of the
Mortgage is subject only to:
(1) the lien of current real property taxes and assessments not yet
due and payable;
(2) covenants, conditions and restrictions, rights of way, easements
and other matters of the public record as of the date of recording
acceptable to prudent mortgage lending institutions generally and
specifically referred to in the lender's title insurance policy delivered
to the originator of the Mortgage Loan and (a) referred to or otherwise
considered in the appraisal made for the originator of the Mortgage Loan or
(b) which do not adversely affect the Appraised Value of the Mortgaged
Property set forth in such appraisal;
(3) other matters to which like properties are commonly subject which
do not materially interfere with the benefits of the security intended to
be provided by the Mortgage or the use, enjoyment, value or marketability
of the related Mortgaged Property; and
Schedule 1-3
50
(4) with respect to each Mortgage Loan which is indicated by such
Borrower to be a Second Lien Mortgage Loan (as reflected on the Mortgage
Loan Tape) a prior first mortgage lien on the Mortgaged Property.
Any security agreement, chattel mortgage or equivalent document related to and
delivered in connection with the Mortgage Loan establishes and creates a valid,
subsisting and enforceable (A) first lien and first priority security interest
with respect to each Mortgage Loan which is indicated by such Borrower to be a
First Lien Mortgage Loan (as reflected on the Mortgage Loan Tape), or (B) second
lien and second priority security interest with respect to each Mortgage Loan
which is indicated by such Borrower to be a Second Lien Mortgage Loan (as
reflected on the Mortgage Loan Tape), in either case, on the property described
therein and the Borrower has full right to pledge and assign the same to the
Lender. The Mortgaged Property was not, as of the date of origination of the
Mortgage Loan, subject to a mortgage, deed of trust, deed to secure debt or
other security instrument creating a lien subordinate to the lien of the
Mortgage.
(k) VALIDITY OF MORTGAGE DOCUMENTS. The Mortgage Note and the Mortgage and
any other agreement executed and delivered by a Mortgagor or guarantor, if
applicable, in connection with a Mortgage Loan are genuine, and each is the
legal, valid and binding obligation of the maker thereof enforceable in
accordance with its terms. All parties to the Mortgage Note, the Mortgage and
any other such related agreement had legal capacity to enter into the Mortgage
Loan and to execute and deliver the Mortgage Note, the Mortgage and any such
agreement, and the Mortgage Note, the Mortgage and any other such related
agreement have been duly and properly executed by such related parties. No
fraud, error, omission, misrepresentation, negligence or similar occurrence with
respect to a Mortgage Loan has taken place on the part of any Person, including,
without limitation, the Mortgagor, any appraiser, any builder or developer, or
any other party involved in the origination of the Mortgage Loan. The Borrower
has reviewed all of the documents constituting the Servicing File and has made
such inquiries as it deems necessary to make and confirm the accuracy of the
representations set forth herein.
(l) FULL DISBURSEMENT OF PROCEEDS. The Mortgage Loan has been closed and
the proceeds of the Mortgage Loan have been fully disbursed and there is no
further requirement for future advances thereunder, and any and all requirements
as to completion of any on-site or off-site improvement and as to disbursements
of any escrow funds therefor have been complied with. All costs, fees and
expenses incurred in making or closing the Mortgage Loan and the recording of
the Mortgage were paid, and the Mortgagor is not entitled to any refund of any
amounts paid or due under the Mortgage Note or Mortgage.
(m) OWNERSHIP. The Borrower is the sole owner and holder of the Mortgage
Loan. The Mortgage Loan is not assigned or pledged, and the Borrower has good,
indefeasible and marketable title thereto, and has full right to transfer,
pledge and assign the Mortgage Loan to the Lender free and clear of any
encumbrance, equity, participation interest, lien, pledge, charge, claim or
security interest, and has full right and authority subject to no interest or
participation of, or agreement with, any other party, to assign, transfer and
pledge each Mortgage Loan pursuant to this Loan Agreement and following the
pledge of each Mortgage Loan, the Lender will hold such Mortgage Loan free and
clear of any encumbrance, equity, participation interest, lien, pledge, charge,
claim or security interest except any such security interest created pursuant to
the terms of this Loan Agreement.
(n) DOING BUSINESS. All parties which have had any interest in the Mortgage
Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or, during the
period in which they held
Schedule 1-4
51
and disposed of such interest, were) (i) in compliance with any and all
applicable licensing requirements of the laws of the state wherein the Mortgaged
Property is located, and (ii) either (A) organized under the laws of such state,
(B) qualified to do business in such state, (C) a federal savings and loan
association, a savings bank or a national bank having a principal office in such
state, or (D) not doing business in such state.
(o) LTV. No First Lien Mortgage Loan has an LTV greater than 100%. No
Second Lien Mortgage Loan has a Combined LTV greater than 100%.
(p) TITLE INSURANCE. The Mortgage Loan is covered by either (i) an
attorney's opinion of title and abstract of title, the form and substance of
which is acceptable to prudent mortgage lending institutions making mortgage
loans in the area wherein the Mortgaged Property is located or (ii) an ALTA
lender's title insurance policy or other generally acceptable form of policy or
insurance acceptable to FNMA or FHLMC and each such title insurance policy is
issued by a title insurer acceptable to FNMA or FHLMC and qualified to do
business in the jurisdiction where the Mortgaged Property is located, insuring
the Borrower, its successors and assigns, as to the first priority lien of the
Mortgage in the original principal amount of the Mortgage Loan (or to the extent
a Mortgage Note provides for negative amortization, the maximum amount of
negative amortization in accordance with the Mortgage), subject only to the
exceptions contained in clauses (1), (2) and (3) , and with respect to each
Mortgage Loan which is indicated by the Borrower to be a Second Lien Mortgage
Loan (as reflected on the Mortgage Loan Schedule) clause (4) of paragraph (j) of
this Part I of Schedule 1, and in the case of adjustable rate Mortgage Loans,
against any loss by reason of the invalidity or unenforceability of the lien
resulting from the provisions of the Mortgage providing for adjustment to the
Mortgage Interest Rate and Monthly Payment. Where required by state law or
regulation, the Mortgagor has been given the opportunity to choose the carrier
of the required mortgage title insurance. Additionally, such lender's title
insurance policy affirmatively insures ingress and egress and against
encroachments by or upon the Mortgaged Property or any interest therein. The
title policy does not contain any special exceptions (other than the standard
exclusions) for zoning and uses and has been marked to delete the standard
survey exception or to replace the standard survey exception with a specific
survey reading. The Borrower, its successors and assigns, are the sole insureds
of such lender's title insurance policy, and such lender's title insurance
policy is valid and remains in full force and effect and will be in force and
effect upon the consummation of the transactions contemplated by this Loan
Agreement. No claims have been made under such lender's title insurance policy,
and no prior holder or servicer of the related Mortgage, including the Borrower,
has done, by act or omission, anything which would impair the coverage of such
lender's title insurance policy, including, without limitation, no unlawful fee,
commission, kickback or other unlawful compensation or value of any kind has
been or will be received, retained or realized by any attorney, firm or other
Person, and no such unlawful items have been received, retained or realized by
the Borrower.
(q) NO DEFAULTS. There is no default, breach, violation or event of
acceleration existing under the Mortgage or the 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 neither the Borrower nor its predecessors have waived any
default, breach, violation or event of acceleration. With respect to each
Mortgage Loan which is indicated by such Borrower to be a Second Lien Mortgage
Loan (as reflected on the Mortgage Loan Schedule) to the best of Borrower's
knowledge (i) the prior mortgage is in full force and effect, (ii) there is no
default, breach, violation or event of acceleration
Schedule 1-5
52
existing under such prior mortgage or the related mortgage note, (iii) no event
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 thereunder, and either (A) the prior mortgage contains a provision
which allows or (B) applicable law requires, the mortgagee under the Second Lien
Mortgage Loan to receive notice of, and affords such mortgagee an opportunity to
cure any default by payment in full or otherwise under the prior mortgage.
(r) NO MECHANICS' LIENS. There are no mechanics' or similar liens or claims
which have been filed for work, labor or material (and no rights are outstanding
that under the law could give rise to such liens) affecting the Mortgaged
Property which are or may be liens prior to, or equal or coordinate with, the
lien of the Mortgage.
(s) LOCATION OF IMPROVEMENTS; NO ENCROACHMENTS. All improvements which were
considered in determining the Appraised Value of the Mortgaged Property lie
wholly within the boundaries and building restriction lines of the Mortgaged
Property, and no improvements on adjoining properties encroach upon the
Mortgaged Property. No improvement located on or being part of the Mortgaged
Property is in violation of any applicable zoning and building law, ordinance or
regulation.
(t) ORIGINATION; PAYMENT TERMS. The Mortgage Loan was originated by or in
conjunction with a mortgagee approved by the Secretary of Housing and Urban
Development pursuant to Sections 203 and 211 of the National Housing Act, a
savings and loan association, a savings bank, a commercial bank, credit union,
insurance company or similar banking institution which is supervised and
examined by a federal or state authority. Principal payments on the Mortgage
Loan commenced no more than 60 days after funds were disbursed in connection
with the Mortgage Loan. The Mortgage Interest Rate is adjusted, with respect to
adjustable rate Mortgage Loans, on each Interest Rate Adjustment Date to equal
the Index plus the Gross Margin (rounded up or down to the nearest .125%),
subject to the Mortgage Interest Rate Cap. The Mortgage Note is payable on the
first day of each month in equal monthly installments of principal and interest,
which installments of interest, with respect to adjustable rate Mortgage Loans,
are subject to change due to the adjustments to the Mortgage Interest Rate on
each Interest Rate Adjustment Date, with interest calculated and payable in
arrears, sufficient to amortize the Mortgage Loan fully by the stated maturity
date, over an original term of not more than 30 years from commencement of
amortization; provided, however, in the case of a balloon Mortgage Loan, the
Mortgage Loan matures at least five years after the first payment date thereby
requiring a final payment of the outstanding principal prior to full
amortization of the Mortgage Loan. The due date of the first payment under the
Mortgage Note is no more than 60 days from the date of the Mortgage Note.
(u) CUSTOMARY PROVISIONS. The Mortgage Note has a stated maturity. The
Mortgage contains customary and enforceable provisions such as to render the
rights and remedies of the holder thereof adequate for the realization against
the Mortgaged Property of the benefits of the security provided thereby,
including, (i) in the case of a Mortgage designated as a deed of trust, by
trustee's sale, and (ii) otherwise by judicial foreclosure. Upon default by a
Mortgagor on a Mortgage Loan and foreclosure on, or trustee's sale of, the
Mortgaged Property pursuant to the proper procedures, the holder of the Mortgage
Loan will be able to deliver good and merchantable title to the Mortgaged
Property. There is no homestead or other exemption available to a Mortgagor
which would interfere with the right to sell the Mortgaged Property at a
trustee's sale or the right to foreclose the Mortgage.
(v) CONFORMANCE WITH UNDERWRITING GUIDELINES AND AGENCY STANDARDS. The
Mortgage Loan was underwritten in accordance with the Underwriting Guidelines.
The Mortgage Note and Mortgage are on forms similar to those used by FHLMC or
FNMA and the Borrower has not made any representations to a Mortgagor that are
inconsistent with the mortgage instruments used.
Schedule 1-6
53
(w) OCCUPANCY OF THE MORTGAGED PROPERTY. As of the Funding Date the
Mortgaged Property is lawfully occupied under applicable law. All inspections,
licenses and certificates required to be made or issued with respect to all
occupied portions of the Mortgaged Property and, with respect to the use and
occupancy of the same, including but not limited to certificates of occupancy
and fire underwriting certificates, have been made or obtained from the
appropriate authorities. The Borrower has not received notification from any
Governmental Authority that the Mortgaged Property is in material non-compliance
with such laws or regulations, is being used, operated or occupied unlawfully or
has failed to have or obtain such inspection, licenses or certificates, as the
case may be. The Borrower has not received notice of any violation or failure to
conform with any such law, ordinance, regulation, standard, license or
certificate.
(x) NO ADDITIONAL COLLATERAL. The Mortgage Note is not and has not been
secured by any collateral except the lien of the corresponding Mortgage and the
security interest of any applicable security agreement or chattel mortgage
referred to in clause (j) above.
(y) DEEDS OF TRUST. In the event the Mortgage constitutes a deed of trust,
a trustee, authorized and duly qualified under applicable law to serve as such,
has been properly designated and currently so serves and is named in the
Mortgage, and no fees or expenses are or will become payable by the Custodian or
the Lender to the trustee under the deed of trust, except in connection with a
trustee's sale after default by the Mortgagor.
(z) DELIVERY OF MORTGAGE DOCUMENTS. The Mortgage Note, the Mortgage, the
Assignment of Mortgage and any other documents required to be delivered under
the Custodial Agreement for each Mortgage Loan have been delivered to the
Custodian. The Borrower or its agent is in possession of a complete, true and
accurate Mortgage File in compliance with the Custodial Agreement, except for
such documents the originals of which have been delivered to the Custodian.
(aa) TRANSFER OF MORTGAGE LOANS. The Assignment of Mortgage is in
recordable form and is acceptable for recording under the laws of the
jurisdiction in which the Mortgaged Property is located.
(bb) DUE-ON-SALE. The Mortgage contains an enforceable provision for the
acceleration of the payment of the unpaid principal balance of the Mortgage Loan
in the event that the Mortgaged Property is sold or transferred without the
prior written consent of the mortgagee thereunder.
(cc) NO BUYDOWN PROVISIONS; NO GRADUATED PAYMENTS OR CONTINGENT INTERESTS.
The Mortgage Loan does not contain provisions pursuant to which Monthly Payments
are paid or partially paid with funds deposited in any separate account
established by the Borrower, the Mortgagor, or anyone on behalf of the
Mortgagor, or paid by any source other than the Mortgagor nor does it contain
any other similar provisions which may constitute a "buydown" provision. The
Mortgage Loan is not a graduated payment mortgage loan and the Mortgage Loan
does not have a shared appreciation or other contingent interest feature.
(dd) CONSOLIDATION OF FUTURE ADVANCES. Any future advances made to the
Mortgagor prior to the Funding Date have been consolidated with the outstanding
principal amount secured by the Mortgage, and the secured principal amount, as
consolidated, bears a single interest rate and single repayment term. The lien
of the Mortgage securing the consolidated principal amount is expressly insured
as having (A) first lien priority with respect to each Mortgage Loan which is
Schedule 1-7
54
indicated by such Borrower to be a First Lien Mortgage Loan (as reflected on the
Mortgage Loan Schedule), or (B) second lien priority with respect to each
Mortgage Loan which is indicated by such Borrower to be a Second Lien Mortgage
Loan (as reflected on the Mortgage Loan Schedule), in either case, by a title
insurance policy, an endorsement to the policy insuring the mortgagee's
consolidated interest or by other title evidence acceptable to FNMA and FHLMC.
The consolidated principal amount does not exceed the original principal amount
of the Mortgage Loan.
(ee) MORTGAGED PROPERTY UNDAMAGED. The Mortgaged Property is undamaged by
waste, fire, earthquake or earth movement, windstorm, flood, tornado or other
casualty so as to affect adversely the value of the Mortgaged Property as
security for the Mortgage Loan or the use for which the premises were intended
and each Mortgaged Property is in good repair. There have not been any
condemnation proceedings with respect to the Mortgaged Property and the Borrower
has no knowledge of any such proceedings.
(ff) COLLECTION PRACTICES; ESCROW DEPOSITS; INTEREST RATE ADJUSTMENTS. The
origination and collection practices used by the originator, each servicer of
the Mortgage Loan and the Borrower with respect to the Mortgage Loan have been
in all respects in compliance with Accepted Servicing Practices, applicable laws
and regulations, and have been in all respects legal and proper. With respect to
escrow deposits and Escrow Payments (other than with respect to each Mortgage
Loan which is indicated by such Borrower to be a Second Lien Mortgage Loan and
for which the mortgagee under the prior mortgage lien is collecting Escrow
Payments (as reflected on the Mortgage Loan Schedule)), all such payments are in
the possession of, or under the control of, the Borrower or the Servicer and
there exist no deficiencies in connection therewith for which customary
arrangements for repayment thereof have not been made. All Escrow Payments have
been collected in full compliance with state and federal law. An escrow of funds
is not prohibited by applicable law and has been established in an amount
sufficient to pay for every item that remains unpaid and has been assessed but
is not yet due and payable. No escrow deposits or Escrow Payments or other
charges or payments due the Borrower have been capitalized under the Mortgage or
the Mortgage Note. All Mortgage Interest Rate adjustments have been made in
strict compliance with state and federal law and the terms of the related
Mortgage Note. Any interest required to be paid pursuant to state, federal and
local law has been properly paid and credited.
(gg) OTHER INSURANCE POLICIES. No action, inaction or event has occurred
and no state of facts exists or has existed that has resulted or will result in
the exclusion from, denial of, or defense to coverage under any applicable
special hazard insurance policy, PMI Policy or bankruptcy bond, irrespective of
the cause of such failure of coverage. In connection with the placement of any
such insurance, no commission, fee, or other compensation has been or will be
received by the Borrower or by any officer, director, or employee of the
Borrower or any designee of the Borrower or any corporation in which the
Borrower or any officer, director, or employee had a financial interest at the
time of placement of such insurance.
(hh) SOLDIERS' AND SAILORS' CIVIL RELIEF ACT. The Mortgagor has not
notified the Borrower, and the Borrower has no knowledge, of any relief
requested or allowed to the Mortgagor under the Soldiers' and Sailors' Civil
Relief Act of 1940.
(ii) APPRAISAL. The Mortgage File contains an appraisal of the related
Mortgaged Property signed prior to the approval of the Mortgage Loan application
by a qualified appraiser, duly appointed by the Borrower, who had no interest,
direct or indirect in the Mortgaged Property or in any loan made on the security
thereof, and whose compensation is not affected by the approval or
Schedule 1-8
55
disapproval of the Mortgage Loan, and the appraisal and appraiser both satisfy
the requirements of FNMA or FHLMC and Title XI of the Federal Institutions
Reform, Recovery, and Enforcement Act of 1989 as amended and the regulations
promulgated thereunder, all as in effect on the date the Mortgage Loan was
originated.
(jj) DISCLOSURE MATERIALS. The Mortgagor has executed a statement to the
effect that the Mortgagor has received all disclosure materials required by
applicable law with respect to the making of adjustable rate mortgage loans, and
the Borrower maintains such statement in the Mortgage File.
(kk) CONSTRUCTION OR REHABILITATION OF MORTGAGED PROPERTY. No Mortgage Loan
was made in connection with the construction or rehabilitation of a Mortgaged
Property or facilitating the trade-in or exchange of a Mortgaged Property.
(ll) NO DEFENSE TO INSURANCE COVERAGE. No action has been taken or failed
to be taken, no event has occurred and no state of facts exists or has existed
on or prior to the Funding Date (whether or not known to the Borrower on or
prior to such date) which has resulted or will result in an exclusion from,
denial of, or defense to coverage under any private mortgage insurance
(including, without limitation, any exclusions, denials or defenses which would
limit or reduce the availability of the timely payment of the full amount of the
loss otherwise due thereunder to the insured) whether arising out of actions,
representations, errors, omissions, negligence, or fraud of the Borrower, the
related Mortgagor or any party involved in the application for such coverage,
including the appraisal, plans and specifications and other exhibits or
documents submitted therewith to the insurer under such insurance policy, or for
any other reason under such coverage, but not including the failure of such
insurer to pay by reason of such insurer's breach of such insurance policy or
such insurer's financial inability to pay.
(mm) CAPITALIZATION OF INTEREST. The Mortgage Note does not by its terms
provide for the capitalization or forbearance of interest.
(nn) NO EQUITY PARTICIPATION. No document relating to the Mortgage Loan
provides for any contingent or additional interest in the form of participation
in the cash flow of the Mortgaged Property or a sharing in the appreciation of
the value of the Mortgaged Property. The indebtedness evidenced by the Mortgage
Note is not convertible to an ownership interest in the Mortgaged Property or
the Mortgagor and the Borrower has not financed nor does it own directly or
indirectly, any equity of any form in the Mortgaged Property or the Mortgagor.
(oo) PROCEEDS OF MORTGAGE LOAN. The proceeds of the Mortgage Loan have not
been and shall not be used to satisfy, in whole or in part, any debt owed or
owing by the Mortgagor to the Borrower or any Affiliate or correspondent of the
Borrower.
(pp) WITHDRAWN MORTGAGE LOANS. If the Mortgage Loan has been released to
the Borrower pursuant to a Request for Release as permitted under Section 5 of
the Custodial Agreement, then the promissory note relating to the Mortgage Loan
was returned to the Custodian within 10 days (or if such tenth day was not a
Business Day, the next succeeding Business Day).
(qq) NO EXCEPTION. The Custodian has not noted any material exceptions on
an Exception Report (as defined in the Custodial Agreement) with respect to the
Mortgage Loan which
Schedule 1-9
56
would materially adversely affect the Mortgage Loan or the Lender's security
interest, granted by the Borrower, in the Mortgage Loan.
(rr) QUALIFIED ORIGINATOR. The Mortgage Loan has been originated by, and,
if applicable, purchased by the Borrower from, a Qualified Originator.
(ss) MORTGAGE SUBMITTED FOR RECORDATION. The Mortgage either has been or
will promptly be submitted for recordation in the appropriate governmental
recording office of the jurisdiction where the Mortgaged Property is located.
Schedule 1-10
57
Part II DEFINED TERMS
In addition to terms defined elsewhere in the Loan Agreement, the following
terms shall have the following meanings when used in this Schedule 1:
"ACCEPTABLE STATE" shall mean any state notified by the Borrower to the
Lender from time to time and approved in writing by the Lender, which approval
has not been revoked by the Lender in their sole discretion, any such notice of
revocation to be given no later than 10 Business Days prior to its intended
effective date.
"ACCEPTED SERVICING PRACTICES" shall mean, with respect to any Mortgage
Loan, those mortgage servicing practices of prudent mortgage lending
institutions which service mortgage loans of the same type as such Mortgage
Loans in the jurisdiction where the related Mortgaged Property is located.
"ALTA" means the American Land Title Association.
"APPRAISED VALUE" shall mean the value set forth in an appraisal made in
connection with the origination of the related Mortgage Loan as the value of the
Mortgaged Property.
"BEST'S" means Best's Key Rating Guide, as the same shall be amended from
time to time.
"COMBINED LTV" OR "CLTV" shall mean with respect to any Mortgage Loan, the
ratio of (a) the outstanding principal balance as of the related Cut-off Date of
(i) the Mortgage Loan plus (ii) the mortgage loan constituting the first lien to
(b) the Appraised Value of the Mortgaged Property.
"CUT-OFF DATE" means the first day of the month in which the related
Funding Date occurs.
"DUE DATE" means the day of the month on which the Monthly Payment is due
on a Mortgage Loan, exclusive of any days of grace.
"ESCROW PAYMENTS" means with respect to any Mortgage Loan, the amounts
constituting ground rents, taxes, assessments, water rates, sewer rents,
municipal charges, mortgage insurance premiums, fire and hazard insurance
premiums, condominium charges, and any other payments required to be escrowed by
the Mortgagor with the mortgagee pursuant to the Mortgage or any other document.
"FHLMC" means the Federal Home Loan Mortgage Corporation, or any successor
thereto.
"FNMA" means the Federal National Mortgage Association, or any successor
thereto.
"GROSS MARGIN" means with respect to each adjustable rate Mortgage Loan,
the fixed percentage amount set forth in the related Mortgage Note.
"INDEX" means with respect to each adjustable rate Mortgage Loan, the index
set forth in the related Mortgage Note for the purpose of calculating the
interest rate thereon.
Schedule 1-11
58
"INSURANCE PROCEEDS" means with respect to each Mortgage Loan, proceeds of
insurance policies insuring the Mortgage Loan or the related Mortgaged Property.
"INTEREST RATE ADJUSTMENT DATE" means with respect to each adjustable rate
Mortgage Loan, the date, specified in the related Mortgage Note and the Mortgage
Loan Schedule, on which the Mortgage Interest Rate is adjusted.
"LOAN-TO-VALUE RATIO" or "LTV" means with respect to any Mortgage Loan, the
ratio of the original outstanding principal amount of the Mortgage Loan to the
lesser of (a) the Appraised Value of the Mortgaged Property at origination or
(b) if the Mortgaged Property was purchased within 12 months of the origination
of the Mortgage Loan, the purchase price of the Mortgaged Property.
"MONTHLY PAYMENT" means the scheduled monthly payment of principal and
interest on a Mortgage Loan as adjusted in accordance with changes in the
Mortgage Interest Rate pursuant to the provisions of the Mortgage Note for an
adjustable rate Mortgage Loan.
"MORTGAGE INTEREST RATE" means the annual rate of interest borne on a
Mortgage Note, which shall be adjusted from time to time with respect to
adjustable rate Mortgage Loans.
"MORTGAGE INTEREST RATE CAP" means with respect to an adjustable rate
Mortgage Loan, the limit on each Mortgage Interest Rate adjustment as set forth
in the related Mortgage Note.
"MORTGAGEE" means the Borrower or any subsequent holder of a Mortgage Loan.
"ORIGINATION DATE" shall mean, with respect to each Mortgage Loan, the date
of the Mortgage Note relating to such Mortgage Loan, unless such information is
not provided by the Borrower with respect to such Mortgage Loan, in which case
the Origination Date shall be deemed to be the date that is 40 days prior to the
date of the first payment under the Mortgage Note relating to such Mortgage
Loan.
"PMI POLICY" or "PRIMARY INSURANCE POLICY" means a policy of primary
mortgage guaranty insurance issued by a Qualified Insurer.
"QUALIFIED INSURER" means an insurance company duly qualified as such under
the laws of the states in which the Mortgaged Property is located, duly
authorized and licensed in such states to transact the applicable insurance
business and to write the insurance provided, and approved as an insurer by FNMA
and FHLMC and whose claims paying ability is rated in the two highest rating
categories by any of the rating agencies with respect to primary mortgage
insurance and in the two highest rating categories by Best's with respect to
hazard and flood insurance.
"QUALIFIED ORIGINATOR" means an originator of Mortgage Loans reasonably
acceptable to the Lender.
"SERVICING FILE" means with respect to each Mortgage Loan, the file
retained by the Borrower consisting of originals of all documents in the
Mortgage File which are not delivered to a Custodian and copies of the Mortgage
Loan Documents set forth in Section 2 of the Custodial Agreement.
Schedule 1-12
59
SCHEDULE 2
FILING JURISDICTIONS AND OFFICES
Secretary of State of the State of Maryland
Secretary of State of the State of New Jersey
Secretary of State of the State of New York
Schedule 2-1
60
EXHIBIT A
---------
[FORM OF AMENDED AND RESTATED PROMISSORY NOTE]
$150,000,000 December 8, 1997
as amended and restated as of January 8, ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
FOR VALUE RECEIVED, HANOVER CAPITAL MORTGAGE HOLDINGS, INC., a Maryland
corporation, and HANOVER CAPITAL PARTNERS, LTD, a New York corporation (each a
"BORROWER", collectively the "BORROWERS"), hereby promise to pay to the order of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MORTGAGE CAPITAL INC. (the "LENDER"), at the principal office of
the Lender at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, in lawful money of the
United States, and in immediately available funds, the principal sum of ONE
HUNDRED FIFTY MILLION DOLLARS ($150,000,000) (or such lesser amount as shall
equal the aggregate unpaid principal amount of the Loans made by the Lender to
the Borrowers under the Loan Agreement), on the dates and in the principal
amounts provided in the Loan Agreement, and to pay interest on the unpaid
principal amount of each such Loan, at such office, in like money and funds, for
the period commencing on the date of such Loan until such Loan shall be paid in
full, at the rates per annum and on the dates provided in the Loan Agreement.
The date, amount and interest rate of each Loan made by the Lender to the
Borrowers, and each payment made on account of the principal thereof, shall be
recorded by the Lender on its books and, prior to any transfer of this Amended
and Restated Promissory Note, endorsed by the Lender on the schedule attached
hereto or any continuation thereof; PROVIDED, that the failure of the Lender to
make any such recordation or endorsement shall not affect the obligations of the
Borrowers to make a payment when due of any amount owing under the Loan
Agreement or hereunder in respect of the Loans made by the Lender.
This Amended and Restated Promissory Note is the Amended and Restated Note
referred to in the Amended and Restated Master Loan and Security Agreement dated
as of January___, 1999 (as amended, supplemented or otherwise modified and in
effect from time to time, the "LOAN AGREEMENT") between Hanover Capital Mortgage
Holdings, Inc., Hanover Capital Partners, LTD and the Lender, and evidences
Loans made by the Lender thereunder. Terms used but not defined in this Amended
and Restated Promissory Note have the respective meanings assigned to them in
the Loan Agreement.
The Borrowers agree to pay all the Lender's costs of collection and
enforcement (including reasonable attorneys' fees and disbursements of Lender's
counsel) in respect of this Amended and Restated Promissory Note when incurred,
including, without limitation, reasonable attorneys' fees through appellate
proceedings.
Notwithstanding the pledge of the Collateral, the Borrowers hereby
acknowledge, admit and agree that the Borrowers' obligations under this Amended
and Restated Promissory Note are recourse obligations of the Borrowers to which
each Borrower pledges its full faith and credit. Each Borrower hereby
acknowledges and agrees that such Borrower shall be jointly and severally liable
hereunder.
A-1
61
The Borrowers, and any endorsers or guarantors hereof, (a) severally waive
diligence, presentment, protest and demand and also notice of protest, demand,
dishonor and nonpayments of this Amended and Restated Promissory Note, (b)
expressly agree that this Amended and Restated Promissory Note, or any payment
hereunder, may be extended from time to time, and consent to the acceptance of
further Collateral, the release of any Collateral for this Amended and Restated
Promissory Note, the release of any party primarily or secondarily liable
hereon, and (c) expressly agree that it will not be necessary for the Lender, in
order to enforce payment of this Amended and Restated Promissory Note, to first
institute or exhaust the Lender's remedies against the Borrower or any other
party liable hereon or against any Collateral for this Amended and Restated
Promissory Note. No extension of time for the payment of this Amended and
Restated Promissory Note, or any installment hereof, made by agreement by the
Lender with any person now or hereafter liable for the payment of this Amended
and Restated Promissory Note, shall affect the liability under this Amended and
Restated Promissory Note of the Borrowers, even if the Borrower is not a party
to such agreement; PROVIDED, HOWEVER, that the Lender and the Borrowers, by
written agreement between them, may affect the liability of the Borrowers.
Any reference herein to the Lender shall be deemed to include and apply to
every subsequent holder of this Amended and Restated Promissory Note. Reference
is made to the Loan Agreement for provisions concerning optional and mandatory
prepayments, Collateral, acceleration and other material terms affecting this
Amended and Restated Promissory Note.
This Amended and Restated Promissory Note amends and restates in its
entirety the Promissory Note dated December 8, 1997 (the "EXISTING PROMISSORY
NOTE") and is given as a continuation, rearrangement and extension, and not a
novation, release or satisfaction, of the Existing Promissory Note. The issuance
and delivery of this Amended and Restated Promissory Note is in substitution for
the Existing Promissory Note. The Borrowers hereby acknowledge and agree that
simultaneously with the Borrowers' execution and delivery of this Amended and
Restated Promissory Note to the Lender, the Lender has delivered to the
Borrowers the Existing Promissory Note.
A-2
62
THIS AMENDED AND RESTATED PROMISSORY NOTE SHALL BE GOVERNED BY AND
CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO CHOICE
OF LAW DOCTRINE) WHOSE LAWS THE BORROWER EXPRESSLY ELECTS TO APPLY TO THIS
AMENDED AND RESTATED PROMISSORY NOTE. THE BORROWER AGREES THAT ANY ACTION OR
PROCEEDING BROUGHT TO ENFORCE OR ARISING OUT OF THIS AMENDED AND RESTATED
PROMISSORY NOTE MAY BE COMMENCED IN THE SUPREME COURT OF THE STATE OF NEW YORK,
BOROUGH OF MANHATTAN, OR IN ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ FOR THE
SOUTHERN DISTRICT OF NEW YORK.
HANOVER CAPITAL MORTGAGE HOLDINGS, INC.
By: ___________________________________
Name:
Title:
HANOVER CAPITAL PARTNERS, :LTD
By: ___________________________________
Name:
Title:
A-3
63
SCHEDULE OF LOANS
This Amended and Restated Promissory Note evidences Loans made under the
within-described Loan Agreement to the Borrowers, on the dates, in the principal
amounts and bearing interest at the rates set forth below, and subject to the
payments and prepayments of principal set forth below:
PRINCIPAL AMOUNT OF INTEREST AMOUNT PAID UNPAID PRINCIPAL NOTATION
DATE MADE LOAN RATE OR PREPAID AMOUNT MADE BY
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A-4
64
EXHIBIT B
---------
[FORM OF CUSTODIAL AGREEMENT]
B-1
65
EXHIBIT C
---------
[FORM OF OPINION OF COUNSEL TO BORROWERS]
(date)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Mortgage Capital Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs and Mesdames:
You have requested [our] [my] opinion, as counsel to Hanover Capital
Mortgage Holdings, Inc., a Maryland corporation ("HCMH") and Hanover Capital
Partners, LTD, a New York corporation ("HCP" and, with HCMH, a "BORROWER",
collectively, the "BORROWERS"), with respect to certain matters in connection
with that certain Amended and Restated Master Loan and Security Agreement, dated
as of January 8, 1999 (the "LOAN AND SECURITY AGREEMENT"), by and between the
Borrowers and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Mortgage Capital Inc. (the "LENDER"), being
executed contemporaneously with an Amended and Restated Promissory Note dated
January 8, 1999 from the Borrowers to the Lender (the "NOTE"), and an Amended
and Restated Custodial Agreement, dated as of January 8, 1999 (the "CUSTODIAL
AGREEMENT"), by and among the Borrowers, First Chicago National Processing Corp.
(the "CUSTODIAN"), and the Lender. Capitalized terms not otherwise defined
herein have the meanings set forth in the Loan and Security Agreement.
[We] [I] have examined the following documents:
1. the Loan and Security Agreement;
2. the Note;
3. Custodial Agreement;
4. unfiled copies of the financing statements listed on SCHEDULE 1
(collectively, the "FINANCING STATEMENTS") naming the Borrowers as
Debtor and the Lender as Secured Party and describing the Collateral
(as defined in the Loan and Security Agreement) as to which security
interests may be perfected by filing under the Uniform Commercial Code
of the States listed on SCHEDULE 1 (the "FILING COLLATERAL"), which I
understand will be filed in the filing offices listed on SCHEDULE 1
(the "FILING OFFICES");
5. the reports listed on SCHEDULE 2 as to UCC financing statements
(collectively, the "UCC SEARCH REPORT"); and
6. such other documents, records and papers as we have deemed necessary
and relevant as a basis for this opinion.
C-1
66
To the extent [we] [I] have deemed necessary and proper, [we] [I] have
relied upon the representations and warranties of the Borrowers contained in the
Loan and Security Agreement. [We] [I] have assumed the authenticity of all
documents submitted to me as originals, the genuineness of all signatures, the
legal capacity of natural persons and the conformity to the originals of all
documents.
Based upon the foregoing, it is [our] [my] opinion that:
1. HCMH is a Maryland corporation duly organized, validly existing and in
good standing under the laws of Maryland and is qualified to transact business
in, and is in good standing under, the laws of the state of Maryland. HCP is a
New York corporation duly organized, validly existing and in good standing under
the laws of New York and is qualified to transact business in, and is in good
standing under, the laws of the state of New York.
2. Each of the Borrowers has the corporate power to engage in the
transactions contemplated by the Loan and Security Agreement, the Note, and the
Custodial Agreement and all requisite corporate power, authority and legal right
to execute and deliver the Loan and Security Agreement, the Note, and the
Custodial Agreement and observe the terms and conditions of such instruments.
Each of the Borrowers has all requisite corporate power to borrow under the Loan
and Security Agreement and to grant a security interest in the Collateral under
the Loan and Security Agreement.
3. The execution, delivery and performance by the Borrowers of the Loan and
Security Agreement, the Note, and the Custodial Agreement, and the borrowings by
the Borrowers and the pledge of the Collateral under the Loan and Security
Agreement have been duly authorized by all necessary corporate action on the
part of the Borrowers. Each of the Loan and Security Agreement, the Note and the
Custodial Agreement have been executed and delivered by the Borrowers and are
legal, valid and binding agreements enforceable in accordance with their
respective terms against the Borrowers, subject to bankruptcy laws and other
similar laws of general application affecting rights of creditors and subject to
the application of the rules of equity, including those respecting the
availability of specific performance, none of which will materially interfere
with the realization of the benefits provided thereunder or with the Lender's
security interest in the Collateral.
4. No consent, approval, authorization or order of, and no filing or
registration with, any court or governmental agency or regulatory body is
required on the part of the Borrower for the execution, delivery or performance
by the Borrowers of the Loan and Security Agreement, the Note and the Custodial
Agreement or for the borrowings by the Borrowers under the Loan and Security
Agreement or the granting of a security interest to the Lender in the
Collateral, under the Loan and Security Agreement.
5. The execution, delivery and performance by the Borrowers of, and the
consummation of the transactions contemplated by, the Loan and Security
Agreement, the Note and the Custodial Agreement do not and will not (a) violate
any provision of the Borrowers' charters or by-laws, (b) violate any applicable
law, rule or regulation, (c) violate any order, writ, injunction or decree of
any court or governmental authority or agency or any arbitral award applicable
to the Borrowers of which I have knowledge (after due inquiry) or (d) result in
a breach of, constitute a default under, require any consent under, or result in
the acceleration or required prepayment of any indebtedness pursuant to the
terms of, any agreement or instrument of which I have knowledge (after due
inquiry) to which the Borrowers are a party or by which they are bound or to
which it is subject, or (except for the Liens created pursuant to the Loan and
Security Agreement) result in the creation or imposition of any Lien upon any
Property of the Borrowers pursuant to the terms of any such agreement or
instrument.
6. There is no action, suit, proceeding or investigation pending or, to the
best of [our] [my] knowledge, threatened against the Borrowers which, in [our]
[my] judgment, either in any one instance or in the aggregate, would be
reasonably likely to result in any material adverse change in
C-2
67
the properties, business or financial condition, or prospects of the Borrowers
or in any material impairment of the right or ability of the Borrowers to carry
on its business substantially as now conducted or in any material liability on
the part of the Borrower or which would draw into question the validity of the
Loan and Security Agreement, the Note, the Custodial Agreement or the Mortgage
Loans or of any action taken or to be taken in connection with the transactions
contemplated thereby, or which would be reasonably likely to impair materially
the ability of the Borrowers to perform under the terms of the Loan and Security
Agreement, the Note, the Custodial Agreement or the Mortgage Loans.
7. The Loan and Security Agreement is effective to create, in favor of the
Lender, a valid security interest under the Uniform Commercial Code in all of
the right, title and interest of the Borrowers in, to and under the Collateral
as collateral security for the payment of the Secured Obligations (as defined in
the Loan and Security Agreement), except that (a) such security interests will
continue in Collateral after its sale, exchange or other disposition only to the
extent provided in Section 9-306 of the Uniform Commercial Code, and (b) the
security interests in Collateral in which the Borrowers acquires rights after
the commencement of a case under the Bankruptcy Code in respect of the Borrowers
may be limited by Section 552 of the Bankruptcy Code.
8. When the Mortgage Notes are delivered to the Custodian, endorsed in
blank by a duly authorized officer of the applicable Borrower, the security
interest referred to in paragraph 7 above in the Mortgage Notes will constitute
a fully perfected first priority security interest in all right, title and
interest of the Borrowers therein, in the Mortgage Loan evidenced thereby and in
the Borrowers' interest in the related Mortgaged Property.
9. (a) Upon the filing of financing statements on Form UCC-1 naming the
Lender as "Secured Party" and the Borrowers as "Debtor", and describing the
Collateral, in the jurisdictions and recording offices listed on SCHEDULE 1
attached hereto, the security interests referred to in paragraph 7 above will
constitute fully perfected security interests under the Uniform Commercial Code
in all right, title and interest of the Borrowers in, to and under such
Collateral, which can be perfected by filing under the Uniform Commercial Code.
(b) The UCC Search Report sets forth the proper filing offices and the
proper debtors necessary to identify those Persons who have on file in the
jurisdictions listed on SCHEDULE 1 financing statements covering the Filing
Collateral as of the dates and times specified on SCHEDULE 2. Except for the
matters listed on SCHEDULE 2, the UCC Search Report identifies no Person who has
filed in any Filing Office a financing statement describing the Filing
Collateral prior to the effective dates of the UCC Search Report.
10. The Assignments of Mortgage are in recordable form, except for the
insertion of the name of the assignee, and upon the name of the assignee being
inserted, are acceptable for recording under the laws of the state where each
related Mortgaged Property is located.
Very truly yours,
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EXHIBIT D
---------
FORM OF REQUEST FOR BORROWING
Amended and Restated Master Loan and Security Agreement, dated as of January 8,
1999 (the "LOAN AND SECURITY AGREEMENT"), by and between the Borrowers and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Mortgage Capital Inc. (the "LENDER"),
Lender: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Mortgage Capital Inc.
Borrower: Hanover Capital Mortgage Holdings, Inc.
Hanover Capital Partners, LTD
Requested Fund Date: _______________________________________
Transmission Date: _______________________________________
Transmission Time:
Number of Mortgage
Loans to be Pledged: _______________________________________
UPB: $______________________________________
Requested Wire Amount: $______________________________________
Wire Instructions:
Requested by:
HANOVER CAPITAL MORTGAGE HOLDINGS, INC.
By:____________________________________
Name:
Title:
HANOVER CAPITAL PARTNERS, LTD
By:____________________________________
Name:
Title:
D-1
69
EXHIBIT E-1
-----------
FORM OF BORROWER'S RELEASE LETTER
[Date]
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Mortgage Capital Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ____________________
Facsimile: ____________________
Re: Amended and Restated Master Loan and Security Agreement, dated as of
January 8, 1999 (the "LOAN AND SECURITY AGREEMENT"), by and among
Hanover Capital Mortgage Holdings, Inc. and Hanover Capital Partners,
LTD. (the "BORROWERS") and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Mortgage Capital Inc. (the
"LENDER")
Ladies and Gentlemen:
With respect to the mortgage loans described in the attached SCHEDULE A
(the "MORTGAGE LOANS") (a) we hereby certify to you that the Mortgage Loans are
not subject to a lien of any third party and (b) we hereby release all right,
interest or claim of any kind with respect to such Mortgage Loans, such release
to be effective automatically without further action by any party upon payment
from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Mortgage Capital Inc., of the amount of the Loan
contemplated under the Loan and Security Agreement (calculated in accordance
with the terms thereof) in accordance with the wiring instructions set forth in
the Loan and Security Agreement.
Very truly yours,
HANOVER CAPITAL MORTGAGE HOLDINGS, INC.
By: __________________________
Name: __________________________
Title: __________________________
HANOVER CAPITAL PARTNERS, LTD
By: __________________________
Name: __________________________
Title: __________________________
▇-▇-▇
▇▇
▇▇▇▇▇▇▇ ▇-▇
-----------
FORM OF WAREHOUSE LENDER'S RELEASE LETTER
(Date)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Mortgage Capital Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ________________
Facsimile:________________
Re: Certain Mortgage Loans Identified on SCHEDULE A hereto and owned by
[Hanover Capital Mortgage Holdings, Inc.][Hanover Capital Partners,
LTD]
The undersigned hereby releases all right, interest, lien or claim of any
kind with respect to the mortgage loan(s) described in the attached SCHEDULE A,
such release to be effective automatically without any further action by any
party upon payment in one or more installments, in immediately available funds
of $__________________, in accordance with the following wire instructions:
________________________
________________________
Very truly yours,
[WAREHOUSE LENDER]
By:________________________________
Name:______________________________
Title:_____________________________
E-2-1
71
EXHIBIT F
---------
UNDERWRITING GUIDELINES
F-1
72
EXHIBIT G
---------
FORM OF BLOCKED ACCOUNT AGREEMENT
January __, 1999
_______________________
_______________________
_______________________
Attn:__________________
Re: Collection Account Established by ______________ ("SERVICER") Pursuant
to that Certain Servicing Agreement (as amended, supplemented or
otherwise modified from time to time, the "SERVICING AGREEMENT"),
dated __________, 199__, between Servicer and Hanover Capital Mortgage
Holdings, Inc. ("BORROWER")
Ladies and Gentlemen:
We refer to the collection account established by the Servicer pursuant to
the Servicing Agreement, at _______________, ___________, _____, Account
No._____________, ABA# ____________ (the "BLOCKED ACCOUNT"), which Servicer
maintains in the Servicer's name in trust for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Mortgage Capital
Inc. (the "LENDER").
The Servicer will, from time to time, deposit funds received in accordance
with the Servicing Agreement into the Blocked Account. Lender has established a
secured loan arrangement with the Borrower. By its execution of this letter, the
Servicer acknowledges that the Borrower has granted a security interest in all
of the Borrower's right, title and interest in and to the Blocked Account and
any funds from time to time on deposit therein, that such funds are received by
the Servicer in trust for the benefit of Lender and, except as provided below,
are for application against the Borrower's liabilities to Lender.
By the Servicer's execution of this letter, it agrees: (a) that all funds
from time to time hereafter in the Blocked Account are the property of the
Borrower held in trust for the benefit of the Lender and that unless and until
the Servicer receives notice from the Lender that an event of default has
occurred and is continuing under the Lender's secured lending arrangement with
the Borrower (a "NOTICE OF EVENT OF DEFAULT"), the Servicer shall transfer funds
from the Blocked Account in accordance with the Borrower's instructions; (b)
that Servicer will not exercise any right of set-off, banker's lien or any
similar right in connection with such funds PROVIDED, that in the event any
check is returned to the Servicer because of insufficient funds (or is otherwise
unpaid) the Servicer shall be entitled to set off the amount of any such
returned check; (c) that until the Servicer receives written notification from
the Lender to the contrary, the Servicer will not withdraw (other than as
expressly set forth in the Servicing Agreement or herein) or permit any person
or entity to withdraw or transfer funds from the Blocked Account; and (d) that
if the Servicer receives a Notice of Event of Default from the Lender, the
Servicer shall not withdraw or permit the Borrower to withdraw or transfer funds
from
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73
the Blocked Account and shall cause or permit withdrawals from the Blocked
Account in any manner as the Lender may instruct.
All bank statements in respect to the Blocked Account shall be sent to the,
Borrower with copies to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Mortgage Capital Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇
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74
Kindly acknowledge your agreement with the terms of this agreement by
signing the enclosed copy of this letter and returning it to the undersigned.
Very truly yours,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MORTGAGE CAPITAL INC.
By:_________________________________
Title:
Agreed and acknowledged:
____________________________________
By:____________________________________
Title:
G-3
75
2
EXHIBIT H
---------
FORM OF SERVICER NOTICE
-----------------------
__________ __, 199__
[SERVICER], as Servicer
[ADDRESS]
Attention: ___________
Re: Amended and Restated Master Loan and Security Agreement, dated as of
January ___, 1999 (the "LOAN AND SECURITY AGREEMENT"), by and between
Hanover Capital Mortgage Holdings, Inc. and Hanover Capital Partners,
LTD (the "BORROWERS") and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Mortgage Capital Inc. (the
"LENDER").
Ladies and Gentlemen:
[SERVICER} (the "SERVICER") is servicing certain mortgage loans for the
Borrowers pursuant to certain Servicing Agreements between the Servicer and the
Borrowers. Pursuant to the Loan and Security Agreement between the Lender and
the Borrowers, the Servicer is hereby notified that the Borrowers have pledged
to the Lender certain mortgage loans which are serviced by Servicer which are
subject to a security interest in favor of the Lender.
Upon receipt of a Notice of Event of Default from the Lender in which the Lender
shall identify the mortgage loans which are then pledged to Lender under the
Loan Agreement (the "MORTGAGE LOANS"), the Servicer shall segregate all amounts
collected on account of such Mortgage Loans, hold them in trust for the sole and
exclusive benefit of the Lender, and remit such collections in accordance with
the Lender's written instructions. Following such Notice of Event of Default,
Servicer shall follow the instructions of Lender with respect to the Mortgage
Loans, and shall deliver to Lender any information with respect to the Mortgage
Loans reasonably requested by Lender.
Notwithstanding any contrary information which may be delivered to the Servicer
by the Borrowers, the Servicer may conclusively rely on any information or
Notice of Event of Default delivered by the Lender, and the Borrowers shall
indemnify and hold the Servicer harmless for any and all claims asserted against
it for any actions taken in good faith by the Servicer in connection with the
delivery of such information or Notice of Event of Default.
H-1
76
Please acknowledge receipt of this instruction letter by signing in the
signature block below and forwarding an executed copy to the Lender promptly
upon receipt. Any notices to the Lender should be delivered to the following
address: ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇; Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇,
with a copy to Mr. ▇▇▇▇ ▇▇▇▇▇▇; Telephone: (▇▇▇) ▇▇▇-▇▇▇▇; Facsimile: (212)
761-0747.
Very truly yours,
HANOVER CAPITAL MORTGAGE
HOLDINGS, INC.
By:________________________________
Name:
Title:
HANOVER CAPITAL PARTNERS, LTD
By:________________________________
Name:
Title:
ACKNOWLEDGED:
___________________________________, as Servicer
By:__________________________________________________
Name:
Title:
Telephone:
Facsimile:
H-2