EXHIBIT 10.10
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FIRST AMENDED AND RESTATED WORKING CAPITAL
LINE OF CREDIT AND SECURITY AGREEMENT
BETWEEN
HOMEOWNERS MORTGAGE & EQUITY, INC.,
A DELAWARE CORPORATION, D/B/A HOME, INC.,
AS THE BORROWER
AND
GUARANTY FEDERAL BANK, F.S.B.
AS THE BANK
DATED AS OF SEPTEMBER 24, 1997
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FIRST AMENDED AND RESTATED WORKING CAPITAL
LINE OF CREDIT AND SECURITY AGREEMENT
THIS FIRST AMENDED AND RESTATED WORKING CAPITAL LINE OF CREDIT AND SECURITY
AGREEMENT (the "AGREEMENT"), dated effective as of, although not necessarily
executed on, SEPTEMBER 24, 1997 by and between HOMEOWNERS MORTGAGE & EQUITY,
INC., A DELAWARE CORPORATION, D/B/A HOME, INC., having its principal office at
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (the "BORROWER"), and
GUARANTY FEDERAL BANK, F.S.B., A FEDERAL SAVINGS BANK, having an office at ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (the "BANK") and HOMECAPITAL INVESTMENT
CORPORATION, A NEVADA CORPORATION ("GUARANTOR").
WHEREAS, on NOVEMBER 8, 1996, the Borrower requested the Bank to extend a
revolving line of credit to the Borrower to finance the working capital
requirements of Borrower, and the parties set forth the terms and conditions
under which Advances under the line of credit would be made and the security to
be provided for the repayment thereof in that certain WORKING CAPITAL LINE OF
CREDIT AND SECURITY AGREEMENT dated of even date therewith and that certain
Promissory Note in the original principal sum of $3,000,000.00 executed by
Borrower payable to the order of Bank and that certain Unconditional Guaranty
dated of even date therewith executed by Guarantor (as hereinafter defined) and
certain other documents;
WHEREAS, on JANUARY 1, 1997, Bank, Borrower and Guarantor executed that
certain FIRST AMENDMENT TO THE LOAN AGREEMENT modifying certain provisions of
the Loan Agreement and the Loan Documents including an
increase in the Commitment to $5,000,000.00;
WHEREAS, on JULY 25, 1997, Bank, Borrower and Guarantor executed that
certain SECOND AMENDMENT TO THE LOAN AGREEMENT modifying certain provisions of
the Loan Agreement and the Loan Documents including an increase in the
Commitment to $6,800,000.00;
WHEREAS, on AUGUST 13, 1997, Bank, Borrower and Guarantor executed that
certain THIRD AMENDMENT TO THE LOAN AGREEMENT modifying certain provisions of
the Loan Agreement;
WHEREAS, Bank, Borrower and Guarantor now desire to further modify the Loan
Agreement and the Loan Documents to integrate the current and prior changes into
this FIRST AMENDED AND RESTATED WORKING CAPITAL LINE OF CREDIT AND SECURITY
AGREEMENT;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINED TERMS.
Capitalized terms defined below or elsewhere in this Agreement (including
the Exhibits hereto) shall have the following meanings:
"ACCOUNTS" shall have the meaning assigned to such term in the UCC.
"ADJUSTED TANGIBLE NET WORTH" shall mean, as of any date, the amount equal
to (i) THE SUM OF (A) the Net Worth of Borrower as of such date PLUS (B) an
amount equal to NINETY PERCENT (90%) of the Capitalized Servicing of Borrower as
of such date PLUS (C) an amount equal to NINETY PERCENT (90%) of the Excess
Servicing Receivables
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of Borrower, MINUS (ii) the value of all Intangible Assets, Capitalized
Servicing, Excess Servicing Receivables and receivables from Affiliates of
Borrower on such date.
"ADVANCE" means a disbursement by the Bank under the Commitment, including
readvances of funds previously advanced to the Borrower and repaid to the Bank.
"ADVANCE REQUEST" has the meaning set forth in Section 2.2(a) hereof.
"AFFILIATE" shall mean (i) any Person (hereinafter defined) directly or
indirectly (through one or more intermediaries) controlling, controlled by or
under common control, with the Person in question, which in the case of a Person
which is a partnership, shall include each of the constituent partners, whether
general or limited partners thereof, or (ii) any Person who is a director,
shareholder, officer or employee of (a) such Person or (b) any person described
in the preceding clause (i). The term "control", as used in the immediately
preceding sentence, means, with respect to a corporation, any ownership interest
which exceeds TEN PERCENT (10%) of the issued and outstanding stock in such
corporation, and, with respect to an entity that is not a corporation, the
possession, directly or indirectly, of any ownership interest which exceeds TEN
PERCENT (10%) of the ownership interests in such entity.
"AGENCY" or "AGENCIES" shall mean FHLMC, FNMA and/or GNMA.
"AGENCY SERVICING ACCOUNTS" means any "account," as such term is defined in
the UCC, now or hereafter owned by Borrower that arises from any Agency
Servicing Agreements, and shall include, to the extent not contained in such
definition of "account", but shall not be limited to, all accounts receivable,
contracts, book debts, notes, drafts, instruments, documents, acceptances and
other forms of obligations now owned or hereafter received or acquired by or
belonging or owing to Borrower under the Agency Servicing Agreements (including
under any trade names, styles or divisions thereof), all moneys due or to become
due to Borrower under the Agency Servicing Agreements for the performance of
services by it, including, without limitation, all Rights of Borrower to
enforce, collect and receive payments on such Agency Servicing Accounts arising
from Agency Servicing Agreements and to bring an action to enforce such Agency
Servicing Accounts, the balance of every deposit account, now or hereafter
acquired, of Borrower arising from Agency Servicing Agreements and any other
claim of Borrower arising from Agency Servicing Agreements, now or hereafter
existing and all collateral security and guarantees of any kind given by any
Person with respect to any of the foregoing arising from Agency Servicing
Agreements.
"AGENCY SERVICING AGREEMENTS" means all agreements pursuant to which the
Borrower undertakes to service Mortgage Notes and Mortgages or pools of Mortgage
Notes and Mortgages owned, insured or guaranteed by FNMA, FHLMC or GNMA.
"AGENCY SERVICING PAYMENTS" means all amounts payable or reimbursable to
Borrower in connection with its Agency Servicing Rights, including but not
limited to, (i) amounts paid to Borrower directly by Agencies and (ii) amounts
recoverable by Borrower directly out of custodial payments and other amounts in
or for deposit into the Custodial Accounts, (iii) accounts recoverable by
Borrower from advances made by Borrower pursuant to the FNMA Guide, and (iv) the
servicing income and fees payable to the Borrower under such Agency Servicing
Agreement.
"AGENCY SERVICING RECORDS" means all contracts and other documents, books,
records and other information (including without limitation, computer programs,
tapes, discs, punch cards, data processing software and related property and
rights) maintained with respect to the Agency Servicing Agreements.
"AGENCY SERVICING RIGHTS" means all of the Borrower's right, title and
interest in and under the Agency Servicing Agreements, including, without
limitation, the rights of the Borrower to income and reimbursement thereunder
including without limitation the rights to any Excess Servicing Receivable.
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"AGREEMENT" means this FIRST AMENDED AND RESTATED WORKING CAPITAL LINE OF
CREDIT AND SECURITY AGREEMENT, either as originally executed or as it may from
time to time be supplemented, modified or amended.
"APPRAISAL" means a written statement complying with Appraisal Laws and
Regulations as to the market value of (a) the Excess Servicing Rights for
Eligible Collateral and/or (b) the Excess Interest Certificates, from an
appraiser acceptable to Bank in its sole discretion.
"APPRAISAL LAWS AND REGULATIONS" means laws set forth in Title XI of the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 and the
Federal Deposit Insurance Corporation Improvement Act of 1991 and regulations
promulgated by the Office of the Comptroller of the Currency (the "OCC") or any
other Governmental Authority in connection therewith regarding Appraisals with
respect to loans made by Persons regulated by the OCC.
"APPRAISED VALUE" shall mean the value established by an Appraisal obtained
by Bank from an appraiser acceptable to Bank in its sole discretion.
"BANK" has the meaning set forth in the first paragraph of this Agreement.
"BASE RATE" means the rate of interest per annum equal to the base or prime
rate for commercial loans as publicly announced from time to time by Bank, as
the same may vary from time to time upward or downward with (and effective as of
the date of) each announcement, without notice to Borrower or any guarantor
(such rate being set by Bank as a general rate of reference, taking into account
such factors as Bank may deem appropriate, it being understood that many of its
commercial and other loans are priced in relation to such rate, that it is not
necessarily the lowest or best rate actually charged to any of Bank's customers
and that it may make various commercial or other loans at rates of interest
having no relationship to such rate), subject, however, to the right of Bank, at
any time and from time to time, to substitute a substantially comparable
reference rate of interest in lieu of the base rate of Bank, upon giving notice
to Borrower.
"BORROWER" shall have the meaning assigned to such term in the preamble
hereof.
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the State of Texas.
"CAPITALIZED SERVICING" shall mean the servicing owned by Borrower which is
capitalized on the balance sheet of Borrower in accordance with GAAP.
"CASH EQUIVALENTS" shall mean (i) securities issued or directly and fully
guaranteed or insured by the United States Government or any agency or
instrumentality thereof which mature within ninety days from the date of
acquisition and (ii) time deposits and certificates of deposit, which mature
within ninety days of the date of acquisition of any domestic commercial bank
having capital and surplus in excess of $200,000,000.00, which has, or the
holding company of which has, a commercial paper rating of at least A-1 or the
equivalent thereof by Standard & Poors Corporation or P-1 or the equivalent
thereof by ▇▇▇▇▇'▇ Investors Service, Inc.
"CERTIFICATED SECURITIES" shall have the meaning assigned to such term in
the UCC.
"CHATTEL PAPER" shall have the meaning assigned to such term in the UCC.
"COLLATERAL" has the meaning set forth in SECTION 3.1 hereof.
"COLLATERAL VALUE" shall mean (1) with respect to ELIGIBLE COLLATERAL
consisting of FNMA Servicing RIGHTS the LESSER OF (A) FIFTY PERCENT (50%) of the
Appraised Value of the Excess Servicing Receivables relating to Eligible
Collateral specifically pledged to Bank in connection with a current or past
Advance Request, as determined on the
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date hereof, on the date of any Advance and on December 31, March 31, June 30
and September 30 of each year by an appraiser selected by Borrower acceptable to
Bank in its sole discretion, which appraisal shall be paid for by Borrower and
shall be acceptable to Bank in its sole discretion or (B) the amount of such
Excess Servicing Receivables capitalized on Borrower's balance sheet in
accordance with GAAP and (2) with respect to Eligible Collateral consisting of
Excess Interest Certificates, fifty-five percent (55%) of the Appraised Value of
such Excess Interest Certificates; provided, however, if an Excess Interest
Certificate ceases to qualify under Rule 144A of the Securities Act of 1933,
then the Collateral Value attributable to such certificate shall be zero (0).
"COMMITMENT" has the meaning set forth in Section 2.1(a) hereof.
"COMMITMENT FEE" has the meaning set forth in Section 2.11 hereof.
"COMPLIANCE CERTIFICATE" shall mean the form of certificate attached hereto
as EXHIBIT "F".
"CONVENTIONAL EQUITY RECOVERY LOAN" shall mean a Conventional Loan which is
secured by a first or second lien mortgage on a non-homestead second or vacation
home and the proceeds are not used for the purchase of the home.
"CONVENTIONAL HOME IMPROVEMENT LOAN" shall mean a Conventional Loan which
is secured by a second lien mortgage and the proceeds of which are utilized
solely for construction of improvements to the home encumbered by such Mortgage.
"CONVENTIONAL LOAN" means a Mortgage Loan (excluding FHA Loans and VA
Loans) reasonably satisfactory to the Bank, which conforms to the eligibility
requirements established by an Investor pursuant to the requirements of a Take-
out Commitment acceptable to Bank.
"CONVENTIONAL MORTGAGE LOAN" means a Mortgage Loan other than a FHA-insured
or VA-guaranteed Mortgage Loan.
"CONVENTIONAL PURCHASE MONEY SECOND LIEN LOAN" shall mean a Conventional
Loan which is secured by a second lien mortgage and the proceeds of which are
utilized to purchase the home encumbered by such Mortgage.
"CUSTODIAL ACCOUNTS" means all deposit accounts maintained by Borrower or a
subservicer for the benefit of any Agency pursuant to the related Agency
Servicing Agreement.
"CUSTODIAN" means the organization which holds documents relating to pooled
Mortgage Loans on the Borrower's and GNMA'S, FNMA's or FHLMC's behalf.
"DEBT" means, with respect to any Person, at any date (a) all indebtedness
or other obligations of such Person which, in accordance with GAAP, would be
included in determining total liabilities as shown on the liabilities side of a
balance sheet of such Person at such date; (b) all indebtedness or other
obligations of such Person for borrowed money or for the deferred purchase price
of property or services; (c) all indebtedness or other obligations of any other
Person for borrowed money or for the deferred purchase price of property or
services in respect of which such Person is liable, contingently or otherwise,
to pay or advance money or property as guarantor, endorser, or otherwise (except
as endorser of negotiable instruments for collection in the ordinary course of
business), or which such Person has agreed to purchase or otherwise acquire; and
(d) all indebtedness for borrowed money or for the deferred purchase price of
property or services secured by a Lien on any property owned or being purchased
by such Person (even though such Person has not assumed or otherwise become
liable for the payment of such indebtedness) to the extent that such
indebtedness would not be otherwise counted as a liability for purposes of
determining the Tangible Net Worth of such Person and to the extent that such
indebtedness does not exceed the net book value for such property.
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"DEFAULT" means the occurrence of any event or existence of any condition
which, but for the giving of notice, the lapse of time, or both, would
constitute an Event of Default.
"DETERMINATION DATE" means January 1, April 1, July 1, and October 1 of
each year.
"ELIGIBLE COLLATERAL" means (a) FNMA SERVICING RIGHTS (under which the only
remedy available to FNMA is termination of the Servicing Agreement) owned by the
Borrower for which the related Mortgage Loans serviced are no more than sixty
(60) days delinquent, are not in the process of foreclosure or bankruptcy and
are qualified as FNMA Title I Loans and (b) EXCESS INTEREST CERTIFICATES
currently paying the holders of such certificates the excess spread from the
accrued interest on a monthly basis.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time and any successor statute.
"ERISA AFFILIATE" of Borrower or any Subsidiary of Borrower shall mean any
trade or business (whether or not incorporated) which, together with Borrower or
such Subsidiary, as the case may be, would be treated as a single employer under
Section 4001 of ERISA.
"EVENT OF DEFAULT" means any of the conditions or events set forth in
SECTION 8.1 hereof.
"EXCESS INTEREST CERTIFICATES" shall mean with respect to a series of HOME
Asset Backed Bonds (the "BONDS") the Certificated Securities issued by HOME
SECURITIZATION TRUST I (THE "TRUST") which qualify under Rule 144A of the
Securities Act of 1933 and represent (a) the right to monthly interest payments
which are attributable to the difference between the interest rate paid on
such series of Bonds, including without limitation, Series 1997-1 Bonds and the
interest rate paid on the FNMA Securities that have been pledged to back such
series of Bonds and the related Excess Interest Certificates, and (b) the right
to any remaining principal and interest from the FNMA Securities for such series
of Bonds after the payment in full of such series of Bonds. A further
description of such Excess Interest Certificates shall be set forth in a pro
forma Excess Interest Certificate and the private placement memorandum relating
to the private sale of such Excess Interest Certificates which shall be attached
to the related Advance Request and which shall also be provided to Bank five (5)
Business Days prior to such requested Advance.
"EXCESS SERVICING RECEIVABLES" shall mean the amount capitalized on
Borrower's balance sheet which reflects the PRESENT VALUE OF FUTURE CASH FLOWS
estimated to be received by Borrower subsequent to loan sales to or swaps for
FNMA Securities with FNMA. The discounted cash flow streams are based on the
difference between (A) the gross note rate of a Mortgage Loan sold to FNMA and
which is being serviced by Borrower under an Agency Servicing Agreement for FNMA
MINUS (B) the sum of (i) (a) the MBS pass through rate paid to FNMA with respect
to such Mortgage Loan under such Agency Servicing Agreement PLUS (ii) the
SUBSERVICING FEE payable to the Subservicer attributable to such Mortgage Loan
and (iii) in the case of a swap of Mortgage Loans by Borrower to FNMA for FNMA
Securities, the FNMA Guaranty Fee.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time and any successor statute.
"FHA" means the Federal Housing Administration of the United States
Department of Housing and Urban Development and any successor thereto.
"FHA LOAN" shall mean a Mortgage Loan, payment of which is completely
insured by the FHA under the National Housing Act or Title V of the Housing Act
of 1949 or with respect to which there is a current, binding and enforceable
commitment for such insurance issued by the FHA.
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"FHLMC" shall mean the Federal Home Loan Mortgage Corporation, a wholly-
owned corporate instrumentality of the United States of America created pursuant
to the Emergency House Finance Act of 1970, or its successor.
"FHLMC ACKNOWLEDGMENT AGREEMENT" means the form acknowledgment agreement
employed by FHLMC in respect of assignments of FHLMC Servicing Rights.
"FHLMC GUIDE" means the FHLMC Sellers' & Servicers' Guide, as amended,
modified or supplemented from time to time.
"FHLMC SECURITIES" means participation certificates representing undivided
interests in mortgage loans purchased by FHLMC pursuant to the Emergency Home
Finance Act of 1970, as amended.
"FHLMC SERVICING RIGHTS" means Agency Servicing Rights that pertain to
FHLMC Securities.
"FICA" means the Federal Insurance Contributions Act.
"FNMA" means The Federal National Mortgage Association and any successor
thereto.
"FNMA ACKNOWLEDGMENT AGREEMENT" means the form acknowledgment agreement
employed by FNMA in respect of assignments of FNMA Servicing Rights.
"FNMA GUIDE" means the FNMA Selling Guide and the FNMA Servicing Guide, as
amended, modified or supplemented from time to time.
"FNMA SECURITIES" means modified pass-through mortgage-backed certificates
guaranteed by FNMA pursuant to the National Housing Act, as amended.
"FNMA SERVICING RIGHTS" means Agency Servicing Rights that pertain to FNMA
Securities and Mortgage Loans that are purchased by FNMA on a whole loan basis
and held in portfolio by FNMA.
"FNMA TITLE I LOAN" shall mean a home improvement Mortgage Loan which FNMA
has determined has qualified under the FNMA requirements for Title I Loans under
the FNMA Guide and is insured by FHA.
"FUNDING ACCOUNT" shall mean the non-interest bearing demand checking
account (Account Number 3940000965) established by Borrower with the Bank to be
used for the deposit of proceeds of Advances.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" or "GAAP" shall mean those
generally accepted accounting principles and practices which are recognized as
such by the American Institute of Certified Public Accountants acting through
its Accounting Principles Board or by the Financial Accounting Standards Board
or through other appropriate boards or committees thereof and which are
consistently applied for all periods after the date hereof, except that any
accounting principle or practice required to be changed by the said Accounting
Principles Board or Financial Accounting Standards Board (or other appropriate
board or committee of the said Boards) in order to continue as a generally
accepted accounting principle or practice may so be changed.
"GAAP NET WORTH" means with respect to any Person at any date, the excess
of the total assets over total liabilities of such Person on such date, each to
be determined in accordance with GAAP.
"GENERAL INTANGIBLES" shall have the meaning assigned to such term in the
UCC.
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"GNMA" shall mean the Government National Mortgage Association, a wholly-
owned corporate instrumentality of the United States of America within the
Department of Housing and Urban Development, or its successor.
"GNMA GUIDE" means the GNMA I and GNMA II Mortgage Backed Securities
Guides, GNMA Handbooks 5500.1 and 5500.2, as amended, modified or supplemented
from time to time.
"GNMA SECURITIES" shall mean modified pass-through type mortgage backed
certificates guaranteed by GNMA pursuant to Section 306(g) of the National
Housing Act, as amended.
"GNMA SERVICING RIGHTS" means Agency Servicing Rights that pertain to GNMA
Securities.
"GUARANTOR" means HOMECAPITAL INVESTMENT CORPORATION, A NEVADA CORPORATION.
"GUARANTY" of any Person shall mean any contract, agreement or
understanding of such Person pursuant to which such Person guarantees, or in
effect guarantees, any Indebtedness of any other Person (the "PRIMARY OBLIGOR")
in any manner, whether directly or indirectly, including without limitation
agreements: (i) to purchase such Indebtedness or any property constituting
security therefor; (ii) to advance or supply funds (A) for the purchase or
payment of such Indebtedness, or (B) to maintain working capital or other
balance sheet conditions, or otherwise to advance or make available funds for
the purchase or payment of such Indebtedness; (iii) to purchase property,
securities or service primarily for the purpose of assuring the holder of such
Indebtedness of the ability of the Primary Obligor to make payment of the
Indebtedness; or (iv) otherwise to assure the holder of the Indebtedness of the
Primary Obligor against loss in respect thereof; except that "Guaranty" shall
not include the endorsement in the ordinary course of business of negotiable
instruments or documents for deposit or collection.
"HOME SECURITIZATION TRUST I" is the Issuer of the Excess Interest
Certificates and the Bonds and is a Delaware business trust, which has been
established pursuant to a declaration of trust dated as of September 1, 1997.
"HUD" means the United States Department of Housing and Urban Development
or any successor thereto.
"INDEBTEDNESS" of any Person shall mean (i) all indebtedness of such
Person, whether or not represented by bonds, debentures, notes or other
securities, for the repayment of money borrowed, (ii) all deferred indebtedness
of such Person for the payment of the purchase price of property or assets
purchased, (iii) all obligations of such Person under any lease which are
required to be capitalized for balance sheet purposes, (iv) all Guaranties of
such Person, (v) all indebtedness secured by any Lien existing on property owned
by such Person, whether or not the indebtedness secured thereby shall have been
assumed by such Person, (vi) all unfunded benefit liabilities (within the
meaning of 4001(a)(18) of ERISA) under each Plan maintained by such Person or
its Related Persons, (vii) any obligation of such Person (a) created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person, or (b) under letters of credit, acceptances or
similar obligations issued or created for the account of such Person.
"INDEMNIFIED LIABILITIES" has the meaning set forth in SECTION 9.3 hereof.
"INSTRUMENTS" shall have the meaning assigned to such term in the UCC.
"INSURER" means FHA, VA or a private mortgage insurer, as applicable.
"INTANGIBLE ASSETS" of any Person shall mean those assets of such Person
which are (i) deferred assets, (ii) contract rights to service mortgage loans,
patents, copyrights, trademarks, trade names, franchises, goodwill, experimental
expenses, and other similar assets which would be classified as intangible on a
balance sheet of such Person prepared in accordance with GAAP, (iii) unamortized
debt discount and expense and (iv) assets located, and notes and receivables due
from obligors domiciled outside the United States of America.
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"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, or any
subsequent federal income tax law or laws, as any of the foregoing have been or
may from time to time be amended.
"INVESTOR" means FNMA, FHLMC or GNMA or a financially responsible private
institution (which is deemed acceptable by the Bank in its sole discretion)
purchasing Mortgage Loans from the Borrower.
"LIBOR RATE" shall mean the rate of interest per annum (rounded upward, if
necessary, to the nearest whole one sixteenth (1/16th) of one percentage point
of the rate per annum) equal to the interest settlement rate for U.S. Dollars as
published by the British Bankers Association as of 11:00 a.m. London time two
Business Days (on which commercial banks are open for international business in
London) prior to the first day of such calendar month, for the approximate
principal amount of the collective outstanding principal balances of the Notes
of the Banks, for a period of time equal to thirty (30) days - as quoted by
Bloomberg. If no such rate is published by the British Bankers Association,
then No LIBOR Rate may be elected pursuant to this Agreement and the rate of
interest shall be the Base Rate plus one and ONE-HALF PERCENT (1 1/2%).
"LIBOR RATE PORTION" shall mean the outstanding principal balance of the
Note.
"LIBOR RESERVE REQUIREMENT" shall mean, on any day, that percentage
(expressed as a decimal fraction) which is in effect on such date, as provided
by the Federal Reserve System for determining the maximum reserve requirements
generally applicable to financial institutions regulated by the Federal Reserve
Board comparable in size and type to Bank (including, without limitation, basic
supplemental, marginal and emergency reserves) under Regulation D with respect
to "Eurocurrency liabilities" as currently defined in Regulation D, or under any
similar or successor regulation with respect to Eurocurrency liabilities or
Eurocurrency funding (or other category of liabilities which includes deposits
by reference to which the interest rate on a LIBOR Rate Portion is determined or
any category or extensions of credit which includes loans by a non-United State
office of Bank to United States residents. Each determination by Bank of the
LIBOR Reserve Requirement shall, in the absence of manifest error, be conclusive
and binding.
"LIEN" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security interest).
"LIQUIDITY" means the sum of (a) Borrower's lien free Cash Equivalents and
(b) Borrower's availability (loan amount minus funds advanced) under the
Warehousing Credit Facility to borrow additional funds under such credit
facility.
"LOAN DOCUMENTS" shall mean instruments and documents representing,
evidencing or securing the Indebtedness evidenced by the Note.
"MARGIN STOCK" has the meaning assigned to that term in Regulation U of the
Board of Governors of the Federal Reserve System as in effect from time to time.
"MATERIAL ADVERSE EFFECT" shall mean any event or set of circumstances that
(i) would have a material adverse effect on the validity or enforceability of
this Agreement, the Note or any Loan Document, (ii) is, or upon the passage of
time or happening of an event will be, material and adverse to the financial
condition or business operations of Borrower or Guarantor, or (iii) would
materially impair the ability of Borrower or Guarantor to fulfill its
obligations under this Agreement, the Note or any Loan Document to which it is a
party.
"MATURITY DATE" shall mean JUNE 30, 1998.
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"MAXIMUM RATE" means at the particular time in question the maximum rate of
interest which, under applicable law, may then be charged on the Note. If such
maximum rate of interest changes after the date hereof, the Maximum Rate shall
be automatically increased or decreased, as the case may be, without notice to
Borrower from time to time as of the effective time of each change in such
maximum rate. If applicable law ceases to provide for such a maximum rate of
interest, the Maximum Rate shall be a per annum rate of interest equal to six
percent (6.0%) plus the Base Rate from time to time in effect.
To the extent federal law permits Bank ot contract for, charge or receive a
greater amount of interest, Bank will rely on federal law instead of the Texas
Finance Code, as supplemented by Texas Credit Title for the purpose of
determining the Maximum Rate. Additionally, to the maximum extent permitted by
applicable law now or hereafter in effect, Bank may, at its option and from time
to time, implement any other method of computing the Maximum Rate under the
Texas Finance Code, as supplemented by Texas Credit Title, or under other
applicable law by giving notice, if required, to Borrower as provided by
applicable law now or hereafter in effect. Notwithstanding anything to the
contrary contained herein or in any of the other Loan Documents, it is not the
intention of Bank to accelerate the maturity of any interest that has not
accrued at the time of such acceleration or to collect unearned interest at the
time of such acceleration.
In no event shall Chapter 346 of the Texas Finance Code (which regulates
certain revolving loan accounts and revolving tri-party accounts) apply to the
Note. To the extent that Chapter 303 of the Texas Finance Code is applicable to
this Note, the "weekly ceiling" specified in Chapter 303 is the applicable
ceiling; provided, that if any applicable law permits greater interest, the law
permitting the greatest interest shall apply.
"MORTGAGE" shall mean a mortgage or deed of trust, on standard forms
approved by VA, FHA, FNMA or FHLMC or otherwise in form and substance
satisfactory to Bank, granting a perfected first-priority (or second-priority in
the case of a Second Lien Mortgage Loan or inferior lien in the case of a FNMA
Title I Loan) lien on residential real property consisting of land and a single
family (1-4 family) dwelling thereon which is completed and ready for occupancy.
"MORTGAGE LOAN" means a loan evidenced by a Mortgage Note. A Mortgage Loan
shall be a Residential Mortgage Loan and may be a Conventional Loan, a
Conventional Equity Recovery Loan, Conventional Home Improvement Loan, a
Conventional Purchase Money Second Lien Loan or a FNMA Title I Loan.
"MORTGAGE LOAN DOCUMENTS" means the Mortgage, Mortgage Note, credit and
closing packages, disclosures, and all other records and documents necessary to
establish the eligibility of the Mortgage Loans for mortgage insurance or
guarantee by an Insurer or for purchase by an Investor.
"MORTGAGE NOTE" means a note secured by a Mortgage and evidencing a
Mortgage Loan.
"MORTGAGE NOTE AMOUNT" means the outstanding unpaid principal amount of a
Mortgage Note at the time such Mortgage Note is pledged to the Bank.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA which is maintained for employees of the Borrower or a
Subsidiary of the Borrower.
"NET COLLATERAL DEFICIT" means, at any time, the amount, if any, by which
the aggregate Collateral Value of all Eligible Collateral is exceeded by the
outstanding principal balance of the Loan, as determined by Bank in its sole
discretion.
"NET INCOME" means, for any period of time, the net income appearing on an
income statement of such Person prepared as of the end of such calendar quarter
in accordance with GAAP.
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"NET WORTH" of any Person shall mean, as of any date, the total
shareholder's equity (including capital stock, additional paid-in capital and
retained earnings after deducting treasury stock) which would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP.
"NON-AGENCY SERVICING ACCOUNTS" means any "account," as such term is
defined in the UCC, now or hereafter owned by Borrower that arises from any Non-
Agency Servicing Agreement, and shall include, to the extent not contained in
such definition of "account", but shall not be limited to, all accounts
receivable, contracts, book debts, notes, drafts, instruments, documents,
acceptances and other forms of obligations now owned or hereafter received or
acquired by or belonging or owing to Borrower under the Non-Agency Servicing
Agreements (including under any trade names, styles or divisions thereof), all
moneys due or to become due to Borrower under the Non-Agency Servicing
Agreements for the performance of services by it, including, without limitation,
all Rights of Borrower to enforce, collect and receive payments on such Non-
Agency Servicing Accounts arising from Non-Agency Servicing Agreements and to
bring an action to enforce such Non-Agency Servicing Accounts, the balance of
every deposit account, now or hereafter acquired, of Borrower arising from Non-
Agency Servicing Agreements and any other claim of Borrower arising from Non-
Agency Servicing Agreements, now or hereafter existing and all collateral
security and guarantees of any kind given by any Person with respect to any of
the foregoing arising from Non-Agency Servicing Agreements.
"NON-AGENCY SERVICING AGREEMENTS" means all agreements pursuant to which
the Borrower undertakes to service Mortgage Notes and Mortgages or pools of
Mortgage Notes and Mortgages for any Party other than an Agency which are
acquired by Borrower.
"NON-AGENCY SERVICING PAYMENTS" means all amounts payable or reimbursable
to Borrower in connection with its Non-Agency Servicing Rights, including but
not limited to, (i) amounts paid to Borrower directly by Agencies and (ii)
amounts recoverable by Borrower directly out of custodial payments and other
amounts in or for deposit into the Custodial Accounts, (iii) accounts
recoverable by Borrower from advances made by Borrower pursuant to the Non-
Agency Servicing Agreement, and (iv) the servicing income and fees payable to
the Borrower under such Non-Agency Servicing Agreement.
"NON-AGENCY SERVICING RECORDS" means all contracts and other documents,
books, records and other information (including without limitation, computer
programs, tapes, discs, punch cards, data processing software and related
property and rights) maintained with respect to the Non-Agency Servicing
Agreements.
"NON-AGENCY SERVICING RIGHTS" means all of the Borrower's right, title and
interest in and under the Non-Agency Servicing Agreements, including, without
limitation, the rights of the Borrower to income and reimbursement thereunder.
"NOTE" has the meaning set forth in Section 2.3 hereof.
"NOTICES" has the meaning set forth in Section 10.3 hereof.
"OBLIGATIONS" shall mean all Indebtedness owed to Bank by Borrower or
Guarantor under this Agreement and/or the Warehousing Credit Facility.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
successor to any or all of the Pension Benefit Guaranty Corporation's functions
under ERISA.
"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof.
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"PLAN" shall mean any employee benefit plan or other plan which is subject
to the provisions of Title IV of ERISA or to the minimum funding standards under
Section 412 of the Code and which is maintained for employees of Borrower or any
Subsidiary of Borrower or any of their respective ERISA Affiliates.
"PROPOSED INDEBTEDNESS" shall mean subordinated debt and approved gestation
financing listed on EXHIBIT "K" after such indebtedness has been approved by
Bank in its sole and absolute discretion after receiving certified copies of the
proposed loan documents relating to such indebtedness and the executed loan
documents pertaining to such indebtedness.
"REDEMPTION AMOUNT" has the meaning set forth in Section 3.3 hereof.
"REPORTABLE EVENT" shall mean a reportable event described in Section 4043
of ERISA or the regulations thereunder for which the 30-day notice is not waived
by such regulations, a withdrawal from a Plan described in Section 4063 or 4064
of ERISA, or a cessation of operations described in Section 4062(e) of ERISA.
"REPURCHASE FACILITY" or "REPO FACILITY" shall mean a facility provided by
a third party under which Borrower may purchase and originate Mortgage Loans
pursuant to a written agreement with such third party defining Borrower's
requirement to sell such Mortgage Loans to such third party and ultimately
repurchase such Mortgage Loans from such third party at a later date.
"REQUIREMENT OF LAW" as to any Person shall mean the articles of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, statute, code, ordinance, order, rule, regulation,
judgment, decree, injunction, franchise, permit, certificate, license,
authorization or other determination, direction or requirement (including,
without limitation, any of the foregoing which relate to environmental standards
or controls, energy regulations and occupational, safety and health standards or
controls) of any arbitrator, 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.
"RESERVE REQUIREMENTS" means (a) the maximum aggregate reserve requirement
imposed on Bank (including all basic, supplemental, marginal and other reserves
and taking into account any transitional adjustments or other scheduled changes
in reserve requirements) that is imposed on non-personal time deposits of
$100,000 or more, and (b) the net assessment rate per annum payable to the
Federal Deposit Insurance Corporation (or any successor) for the insurance of
domestic deposits of Bank during the calendar year in which such assessment rate
is determined, as reasonably estimated by Bank.
"RESIDENTIAL MORTGAGE LOAN" means a Mortgage Loan secured by a Mortgage
covering improved real property containing a one- to four-family residence.
"RESIDUAL FINANCING" shall mean committed or uncommitted agreements between
Borrower and a third party providing for the financing of certain assets
("Residual Assets") created by the process of converting Mortgage Loans into
securities and which represent Borrower's right to receive subsequent cash flows
from such securities subject to the senior rights of the ultimate owners of such
securities.
"SALES AGREEMENTS" means all commitments and sales agreements with respect
to all or any portion of any assets of Borrower relating to Agency Servicing
Agreements, Agency Servicing Records, Agency Servicing Rights, Non-Agency
Servicing Agreements, Non-Agency Servicing Records, Non-Agency Servicing Rights,
Subservicing Contracts or any other Collateral.
"SALES PROCEEDS" means, as to any sale of any Collateral including but not
limited to sales of Servicing Rights, the gross proceeds paid or to be paid to
or received by Borrower, whether paid or payable in cash or to be paid pursuant
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to the terms of an agreement or debt instrument, less the reasonable and
necessary expenses of such sale as approved by Bank.
"SECOND LIEN MORTGAGE LOAN" shall mean a Mortgage Loan which qualifies
under the definition of Mortgage Collateral except for the fact that it is
secured by a Mortgage which grants a perfected second-priority lien on
residential real property consisting of land and a single family (1-4 family)
dwelling thereon which is completed and ready for occupancy. Such Mortgage Loan
shall be a Covered Mortgage Loan.
"SERVICING AGREEMENT" means the rights and obligations of the Borrower, as
servicer, pursuant to any Agency Servicing Agreements and any Non-Agency
Servicing Agreements including but not limited to those identified on EXHIBIT
"E" attached hereto or made part hereof, as the same may be revised from time to
time, or such other servicing contracts to which Borrower is or may be a party,
to administer, collect the payments for the reduction of principal and
application of interest, pay taxes and insurance, remit collected payments,
provide foreclosure services, provide full escrow administration and any other
obligations required by any Investor or Insurer in, of or for the Mortgage Loans
pursuant to the Servicing Agreements, together with the right to receive the
servicing fee and any ancillary fees arising from or connected to the Mortgage
Loans.
"SETTLEMENT ACCOUNT" shall mean the non-interest bearing demand checking
account (ACCOUNT NO. 3940000973) established by Borrower with the Bank to be
used for (i) the deposit of proceeds from the sale of Collateral and (ii) the
payment of the Indebtedness evidenced by the Loan Documents.
"STATEMENT DATE" has the meaning set forth in SECTION 4.1(a)(7) hereof.
"SUBSERVICER" shall mean Compu-Link Loan Service, Inc. and Financial
Collection Agencies of Pennsylvania, Inc. or any other Person acting as a
subservicer for Borrower with respect to Non-Agency Servicing Agreements and/or
Agency Servicing Agreements.
"SUBSERVICING CONTRACTS" means any agreement between Borrower and any other
party providing for the delegation of obligations and liabilities of Borrower
under any Servicing Agreement to such third party including but not limited to
those listed on EXHIBIT "L", whether now existing or hereafter entered into.
"SUBSIDIARY" means, with respect to any Person, any corporation,
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned in any percentage by such Person.
"TANGIBLE NET WORTH" of Borrower shall mean at any time, as determined by
GAAP, an amount equal to the sum of (i) Borrower's Net Worth, minus (ii) the
value of all assets of Borrower that would be characterized as Intangible
Assets.
"TOTAL LIABILITIES" of Borrower shall mean, as of any date, all amounts
which would be included as liabilities on a balance sheet of Borrower as of such
date prepared in accordance with GAAP.
"UCC" shall mean the Uniform Commercial Code as adopted in the State of
Texas, TEX. BUS. & COM. CODE ▇▇▇. (S)1.101 ET SEQ. (▇▇▇▇▇▇ 1968 and Supp. 1991),
as the same may hereafter be amended.
"UNCERTIFICATED SECURITIES" shall have the meaning assigned to such term in
the UCC.
"VA" means the Department of Veterans Affairs and any successor thereto.
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"WAREHOUSING CREDIT FACILITY" means that certain line of credit from Bank
to Borrower evidenced by that certain Loan Agreement by and between Borrower and
Bank dated as of June 1, 1996, together with all amendments, modifications and
extensions thereto.
SECTION 1.2 OTHER DEFINITIONAL PROVISIONS.
1.2(a) All meanings defined in this Agreement shall have the above-
defined meanings when used in the Note or any Loan Document, certificate,
report or other document made or delivered pursuant to this Agreement,
unless the context therein shall otherwise require.
1.2(b) Defined terms used herein in the singular shall import the
plural and vice versa.
1.2(c) The words "hereof," "herein," "hereunder" and similar terms
when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement.
1.2(d) Section, schedule and exhibit references herein are
references to sections, schedules and exhibits to this Agreement unless
otherwise specified.
1.2(e) As used herein, in the Note, or in any other Loan Document,
certificate, report or other document made or delivered pursuant hereto,
accounting terms relating to any Person and not specifically defined in
this Agreement or otherwise shall have the respective meanings given to
them under GAAP.
1.2(f) Unless otherwise specified herein, all times set forth herein
are Dallas, Texas time.
ARTICLE II
THE CREDIT
SECTION 2.1 THE COMMITMENT
2.1(a) Subject to the terms and conditions of this Agreement and
provided no Event of Default has occurred and no Default has occurred and is
continuing, the Bank agrees, from time to time during the period from the date
hereof to the Maturity Date (unless such period is earlier determined pursuant
hereto) make Advances to, or on behalf of the Borrower or its designee, provided
the total aggregate principal amount which is outstanding at any one time of all
such ADVANCES SHALL NOT EXCEED SIXTEEN MILLION SIX HUNDRED SIXTY-SIX THOUSAND
SIX HUNDRED AND NO/100 DOLLARS ($16,666,600.00). The obligation of the Bank to
make Advances hereunder up to such limits is hereinafter referred to as the
"COMMITMENT". Within the Commitment, the Borrower may borrow, repay and
reborrow. Notwithstanding the foregoing, the Bank shall not be obligated to
make Advances hereunder at all or up to any specified aggregate limit unless the
Borrower elects to pay the Commitment Fee specified in Section 2.11 hereof, in
which event this Agreement shall govern any Advances that the Bank from time to
time elects in its sole discretion to make to the Borrower.
2.1(b) Advances shall be used by the Borrower solely for the PURPOSE
of financing the origination and retention of Title I Excess Servicing Rights
related to FNMA Securities and the retention of Excess Interest Certificates
generated by Borrower pursuant to the issuance of Bonds and Excess Interest
Certificates by its Affiliate HOME SECURITIZATION TRUST I and shall be made at
the request of the Borrower, in the manner hereinafter provided in SECTION 2.2,
against the pledge of Eligible Collateral.
2.1(c) No Advance shall exceed the COLLATERAL VALUE of the Eligible
Collateral pledged in connection with such Advance.
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2.1(d) NO NET COLLATERAL DEFICIT shall exist before or after such
Advance.
2.1(e) Borrower shall be IN COMPLIANCE with all provisions
contained in the Loan Documents including but not limited to those covenants
stated on the Compliance Schedule.
SECTION 2.2 PROCEDURES FOR OBTAINING ADVANCES.
2.2(a) The Borrower may obtain an Advance hereunder, subject to the
satisfaction of the CONDITIONS set forth in SECTIONS 4.1 AND 4.2 hereof, upon
compliance with the procedures set forth in this SECTION 2.2. Requests for
Advances shall be initiated by the Borrower by delivering to the Bank a
completed and signed request for an Advance (an "ADVANCE REQUEST") on the then
current form therefor approved by the Bank. The current form in use by the Bank
is set forth in EXHIBIT "C" hereto. The Bank shall have the right to revise or
supplement approved forms of Advance Request by giving notice thereof to the
Borrower.
2.2(b) Each Advance under this Agreement shall be in the aggregate
amount of NOT LESS THAN $100,000.00. The obligation of the Bank to make any
Advance is subject to the following further conditions precedent:
(i) prior to 9:00 P.M. (Dallas, Texas time) on the Business Day
FIVE (5) BUSINESS DAYS PRIOR to the Borrowing Date, Borrower shall give to
the Bank telephonic or telecopy NOTICE of the amount of such Borrowing and
prior to 10:30 A.M. (Dallas, Texas time) on the Business Day FIVE (5)
BUSINESS DAYS prior to the Borrowing Date, Bank shall have received from
the Borrower via telecopy or Federal Express an executed Advance Request;
(ii) prior to the deadlines stated in SECTION 2.2(b)(i), Borrower
shall deliver to the POSSESSION of the Bank all of the items required to be
delivered to the Bank by SECTION 2.2(c);
(iii) the REPRESENTATIONS AND WARRANTIES of Borrower contained in
this Agreement or any Loan Document (other than those representations and
warranties which are by their terms limited to the date of the agreement in
which they are initially made) shall be true and correct in all material
respects on and as of the date of such Advance;
(iv) NO DEFAULT OR EVENT OF DEFAULT shall have occurred and be
continuing as of the date of such Advance;
(v) NO circumstance or event, as determined by the Bank in its
reasonable discretion, having a MATERIAL ADVERSE EFFECT shall have occurred
and be continuing;
(vi) the FUNDING ACCOUNT and the SETTLEMENT ACCOUNT shall be
established and in existence; and
(vii) no NET COLLATERAL DEFICIT shall exist.
2.2(c) The procedures to be followed by the Borrower in making an
Advance Request, are as follows. The Borrower shall provide to Bank at least
FIVE (5) BUSINESS DAYS PRIOR to the Borrowing Date the following:
(i) an APPRAISAL showing the Collateral Value for the NEW Eligible
Collateral being pledged in connection with the Advance Request;
(ii) if requested by Bank, an Appraisal showing the Collateral Value
for all Eligible Collateral;
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(iii) an executed ADVANCE REQUEST;
(iv) (A) a true, correct and complete copy of the applicable
SERVICING AGREEMENT or (B) THE ORIGINAL EXCESS INTEREST CERTIFICATES
together with a true, correct and complete copy of the private placement
memorandum, the Indenture and all other relevant documents relating to the
Excess Interest Certificates;
(v) such amendments to Loan Documents as are deemed necessary by
Bank in its sole discretion to grant Bank a PERFECTED FIRST LIEN security
interest in the Collateral including Financing Statements;
(vi) ACKNOWLEDGMENT AGREEMENTS for the applicable Servicing
Agreements;
(vii) a UCC SEARCH for all applicable jurisdictions; and
(viii) a BORROWING BASE REPORT (herein so called) in the form
attached hereto as EXHIBIT "D".
2.2(d) Before funding any Advance, the Bank shall have a reasonable
time to examine each Advance Request and the Collateral Documents to be
delivered prior to the Advance, and may reject any Advance Request or Collateral
Document that does not meet the requirements of this Agreement.
2.2(e) To make an Advance, the Bank shall transfer funds to the
Borrower's Funding Account in the amount of the Advance in accordance with the
procedures described herein.
2.2(f) All Advances under this Agreement shall constitute a single
indebtedness and all of the Collateral shall be security for the Note and for
the performance of all obligations of the Borrower to the Bank.
SECTION 2.3 NOTE. The Borrower's obligation to pay the principal of, and
interest on, all Advances made by the Bank shall be evidenced by the promissory
note (the "NOTE") of the Borrower dated as of the date hereof substantially in
the form of EXHIBIT "A" attached hereto. The term "NOTE" shall include all
extensions, renewals and modifications of the Note and all substitutions
therefor. All terms and provisions of the Note are incorporated herein.
SECTION 2.4 INTEREST & TRANSACTION FEES.
2.4(a) The unpaid amount of each Advance shall bear INTEREST, from
the date of such Advance until paid in full, at the rate per annum equal to the
lesser of (a) the Maximum Rate or, (b) the rate of interest, from time to time,
which is equal to (1) THE SUM OF FOUR AND ONE HALF PERCENT (4.50%) PER ANNUM
PLUS THE LIBOR RATE in the case of Advances secured by a pledge of FNMA
SERVICING or (2) THE SUM OF THREE AND THREE QUARTERS PERCENT (3.75%) PER ANNUM
PLUS THE LIBOR RATE in the case of Advances secured by a pledge of EXCESS
INTEREST CERTIFICATES. The interest rate shall be computed on the basis of a
360 day year applied to the actual number of days elapsed in each interest
calculation period. The interest rate will be adjusted as of the effective date
of each change in the LIBOR Rate.
2.4(b) All interest shall be payable to the Bank as provided in the
Note.
2.4(c) The holder of the Note is hereby authorized to record the date
and amount of each payment of principal and interest, and applicable interest
rates and other information with respect thereto, on the schedules annexed to
and constituting a part of the Note and any such recordation shall constitute
prima facie evidence of the accuracy of the information so recorded; provided,
however, that the failure to make a notation or the inaccuracy of any notation
shall not limit or otherwise affect the obligations of the Borrower hereunder or
thereunder.
SECTION 2.5 PRINCIPAL PAYMENTS.
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2.5(a) The outstanding PRINCIPAL amount of each Advance shall be
payable in full upon the earliest to occur of (i) demand, or (ii) Maturity Date.
2.5(b) The Borrower shall have the right to PREPAY the outstanding
Advances in whole or in part, from time to time, without premium or penalty or
advance notice.
2.5(c) The Borrower shall be OBLIGATED TO PAY to the Bank, without
the necessity of prior demand or notice from the Bank, and the Borrower
authorizes the Bank to charge its account for, the amount of any outstanding
Advance attributable to the Eligible Collateral or sales proceeds from
Collateral, upon the occurrence of any of the following events:
(1) Upon SALE of any Collateral or the receipt of any sales
proceeds by Borrower;
(2) Any OBLIGOR of a Mortgage Loan serviced under the Eligible
Collateral shall have contested the validity of the Mortgage Loan pursuant to
the Federal Truth in Lending Act, the Real Estate Settlement Procedures Act, the
Equal Credit Opportunity Act, or any other federal or state law or regulation,
or any such Mortgage Loan shall have been rescinded, or the Bank, in its
reasonable judgment, determines that such Mortgage Loan is not in compliance
with applicable federal and/or state laws or regulations;
(3) Any Mortgage securing a MORTGAGE LOAN serviced under the
Eligible Collateral shall not continue to be (A) a valid and enforceable Lien
(of the priority represented to Bank) on the mortgaged property covered thereby,
and in compliance with all laws applicable thereto, (C) in full force and
effect, and (C) fully serviced by Borrower (including the collection of all
amounts due thereon) or a Subservicer approved by Bank in its sole discretion;
or
(4) Any Mortgage Loan serviced under the Eligible Collateral
CEASES TO CONFORM to the eligibility requirements published and established from
time to time by FNMA or a private Investor approved by Bank in its sole
discretion.
2.5(d).THE BORROWER SHALL BE OBLIGATED TO PAY TO THE BANK BY DIRECT
WIRE TRANSFER FROM ITS PURCHASER TO BANK, WITHOUT THE NECESSITY OF PRIOR DEMAND
OR NOTICE FROM THE BANK, ALL SALES PROCEEDS FROM THE SALE OF ANY COLLATERAL.
ALL CONTRACTS RELATING TO THE SALE OF ANY OF THE COLLATERAL SHALL CONTAIN AS AN
EXHIBIT THE ACKNOWLEDGMENT ATTACHED HERETO AS EXHIBIT "J" AND SHALL NOT BE
EXECUTED UNLESS BORROWER DELIVERS TO BANK PRIOR TO EXECUTION OF THE SALES
CONTRACT BY BORROWER, A FULLY EXECUTED ACKNOWLEDGMENT.
2.5(e).Upon the occurrence of a NET COLLATERAL DEFICIT, Borrower
shall make a principal prepayment in an amount sufficient to eliminate such Net
Collateral Deficit within one (1) business day of the occurrence of the
existence of such Net Collateral Deficit.
SECTION 2.6 EXPIRATION AND/OR TERMINATION OF COMMITMENT
2.6(a) Unless terminated earlier as permitted hereunder, the
Commitment shall expire of its term, and without the necessity of action by the
Bank, on the MATURITY DATE.
2.6(b) The Bank shall have the right, without cause, AT ANY TIME to
terminate the Agreement on not less than THIRTY (30) DAYS' NOTICE to the
Borrower.
2.6(c) The Bank shall have the right to terminate this Agreement
and any line of credit extended to the Borrower pursuant to the terms of this
Agreement, upon any MATERIAL ADVERSE EFFECT in the Borrower's financial
condition as defined by the Bank in its reasonable discretion during the term of
this Agreement. Such a
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Material Adverse Effect of financial condition will include, but shall not be
limited to the occurrence of any one or more of the events listed in SECTION 6.6
hereto.
SECTION 2.7 CONCERNING THE FUNDING ACCOUNT, THE SETTLEMENT ACCOUNT AND THE
OPERATING ACCOUNT. The Borrower hereby expressly acknowledges that the Funding
Account, the Settlement Account and the Operating Account are subject in all
respects to the right of OFFSET in favor of the Bank granted under SECTION
10.19. Further, it is expressly agreed that:
2.7(a) the FUNDING ACCOUNT shall be subject to the sole dominion
and control of the Bank who shall disburse amounts from time to time on deposit
therein in accordance with the terms of this Agreement;
2.7(b) the SETTLEMENT ACCOUNT shall be subject to the sole dominion
and control of the Bank who shall disburse amounts from time to time on deposit
therein in accordance with the terms of this Agreement;
2.7(c) subject to the right of offset in favor of the Bank, the
OPERATING ACCOUNT shall be subject to the sole dominion and control of the
Borrower;
2.7(d) nothing other than proceeds of Advances shall be deposited
in the FUNDING ACCOUNT; and
2.7(e) the SETTLEMENT ACCOUNT shall only be used for (i) proceeds
from the sale or other disposition of Collateral and (ii) the payment of the
Indebtedness evidenced by the Loan Documents.
SECTION 2.8 REPRESENTATIONS AND WARRANTIES REGARDING MORTGAGE NOTES.
Effective with the delivery of the Advance Request, the Borrower represents and
warrants to Bank with respect to each Mortgage Note serviced pursuant to the
Collateral that:
2.8(a) The Borrower (and, if the Borrower did not originate the loan
evidenced by such Mortgage Note, to the best of Borrower's knowledge, the
originator of such loan) complied, and the Mortgage Collateral comply, in all
material respects with all applicable REQUIREMENTS OF LAW, including, without
limitation, (i) any usury laws, (ii) the Real Estate Settlement Procedures Act
of 1974, as amended, (iii) the Equal Credit Opportunity Act, as amended, (iv)
the Federal Truth in Lending Act, as amended, (v) Regulation Z of the Board of
Governors of the Federal Reserve System, as amended, and (vi) any consumer
protection laws;
2.8(b) the full Face Amount of such Mortgage Note (less any discount
points paid by or on behalf of the borrower under such Mortgage Note) was FUNDED
to the borrower thereunder and any such discount points paid were normal and
customary;
2.8(c) the Mortgage related to such Mortgage Note creates a perfected
FIRST-PRIORITY LIEN (or second-priority Lien in the case of Second Lien Mortgage
Loan, or inferior priority lien in the case of a FNMA Title I Loan) on
residential real property consisting of land and a one-to-four family dwelling
thereon which is completed and ready for occupancy and such Mortgage, the title
policy relevant thereto (only if required by FNMA or the Investor, if not FNMA)
and the other Mortgage documents relevant thereto comply in all respects with
the requirements of the Investor; and
2.8(d) the Mortgage Loan QUALIFIES under the definition of Mortgage
Loan.
SECTION 2.9 METHOD OF MAKING PAYMENTS.
All payments hereunder shall be received by the Bank on the date when
due and shall be made in lawful money of the United States of America in
immediately available funds at the office of the Bank, at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, to the Settlement Account or at such other place as the
Bank from time to time shall
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designate. Whenever any payment to be made hereunder or under the Note shall be
stated to be due on a day which is not a Business Day, the due date thereof
shall be extended to the next succeeding Business Day, and, with respect to
payments of principal, the interest thereon shall be payable at the applicable
rate during such extension. Funds received by the Bank after 12:00 NOON (DALLAS,
TEXAS TIME) on a Business Day shall be deemed to have been paid by the Borrower
on the next succeeding Business Day.
SECTION 2.10 LATE PAYMENT FEES. In the event the Borrower fails to make
any payment (whether of principal, interest or any other sum) on the date such
payment is due and payable hereunder or under the Note, and such failure
continues for more than five (5) days, the Borrower shall pay to the Bank, upon
demand therefor, a late payment fee equal to five percent (5%) of the amount of
such payment.
SECTION 2.11 COMMITMENT FEE. As a condition to obtaining the Commitment,
the Borrower agrees to pay to the Bank the Commitment Fee in advance in the
following manner (i) $3,750.00 each on NOVEMBER 8, 1996 and JANUARY 1, 1997,
(ii) on FEBRUARY 25, 1997 in the amount of $944.44, (iii) equal payments of
$6,250.00 EACH on APRIL 1, 1997 AND JULY 1, 1997, (iv) on OCTOBER 1, 1997 in
the amount of $10, 417.00, and (v) ON THE FIRST DAY OF EACH CALENDAR QUARTER
THEREAFTER equal payments of $10,417.00 EACH.
SECTION 2.12 YIELD PROTECTION. If at any time after the date hereof, and
from time to time, the Bank reasonably determines that the adoption or
modification of any applicable law, rule or regulation regarding taxation,
Bank's required levels of reserves, deposits, insurance or capital (including
any allocation of capital requirements or conditions), or similar requirements,
or any interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation,
administration or compliance of Bank with any of such requirements, has or would
have the effect of (a) increasing Bank's costs relating to the obligation
hereunder, or (b) reducing the yield or rate of return of Bank on the obligation
hereunder, to a level below that which Bank could have achieved but for the
adoption or modification of any such requirements, the Borrower shall, within
thirty (30) days of any request by Bank, either (i) agree in writing to pay to
Bank such additional amounts as Bank reasonably determines is necessary to
maintain the yield, rate of return and/or level of Bank's costs, which Bank
would have achieved but for the above-referenced adoption or modification of
applicable law, rule or regulation or (ii) pay in full all sums owed hereunder
including all principal, interest, expenses and fees and deliver to the Bank
notification that the Bank shall have no further obligation to make Advances
hereunder and that the Bank shall have no further obligations to Borrower
hereunder. No failure by Bank to immediately demand payment of any additional
amounts payable hereunder shall constitute a waiver of Bank's right to demand
payment of such amounts at any subsequent time. Such additional amounts shall
not be charged retroactively, that is all such additional amounts shall only be
charged for that period of time following the thirty (30) day notice period
required in this paragraph. Nothing herein contained shall be construed or so
operate as to require Borrower to pay any interest, fees, costs or charges
greater than is permitted by applicable law.
ARTICLE III
COLLATERAL
SECTION 3.1 ASSIGNMENTS AND GRANT OF SECURITY INTEREST. As security
for the payment of the Note and for the performance of all of the Borrower's
monetary and non-monetary obligations (collectively, the "OBLIGATIONS")
hereunder and under the Warehousing Credit Facility, the Borrower hereby grants
to the Bank a security interest in all rights and interest of the Borrower in
and to the following described property whether now owned or hereafter acquired,
wherever located, howsoever arising or created, and whether now existing or
hereafter arising (collectively, the "COLLATERAL"):
3.1(a) all Accounts and General Intangibles, relating to the
following;
3.1(b) FNMA Servicing Rights.
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3.1(c) FHLMC Servicing Rights.
3.1(d) GNMA Servicing Rights.
3.1(e) Agency Servicing Rights.
3.1(f) Agency Servicing Records.
3.1(g) Borrower's rights under any Subservicing Contracts including
but not limited to Borrower's right to receive payments under any
Subservicing Contracts.
3.1(h) Agency Servicing Accounts.
3.1(i) All Agency Servicing Payments.
3.1(j) Non-Agency Servicing Accounts.
3.1(k) Non-Agency Servicing Agreements.
3.1(l) Non-Agency Servicing Payments.
3.1(m) Non-Agency Servicing Records.
3.1(n) Non-Agency Servicing Rights.
3.1(o) All rights of Borrower in and to the Custodial Accounts.
3.1(p) All Sales Agreements.
3.1(q) All Sales Proceeds.
3.1(r) All Excess Interest Certificates in the possession
(constructive or actual) of Bank or listed on SCHEDULE C-I of an
Advance Request.
3.1(s) the Funding Account, the Operating Account and the Settlement
Account.
3.1(t) All guaranties, indemnifications, security documents, and
other AGREEMENTS, documents and instruments relating to the Agency
Servicing Agreements and the Non-Agency Servicing Agreements by which the
Persons executing the same guarantee or collateralize, among other things,
payment or performance of any, and all of the Agency Servicing Agreements
and the Non-Agency Servicing Agreements described above or protect Borrower
against loss relating to the Agency Servicing Agreements and the Non-Agency
Servicing Agreements described above.
3.1(u) All accounting information, ledger sheets, files, RECORDS,
documents, and any other media (including, without limitation, computer
programs, tapes and related electronic data and processing software) in
which or on which any of the information, knowledge, data, or records may
be recorded or stored relating to the Agency Servicing Agreements and the
Non-Agency Servicing Agreements, that evidence Borrower's interest in or
relate to any and all of the Agency Servicing Agreements and the Non-Agency
Servicing Agreements described above (including, without limitation, all
information, data, programs, tapes, disks, and cards necessary to
administer and service any Mortgage Loans with respect to which Borrower
has Agency Servicing Rights and Non-Agency Servicing Rights).
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3.1(v) ALL PERSONAL PROPERTY, contract rights, accounts receivable,
accounts and general intangibles (including, without limitation, the right
to receive payments and deposits of any kind under or in connection with
the Agency Servicing Agreements and the Non-Agency Servicing Agreements and
other Collateral) of whatsoever kind relating to the Collateral, including,
without limitation, the right to receive all hazard, private mortgage and
title insurance proceeds and condemnation awards which may be payable in
respect of the premises encumbered by any Collateral.
3.1(w) all of Borrower's property INSURANCE maintained upon and
protecting the assets and property described above.
3.1(x) all files, documents, instruments, surveys, certificates,
correspondence, APPRAISALS, computer programs, tapes, disks, cards,
accounting records and other records, information and data of Borrower
relating to any of the foregoing.
3.1(y) all PRODUCTS AND PROCEEDS (including, without limitation,
insurance proceeds) of, and additions, improvements and accessions to, and
books and records describing or used in connection with, all and any of the
property described above.
Upon the request of the Bank, the Borrower shall execute any further
document or instrument requested by the Bank to further evidence or effectuate
the assignments set forth in this subparagraph.
The SECURITY INTEREST created by this Agreement with respect to FNMA
Servicing Rights, is SUBJECT TO and subordinate to all rights, powers and
prerogatives of FNMA under and in connection with (i) the terms and conditions
of that certain Acknowledgment Agreement with respect to such security interest,
by and between FNMA, Homeowners Mortgage & Equity, Inc., a Delaware corporation,
d/b/a Home, Inc. (the "DEBTOR") and Guaranty Federal Bank, F.S.B. (the "SECURED
PARTY"), (ii) the Mortgage Selling and Servicing Contract and all applicable
pool purchase contracts between FNMA and the Debtor, and (iii) the selling
guide, servicing guide and other guides as each of such guides is amended from
time to time ((ii) and (iii) collectively, the "FNMA CONTRACT"), which rights,
powers and prerogatives include, without limitation, the right of FNMA to
terminate the FNMA Contract with or without cause and the right to sell or have
transferred, the servicing rights as therein provided.
Bank grants to Borrower a LICENSE to receive, retain and spend for its own
account all Agency Servicing PAYMENTS and Non-Agency Servicing Payments until
the occurrence of an Event of Default or a Default. Prior to a Default or Event
of Default, upon receipt by the Borrower of any Agency Servicing Payments and
Non-Agency Servicing Payments, such Agency Servicing Payments shall be released
from the security interest and lien of the Bank hereunder and shall no longer
constitute Collateral hereunder.
SECTION 3.2 DELIVERY OF ADDITIONAL COLLATERAL OR MANDATORY PREPAYMENT. In
the event that the Bank shall determine at any time that the Collateral Value of
the Eligible Collateral then pledged hereunder is less than the aggregate amount
of the Advances then outstanding hereunder, the Borrower shall immediately (a)
deliver to the Bank for pledge hereunder Collateral satisfactory to the Bank in
its sole and absolute discretion and/or cash, in aggregate amounts sufficient to
cover the difference between the Collateral Value of the Eligible Collateral
pledged and the aggregate amount of Advances outstanding hereunder, or (b) repay
the Advances in an amount sufficient to reduce the aggregate balance thereof
outstanding to or below the Collateral Value of the Eligible Collateral pledged
hereunder.
SECTION 3.3 REDEMPTION PURSUANT TO SALE. Provided no Event of Default has
occurred and no Default has occurred and is continuing, the Borrower may, in
connection with a sale (if approved by Bank) of Collateral, redeem Collateral
from pledge, by paying to the Bank, for application to prepayment of the
principal balance of the Note, an amount (the "REDEMPTION AMOUNT") equal to (i)
as to ELIGIBLE COLLATERAL, the greater of (a) the Collateral Value of the
Collateral to be released, or (b) the amount of the Advance made with respect to
such Collateral or (ii)
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in the case of all other Collateral, all sales proceeds payable to the Borrower.
Amounts payable to the Borrower for the purchase of any Collateral shall be paid
directly to the Bank into the "SETTLEMENT ACCOUNT" which account shall be under
the sole dominion and control of Bank. In connection with all such sales, the
purchaser of Collateral as a condition precedent to such sale shall execute the
Purchaser's Acknowledgment in the form attached hereto as EXHIBIT "J". A
security interest granted to the Bank in such Collateral shall continue in
effect until such time as the Bank shall have received the Redemption Amount.
Any and all sales contracts shall be approved by Bank in its reasonable
discretion.
SECTION 3.4 RELEASE OF COLLATERAL. The Borrower may obtain the release
from Bank of the security interest in and lien on all of the Collateral at any
time by paying to the Bank as a repayment hereunder, all amounts owed to the
Bank hereunder and provided further that all obligations of Borrower to Bank
have been satisfied. Any such release of the security interest in and the lien
to all of the Collateral shall be evidenced by the execution and delivery by the
Bank of an appropriate document to evidence such a release and a form of UCC
financing statement release for such collateral being so released and an
acknowledgment by Borrower that the Bank has no further obligations (including
the advance of funds) under this line of credit.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1 INITIAL ADVANCE. The obligation of the Bank to make the
initial Advance is subject to the satisfaction, in the sole discretion of the
Bank, on or before the date thereof of the following conditions precedent:
4.1(a) The Bank shall have received the following, all of which
must be satisfactory in form and content to the Bank, in its sole discretion:
(1) The NOTE duly executed by the Borrower in the form
attached as EXHIBIT "A";
(2) The GUARANTY, in the form attached hereto as EXHIBIT "B",
duly executed by the Guarantor;
(3) Certified copies of the Borrower's articles of
incorporation and bylaws, an OMNIBUS CERTIFICATE and certificates of existence,
good standing and qualification to do business in every jurisdiction in which
such qualification is required of Borrower dated no less recently than three (3)
months prior to the date of the initial Advance;
(4) A written OPINION of counsel to the Borrower and the
Guarantor in form and content satisfactory to the Bank, dated as of, or prior
to, the date of the initial Advance, addressed to the Bank, substantially in the
form attached hereto as EXHIBIT "H".
(5) An original RESOLUTION of the board of directors of the
Borrower, certified as of the date of the initial Advance by its corporate
secretary, authorizing the execution, delivery and performance of this Agreement
and the Note, and all other instruments or documents to be delivered by the
Borrower pursuant to this Agreement;
(6) A certificate of the Borrower's corporate secretary as to
the INCUMBENCY and authenticity of the signatures of the officers of the
Borrower executing this Agreement and the Note and each Advance Request and all
other instruments or documents to be delivered pursuant hereto (the Bank being
entitled to rely thereon until a new such certificate has been furnished to the
Bank);
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(7) A true, correct and complete copy of the original
independently audited FINANCIAL STATEMENTS of the BORROWER (and its
Subsidiaries, on a consolidated basis) for the most recent fiscal year end
containing a balance sheet and related statements of income and retained
earnings (the "STATEMENT DATE") and changes in financial position for the period
ended on the Statement Date, all prepared in accordance with GAAP applied on a
basis consistent with prior periods and acceptable to the Bank and attached to a
"CERTIFICATE ACCOMPANYING FINANCIAL STATEMENTS" in the form attached hereto as
EXHIBIT "I";
(8) FINANCIAL STATEMENTS of the GUARANTOR, executed by
Guarantor, dated no less recently than three (3) months prior to the date of the
initial Advance and attached to a "Certificate Accompanying Financial
Statements" in the form attached hereto as EXHIBIT "I";
(9) Five (5) original ACKNOWLEDGMENTS in the form attached
hereto as EXHIBIT "J" endorsed in blank;
(10) Copies of the Borrower's errors and omissions INSURANCE
policy or mortgage impairment insurance policy and blanket bond coverage policy,
all in form and content satisfactory to the Bank, showing compliance by the
Borrower as of the date of the initial Advance with the related provisions of
SECTION 6.9 hereof;
(11) ACKNOWLEDGMENT AGREEMENT executed by Borrower and Bank
and within thirty (30) days of the date hereof by FNMA;
(12) FNMA POWER OF ATTORNEY executed by Borrower;
(13) ACKNOWLEDGMENT AGREEMENT executed by Borrower and Bank
and FHLMC within thirty (30) days of Borrower's approval as a seller/servicer by
such agency;
(14) FHLMC POWER OF ATTORNEY executed by Borrower within
thirty (30) days of Borrower's approval as a seller/servicer by such agency;
(15) ACKNOWLEDGMENT AGREEMENT executed by Borrower and Bank
and by GNMA within thirty (30) days of Borrower's approval as a seller/servicer
by such agency;
(16) GNMA POWER OF ATTORNEY executed by Borrower within
thirty (30) days of Borrower's approval as a seller/servicer by such agency;
(17) UCC-1 FINANCING STATEMENT and UCC-1 search showing no
financing statements filed of record in the State of Texas except for those
acceptable to Bank in its sole discretion;
(18) Certified copies of the most recent applicable AGENCY
CERTIFICATIONS with seller/servicer numbers and FHA and VA certificates;
(19) Copies of all SERVICING AGREEMENTS with all Agencies and
Investors; and
(20) Copies of the certificates, documents or other written
instruments which evidence the Borrower's eligibility described in SECTION 5.27
hereof, all in form and substance satisfactory to the Bank.
ITEMS 13, 14, 15 AND 16 SHALL NOT BE REQUIRED FOR THE INITIAL ADVANCE BUT
SHALL BE REQUIRED FOR ANY ADVANCE AFTER THE DATE OF THE BORROWER'S APPROVAL AS A
SELLER/SERVICER, AS APPLICABLE, BY FHLMC OR GNMA.
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SECTION 4.2 EACH ADVANCE. The obligation of the Bank to make the initial
and each subsequent Advance is subject to the satisfaction, in the sole
discretion of the Bank, as of the date of each such Advance, of the following
additional conditions precedent:
4.2(A) The Borrower shall have delivered to the Bank the ADVANCE
REQUEST, and Collateral Documents called for under, and shall have satisfied the
procedures set forth in, SECTION 2.2 hereof and the applicable Exhibits hereto
described in those Sections. All items delivered to the Bank must be
satisfactory to the Bank in form and content, and the Bank may reject such of
them as do not meet the requirements of this Agreement.
4.2(B) The Bank shall have received evidence satisfactory to it as
to the due filing and RECORDING in all appropriate offices of all FINANCING
STATEMENTS and other instruments as may be necessary to perfect the security
interest of the Bank in the Collateral under the Uniform Commercial Code of the
State of Texas or other applicable law.
4.2(C) The REPRESENTATIONS AND WARRANTIES of the Borrower contained
in ARTICLE V hereof shall be true and correct in all material respects as if
made on and as of the date of each Advance.
4.2(D) The Borrower and the Guarantor shall have PERFORMED ALL
AGREEMENTS to be performed by them hereunder and under the Guaranty,
respectively, and after giving effect to the requested Advance, there shall
exist no Default hereunder.
4.2(E) The Borrower shall not have (i) incurred any MATERIAL
LIABILITIES, direct or contingent, other than in the ordinary course of its
business, since the dates of the Borrower's most recent financial statements
theretofore delivered to the Bank or (ii) experienced any other MATERIAL ADVERSE
CHANGE in its business or operations.
4.2(F) The Bank shall have received from counsel for the Borrower
and the Guarantor, if requested by the Bank in its sole discretion, an UPDATED
OPINION, in form and substance satisfactory to the Bank, addressed to the Bank
and dated as of the date of such Advance, covering such of the matters set forth
in SECTION 4.1(A)(4) hereto as the Bank may reasonably request.
Acceptance of the proceeds of the requested Advance by the Borrower
shall be deemed a representation by the Borrower that all conditions set forth
in this SECTION 4.2 shall have been satisfied as of the date of such Advance.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
In order to induce the Bank to enter into this Agreement and make each
Advance, the Borrower hereby represents and warrants to the Bank, as of the date
of this Agreement and as of the date of each Advance Request, that:
SECTION 5.1 ORGANIZATION: GOOD STANDING; SUBSIDIARIES. The Borrower
and each Subsidiary of the Borrower and Guarantor is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has the full legal power and authority to own
its property and to carry on its business as currently conducted and is duly
qualified as a foreign corporation to do business and is in good standing in
each jurisdiction in which the transaction of the business in which it is
engaged and is or will be qualified in those states where it proposes to
transact business in the future. The Borrower has no Subsidiaries except as set
forth on EXHIBIT "G" hereto. EXHIBIT "G" sets forth the name of each such
Subsidiary, place of incorporation, each state in which qualified as a foreign
corporation, and the percentage ownership of the capital stock of each such
Subsidiary by the Borrower.
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SECTION 5.2 AUTHORIZATION AND ENFORCEABILITY. The Borrower has the
power and authority to execute, deliver and perform this Agreement, the Note and
all other documents contemplated hereby or thereby. The Guarantor has the power
and capacity to execute, deliver and perform the Guaranty. The execution,
delivery and performance by the Borrower of this Agreement, the Note and all
other documents contemplated hereby or thereby and the making of the borrowing
hereunder and thereunder, have been duly and validly authorized by all necessary
corporate action on the part of the Borrower (none of which actions have been
modified or rescinded, and all of which actions are in full force and effect)
and do not and will not conflict with or violate any provision of law or of the
articles of incorporation or by-laws of the Borrower, conflict with or result in
a breach of or constitute a default or require any consent under, or result in
the creation of any Lien upon any property or assets of the Borrower, or result
in or require the acceleration of any indebtedness of the Borrower pursuant to
any agreement, instrument or indenture to which the Borrower is a party or by
which the Borrower or its property may be bound or affected. This Agreement,
the Note and all other documents contemplated hereby or thereby and the Guaranty
constitute legal, valid, and binding obligations of the Borrower or of the
Guarantor, respectively, enforceable in accordance with their respective terms.
SECTION 5.3 PRIORITY OF LIENS. The Bank has a valid, enforceable,
perfected, first priority Lien and security interest in the Collateral
heretofore delivered to the Bank by the Borrower and upon delivery to the Bank
of each Advance Request, the Bank shall have a valid, enforceable, perfected,
first priority Lien and Security Interest in the Collateral identified therein
or delivered therewith.
SECTION 5.4 APPROVALS. The execution and delivery of this Agreement,
the Note and all other documents contemplated hereby or thereby and the
performance of the Borrower's obligations hereunder and thereunder do not
require any license, consent, approval or other action of any state or federal
agency or governmental or regulatory authority.
SECTION 5.5 FINANCIAL CONDITION. Borrower has delivered to the Bank
copies of the balance sheets of Borrower and Guarantor dated JUNE 30, 1997 and
the related statements of income, stockholders' equity and changes in financial
position for the year ended such date; such financial statements fairly present
the financial condition of Borrower and Guarantor as of such date and have been
prepared in accordance with GAAP, subject to normal year-end adjustments; as of
the date thereof, there were no obligations, liabilities or Indebtedness
(including material contingent and indirect liabilities and obligations or
unusual forward or long-term commitments) of Borrower or Guarantor which are not
reflected in such financial statements; no change having a Material Adverse
Effect has occurred since the date of such financial statements.
SECTION 5.6 FULL DISCLOSURE. There is no material fact that Borrower
or Guarantor have not disclosed to the Bank which could adversely affect the
properties, business, prospects or condition (financial or otherwise) of
Borrower or Guarantor or could adversely affect the Collateral. Neither the
financial statements nor any certificate or statement delivered herewith or
heretofore by Borrower or Guarantor to the Bank in connection with negotiation
of this Agreement, contains any untrue statement of material fact.
SECTION 5.7 MATERIAL AGREEMENTS. Borrower is not in default (and no
event exists which with notice or the passage of time could become a default)
under any loan agreement, mortgage, security agreement or other material
agreement or obligation to which it is a party or by which any of its properties
is bound including but not limited to the Loan Documents.
SECTION 5.8 NO LITIGATION. There are no actions, suits or legal,
equitable, arbitration or administrative proceedings pending, or to the
knowledge of Borrower threatened, against Borrower, which either individually or
in the aggregate would have a Material Adverse Effect.
SECTION 5.9 TAXES. All tax returns required to be filed by the
Borrower in any jurisdiction have been filed and all taxes, assessments, fees
and other governmental charges upon Borrower or upon any of its properties,
income or franchises have been paid prior to the time that such taxes could give
rise to a Lien thereon, unless protested
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in good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been established on the books of Borrower. The
Borrower has no knowledge of any proposed tax assessment against Borrower.
SECTION 5.10 PRINCIPAL OFFICE, ETC., TAXPAYER IDENTIFICATION NUMBER.
The principal office, chief executive office and principal place of business of
Borrower is at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
Borrower's mailing address is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇. Borrower's taxpayer identification number is ▇▇-▇▇▇▇▇▇▇.
SECTION 5.11 EMPLOYEE BENEFIT PLANS.
(A) Neither Borrower nor any Subsidiary of Borrower, nor any of their
respective ERISA Affiliates, nor any Plan, is in material violation of any
provision of ERISA or any other applicable state or federal law, including
the Code.
(B) No Prohibited Transaction or Reportable Event has occurred with
respect to any Plan.
(C) No notice of intent to terminate a Plan has been filed within the
24-month period preceding the date hereof, nor has any Plan been terminated
under Section 4041(c) of ERISA.
(D) The PBGC has not instituted proceedings to terminate, or appoint a
trustee to administer, any Plan and no event or condition has occurred or
exists which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan.
(E) Neither Borrower nor any Subsidiary of Borrower, nor any of their
respective ERISA Affiliates has incurred or expects to incur any withdrawal
liability to any multiemployer plan within the meaning of Section
4001(a)(3) of ERISA.
(F) Each Plan meets the minimum funding requirements of Section 412 of
the Code and no waiver from such minimum funding requirements has been
applied for or approved pursuant to Section 412(d) of the Code.
(G) No fact exists that could result in any material liability other
than as disclosed on Borrower's financial statements) to Borrower relating
to any former Plan.
(H) No amendment to any Plan has been adopted such that security is
required to be given pursuant to Section 401(a)(29) of the Code, and no
lien exists under Section 412(n) of the Code with respect to any Plan.
(I) With respect to each Plan, the value of unfunded benefit
liabilities (within the meaning of Section 4001(a)(18) of ERISA) does not
exceed $50,000.
(J) Neither the Borrower nor any Subsidiary of Borrower maintains any
plan, arrangement, or commitment which provides medical or dental benefits
to an employee or the employee's dependents after the employee terminates
employment, other than as provided in the continuation coverage provisions
of the Code and ERISA.
SECTION 5.12 OWNERSHIP. HomeCapital Investment Corporation owns,
beneficially and of record, 100% of the issued and outstanding shares of each
class of the stock of Borrower.
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SECTION 5.13 SUBSIDIARIES. As of the date hereof, Borrower has no
subsidiaries other than Home Securities One L.L.C. and Home Securitization Trust
I. As of the date hereof, Borrower does not own, directly or indirectly, any
interest in any Person, other than Home Securities One L.L.C. and Home
Securitization Trust I which are special purpose entities created and owned by
Borrower in connection with the securitization or financing of the Borrower's
assets.
SECTION 5.14 INDEBTEDNESS. As of the date hereof, Borrower has no
Indebtedness outstanding other than the Note and the Indebtedness listed on
EXHIBIT "K".
SECTION 5.15 PERMITS, PATENTS, TRADEMARKS, ETC.
(A) Borrower has ALL permits and licenses NECESSARY for the operation of
its business, except where the failure to have such permits or licenses does not
have a Material Adverse Effect upon the operation of its business.
(B) Borrower owns or possesses (or is licensed or otherwise has the
necessary right to use) all patents, trademarks, service marks, trade names and
copyrights, technology, know-how and processes, and all rights with respect to
the foregoing, which are necessary for the operation of its business, without
any known material conflict with the rights of others. The consummation of the
transactions contemplated hereby will not alter or impair in any material
respect any of such rights of Borrower.
SECTION 5.16 STATUS UNDER CERTAIN FEDERAL STATUTES. Borrower is not (a)
a "holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company", as such terms are defined in the Public Utility Holding Company Act of
1935, as amended, (b) a "public utility", as such term is defined in the Federal
Power Act, as amended, (c) an "investment company", or a company "controlled" by
an "investment company", within the meaning of the Investment Company Act of
1949, as amended, or (d) a "rail carrier", or a "person controlled by or
affiliated with a rail carrier", within the meaning of Title 49, U.S.C., and
Borrower is not a "carrier" to which 49 U.S.C. (S) 11301(b)(1) is applicable.
SECTION 5.17 SECURITIES ACTS AND SECURITIES CREDIT TRANSACTION
REGULATIONS. The Borrower has not issued any unregistered securities in
violation of the Securities Act of 1933, as amended, or of any other Requirement
of Law, and is not violating any rule, regulation, or requirement under the
Securities Act of 1933, as amended, or the Securities and Exchange Act of 1934,
as amended. The Borrower is not required to qualify an indenture under the
Trust Indenture Act of 1939, as amended, in connection with its execution and
delivery of the Note. The Borrower is not a party, whether as a customer or a
creditor, to any transaction that is subject to the Securities Credit
Transaction Regulations.
SECTION 5.18 NO APPROVALS REQUIRED. Other than consents and approvals
previously obtained and actions previously taken, neither the execution and
delivery of this Agreement, the Note and the Loan Documents, nor the
consummation of any of the transactions contemplated hereby or thereby requires
the consent or approval of, the giving of notice to, or the registration,
recording or filing by Borrower of any document with, or the taking of any other
action in respect of, any Person.
SECTION 5.19 NO INSIDER. Neither the Borrower nor any Person having
"control" (as defined in 12 U.S.C. (S)375(b)(9) and the regulations promulgated
pursuant thereto) of the Borrower is, an "executive officer," "director," or
"principal shareholder" (as such terms are defined in 12 U.S.C. (S)375(b)(9) and
the regulations promulgated pursuant thereto) of any Bank, of any bank holding
company of which any Bank is a Subsidiary, or of any Subsidiary of any bank
holding company of which any Bank is a Subsidiary.
SECTION 5.20 GOVERNMENTAL REQUIREMENTS. Borrower is in compliance with
all Requirements of Law, the non-compliance of which would have a Material
Adverse Effect.
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SECTION 5.21 SOLVENCY. Borrower is not "insolvent" on the date hereof
(that is, the sum of Borrower's absolute and contingent liabilities, including
Borrower's obligations to the Bank, does not exceed the fair market value of
Borrower's assets). Borrower's capital is adequate for the businesses in which
Borrower is engaged and intends to be engaged. Borrower has not hereby
incurred, nor does Borrower intend to incur or believe that it will incur, debts
which will be beyond its ability to pay as such debts mature.
SECTION 5.22 ASSUMED NAMES. Since the date which is five (5) years prior
to the date hereof, the Borrower has not engaged in any business under any name,
assumed name or trade name other than HomeOwners Mortgage & Equity, Inc., a
Delaware corporation d/b/a Home, Inc. or Home Improvement Mortgage, Inc.
SECTION 5.23 COMPLIANCE WITH LAWS. Neither the Company nor any
Subsidiary of the Borrower is in violation of any Requirement of Law, or of any
judgment, award, rule, regulation, order, decree, writ or injunction of any
court or public regulatory body or authority which might have a material adverse
effect on the business, operations, assets or financial condition of the
Borrower as a whole.
SECTION 5.24 USE OF PROCEEDS; MARGIN STOCK. The proceeds of the Advances
shall be used by Borrower solely for the funding of Borrower's general working
capital purposes. In no event shall the funds from any Advance be used directly
or indirectly by any Person for personal, family, household or agricultural
purposes or for the purpose of purchasing or carrying any "margin stock" as
defined in Regulation U, or for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry margin stock or
for any other purpose which might constitute this transaction a "purpose credit"
within the meaning of such Regulation U or of Regulation G of the Board of
Governors of the Federal Reserve System (12 C.F.R. 207, as amended) or otherwise
take or permit to be taken any action which would involve a violation of such
Regulation G or Regulation U or Regulation T (12 C.F.R. 220, as amended) or
Regulation Z (12 C.F.R. 224, as amended) or any other regulation of such board.
Neither Borrower nor any Person acting on behalf of Borrower shall take any
action in violation of Regulation U or Regulation X or shall violate Section 7
of the Securities Exchange Act of 1933 or any rule or regulation thereunder, in
each case as now in effect or as the same may hereinafter be in effect or engage
in any transaction which is subject to the Securities Credit Transaction
Regulations.
SECTION 5.25 INVESTMENT COMPANY ACT. The Borrower is not an "investment
company," or a company controlled by an "investment company," within the meaning
of the Investment Company Act of 1940, as amended.
SECTION 5.26 TITLE TO PROPERTIES. The Borrower and each Subsidiary of the
Borrower has good, valid, insurable (in the case of real property) and
marketable title to all of its properties and assets (whether real or personal,
tangible or intangible) reflected on the financial statements described in
SECTION 5.5 hereof, and all such properties and assets are free and clear of all
Liens except as disclosed in such financial statements.
SECTION 5.27 ELIGIBILITY. The Borrower has all state and local permits,
licenses, approvals, registrations and qualifications which it is required to
have in order to make, purchase, sell or service the Mortgage Loans. The
Borrower, if approved, is qualified and in good standing as a lender or
seller/servicer, as set forth below, and meets all requirements applicable to
its status as such:
5.27(A) HUD approved lender, eligible to originate, purchase, hold,
sell and service FHA-insured Mortgage Loans (and to participate in HUD's Direct
Endorsement Mortgage Insurance Program).
5.27(B) FNMA approved seller/servicer of FNMA Title I Mortgage
Loans, eligible to originate, purchase, hold, sell, and service Mortgage Loans
to be sold to FNMA.
5.27(C) Borrower in good standing under the VA loan guarantee
program eligible to originate (on an "automatic" basis), purchase, hold, sell
and service VA guaranteed Mortgage Loans.
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SECTION 5.28 SPECIAL REPRESENTATIONS CONCERNING COLLATERAL. The Borrower
hereby represents and warrants to the Bank, as of the date of this Agreement and
as of the date of each Advance Request, that:
5.28(A) The Borrower owns the Collateral FREE AND CLEAR OF ANY LIEN,
security interest, charge or encumbrance except for the security interest
created by this Agreement and the qualifications stated in the second to last
paragraph of SECTION 3.1. No effective financing statement or other instrument
similar in effect covering all or any part of the Collateral is on file in any
recording office, except such as may have been filed in favor of Bank relating
to this Agreement. The Borrower has no trade name other than Home, Inc.
Borrower shall not execute and there shall not be on file in any public office
any such financing statement or statements and Borrower further agrees that it
will not grant, permit or suffer to exist any security interest, lien or
encumbrance upon any of the Collateral.
5.28(B) Subject to the qualifications stated in the second to last
paragraph of SECTION 3.1, Borrower covenants and warrants that Borrower is the
100% OWNER of said Collateral free and clear of claims or encumbrances by others
and that Borrower has good right, title and authority to pledge, sell, transfer
and assign the same.
5.28(C) Subject to the qualifications stated in the second to last
paragraph of SECTION 3.1, this Agreement, together with a duly filed financing
statement, creates a VALID AND PERFECTED FIRST PRIORITY SECURITY INTEREST in the
Collateral, securing the payment of the Obligations, and all filings and other
actions necessary or desirable to perfect and protect such security interest
have been duly taken or shall be taken at the time of the initial Advance
hereunder.
5.28(D) Subject to the qualifications stated in the second to last
paragraph of SECTION 3.1, NO AUTHORIZATION, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required (and has not been obtained, delivered or filed, as applicable) either
(i) for the grant by the Borrower of the security interest granted hereby or for
the execution, delivery or performance of this Agreement by the Borrower or (ii)
for the perfection of or the exercise by Secured Party of its rights and
remedies hereunder, other than the filing of a financing statement which has
been duly executed by the Borrower and delivered to Bank for filing.
5.28(E) The principal PLACE OF BUSINESS and chief executive office
of the Borrower for purposes of Section 9-103 of the Uniform Commercial Code is
located at the address set forth herein.
5.28(F) The Borrower, all prior servicers and, if different, the
originating mortgagee, have performed ALL OBLIGATIONS required of them to be
performed under or pursuant to each of the Servicing Contracts and related
requirements of the applicable Investor and Insurer and each other document or
agreement relating to the Mortgage Loans by which the Borrower is bound, and no
event has occurred and is continuing which, under the provisions of any such
Servicing Contracts and related requirements of the applicable Investor or other
document or agreement, but for the passage of time or the giving of notice, or
both, would constitute an event of default thereunder.
5.28(G) The books, RECORDS, accounts and reports of the Borrower
with respect to the Agency Servicing Agreements and Non-Agency Servicing
Agreements have been prepared and maintained in accordance with all applicable
Investor and Insurer requirements.
5.28(H) Except for the execution by FNMA of the FNMA Acknowledgment
(with respect to FNMA Servicing Rights) and execution by FHLMC of the FHLMC
Acknowledgment (with respect to the FHLMC Servicing Rights) and execution by
GNMA of the GNMA Acknowledgment (with respect to the GNMA Servicing Rights) no
action, consent or approval by any Governmental Authority or other Person is, or
will be, necessary for Borrower to grant a security interest in any item of
Collateral.
5.28(I) Upon the execution by FNMA of the FNMA Acknowledgment, the
security interest of the Bank in the FNMA Servicing Rights will be a perfected,
first-priority security interest.
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5.28(J) Upon the execution by FHLMC of the FHLMC Acknowledgment, the
security interest of Bank in the FHLMC Servicing Rights will be a perfected,
first-priority security interest.
5.28(K) Upon the execution by GNMA of the GNMA Acknowledgment, the
security interest of the Bank in the GNMA Servicing Rights will be a perfected,
first-priority security interest.
5.28(L) All Agency SERVICING AGREEMENTS, Non-Agency Servicing
Agreements and Subservicing Contracts are VALID AND BINDING agreements between
Borrower and/or the other parties thereto, are full and complete statements of
the terms and provisions of the transactions contemplated thereby, are
unmodified and in full force and effect and are, except as disclosed in writing
to Bank, assignable by their terms to Bank. Borrower's rights under each of the
Agency Servicing Agreements and Non-Agency Servicing Agreements are not subject
to any offset, counterclaim or defense as to enforceability. Notwithstanding
the foregoing, the representations contained in this subparagraph are subject to
the restrictions against assignment without consent, if any, contained in the
rules governing servicing of Mortgage Loans for the benefit of GNMA, FNMA and
FHLMC, as such restrictions may have been modified by such parties in accordance
with agreements executed by such parties in connection with the Loan Agreement.
5.28(M) All Excess Interest Certificates shall be at all time in
strict compliance with the definition of such certificates stated in ARTICLE I
hereof and the requirements stated therein. Upon possession (actual or
constructive) of the Excess Interest Certificates pledged to Bank hereunder Bank
will have a first lien sole and exclusive security interest in such Excess
Interest Certificates. The Excess Interest Certificates shall comply in all
respects with the applicable securities laws of the United States of America and
applicable states. Borrower shall deliver to Bank such memoranda of law and
opinions as Bank may require in connection with the application of securities
laws to the Excess Interest Certificates including but not limited to the
registration and marketability of such securities under Rule 144 or 144A of the
Securities Act of 1933.
5.28(M) Any SALES AGREEMENTS presented to Bank shall constitute
legally binding and enforceable obligations of Borrower and the other parties
thereto, are full and complete statements of the terms and provisions
contemplated thereby, are unmodified and in full force and effect and are
assignable by their terms to Bank.
ARTICLE VI
AFFIRMATIVE COVENANTS
The Borrower agrees that so long as the Commitment is outstanding or there
remain any obligations of the Borrower to be paid or performed under this
Agreement or under the Note, the Borrower shall:
SECTION 6.1 PAYMENT OF NOTE. Pay or cause to be paid the principal and
interest on and all other amounts due and payable hereunder and under the Note
in accordance with the terms hereof and thereof on the respective date that such
sums are due and payable.
SECTION 6.2 FINANCIAL STATEMENTS AND OTHER REPORTS. Deliver to the Bank
the following, all in form and detail reasonably satisfactory to Bank, prepared
in accordance with GAAP and a Certificate Accompanying Financial Statements in
the form of EXHIBIT "I" attached hereto:
6.2(a) As soon as available and in any event within ONE HUNDRED
TWENTY (120) DAYS after the close of each FISCAL YEAR OF BORROWER, copies
of the consolidated and consolidating balance sheet of Borrower as of the
close of such fiscal year and consolidated statements of income and
retained earnings, cash flow statements and changes in stockholders' equity
for such fiscal year, each setting forth in comparative form the
corresponding figures for the preceding fiscal year, all in reasonable
detail together with all notes thereto and accompanied by an opinion
thereon (which shall not be qualified by reason of any limitation imposed
by Borrower) by COOPERS & ▇▇▇▇▇▇▇ LLP or by independent certified public
accountants selected by Borrower
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and satisfactory to Bank, to the effect that such financial statements have
been prepared in accordance with GAAP and such other professional practices
as may then conform to the usual and customary professional standards,
practices and disclosures then in existence in connection with the
preparation and publication of financial statements by independent
certified public accountants and that the examination of such accounts in
connection with such financial statements has been made in accordance with
GAAP and, accordingly, includes such tests of the accounting records and
such other auditing procedures as were considered necessary in the
circumstances.
6.2 (B) As soon as available and in any event within ONE HUNDRED
TWENTY (120) DAYS after the close of each FISCAL YEAR of GUARANTOR, copies
of the consolidated and consolidating balance sheet of Guarantor as of the
close of such fiscal year and consolidated statements of income and
retained earnings, cash flow statements and changes in stockholders' equity
for such fiscal year, each setting forth in comparative form the
corresponding figures for the preceding fiscal year, all in reasonable
detail together with all notes thereto and accompanied by an opinion
thereon (which shall not be qualified by reason of any limitation imposed
by Guarantor) by COOPERS & ▇▇▇▇▇▇▇ LLP or by independent certified public
accountants selected by Guarantor and satisfactory to Bank, to the effect
that such financial statements have been prepared in accordance with GAAP
and such other professional practices as may then conform to the usual and
customary professional standards, practices and disclosures then in
existence in connection with the preparation and publication of financial
statements by independent certified public accountants and that the
examination of such accounts in connection with such financial statements
has been made in accordance with GAAP and, accordingly, includes such tests
of the accounting records and such other auditing procedures as were
considered necessary in the circumstances;
6.2(C) As soon as available and in any event within FORTY-FIVE (45)
DAYS after the end of each calendar quarter, a report in form and detail
acceptable to Bank, prepared as of the end of such month, setting forth the
prepayments of Mortgage Loans underlying all Agency Servicing Rights, Non-
Agency Servicing Rights and Excess Interest Certificates;
6.2(D) As soon as available, and in any event within THIRTY (30) DAYS
after the end of each MONTH of each fiscal year of Borrower, copies of the
consolidated and consolidating balance sheet of BORROWER as of the end of
such month and consolidated and consolidating statements of income and
retained earnings and cash flow statement and of changes in stockholders'
equity for such month, each setting forth in comparative form the
corresponding figures for the preceding fiscal year of Borrower for such
month and for the portion of the fiscal year ending with such month, all in
reasonable detail, and certified by the chief financial officer of Borrower
as being true and correct and as having been prepared in accordance with
GAAP;
6.2(E) Promptly upon receipt thereof, a copy of each other report
submitted to Borrower by independent accountants in connection with any
ANNUAL, INTERIM OR SPECIAL AUDIT of the books of Borrower;
6.2(F) As soon as available, and in any event within THIRTY (30) DAYS
after the end of each MONTH of each fiscal year of Borrower, copies of the
consolidated and consolidating balance sheet of BORROWER as of the end of
such month and consolidated and consolidating statements of income and
retained earnings and cash flow statement and of changes in stockholders'
equity for such month, each setting forth in comparative form the
corresponding figures for the preceding fiscal year of Borrower for such
month and for the portion of the fiscal year ending with such month, all in
reasonable detail, and certified by the chief financial officer of Borrower
as being true and correct and as having been prepared in accordance with
GAAP;
6.2(G) As soon as available and in any event within THIRTY (30) DAYS
after delivery of such reports to any Agency, HUD, FHA or VA, Borrower
shall provide to Bank ALL AUDITS, evidence, auditors certifications and
other financial information supplied to such governmental or quasi-
governmental agencies, including but
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not limited to, any audits or self-compliance reviews prepared in
connection with Borrower's continuing agency certifications;
6.2(H) Promptly and in any event within TWENTY (20) DAYS after the
request of Bank at any time and from time to time, a CERTIFICATE, executed
by the president or chief financial officer of Borrower, setting forth all
of BORROWER'S BORROWINGS other than under this Loan;
6.2(I) As soon as available and in any event within THIRTY (30) DAYS
OF FILING and no later than TWO HUNDRED TWENTY-FIVE (225) DAYS from the end
of each fiscal year of Borrower, copies of all FEDERAL INCOME TAX RETURNS
filed by Borrower;
6.2(J) Within THIRTY (30) DAYS after the end of each MONTH, a
COMPLIANCE CERTIFICATE executed by the President or Chief Executive Officer
of Borrower;
6.2(K) As soon as available and in any event within FIFTEEN (15)
DAYS of their respective Securities and Exchange Commission filing due
dates, FORM 10-KSB AND FORM 10-QSB reports for HOMECAPITAL INVESTMENT
CORPORATION, the parent corporation of Borrower;
6.2(L) Promptly and in any event within FIVE (5) DAYS of such event,
notification of the DEPARTURE of any of the following officers: President
or Executive Vice President;
6.2(M) From time to time, with reasonable promptness, such further
information regarding the business, operations, properties or financial
condition of the Borrower as the Bank may reasonably request.
All financial statements and reports furnished to the Bank hereunder
shall be prepared in accordance with GAAP, applied on a basis consistent with
that applied in preparing the financial statements as at, and for the period
ended, the Statement Date (except to the extent otherwise required to conform to
good accounting practice).
SECTION 6.3 MAINTENANCE OF EXISTENCE; CONDUCT OF BUSINESS. Preserve and
maintain its corporate existence in good standing and all of its rights,
privileges, licenses, qualifications and franchises necessary or desirable in
the normal conduct of its business, including, without limitation, its
eligibility as an approved lender and issuer as described under SECTION 5.27
hereof; conduct its business in an orderly and efficient manner; maintain a net
worth of acceptable assets as required by its Investors at any and all times for
maintaining the Borrower's status as a FHA approved lender; and make no change
in the nature or character of its business or engage in any business in which it
was not engaged on the date of this Agreement.
SECTION 6.4 COMPLIANCE WITH REQUIREMENTS OF LAW. Comply with the
Requirements of Law, rules, regulations and orders of any governmental authority
and prudent industry standards.
SECTION 6.5 INSPECTION OF PROPERTIES AND BOOKS. Permit authorized
representatives of the Bank, its parent company or affiliates to discuss the
business, operations, assets and financial condition of the Borrower and its
Subsidiaries with their officers and employees and to examine their books of
account and make copies or extracts thereof, all at such reasonable times as the
Bank may request. The Borrower will provide its accountants with a copy of this
Agreement promptly after the execution hereof and will instruct its accountants
to answer candidly and fully any and all questions that the officers of the Bank
or any authorized representatives of the Bank may address to them in reference
to the financial condition or affairs of the Borrower and its Subsidiaries. The
Borrower may have its representatives in attendance at any meetings between the
officers or other representatives of the Bank and the Borrower accountants held
in accordance with this authorization.
SECTION 6.6 NOTICE. GIVE PROMPT WRITTEN NOTICE TO THE BANK of (A) on the
FIRST DAY OF EACH MONTH, a LITIGATION REPORT detailing any action, suit or
proceeding instituted by or against the Borrower or any of its
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Subsidiaries in any federal or state court or before any commission or other
regulatory body (federal, state or local, domestic or foreign), or any such
proceedings threatened against the Borrower or any of its Subsidiaries in a
writing containing the details thereof, (B) the filing, recording or assessment
of any federal, state or local tax lien against it, or any of its assets or any
of its Subsidiaries, (C) the occurrence of (I) any Event of Default hereunder or
(II) the occurrence of any Default and continuation thereof for five (5) days,
(d) the actual or threatened suspension, revocation or termination of the
Borrower's eligibility, in any respect, as an approved lender, and issuer as
described under SECTION 5.27 hereof, (E) the suspension, revocation or
termination of any existing credit or investor relationship made to the Borrower
to facilitate the sale and/or origination of residential mortgages, (F) the
transfer or loss of any Servicing Contract to which the Borrower is a party, or
which is held for the benefit of the Borrower, and the reason for such transfer
or loss, if known to the Borrower, (G) any demand by any Investor or Insurer for
either the repurchase of a mortgage loan or indemnification and (H) any other
action, event or condition of any nature which may lead to or result in a
material adverse effect upon the business, operations, assets, or financial
condition of the Borrower and its Subsidiaries or which, with or without notice
or lapse of time or both, would constitute a default under any other agreement,
instrument or indenture to which the Borrower is a party or to which the
Borrower, its properties or assets may be subject.
SECTION 6.7 PAYMENT OF DEBT, TAXES, ETC. Pay and perform all obligations
of the Borrower, and cause to be paid and performed all obligations of its
Subsidiaries, promptly and in accordance with the terms thereof and pay and
discharge or cause to be paid and discharged promptly all taxes, assessments and
governmental charges or levies imposed upon the Borrower or its Subsidiaries or
upon their respective income, receipts or properties before the same shall
become past due, as well as all lawful claims for labor, materials and supplies
or otherwise which, if unpaid, might become a Lien or charge upon such
properties or any part thereof, provided, however, that the Borrower and its
Subsidiaries shall not be required to pay taxes, assessments or governmental
charges or levies or claims for labor, materials or supplies for which the
Borrower or its Subsidiaries shall have obtained an adequate bond or adequate
insurance or which are being contested in good faith and by proper proceedings
which are being reasonably and diligently pursued.
SECTION 6.8 REIMBURSEMENT OF EXPENSES. Borrower shall pay (i) all
reasonable legal fees incurred by the Bank in connection with the preparation,
negotiation or execution of this Agreement, the Note and the Loan Documents and
any amendments, modifications, renewals, extensions, consents or waivers
executed in connection therewith, (ii) all fees, charges or taxes for the
recording or filing of the Loan Documents, (iii) all out-of-pocket expenses of
the Bank incurred in connection with the administration of this Agreement, the
Note and the Loan Documents, including courier expenses incurred in connection
with the Collateral, and (iv) all reasonable amounts expended, advanced or
incurred by the Bank to satisfy any obligation of Borrower under this Agreement
or any Loan Document or to collect the Note, or to enforce the rights of the
Bank under this Agreement or any Loan Document, which amounts shall include all
court costs, attorneys' fees and expenses (including, without limitation, legal
fees and expenses for trial, appeal or other proceedings), fees of auditors and
accountants, and investigation expenses reasonably incurred by the Bank in
connection with any such matters, together with interest at the post-maturity
rate specified in the Note on each such amount from ten (10) days after the date
of written demand or request for reimbursement until the date of reimbursement.
SECTION 6.9 INSURANCE. Will maintain (a) errors and omissions insurance
or mortgage impairment insurance and blanket bond coverage, with such companies
and in such amounts as satisfy the requirements under the applicable Servicing
Agreements applicable to a qualified mortgage originating institution, and (b)
liability insurance and fire and other hazard insurance on its properties, with
responsible insurance companies approved by the Bank, in such amounts and
against such risks as is customarily carried by similar businesses operating in
the same vicinity; and (c) within thirty (30) days after notice from the Bank,
will obtain such additional insurance as the Bank shall reasonably require, all
at the sole expense of the Borrower. Copies of all such policies shall be
furnished to the Bank without charge upon request of the Bank.
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SECTION 6.10 INSURED CLOSINGS. Except with respect to FNMA Title I
Loans, the Borrower will obtain and maintain in effect at all times an insured
closing letter (if obtainable) from each title insurance company from which
mortgagee title insurance is procured, indemnifying and holding the Borrower
harmless from and against the failure of the agents and approved title attorneys
of such title insurance companies to comply with the written closing
instructions of the Borrower as to the Mortgage Loans relating to the Servicing
Contracts serving as Collateral hereunder serviced under the Servicing Contracts
and will provide the Bank with evidence of the same from time to time upon
request. The Borrower agrees to indemnify and hold the Bank harmless from and
against any loss, including reasonable attorneys' fees and costs, attributable
to the failure of such title insurance company, agent or approved attorney to
comply with the disbursement or instruction letter or letters of the Borrower or
of the Bank relating to such Mortgage Loan.
SECTION 6.11 OTHER LOAN OBLIGATIONS. Will perform all obligations under
the terms of each loan agreement, note, mortgage, security agreement or debt
instrument by which the Borrower is bound or to which any of its property is
subject, and will promptly notify the Bank in writing of the cancellation or
reduction of any of its other mortgage warehousing lines of credit or agreements
with any other lender.
SECTION 6.12 USE OF PROCEEDS OF ADVANCES. WILL USE THE PROCEEDS OF EACH
ADVANCE SOLELY FOR THE PURPOSE OF FINANCING THE ORIGINATION AND RETENTION OF
TITLE I EXCESS SERVICING RIGHTS RELATED TO FNMA SECURITIES AND THE RETENTION OF
EXCESS INTEREST CERTIFICATES GENERATED BY BORROWER PURSUANT TO THE ISSUANCE OF
BONDS AND EXCESS INTEREST CERTIFICATES BY ITS AFFILIATE HOME SECURITIZATION
TRUST I AND IN ALL CASES SHALL BE SECURED BY A PLEDGE OF ELIGIBLE COLLATERAL.
SECTION 6.13 ERISA AND PLANS. Borrower shall promptly furnish to the
Bank:
6.13(A) Within ten (10) Business Days after the occurrence of a
Reportable Event with respect to any Plan, a copy of any materials required
to be filed with the PBGC with respect to such Reportable Event;
6.13(B) A copy of any notice of intent to terminate a Plan, no later
than the date such notice is required to be provided to participants of
such Plan under Section 4041(a)(2) of ERISA, and copies of any notices of
noncompliance received from the PBGC under Section 4041(b)(2)(C) of
ERISA, within ten (10) Business Days after the receipt by Borrower or its
Subsidiary of such notice;
6.13(C) Not later than ten (10) Business Days after the receipt
thereof by Borrower, any Subsidiary of Borrower, any ERISA Affiliate of
Borrower or such Subsidiary, or the administrator of any Plan, a copy of
any notice to Borrower or such Subsidiary that the PBGC has instituted
proceedings to terminate such Plan or to appoint a trustee to administer
such Plan;
6.13(D) A statement from the chief financial officer of Borrower
describing any event or condition which might constitute grounds under
Section 4042 of ERISA for the termination of any Plan or for the
appointment of a trustee to administer any Plan, within ten (10) Business
Days after Borrower knows or has reason to know such event or condition
exists; and
6.13(E) Within ten (10) Business Days after receipt thereof by
Borrower or any ERISA Affiliate of Borrower, a copy of any notice
concerning the imposition of any withdrawal liability under Section 4202 of
ERISA.
SECTION 6.14 SPECIAL AFFIRMATIVE COVENANTS CONCERNING COLLATERAL.
6.14(A) The Borrower WARRANTS and will defend the right, title and
interest of the Bank in and to the Collateral against the claims and demands of
all persons whomsoever.
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6.14(B) The Borrower shall SERVICE or cause to be serviced all
Mortgage Loans in accordance with the standard requirements of all applicable
governmental requirements, including without limitation taking all actions
necessary to enforce the obligations of the obligors under such Mortgage Loans.
The Borrower shall hold all escrow funds collected in respect of Mortgage Loans
in trust, without commingling the same with non-custodial funds, and apply the
same for the purposes for which such funds were collected.
6.14(C) The Borrower shall execute and deliver to the Bank such
Uniform Commercial Code FINANCING STATEMENTS with respect to the Collateral as
the Bank may request. The Borrower shall also execute and deliver to the Bank
such further instruments of sale, pledge or assignment or transfer, and such
powers of attorney, as required by the Bank, and shall do and perform all
matters and things necessary or desirable to be done or observed, for the
purpose of effectively creating, maintaining and preserving the security and
benefits intended to be afforded the Bank under this Agreement. The Bank shall
have all the rights and remedies of a secured party under the Uniform Commercial
Code of the State of Texas, or any other applicable law, in addition to all
rights provided for herein.
6.14(D) In the event, for any reason, that the law of any
jurisdiction other than the State of Texas becomes or is applicable to the
Collateral, or any part thereof, or to any of the Obligations, Borrower agrees
to execute and deliver all such instruments and to do all such other things as
may be necessary or appropriate to preserve, protect and enforce the SECURITY
INTEREST or lien of Bank, under the law of such other jurisdiction, to at least
the same extent as such security interest would be protected under the UCC.
6.14(E) The Borrower shall MAINTAIN, at its principal OFFICE or in a
regional office approved by the Bank, or in the office of the Subservicer or a
computer service bureau engaged by the Borrower and approved by the Bank, and,
upon request, shall make available to the Bank the originals, or copies, all
files, surveys, certificates, correspondence, appraisals, computer programs,
tapes, discs, cards, accounting records and other information and data relating
to the Collateral.
6.14(F) Subject to the qualifications stated in the second to the
last paragraph of SECTION 3.1, unless otherwise approved in writing by the Bank,
Borrower shall keep the Collateral FREE FROM ANY LIEN, attachment, security
interest, sequestration, encumbrance, or any other legal or equitable process,
or any encumbrance of any kind or character except as may be granted to the
Bank.
6.14(G) Borrower shall promptly NOTIFY Bank of any change in any
fact or circumstance warranted or represented by Borrower in this Agreement or
in any other writing furnished by Borrower to Bank in connection with the
Collateral or the Obligations, and promptly notify Bank of any claim, action or
proceeding affecting title to the Collateral, or any part thereof, or the
security interests herein granted, and, at the request of Bank appear in and
defend, at Borrower's expense, any such action or proceeding.
6.14(H) Subject to the final paragraph of SECTION 3.1, unless and
until notified to the contrary by the Bank, Borrower shall promptly, at its
expense deliver to the Bank, with appropriate endorsement or assignment, ALL
INSTRUMENTS, ALL EXCESS INTEREST CERTIFICATES, Chattel Paper, monies, checks,
notes, drafts and other evidence of indebtedness, or other property in the
nature of items of payment representing proceeds of any of the Collateral which
are then in, or may thereafter come into, Borrower's possession.
6.14(I) Borrower shall perform, at its sole cost and expense, any
and all steps, and shall pay the amount of all reasonable EXPENSES necessary to
obtain, preserve, perfect, defend and enforce the security interest in any of
the Collateral, and preserve, defend, enforce and collect the Collateral.
6.14(J) Subject to the final paragraph of SECTION 3.1, should the
COLLATERAL, or any part thereof, ever be in any manner converted into another
type of property or any money or other proceeds ever be paid or delivered to
Borrower as a result of Borrower's rights in the Collateral, then, in any such
event, all such property, money or other
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proceeds shall become part of the Collateral, and Borrower covenants to
immediately pay and deliver to Bank all of the same which are susceptible of
delivery, and, at the same time Borrower will properly endorse or assign the
same.
6.14(K) Borrower shall DELIVER to Bank the following: (I) a true and
correct copy of each Agency SERVICING AGREEMENT (exclusive of any Agency
servicing guide) and Non-Agency Servicing Agreement; (II) a consent to and/or
acknowledgment of the security interest of Bank in each such Agency Servicing
Agreement and Non-Agency Servicing Agreement and the rights of Bank under this
Agreement, executed by each Agency; (III) a LISTING of all MORTGAGE LOANS
subject to the Agency Servicing Agreements and the location of Borrower's files
and records with respect thereto; and (IV) such other FILES, documents,
instruments, certificates, correspondence or records that Bank, in its
reasonable discretion, may deem necessary, appropriate or desirable in
accordance with this Agreement.
6.14(L) On the date hereof, on the date of EACH ADVANCE and the
FIRST DAY of each calendar QUARTER (JANUARY 1, APRIL 1, JULY 1, OCTOBER 1)
Borrower shall deliver to Bank, at Borrower's sole expense, an Appraisal, from a
third party appraiser acceptable to Bank in its sole discretion stating the
current fair market value of the Collateral Value of all Eligible Collateral.
Additionally, Bank may at any time require, upon demand, that Borrower furnish
Bank with a Compliance Certificate. A COMPLIANCE CERTIFICATE shall accompany
all Appraisals.
6.14(M) Borrower shall provide to Bank all reports prepared by or on
behalf of, and information received by, Borrower with respect to the Excess
Interest Certificates, including, without limitation, (I) all reports provided
by or to Borrower pursuant to Section 8.07 of that certain Indenture dated of
even date herewith between Home Securitization Trust I Series 1997-1, U.S. Bank,
National Association, and Borrower, and (II) any financial statements received
by or prepared on behalf of Borrower with respect to the Excess Interest
Certificates. Borrower shall not take any actions that would prohibit the
Excess Interest Certificates from being eligible for sale under Rule 144A as
promulgated under the Securities Act of 1933, as amended.
ARTICLE VII
NEGATIVE COVENANTS
The Borrower agrees that so long as the Commitment is outstanding or there
remain any obligation of the Borrower to be paid or performed hereunder or under
the Note, the Borrower shall not, either directly or indirectly, without the
prior written consent of the Bank:
SECTION 7.1 LIMITATION ON INDEBTEDNESS. Borrower shall not, without the
prior written consent of the Bank, incur, create, contract, assume, have
outstanding, guarantee or otherwise be or become, directly or indirectly, liable
in respect of any Indebtedness, EXCEPT (I) the Obligations, (II) current
liabilities for taxes and assessments, (III) EXISTING INDEBTEDNESS AND PROPOSED
INDEBTEDNESS listed on EXHIBIT "K" attached hereto and incorporated herein by
this reference, (IV) current amounts payable or accrued (other than for borrowed
funds or purchase money obligations) which have been incurred in the ordinary
course of business and (V) Indebtedness incurred in the ordinary course of
business not to exceed on an annual basis $200,000.00 at any time other than any
Indebtedness incurred pursuant to CLAUSES (I), (II), (III) AND (IV); provided
that all such liabilities, accounts and claims permitted under CLAUSES (II)
THROUGH (V) shall be promptly paid and discharged when due or in conformity with
customary trade terms, unless the same shall be contested in good faith by
Borrower.
SECTION 7.2 NO MERGER. Borrower shall not merge or consolidate with or
into any corporation, or acquire by purchase or otherwise all or substantially
all of the assets or capital stock of any Person unless approved fifteen (15)
days in advance by the Bank in writing.
SECTION 7.3 FISCAL YEAR, METHOD OF ACCOUNTING. Borrower shall not change
its fiscal year or method of accounting.
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SECTION 7.4 LINES OF BUSINESS. Borrower shall not directly or indirectly
engage in any business other than that currently engaged in by Borrower and any
business incidental thereto.
SECTION 7.5 LIQUIDATIONS, CONSOLIDATIONS AND DISPOSITIONS OF SUBSTANTIAL
ASSETS. Borrower shall not dissolve or liquidate or sell, transfer, pledge,
lease or otherwise dispose of any portion of its property or assets or business
(other than Mortgage Loans sold in compliance with the provisions of the Loan
Documents in the ordinary course of business); provided, however, that nothing
herein shall be construed to prohibit Borrower from selling Mortgage Notes to
Investors in the ordinary course of its business subject to the terms of this
Agreement.
SECTION 7.6 LOANS, ADVANCES, AND INVESTMENTS. Borrower shall not make any
loan (other than loans made in the ordinary course of its business as a mortgage
company), advance, or capital contribution to, or investment in, or purchase or
otherwise acquire any of the capital stock, securities, or evidences of
indebtedness of, any Person (collectively, "INVESTMENT"), or otherwise acquire
any interest in, or control of, another Person, except for the following:
(A) Cash Equivalents;
(B) Any acquisition of securities or evidences of indebtedness of
others when acquired by Borrower in settlement of accounts receivable or
other debts arising in the ordinary course of business, so long as the
aggregate amount of any such securities or evidences of indebtedness is not
material to the business or condition (financial or otherwise) of Borrower;
(C) Mortgage Backed Securities acquired in the ordinary course of
Borrower's business; and
(D) Owned real estate and Mortgage Loans, required to be repurchased
by Investors, not to exceed at any time that amount equal to FIVE PERCENT
(5%) OF BORROWER'S GAAP NET WORTH.
SECTION 7.7 OPERATIONAL CHANGES. Borrower shall not (A) change the
location of any Collateral for the Loan, (B) change its taxpayer identification
number, (C) change its address for its chief executive office or its mailing
address or change its name, identity or corporate structure in any manner which
might make any financing or continuation statement filed in connection with this
Security Agreement seriously misleading within the meaning of Section 9.402 of
the UCC (or any other then applicable provision of the UCC) unless Borrower
shall have given the Bank at least sixty (60) days' prior written notice thereof
and shall have taken all action (or made arrangements to take such action
substantially simultaneously with such change if it is impossible to take such
action in advance) necessary or reasonably requested by the Bank to amend such
financing statement or continuation statement so that it is not seriously
misleading, or (D) change its principal place of business or remove the records
concerning the Collateral unless it has given the Bank at least thirty (30)
days' prior written notice of its intent to do so and has taken such action as
is necessary or advisable in the opinion of the Bank to cause the security
interest of the Bank in the Collateral to continue to be a first priority
perfected security interest.
SECTION 7.8 COMPLIANCE WITH ERISA. Borrower shall not, and shall not
permit any ERISA Affiliate to:
(A) (i) engage in any transaction in connection with which Borrower or
any ERISA Affiliate could be subject to either a civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the
Code, (ii) fail to make full payment when due of all amounts which, under
the provisions of any Plan, applicable law or applicable collective
bargaining agreement, Borrower or any ERISA Affiliate is required to pay as
contributions thereto, or (iii) permit to exist any accumulated funding
deficiency, whether or not waived, with respect to any Plan if, in the case
of any of subdivision (i), (ii) or (iii) above, such penalty or tax, or the
failure to make such payment, or the existence of such deficiency, as the
case may be, will likely have a Material Adverse Effect on the financial
position of Borrower;
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(B) permit the amount of unfunded benefit liabilities (within the
meaning of Section 4001 (a) (18) of ERISA) under each Plan maintained at
such time by Borrower or any of its Related Persons (other than
Multiemployer Plans or "multiple employer Plans") to exceed $50,000; or
(C) permit the aggregate complete or partial withdrawal liability
under Title IV of ERISA with respect to all Plans which are 'multiple
employer Plans" and all Multiemployer Plans incurred by Borrower or any
Related Person to exceed $50,000.
SECTION 7.9. MINIMUM GAAP NET WORTH. Borrower's GAAP Net Worth shall not
be less than THE SUM OF (A) GAAP NET WORTH as reflected in the most recent
financial statements delivered to Bank pursuant to SECTION 6.2(A), PLUS (B)
EIGHTY PERCENT ( 80%) OF EACH SUBSEQUENT FISCAL QUARTERS POSITIVE NET INCOME on
a CUMULATIVE basis since the report referenced in (A), PLUS (C) ONE HUNDRED
PERCENT (100%) of all CONTRIBUTIONS to stockholders' equity of Borrower since
the end of the preceding fiscal year after subtracting all fees and costs
directly incurred in conjunction with such contribution.
SECTION 7.10 MINIMUM TANGIBLE NET WORTH. Borrower's Tangible Net Worth
will never be less than the minimum required by the respective purchasers of the
Mortgages, including HUD, FNMA, GNMA and FHLMC requirements in existence at any
time.
SECTION 7.11. MINIMUM ADJUSTED TANGIBLE NET WORTH. Borrower's Adjusted
Tangible Net Worth shall not be less than THE GREATER OF (A) the Adjusted
Tangible Net Worth REQUIRED OF BORROWER for the PRECEDING CALENDAR QUARTER AND
(B) BORROWER'S ACTUAL ADJUSTED TANGIBLE NET WORTH on the current Determination
Date MULTIPLIED BY EIGHTY PERCENT (80%).
SECTION 7.12 MAXIMUM TOTAL LIABILITIES TO ADJUSTED TANGIBLE NET WORTH
RATIO. The ratio of Borrower's Total Liabilities to Borrower's Adjusted
Tangible Net Worth shall not at any time be more than 5.0 TO 1.0. FOR PURPOSES
OF THIS PARAGRAPH ONLY, (I) REPURCHASE AGREEMENTS SHALL NOT BE CONSIDERED
INDEBTEDNESS UNLESS OUTSTANDING ON THE LAST DAY OF THE CALENDAR QUARTER IN WHICH
SUCH RATIO IS DETERMINED BUT (II) ANY FINANCING AGREEMENTS PROVIDED BY FNMA
AND/OR ANY RESIDUAL FINANCING AGREEMENTS SHALL BE CONSIDERED INDEBTEDNESS.
SECTION 7.13 MINIMUM LIQUIDITY. Borrower shall at all times maintain a
Liquidity of no less than $500,000.00.
SECTION 7.14 MANAGEMENT. The PRESIDENT of Borrower shall not be changed
without the prior written consent of the Bank.
SECTION 7.15 INTERESTED TRANSACTIONS. Except with respect to any
transaction not exceeding $50,000.00 in value, Borrower shall not engage in any
transaction with any of its Affiliates (A) except on an arm's-length basis and
on terms no less favorable to Borrower than those obtainable from persons who
have no such relationship to Borrower and (B) provided that Borrower shall have
given the Bank prior written notice of such transaction with any director,
officer or managerial personnel.
SECTION 7.16 TRANSFER OF STOCK. Individually and on a cumulative no more
than 35% of the stock in Borrower shall be sold, transferred or conveyed to or
by any party without the prior written consent of the Bank.
SECTION 7.17 SUBSIDIARIES. Borrower shall not create any Subsidiaries
without the prior written consent of the Bank, except with respect to the
creation of special purpose entities in connection with the securitization or
financing of the Borrower's assets.
SECTION 7.18 LOSS OF ELIGIBILITY. Take, or fail to take, any action that
would cause the Borrower to lose all or any part of its status as an eligible
lender, as described under SECTION 5.27 hereof.
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SECTION 7.19 SPECIAL NEGATIVE COVENANTS CONCERNING COLLATERAL.
7.19(A) Except as otherwise provided in the Servicing Agreement in
connection with the performance of the Borrower's servicing obligations
thereunder, the Borrower shall not AMEND or modify, or waive any of the terms
and conditions of, or settle or compromise any claim in respect of, any
Collateral pledged hereunder.
7.19(B) The Borrower shall not SELL, contract to sell, assign,
transfer or otherwise dispose of, or grant any option with respect to, or pledge
or otherwise encumber any of the Collateral or any interest therein.
7.19(C) The Borrower shall not make any compromise, adjustment or
SETTLEMENT in respect of any of the Collateral or liquidate the Collateral.
7.19(d) The Borrower shall not sell, contract to sell, pledge or
grant a security interest in any existing or future Servicing Contracts of the
Borrower pursuant to the terms of this Agreement, or omit to take any action
required to keep all such Servicing Contracts in full force and effect.
ARTICLE VIII
DEFAULTS; REMEDIES
SECTION 8.1 EVENTS OF DEFAULT. The occurrence of any of the following
conditions or events shall be an event of default ("EVENT OF DEFAULT"):
8.1(A) Failure to pay the PRINCIPAL of any Advance when due,
whether at stated maturity, by acceleration, or otherwise; or failure to pay any
installment of interest on any Advance or any other amount due under this
Agreement or under the Warehousing Credit Facility when due; or
8.1(B) Failure of the Borrower or any of its Subsidiaries or
Guarantor to pay, or any default in the payment of any principal or interest on,
ANY OTHER INDEBTEDNESS or in the payment of any contingent obligation beyond any
period of grace provided; or breach or default with respect to any other
material term of any other indebtedness or of any loan agreement, note,
mortgage, security agreement, indenture or other agreement relating thereto, if
the effect of such failure, default or breach is to cause, or to permit the
holder or holders thereof (or a trustee on behalf of such holder or holders) to
cause, indebtedness of the Borrower or its Subsidiaries to become or be declared
due prior to its stated maturity (upon the giving or receiving of notice, lapse
of time, both, or otherwise); or
8.1(C) Failure of the Borrower or Guarantor to PERFORM OR COMPLY
with any term or condition applicable to it contained in SECTIONS 6.1 THROUGH
6.14, inclusive, or 7.1 THROUGH 7.19, inclusive, of this Agreement, or any of
its obligations under the Warehousing Credit Facility; or
8.1(D) Any of the Borrower's or Guarantor's REPRESENTATIONS OR
WARRANTIES made herein or in any statement or certificate at any time given by
the Borrower or Guarantor in writing pursuant hereto or in connection herewith
shall be false in any material respect on the date as of which made; or
8.1(E) The Borrower or Guarantor shall default in the performance
of or compliance with any term contained in this Agreement [other than those
referred to in SUBSECTIONS 8.1(A), (B), (C), (D), (F), (G), (H), (I), (J), (K)
OR (L)] and such default shall not have been remedied or waived within FIFTEEN
(15) DAYS after receipt of notice from the Bank of such default; or
8.1(F) (1) A court having jurisdiction shall enter a decree or order
for relief in respect of the Borrower or any of its Subsidiaries or of Guarantor
in an involuntary case under any applicable BANKRUPTCY,
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insolvency or other similar law now or hereafter in effect, which decree or
order is not stayed; or (2) any other similar relief shall be granted under any
applicable federal or state law; or a decree or order of a court having
jurisdiction for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over the Borrower or
any of its Subsidiaries or of Guarantor, or over all or a substantial part of
their respective property, shall have been entered; or the involuntary
appointment of an interim receiver, trustee or other custodian of the Borrower
or any of its Subsidiaries or of Guarantor for all or a substantial part of
their respective property; or the issuance of a warrant of attachment, execution
or similar process against any substantial part of the property of the Borrower
or any of its Subsidiaries or of Guarantor, and the continuance of any such
events in this clause (2) for thirty (30) days unless dismissed, bonded off or
discharged; or
8.1(G) The Borrower or any of its Subsidiaries or Guarantor shall
have an order for relief entered with respect to it or commence a voluntary case
under any applicable BANKRUPTCY, insolvency or other similar law now or
hereafter in effect, or shall consent to the entry of an order for relief in an
involuntary case, or to the conversion to an involuntary case, under any such
law, or shall consent to the appointment of or taking possession by a receiver,
trustee or other custodian for all or a substantial part of its property; the
making by the Borrower or any of its Subsidiaries or any Guarantor of any
assignment for the benefit of creditors; or the inability or failure of the
Borrower or any of its Subsidiaries or of any Guarantor, or the admission by the
Borrower or any of its Subsidiaries or any Guarantor in writing of its inability
to pay its debts as such debts become due; or
8.1(H) Any money JUDGMENT, writ or warrant of attachment, or
similar process involving in any case an amount IN EXCESS OF $25,000 shall be
entered or filed against the Borrower or any of its Subsidiaries or Guarantor or
any of their respective assets and shall remain undischarged, unvacated,
unbonded or unstayed for a period of FIVE (5) DAYS or in any event later than
five (5) days prior to the date of any proposed sale thereunder; or
8.1(I) Any ORDER, judgment or decree shall be entered against the
Borrower or Guarantor decreeing the dissolution, LIQUIDATION or split up of the
Borrower or Guarantor and such order shall remain undischarged or unstayed; or
8.1(J) Any PLAN maintained by the Borrower or any of its
Subsidiaries or Guarantor shall be terminated within the meaning of TITLE IV OF
ERISA or a trustee shall be appointed by an appropriate United States district
court to administer any Plan, or the Pension Benefit Guaranty Corporation (or
any successor thereto) shall institute proceedings to terminate any Plan or to
appoint a trustee to administer any Plan if as of the date thereof the
Borrower's liability or any such Subsidiary's liability or Guarantor's
liabilities (after giving effect to the tax consequences thereof) to the Pension
Benefit Guaranty Corporation (or any successor thereto) for unfunded guaranteed
vested benefits under the Plan exceeds the then current value of assets
accumulated in such Plan by more than $25,000 (or in the case of a termination
involving the Borrower or any of its Subsidiaries or Guarantor's liabilities as
a "substantial employer" (as defined in Section 4001(a)(2) of ERISA) the
withdrawing employer's proportionate share of such excess shall exceed such
amount); or
8.1(K) The Borrower or any of its Subsidiaries or Guarantor as
employer under a Multiemployer Plan shall have made a complete or partial
WITHDRAWAL from such Multiemployer Plan and the plan sponsor of such
Multiemployer Plan shall have notified such withdrawing employer that such
employer has incurred a withdrawal liability in an annual amount EXCEEDING
$25,000; or
8.1(L) The Borrower or Guarantor shall purport to disavow its
obligations hereunder or shall contest the validity or enforceability hereof; or
the Bank's security interest in any portion of the Collateral shall become
unenforceable or otherwise impaired.
SECTION 8.2 REMEDIES.
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8.2(A) Upon the occurrence of any Event of Default described in
SECTION 8.1(F) OR (G) the unpaid principal amount of and accrued interest on the
Note shall AUTOMATICALLY become DUE AND PAYABLE, without presentment, demand or
other requirements of any kind, all of which are hereby expressly waived by the
Borrower.
8.2(B) Upon the occurrence of any Event of Default (other than
those described in SECTION 8.1(F) OR (G)), the Bank MAY, by written notice to
the Borrower DECLARE all or any portion of the Advances to be due and payable
whereupon the same shall forthwith become DUE AND PAYABLE, together with all
accrued interest thereon, and the obligation of the Bank to make Advances shall
thereupon terminate.
8.2(C) Upon the occurrence of any Event of Default, the Bank may
also do any one or more or all of the following:
(1) FORECLOSE upon or otherwise enforce its security interest in and
Lien on all of the Collateral or on any portion thereof to secure all payments
and performance of obligations owed by Borrower under this Agreement.
(2) NOTIFY ALL OBLIGORS of Collateral or on any portion thereof that
the Collateral has been assigned to the Bank and that all payments thereon are
to be made directly to the Bank or such other party as may be designated by the
Bank; settle, compromise, or release, in whole or in part, any amounts owing on
the Collateral, any such obligor or Investor or any portion of the Collateral,
on terms acceptable to the Bank; enforce payment and prosecute any action or
proceeding with respect to and any and all Collateral; and where any such
Collateral is in default, foreclose on and enforce security interests in, such
Collateral by any available judicial procedure or without judicial process and
sell property acquired as a result of any such foreclosure.
(3) ACT, OR CONTRACT with a third party to act, as servicer of all or
any item of Collateral requiring servicing, such third party's fees to be paid
by the Borrower.
(4) Exercise all rights and remedies of a secured creditor under the
UCC of the State of Texas or the state in which the Collateral is located,
including but not limited to taking possession and disposing of all or any
portion of the Collateral and selling the Collateral at public or private sale,
as a unit or in parcels, upon any terms and prices and in any order, free from
any claim or right of any kind; and for such purpose the Bank may maintain all
or any part of the Collateral and the Servicing Records with respect to the
Collateral on Borrower's premises for such period of time as may be reasonably
necessary without any charge whatsoever. Upon Bank's demand, Borrower will take
all steps necessary to prepare the Collateral for and otherwise assist in any
proposed disposition of the Collateral; and assemble the Collateral and the
Servicing Records with respect to the Collateral and make it available to the
Bank at a reasonably convenient location. Any disposition of the Collateral may
be made by way of one or more contracts and at any such disposition it shall not
be necessary to exhibit the Collateral. To enforce the rights granted to the
Bank pursuant to the terms of this Security Agreement, the Bank may take all
actions reasonably necessary to take possession of the Collateral and the
Servicing Records with respect to the Collateral, and shall not be liable for
damages to, or destruction of, persons or property in connection therewith and
shall in no way be liable for any consequential damages (whatsoever be the
proximate cause thereof) of any kind. In addition, in order to dispose of the
Collateral and otherwise enforce the rights granted to it hereunder, Bank may
use, and advertise the Collateral for sale under, any and all trade names or
service names attached to, fixed upon or made part of any of the Collateral.
Subject to the limitations of the Agencies, Bank may access any or all Custodial
Accounts, to the extent that Borrower is entitled to do so, for the recovery of
Agency Servicing Payments and Non-Agency Servicing Payments due to Borrower, and
to apply such amounts so received in payment of the outstanding amount of the
Obligations in such order and manner as Bank shall determine in its sole
discretion. The Bank shall give the Borrower not less than five (5) days'
notice of any such public sale or of the date after which private sale may be
held. The Borrower agrees that five (5) days' notice shall be reasonable
notice. At any such sale the Collateral may be sold as an entirety or in
separate parts, as the Bank may determine. The Bank may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and
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such sale may be made at any time or place to which the same may be so
adjourned. In case of any sale of all or any part of the Collateral on credit or
for future delivery, the Collateral so sold may be retained by the Bank until
the selling price is paid by the purchaser thereof, but the Bank shall not incur
any liability in case of the failure of such purchaser to take up and pay for
the Collateral so sold and, in case of any such failure, such Collateral may
again be sold upon like notice. The Bank may, however, instead of exercising the
power of sale herein conferred upon it, proceed by a suit or suits at law or in
equity to collect all amounts due upon all or any portion of the Collateral or
to foreclose the pledge and sell all or any portion of the Collateral under a
judgment or decree of a court or courts of competent jurisdiction, or both.
(5) PROCEED AGAINST the Borrower on the Note or against the
Guarantor under the Guaranty or both.
(6) Pursue ANY RIGHTS AND/OR REMEDIES available at law or in
equity against the Borrower or the Guarantor or both.
8.2(D) The Bank shall incur no liability as a result of the sale of
the Collateral, or any part thereof, at any PRIVATE SALE. The Borrower hereby
waives any claims it may have against the Bank arising by reason of the fact
that the price at which the Collateral may have been sold at such private sale
was less than the price which might have been obtained at a public sale or was
less than the aggregate amount of the outstanding Advances and the unpaid
interest accrued thereon, even if the Bank accepts the first offer received and
does not offer the Collateral, or any part thereof, to more than one offeree.
8.2(E) The BORROWER WAIVES any right to require the Bank to (1)
proceed against any Person, (2) proceed against or exhaust all or any of the
Collateral or pursue its rights and remedies as against the Collateral in any
particular order, or (3) pursue any other remedy in its power. The Bank shall
not be required to take any steps necessary to preserve any rights of the
Borrower against holders of mortgages prior in lien to the Lien of any Mortgage
included in the Collateral or to preserve rights against prior parties.
8.2(F) The Bank may, but shall not be obligated to, ADVANCE ANY
SUMS or do any act or thing necessary to uphold and enforce the Lien and
priority of, or the security intended to be afforded by, any Mortgage included
in the Collateral, including, without limitation, payment of delinquent taxes or
assessments and insurance premiums. All advances, charges, costs and expenses,
including reasonable attorneys' fees and disbursements, incurred or paid by the
Bank in exercising any right, power or remedy conferred by this Agreement, or in
the enforcement hereof, together with interest thereon, at the rate of interest
specified in the Note, from the time of payment until repaid, shall become a
part of principal balance outstanding under the Note.
8.2(G) The rights, titles, interests, liens and securities of the
Bank hereunder shall be CUMULATIVE of all of the securities, rights, titles,
interests or liens which the Bank may now or at any time hereafter hold securing
the payment of the Obligations, or any part thereof.
8.2(H) The Bank is hereby expressly authorized to apply by
appropriate judicial proceedings for appointment of a receiver for the
Collateral, or any part thereof, and Borrower hereby expressly consents to any
such appointment.
8.2(I) The Bank is hereby authorized, in its own name or the name
of Borrower, after an Event of Default, to NOTIFY any or all parties obligated
on any of the Collateral to make all payments due or to become due thereon
directly to the Bank, or such other person or officer as the Bank may require,
whereupon the power and authority of Borrower to collect the same in the
ordinary course of its business shall be deemed to be immediately revoked and
terminated. With or without such general notification, the Bank may take or
bring in Borrower's name or that of the Bank all steps, actions, suits or
proceedings deemed by the Bank necessary or desirable to effect possession or
collection of the Collateral, including sums due or paid thereon, may complete
any contract or agreement
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of Borrower in any way related to any of the Collateral, may make allowances or
adjustments related to the Collateral, may compromise any claims related to the
Collateral, may issue credit in its own name or the name of Borrower, and Bank
may remove from Borrower's premises all documents, instruments, records, files
or other items relating to the Collateral (including any Servicing Records with
respect to the Collateral) , and the Bank may, without cost or expense to the
Bank, use Borrower's personnel, supplies and space to take possession of,
administer, collect and dispose of the Collateral. Regardless of any provision
hereof, however, Bank shall ever be liable to Borrower for the failure of Bank
to collect or for its failure to exercise diligence in the collection,
possession, or any transaction concerning, all or part of the Collateral or sums
due or paid thereon, nor shall Bank be under any obligation whatsoever to anyone
by virtue of this Security Agreement, except to account for the funds that the
Bank shall actually receive hereunder.
8.2(J) NO FAILURE on the part of the Bank to exercise, and no delay
in exercising, any right, power or remedy provided hereunder, at law or in
equity shall operate as a waiver thereof; nor shall any single or partial
exercise by the Bank of any right, power or remedy provided hereunder, at law or
in equity preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. Without intending to limit the foregoing, all
defenses based on the statute of limitations are hereby waived by the Borrower.
The remedies herein provided are cumulative and are not exclusive of any
remedies provided at law or in equity.
SECTION 8.3 APPLICATION OF PROCEEDS. The proceeds of any sale or other
enforcement of the Bank's security interest in all or any part of the Collateral
shall be applied by the Bank:
FIRST, to the payment of the COSTS AND EXPENSES of such sale or
enforcement, including reasonable compensation to the Bank's agents and counsel,
and all expenses, liabilities and advances made or incurred by or on behalf of
the Bank in connection therewith;
SECOND, to the payment of ANY OTHER AMOUNTS DUE (other than principal
and interest) under the Note or this Agreement and the Warehousing Credit
Facility;
THIRD, to the payment of INTEREST accrued and unpaid on the Note and
the Note evidencing the Warehousing Credit Facility;
FOURTH, to the payment of the outstanding PRINCIPAL balance of the
Note and the Note evidencing the Warehousing Credit Facility; and
FINALLY, to the payment to the Borrower, or to its successors or
assigns, or as a court of competent jurisdiction may direct, of any SURPLUS then
remaining from such proceeds. If the proceeds of any such sale are insufficient
to cover the costs and expense; of such sale, as aforesaid, and the payment in
full of the Note and all other amounts due hereunder, the Borrower shall remain
liable for any deficiency.
SECTION 8.4 BANK APPOINTED ATTORNEY-IN-FACT. The Bank is hereby appointed
the attorney-in-fact of the Borrower, with full power of substitution, for the
purpose of carrying out the provisions hereof and taking any action and
executing any instruments which the Bank may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is
irrevocable and coupled with an interest. Without limiting the generality of
the foregoing, the Bank shall have the right and power to give notices of its
security interest in the Collateral to any Person, either in the name of the
Borrower or in its own name, or to receive, endorse and correct all checks made
payable to the order of the Borrower representing any payment on account of the
principal of or interest on, or the proceeds of sale of, any of the Collateral
or and to give full discharge for the same.
SECTION 8.5 RIGHT OF SET-OFF. If the Borrower shall default in the
payment of the Note, any interest accrued thereon, or any other sums which may
become payable hereunder when due, or in the performance of any of its other
obligations or liabilities under this Agreement, the Bank, shall have the right,
at any time and from time to time, without notice, to set-off and to appropriate
or apply any and all deposits of money or property or any other
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indebtedness at any time held or owing by the Bank or a parent company,
affiliate, or subsidiary of the Bank to or for the credit of the account of the
Borrower against and on account of the obligations and liabilities of the
Borrower under the Note and this Agreement, irrespective of whether or not the
Bank shall have made any demand hereunder and whether or not said obligations
and liabilities shall have matured, provided, however, that the aforesaid right
of set-off shall not apply to any deposits of escrow monies being held on behalf
of the mortgagors under Mortgage Loans or other third parties.
SECTION 8.6 REASONABLE ASSURANCES. If, at any time during the term of
the Agreement, Bank has reason to believe that Borrower is not conducting its
business in accordance with, or otherwise is not satisfying: (i) all applicable
statutes, regulations, rules, and notices of federal, state, or local
governmental agencies or instrumentalities, all applicable requirements of
Investors and Insurers and prudent industry standards or (ii) all applicable
requirements of Bank, as set forth in this Agreement, then, Bank shall have the
right to demand, pursuant to written notice from Bank to Borrower specifying
with particularity the alleged act, error or omission in question, reasonable
assurances from Borrower that such a belief is in fact unfounded, and any
failure of Borrower to provide to Bank such reasonable assurances in form and
substance reasonably satisfactory to Bank, within the time frame specified in
such written notice shall itself constitute an Event of Default hereunder.
Borrower hereby authorizes Bank to take such actions as may be necessary or
appropriate to confirm the continued eligibility of Borrower for Advances
hereunder, including without limitation (i) ordering credit reports and (ii)
contacting licensing authorities, Agencies and Investors or Insurers.
ARTICLE IX
REIMBURSEMENT OF EXPENSES; INDEMNITY
The Borrower shall:
SECTION 9.1 COST OF TRANSACTION AND ENFORCEMENT. Pay all out-of-pocket
costs and expenses of the Bank, including reasonable attorney's fees, in
connection with the documentation, administration and enforcement of this
Agreement, the Note, and other documents and instruments related hereto and the
making and repayment of the Advances and the payment of interest thereon.
SECTION 9.2 PAYMENTS OF TAXES. Pay, and hold the Bank and any holder of
the Note harmless from and against, any and all present and future stamp,
documentary and other similar taxes with respect to the foregoing matters and
save the Bank and the holder or holders of the Note harmless from and against
any and all liabilities with respect to or resulting from any delay or omission
to pay such taxes.
SECTION 9.3 INDEMNIFICATION. INDEMNIFY, PAY AND HOLD HARMLESS THE BANK
AND ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS AND ANY SUBSEQUENT
HOLDER OF THE NOTE FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS,
LOSSES, DAMAGES, PENALTIES, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS
OF ANY KIND WHATSOEVER (THE "INDEMNIFIED LIABILITIES") (EXCLUDING ANY SUCH
INDEMNIFIED LIABILITIES RESULTING FROM FAILURE BY THE BANK TO PERFORM ANY OF ITS
OBLIGATIONS (BUT INCLUDING THOSE RELATING TO BANK'S NEGLIGENCE) UNDER THIS
AGREEMENT, THE NOTE, OR ANY OTHER DOCUMENT REFERRED TO HEREIN AS ESTABLISHED IN
A SUIT BETWEEN THE BORROWER AND THE BANK WHICH MAY BE THE SAME SUIT IN WHICH
INDEMNIFICATION IS BEING SOUGHT HEREUNDER BY THE BANK) WHICH MAY BE IMPOSED
UPON, INCURRED BY OR ASSERTED AGAINST THE BANK OR SUCH HOLDER IN ANY WAY
RELATING TO OR ARISING OUT OF THIS AGREEMENT, THE NOTE, OR ANY OTHER DOCUMENT
REFERRED TO HEREIN OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY TO
THE EXTENT THAT ANY SUCH INDEMNIFIED LIABILITIES RESULT (DIRECTLY OR INDIRECTLY)
FROM (I) THE INACCURACY OR INCOMPLETENESS OF ANY REPRESENTATION OR WARRANTY MADE
BY THE BORROWER IN THIS AGREEMENT OR ANY SCHEDULE, STATEMENT, EXHIBIT OR
CERTIFICATE FURNISHED BY THE BORROWER PURSUANT TO THIS AGREEMENT OR (H) THE
FAILURE BY THE
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BORROWER TO OBSERVE OR PERFORM ANY TERM OR PROVISION OF THIS AGREEMENT OR OF ANY
AGREEMENT EXECUTED IN CONNECTION HEREWITH, INCLUDING WITHOUT LIMITATION ANY
CLAIMS MADE, OR ANY ACTIONS, SUITS OR PROCEEDINGS COMMENCED OR THREATENED, BY OR
ON BEHALF OF ANY CREDITOR (EXCLUDING THE BANK AND THE HOLDER OR HOLDERS OF THE
NOTE), SECURITY HOLDER, SHAREHOLDER, MORTGAGOR, CUSTOMER (INCLUDING, WITHOUT
LIMITATION, ANY PERSON OR ENTITY HAVING ANY DEALINGS OF ANY KIND WITH THE
BORROWER), TRUSTEE, DIRECTOR, OFFICER, EMPLOYEE AND/OR AGENT OF THE BORROWER
ACTING IN SUCH CAPACITY, THE BORROWER OR ANY GOVERNMENTAL REGULATORY BODY OR
AUTHORITY (EXCLUDING THE OFFICE OF THE COMPTROLLER OF THE CURRENCY, THE FEDERAL
DEPOSIT INSURANCE CORPORATION AND ANY OTHER BANKING REGULATORY BODY OR AUTHORITY
HAVING JURISDICTION OVER THE BANK).
ARTICLE X
MISCELLANEOUS
SECTION 10.1 RELATIONSHIP OF PARTIES. The relationship between Bank and
the Borrower is limited to that of creditor/secured party, on the one hand, and
borrower, on the other hand. The provisions herein for compliance with
financial covenants and delivery of financial statements, are intended solely
for the benefit of Bank to protect its interests as lender in assuring
performance of the obligations hereunder, and nothing contained in this
Agreement shall be construed as permitting or obligating Bank to act as a
financial or business advisor or consultant to the Borrower, as permitting or
obligating the Bank to control the Borrower or to conduct the Borrower's
operations, as creating any joint venture, agency, fiduciary, trustee, or other
relationship between the parties other than as explicitly and specifically
stated in this Agreement. The Borrower acknowledges that it has had the
opportunity to obtain the advice of experienced counsel of its own choosing in
connection with the negotiation and execution of this Agreement and to obtain
the advice of such counsel with respect to all Matters contained herein. The
Borrower further acknowledges that it is experienced with respect to financial
and credit matters and has made its own independent decision to execute and
deliver this Agreement.
SECTION 10.2 RECOURSE. The Borrower acknowledges and agrees that it is
fully liable for repayment of all Advances and all sums due hereunder or under
the Note and for performance of all obligations contained in this Agreement.
SECTION 10.3 NOTICES. All notices, demands, consents, requests and other
communications required or permitted to be given or made hereunder
(collectively, "NOTICES") shall, except as otherwise expressly provided
hereunder, be in writing and shall be delivered in person or telegraphed or
mailed, first class, return receipt requested, postage prepaid, or by overnight
delivery service or by telecopy or other telecommunications device addressed to
the respective parties hereto at their respective addresses hereinafter set
forth or, as to any such party, at such other address as may be designated by it
in a Notice to the other. All Notices shall be conclusively deemed to have been
properly given or made on the day when deposited in the mails or when delivered
to the overnight delivery service or when sent by telecopy, addressed as
follows:
IF TO THE BORROWER: HOMEOWNERS MORTGAGE & EQUITY, INC.,
A DELAWARE CORPORATION, D/B/A HOME, INC.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
ATTN: ▇▇▇▇ ▇▇▇▇▇▇▇, PRESIDENT
TELECOPY NO.: (▇▇▇) ▇▇▇-▇▇▇▇
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IF TO THE BANK: GUARANTY FEDERAL BANK, F.S.B.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
ATTN: WAREHOUSE LENDING
TELECOPY NO: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 10.4 TERMS BINDING UPON SUCCESSORS; SURVIVAL. The terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. All
representations, warranties, covenants and agreements herein contained on the
part of the Borrower shall survive the making of any Advance and the execution
of the Note, and shall be effective so long as there remains any obligation of
the Borrower hereunder or under the Note or under the Warehousing Credit
Facility, to be paid or performed.
SECTION 10.5 REGULATORY REQUIREMENTS. This Agreement is subject to all
governmental regulations to which the Bank is subject. Notwithstanding anything
to the contrary, in no event shall the Bank be obligated to advance to Borrower
hereunder or under the Loan Documents any amounts which would cause the Bank to
exceed applicable governmental lending limit regulations.
SECTION 10.6 INTEREST. The Note and all of the other Loan Documents are
intended to be performed in accordance with, and only to the extent permitted
by, all applicable usury laws. If any provision hereof or of any of the other
Loan Documents or the application thereof to any person or circumstance shall,
for any reason and to any extent, be invalid or unenforceable, neither the
application of such provision to any other person or circumstance nor the
remainder of the instrument in which such provision is contained shall be
affected thereby and shall be enforced to the greatest extent permitted by law.
It is expressly stipulated and agreed to be the intent of the Bank to at all
times comply with the usury and other applicable laws now or hereafter governing
the interest payable on the Indebtedness evidenced by the Note. If the
applicable law is ever revised, repealed or judicially interpreted so as to
render usurious any amount called for under this Note or under any of the other
Loan Documents, or contracted for, charged, taken, reserved or received with
respect to the Indebtedness evidenced by this Note, or if Bank's exercise of the
option to accelerate the maturity of the Note, or if any prepayment by Borrower
results in Borrower having paid any interest in excess of that permitted by law,
then it is the express intent of Borrower and Bank that all excess amounts
theretofore collected by Bank be credited on the principal balance of the Note
(or, if the Note and all other Indebtedness arising under or pursuant to the
other Loan Documents have been paid in full, refunded to Borrower), and the
provisions of the Note and the other Loan Documents immediately be deemed
reformed and the amounts thereafter collectable hereunder and thereunder
reduced, without the necessity of the execution of any new document, so as to
comply with the then applicable law, but so as to permit the recovery of the
fullest amount otherwise called for hereunder or thereunder. All sums paid, or
agreed to be paid, by Borrower for the use, forbearance, detention, taking,
charging, receiving or reserving of the indebtedness of Borrower to Bank under
the Note or arising under or pursuant to the other Loan Documents shall, to the
maximum extent permitted by applicable law, be amortized, prorated, allocated
and spread throughout the full term of such indebtedness until payment in full
so that the rate or amount of interest on account of such indebtedness does not
exceed the usury ceiling from time to time in effect and applicable to such
indebtedness for so long as such indebtedness is outstanding. To the extent
federal law permits Bank to contract for, charge or receive a greater amount of
interest, Bank will rely on federal law instead of the Texas Finance Code, as
supplemented by Texas Credit Title for the purpose of determining the Maximum
Rate. Additionally, to the maximum extent permitted by applicable law now or
hereafter in effect, Bank may, at its option and from time to time, implement
any other method of computing the Maximum Rate under the Texas Finance Code, as
supplemented by Texas Credit Title, or under other applicable law by giving
notice, if required, to Borrower as provided by applicable law now or hereafter
in effect. Notwithstanding anything to the contrary contained herein or in any
of the other Loan Documents, it is not the intention of Bank to accelerate the
maturity of any interest that has not accrued at the time of such acceleration
or to collect unearned interest at the time of such acceleration. In no event
shall Chapter 346 of the Texas Finance code (which regulates certain revolving
loan accounts and revolving tri-party accounts) apply to the Note. To the extent
that Chapter 303 of the Texas Finance Code is applicable to this Note, the
"weekly ceiling" specified in
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Chapter 303 is the applicable ceiling; provided that, it any applicable law
permits greater interest, the law permitting the greatest interest shall apply.
SECTION 10.7 ASSIGNMENTS, ETC.
(A) ASSIGNMENTS AND PARTICIPATIONS. All covenants and agreements by or on
behalf of Borrower in the Note, this Agreement, or any other Loan Document shall
bind Borrower's successors and assigns and shall inure to the benefit of the
Bank and its successors and assigns. Borrower shall not, however, have the
right to assign its rights under this Agreement or any interest herein, without
the prior written consent of the Bank. The Bank may assign to one or more
Persons all or any part of, and may grant participations to one or more Persons
in all or any part of, its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Commitment, the Advances
owing to it and the Note held by it). In the event that Bank sells
participations in the Note or other Obligations of Borrower incurred or to be
incurred pursuant to this Agreement, to other lenders, each of such other
lenders shall have the rights of set off against such Obligations and similar
rights or Liens to the same extent as may be available to the Bank.
(B) ADDITIONAL BANK. From time to time additional Bank may be added hereto
upon execution by the Borrower, the Bank and such additional Bank of
documentation in form and substance satisfactory to each of such parties.
SECTION 10.8 EXHIBITS. The exhibits attached to this Agreement are
incorporated herein and shall be considered a part of this Agreement for the
purposes stated herein, except that in the event of any conflict between any of
the provisions of such exhibits and the provisions of this Agreement, the
provisions of this Agreement shall prevail.
SECTION 10.9 TITLES OF ARTICLES, SECTIONS AND SUBSECTIONS. All titles or
headings to articles, sections, subsections or other divisions of this Agreement
or the exhibits hereto are only for the convenience of the parties and shall not
be construed to have any effect or meaning with respect to the other content of
such articles, sections, subsections or other divisions, such other content
being controlling as to the agreement between the parties hereto.
SECTION 10.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, and it shall not be necessary that the signatures of both parties
hereto be contained on any one counterpart hereof; each counterpart shall be
deemed an original, but all counterparts together shall constitute one and the
same instrument.
SECTION 10.11. WAIVER OF TRIAL BY JURY. AS A SPECIFICALLY BARGAINED
INDUCEMENT FOR THE BANK TO ENTER INTO THIS AGREEMENT AND EXTEND CREDIT TO
BORROWER, BORROWER AND THE BANK EACH WAIVE TRIAL BY JURY WITH RESPECT TO ANY
ACTION, CLAIM, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT AND/OR THE CONDUCT OF THE RELATIONSHIP BETWEEN THE
BANK AND BORROWER.
SECTION 10.12. CONFIDENTIALITY. Except as provided herein to the contrary,
all correspondence from the Bank to Borrower and all of the Loan Documents are
confidential and may not be shown by Borrower to or discussed by Borrower with
any third party (other than on a confidential basis with Borrower's legal
counsel and independent public accountants) without Bank's prior written
consent. All documents, forms, correspondence, files, contracts, customer
lists, financial tables, records, techniques, processes and all other
information directly or indirectly given to or received by Bank during the term
of this Agreement, that relate in any manner to any business or operation that
Borrower is engaged in, constitute trade secrets of Borrower and shall remain
the property of Borrower subject to the rights, security interests and remedies
of Bank. During and after the term of this Agreement, Bank shall maintain the
confidentiality of all such trade secrets and not disclose to any person (other
than an employee or agent of Bank or any Affiliate thereof) any confidential
information relating to such trade secrets, without the consent of Borrower, or
until such information ceases to be confidential. Notwithstanding the
foregoing, Bank shall not be precluded from
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disclosures respecting Borrower when required by law or a governmental agency or
in connection with the audit and preparation of the Bank's financial statements.
Upon the termination of this Agreement by Bank, Bank shall deliver to Borrower
all materials and information constituting such trade secrets.
SECTION 10.13 AMENDMENTS. This Agreement may be modified or amended by
the Bank at any time upon 30 days notice to the Borrower. Such modification or
amendment will not take effect if, within fifteen (15) days from the date of
such notice, the Bank receives a written objection to such modification or
amendment from the Borrower. If no such objection is received by the Bank such
modification or amendment will automatically become effective upon the 30th day
from the date of such notice by the Bank.
SECTION 10.14 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the
part of the Borrower or the Bank or any holder of the Note in exercising any
right, power or privilege hereunder and no course of dealing between the
Borrower and the Bank or the holder of the Note shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder or under the Note preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder. The
rights and remedies herein expressly provided are cumulative and not exclusive
of any rights or remedies which the Borrower or the Bank or the holder of the
Note would otherwise have. No notice to or demand on the Borrower in any case
shall entitle the Borrower to any other or further notice or demand in similar
or other circumstances or constitute a waiver of the rights of the Bank or the
holder of the Note to any other or further action in any circumstances without
notice or demand.
SECTION 10.15 INVALIDITY. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal,
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions hereof, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had not been
included.
SECTION 10.16 PARTICIPATIONS. The Bank may from time to time sell or
otherwise grant participations in the Commitment and the Note, and the holder of
any such participation, if the participation agreement so provides, (i) shall,
with respect to its participation, be entitled to all of the rights of the Bank
and (ii) may exercise any and all rights of setoff or banker's lien with respect
thereto, in each case as fully as though the Borrower were directly indebted to
the holder of such participation in the amount of such participation; provided,
however, that the Borrower shall not be required to send or deliver to any of
the participants other than the Bank any of the materials or notices required to
be sent or delivered by it under the terms of this Agreement, nor shall it have
to act except in compliance with the instructions of the Bank.
SECTION 10.17 CHOICE OF LAW. THIS AGREEMENT, THE NOTES AND EACH LOAN
DOCUMENT IS A CONTRACT MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE UNITED STATES OF AMERICA AND THE STATE OF TEXAS,
EXCEPT AS OTHERWISE SPECIFIED HEREIN OR THEREIN, AND, WITH RESPECT TO USURY
LAWS, IF ANY, APPLICABLE TO THE BANKS AND TO THE EXTENT ALLOWED THEREBY, AS SUCH
LAWS MAY HEREAFTER BE IN EFFECT WHICH ALLOW A HIGHER MAXIMUM NONUSURIOUS
INTEREST RATE THAN SUCH LAWS NOW ALLOW. TEX. REV. CIV. STAT. ▇▇▇. ART. ▇▇▇▇,
▇▇. 15 (WHICH REGULATES CERTAIN REVOLVING LOAN ACCOUNTS AND REVOLVING TRI-PARTY
ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT OR THE NOTES.
SECTION 10.18 ADDITIONAL INSTRUMENTS, ETC. The Borrower shall execute and
deliver such further instruments and shall do and perform all matters and things
necessary or expedient to be done or observed for the purpose of effectively
creating, maintaining and preserving the security and benefits intended to be
afforded by this Agreement.
SECTION 10.19 RIGHT OF OFFSET. Borrower hereby grants to the Bank, to
each Bank and to any assignee or participant of any Bank a right of offset, to
secure the repayment of the Obligations, upon any and all monies, securities
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or other property of Borrower, and the proceeds therefrom now or hereafter held
or received by or in transit to such Person, from or for the account of
Borrower, whether for safekeeping, custody, pledge, transmission, collection or
otherwise, and also upon any and all deposits (general or special, time or
demand, provisional or final) and credits of Borrower, and any and all claims of
Borrower against such Person at any time existing. Upon the occurrence of any
Event of Default, such Person is hereby authorized at any time and from time to
time, without notice to Borrower, to offset, appropriate, and apply any and all
items hereinabove referred to against the Obligations. Bank's contractual right
of offset granted by Borrower hereunder is separate and independent of Bank's
common law right of offset and is not governed by any restrictions existing
under the common law right of offset. Notwithstanding anything in this SECTION
10.19 or elsewhere in this Agreement to the contrary, the Bank and any assignee
or participant of any Bank shall not have any right to offset, appropriate or
apply any accounts of Borrower which consist of escrowed funds (except and to
the extent of any beneficial interest of Borrower in such escrowed funds) which
have been so identified by Borrower in writing at the time of deposit thereof.
SECTION 10.20 VENUE. THE BORROWER HEREBY AGREES THAT THE OBLIGATIONS
CONTAINED HEREIN ARE PERFORMABLE IN DALLAS COUNTY, TEXAS. ALL PARTIES HERETO
AGREE THAT (I) ANY ACTION ARISING OUT OF THIS TRANSACTION MAY BE FILED IN DALLAS
COUNTY, TEXAS, (II) VENUE FOR ENFORCEMENT OF ANY OF THE OBLIGATIONS CONTAINED IN
THE LOAN DOCUMENTS SHALL BE IN DALLAS COUNTY, TEXAS, (III) PERSONAL JURISDICTION
SHALL BE IN DALLAS COUNTY, TEXAS, (IV) ANY ACTION OR PROCEEDING UNDER THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE COMMENCED AGAINST BORROWER IN DALLAS
COUNTY, (V) SUCH ACTION MAY BE INSTITUTED IN THE COURTS OF THE STATE OF TEXAS
LOCATED IN DALLAS COUNTY, TEXAS OR IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF TEXAS LOCATED IN DALLAS COUNTY, TEXAS, AT THE OPTION OF THE
BANK AND (VI) THE BORROWER HEREBY WAIVES ANY OBJECTION TO THE VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING AND ADDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO BE
SUED ELSEWHERE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF BANK TO ACCOMPLISH
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
SECTION 10.21 BORROWER INFORMATION. The Borrower hereby authorizes the
Bank to provide any Affiliate of the Bank with information regarding the
Borrower, including copies of documents, financial statements, corporate records
and reports, obtained by the Bank from the Borrower or any other entity during
the course of the negotiation or administration of this Agreement.
SECTION 10.22 TIME. Time is of the essence in the performance of this
Agreement.
SECTION 10.23. ENTIRE AGREEMENT. THIS WRITTEN LOAN AGREEMENT AND THE OTHER
LOAN DOCUMENTS REPRESENTED THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
BORROWER:
HOMEOWNERS MORTGAGE & EQUITY, INC.,
a Delaware corporation, d/b/a HOME, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
BANK:
GUARANTY FEDERAL BANK, F.S.B.,
a federal savings bank
By: /s/ W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------------------
W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
Vice President
GUARANTOR:
HOMECAPITAL INVESTMENT CORPORATION,
a Nevada corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, President
STATE OF TEXAS (S)
(S)
COUNTY OF DALLAS (S)
This instrument was ACKNOWLEDGED before me the 24th day of September, 1997,
by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, in his capacity as Executive Vice President of HOMEOWNERS
MORTGAGE & EQUITY, INC., a Delaware corporation, d/b/a HOME, INC., on behalf of
said corporation.
(SEAL) /s/ ▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------------
Notary Public - State of Texas
▇▇▇▇▇ ▇▇▇▇▇
My Commission expires: --------------------------------------------
9-11-2000 Printed Name of Notary
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STATE OF TEXAS (S)
(S)
COUNTY OF DALLAS (S)
This instrument was ACKNOWLEDGED before me the 24th day of September, 1997,
by W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, in his capacity as Vice President of GUARANTY FEDERAL
BANK, F.S.B., a federal savings bank, on behalf of said bank.
(SEAL) /s/ ▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------------
Notary Public - State of Texas
▇▇▇▇▇ ▇▇▇▇▇
My Commission expires: --------------------------------------------
9-11-2000 Printed Name of Notary
STATE OF TEXAS (S)
(S)
COUNTY OF DALLAS (S)
This instrument was ACKNOWLEDGED before me the 24th day of September, 1997,
by ▇▇▇▇ ▇▇▇▇▇▇▇, in his capacity as President of HOMECAPITAL INVESTMENT
CORPORATION., a Nevada corporation, on behalf of said corporation.
(SEAL) /s/ ▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------------
Notary Public - State of Texas
▇▇▇▇▇ ▇▇▇▇▇
My Commission expires: --------------------------------------------
9-11-2000 Printed Name of Notary
1599262.03
-51-
LIST OF EXHIBITS
EXHIBIT A Promissory Note
EXHIBIT B Guaranty
EXHIBIT C Advance Request
EXHIBIT D Borrowing Base Report
EXHIBIT E List of Servicing Contracts
EXHIBIT F Compliance Certificate
EXHIBIT G Subsidiaries
EXHIBIT H Form of Legal Opinion by Counsel to Borrower
EXHIBIT I Certificate Accompanying Financial Statements
EXHIBIT J Purchaser's Acknowledgment Agreement
EXHIBIT K Existing and Proposed Indebtedness
EXHIBIT L Subservicing Contracts
EXHIBIT M Proforma Excess Interest Certificate and Offering Memorandum
-52-
EXHIBIT "A" [WC]
PROMISSORY NOTE
$16,666,600.00 DALLAS, TEXAS SEPTEMBER 24, 1997
FOR VALUE RECEIVED, the undersigned, HOMEOWNERS MORTGAGE & EQUITY, INC., A
DELAWARE CORPORATION, D/B/A HOME, INC. (herein called "BORROWER"), hereby
promises to pay to the order of GUARANTY FEDERAL BANK, F.S.B., a federal savings
bank (herein called "BANK"), the principal sum of SIXTEEN MILLION SIX HUNDRED
SIXTY-SIX THOUSAND SIX HUNDRED AND NO/100 DOLLARS ($16,666,600.00) or, if less,
the aggregate unpaid principal amount of the Loan made under this Note by Bank
to Borrower pursuant to the terms of the FIRST AMENDED AND RESTATED WORKING
CAPITAL LINE OF CREDIT AND SECURITY AGREEMENT [SERVICING SECURED] together with
all amendments, modifications and extensions thereto ("LOAN AGREEMENT") dated
NOVEMBER 8, 1996, together with interest on the unpaid principal balance thereof
as hereinafter set forth, both principal and interest payable as herein provided
in lawful money of the United States of America, for the account of Bank, at
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ or at such other place within Dallas
County, Texas or such other address as may be given to Borrower by the Bank.
This Note (A) is executed and delivered pursuant to the Loan Agreement and
is the Note as defined therein, (B) is subject to the terms and provisions of
the Loan Agreement, which contains provisions for payments and prepayments
hereunder, acceleration of the maturity hereof upon the happening of certain
stated events and the obligation of Bank to advance funds hereunder, and (C) is
secured by and entitled to the benefits of certain Loan Documents (herein so
called). Payments on this Note shall be made and applied as provided herein and
in the Loan Agreement. Reference is hereby made to the Loan Agreement for a
description of certain rights, limitations of rights, obligations and duties of
the parties hereto and for the meanings assigned to terms used and not defined
herein and to the Loan Documents for a description of the nature and extent of
the security thereby provided and the rights of the parties thereto. All
capitalized terms used herein and not otherwise defined herein shall have the
meanings given thereto in the Loan Agreement. The holder of this Note shall be
entitled to the benefits provided for in the Loan Agreement.
INTEREST shall be due and payable on the tenth (10TH) DAY OF EACH MONTH,
beginning OCTOBER 10, 1997. Interest shall accrue on the outstanding principal
balance of this Note at the rates specified in the Loan Agreement.
The PRINCIPAL amount of this Note, together with all unpaid interest
accrued hereon, shall be due and payable in full on JUNE 30, 1998 (the "MATURITY
DATE"). All payments of principal of and interest upon this Note shall be made
by Borrower to the Bank in federal or other immediately available funds. All
payments made hereon shall be due and payable and applied in accordance with the
Loan Agreement.
This Note and all of the other Loan Documents are intended to be performed in
accordance with, and only to the extent permitted by, all applicable usury laws.
If any provision hereof or of any of the other Loan Documents or the application
thereof to any person or circumstance shall, for any reason and to any extent,
be invalid or unenforceable, neither the application of such provision to any
other person or circumstance nor the remainder of the instrument in which such
provision is contained shall be affected thereby and shall be enforced to the
greatest extent permitted by law. It is expressly stipulated and agreed to be
the intent of the holder hereof to at all times comply with the usury and
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1
other applicable laws now or hereafter governing the interest payable on the
indebtedness evidenced by this Note. If the applicable law is ever revised,
repealed or judicially interpreted so as to render usurious any amount called
for under this Note or under any of the other Loan Documents, or contracted for,
charged, taken, reserved or received with respect to the indebtedness evidenced
by this Note, or if Bank's exercise of the option to accelerate the maturity of
this Note, or if any prepayment by Borrower results in Borrower having paid any
interest in excess of that permitted by law, then it is the express intent of
Borrower and Bank that all excess amounts theretofore collected by Bank be
credited on the principal balance of this Note (or, if this Note and all other
indebtedness arising under or pursuant to the other Loan Documents have been
paid in full, refunded to Borrower), and the provisions of this Note and the
other Loan Documents immediately be deemed reformed and the amounts thereafter
collectable hereunder and thereunder reduced, without the necessity of the
execution of any new document, so as to comply with the then applicable law, but
so as to permit the recovery of the fullest amount otherwise called for
hereunder or thereunder. All sums paid, or agreed to be paid, by Borrower for
the use, forbearance, detention, taking, charging, receiving or reserving of the
indebtedness of Borrower to Bank under this Note or arising under or pursuant to
the other Loan Documents shall, to the maximum extent permitted by applicable
law, be amortized, prorated, allocated and spread throughout the full term of
such indebtedness until payment in full so that the rate or amount of interest
on account of such indebtedness does not exceed the usury ceiling from time to
time in effect and applicable to such indebtedness for so long as such
indebtedness is outstanding. To the extent federal law permits Bank to contract
for, charge or receive a greater amount of interest, Bank will rely on federal
law instead of the Texas Finance Code, as supplemented by Texas Credit Title for
the purpose of determining the Maximum Rate. Additionally, to the maximum extent
permitted by applicable law now or hereafter in effect, Bank may, at its option
and from time to time, implement any other method of computing the Maximum Rate
under the Texas Finance Code, as supplemented by Texas Credit Title, or under
other applicable law by giving notice, if required, to Borrower as provided by
applicable law now or hereafter in effect. Notwithstanding anything to the
contrary contained herein or in any of the other Loan Documents, it is not the
intention of Bank to accelerate the maturity of any interest that has not
accrued at the time of such acceleration or to collect unearned interest at the
time of such acceleration. In no event shall Chapter 346 of the Texas Finance
Code (which regulates certain revolving loan accounts and revolving tri-party
accounts) apply to this Note. To the extent that Chapter 303 of the Texas
Finance Code is applicable to this Note, the "weekly ceiling" specified in
Chapter 303 is the applicable ceiling; provided that, if any applicable law
permits greater interest, the law permitting the greatest interest shall apply.
If this Note is placed in the hands of an attorney for collection after
default, or if all or any part of the indebtedness represented hereby is proved,
established or collected in any court of in any bankruptcy, receivership, debtor
relief, probate or other court proceedings, Borrower and all endorsers, sureties
and guarantors of this Note jointly and severally agree to pay reasonable
attorneys' fees and collection costs to the holder hereof in addition to the
principal and interest payable hereunder.
Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment for payment, protest, notice of protest,
notice of intention to accelerate the maturity of this Note, diligence in
collecting, the bringing of any suit against any party and any notice of or
defense on account of any extensions, renewals, partial payments or changes in
any manner of or in this Note or in any of its terms, provisions and covenants,
or any releases or substitutions of any security, or any delay, indulgence or
other act of any trustee or any holder hereof, whether before or after maturity.
Maker reserves the right to prepay the outstanding principal balance of
this Note, in whole or in part at any time and from time to time without premium
or penalty, in accordance with the terms of the Loan Agreement.
THIS NOTE IS EXECUTED IN RENEWAL, EXTENSION AND MODIFICATION (BUT NOT IN
EXTINGUISHMENT) OF (A) THAT CERTAIN PROMISSORY NOTE DATED AS OF NOVEMBER 8, 1996
IN THE STATED AMOUNT OF THREE MILLION AND NO/100
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2
DOLLARS ($3,000,000.00) EXECUTED BY BORROWER PAYABLE TO THE ORDER OF BANK, (B)
THAT CERTAIN PROMISSORY NOTE DATED AS OF JANUARY 1, 1997 IN THE STATED AMOUNT OF
FIVE MILLION AND NO/100 DOLLARS ($5,000,000.00) EXECUTED BY BORROWER PAYABLE TO
THE ORDER OF BANK, AND (C) THAT CERTAIN PROMISSORY NOTE DATED AS OF JULY 25,
1997 IN THE STATED AMOUNT OF SIX MILLION EIGHT HUNDRED THOUSAND AND NO/100
DOLLARS ($6,800,000.00) EXECUTED BY BORROWER PAYABLE TO THE ORDER OF BANK.
THE BORROWER HEREBY AGREES THAT THE OBLIGATIONS CONTAINED HEREIN ARE
PERFORMABLE IN DALLAS COUNTY, TEXAS. ALL PARTIES HERETO AGREE THAT (I) ANY
ACTION ARISING OUT OF THIS TRANSACTION SHALL BE FILED IN DALLAS COUNTY, TEXAS,
(II) VENUE FOR ENFORCEMENT OF ANY OF THE OBLIGATIONS CONTAINED IN THE LOAN
DOCUMENTS SHALL BE IN DALLAS COUNTY, TEXAS, (III) PERSONAL JURISDICTION SHALL BE
IN DALLAS COUNTY, TEXAS, (IV) ANY ACTION OR PROCEEDING UNDER THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT SHALL BE COMMENCED AGAINST BORROWER IN DALLAS COUNTY,
(V) SUCH ACTION SHALL BE INSTITUTED IN THE COURTS OF THE STATE OF TEXAS LOCATED
IN DALLAS COUNTY, TEXAS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF TEXAS LOCATED IN DALLAS COUNTY, TEXAS, AT THE OPTION OF THE BANK AND
(VI) THE BORROWER HEREBY WAIVES ANY OBJECTION TO THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING AND ADDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO BE SUED
ELSEWHERE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF BANK TO ACCOMPLISH SERVICE
OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
THIS NOTE, TOGETHER WITH ALL OF THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED
BY AND CONSTRUED ACCORDING TO THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA.
THIS NOTE AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
HOMEOWNERS MORTGAGE & EQUITY, INC., a Delaware
corporation, d/b/a HOME, INC.
By:
------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
3
STATE OF TEXAS (S)
(S)
COUNTY OF DALLAS (S)
This instrument was ACKNOWLEDGED before me the ____ day of September, 1997,
by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Executive Vice President of HOMEOWNERS MORTGAGE & EQUITY,
INC., a Delaware corporation, d/b/a HOME, INC. on behalf of said corporation.
--------------------------------------------
Notary Public - State of Texas
My Commission expires: --------------------------------------------
Printed Name of Notary
----------------------
100316\1599262.03
4
[WC]
EXHIBIT "B"
UNCONDITIONAL GUARANTY
WHEREAS, HOMEOWNERS MORTGAGE & EQUITY, INC., A DELAWARE CORPORATION, D/B/A
HOME, INC. (hereinafter called the "BORROWER"), desire to borrow from GUARANTY
FEDERAL BANK, F.S.B. (the "BANK"), the principal sum of SIXTEEN MILLION SIX
HUNDRED SIXTY-SIX THOUSAND SIX HUNDRED AND NO/100 DOLLARS ($16,666,600.00)
(collectively, the "LOAN"); and
WHEREAS, said borrowings are to be made by the Borrower pursuant to and
under the terms of that FIRST AMENDED AND RESTATED WORKING CAPITAL LINE OF
CREDIT AND SECURITY AGREEMENT [SERVICING SECURED] dated effective as of
SEPTEMBER 24, 1997, between the Borrower and the Bank together with all
amendments thereof (hereinafter called the "LOAN AGREEMENT") and all promissory
notes executed by Borrower in connection therewith; and
WHEREAS, the undersigned desires the Bank to modify the Loan Agreement and
to continue to make the aforesaid Loan, and the Bank requires, as a condition
thereof, that a guaranty in the form hereof be executed and delivered by the
undersigned;
NOW, THEREFORE, in consideration of the premises and to induce the Bank to
enter into the Loan Agreement and to make the Loan contemplated thereby and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the undersigned, HOMECAPITAL INVESTMENT CORPORATION, a
Nevada corporation (hereinafter called the "GUARANTOR"), hereby UNCONDITIONALLY
GUARANTEES to the Bank and to every subsequent holder or holders of any
promissory note or notes evidencing the Loan (said promissory note or notes
together with any note or notes renewing the same or any part thereof being
hereinafter collectively called the "NOTE") that (I) the principal of and
interest on, and attorneys' fees provided in, the Note will be promptly paid
when due in accordance with the provisions thereof or, in the case of extension
of time of payment in whole or in part of the Note, all sums will be promptly
paid when due in accordance with the terms of the extension; (II) all covenants
and agreements of the Borrower contained in the Note, the Loan Agreement and/or
any other instrument evidencing, securing or governing the disbursement of the
Loan, whether presently existing or hereinafter entered into, will be duly and
promptly observed and performed; and (III) all additional amounts owing or which
hereafter become owing by the Borrower under the terms of the Note, the Loan
Agreement and/or any other instrument evidencing, securing or governing the
disbursement of the Loan, whether presently existing or hereinafter entered
into, will be promptly paid when due. THIS GUARANTY DIRECTLY AND SUBSTANTIALLY
BENEFITS GUARANTOR.
The obligations of the Guarantor shall be performable without demand of the
Bank and shall be unconditional irrespective of the genuineness, validity,
regularity or enforceability of the Loan Agreement or the Note, or any other
circumstance which might otherwise constitute a legal or equitable discharge of
a surety or a guarantor; and the Guarantor hereby WAIVES diligence, presentment,
demand of payment, protest, all notices (whether of nonpayment, acceleration,
dishonor, protest or otherwise) with respect to the Note, notice of acceptance
of this Guaranty and of the incurring by the Borrower of any of the obligations
hereinbefore mentioned, all demands whatsoever, and all rights to require the
Bank, to (a) proceed against the Borrower, (b) proceed against or exhaust any
collateral held by the Bank to secure the payment of the indebtedness guaranteed
hereby, or (c) pursue any other remedy the Bank may now or hereafter have
against the Borrower.
The GUARANTOR hereby AGREES that, at any time or from time to time, WITHOUT
NOTICE to the Guarantor:
(1) The time for PAYMENT of the principal of or interest on the Note
evidencing the Loan may be EXTENDED or the Note may be RENEWED in whole or
in part;
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1
(2) The TIME for the Borrower's performance of or compliance with any
covenant or agreement contained in the Loan Agreement, the Note and/or any
other instrument evidencing, securing or governing the disbursement of the
Loan, whether presently existing or hereinafter entered into, MAY BE
EXTENDED or such performance or compliance may be waived;
(3) The MATURITY of the Note MAY BE ACCELERATED as provided therein or
in the Loan Agreement and/or any other instrument evidencing, securing or
governing the disbursement of the Loan, whether presently existing or
hereinafter entered into;
(4) The Loan Agreement, the Note and/or any other instrument
evidencing, securing or governing the disbursement of the Loan, whether
presently existing or hereinafter entered into, MAY BE MODIFIED OR AMENDED
by the Bank and the Borrower in any respect, including, but not limited to,
an increase in the principal amount; and
(5) ANY SECURITY for the Loan may be modified, exchanged, surrendered
or otherwise dealt with and/or additional security may be pledged or
mortgaged for the Loan;
ALL WITHOUT AFFECTING THE LIABILITY OF THE GUARANTOR.
The Guarantor hereby acknowledges that the WITHDRAWAL from, or termination
of, any ownership interest in Borrower shall not alter, affect or in any way
limit the obligations of Guarantor hereunder.
If this Guaranty shall be placed in the hands of an attorney for collection
or should it be collected by legal proceedings or through any probate or
bankruptcy court, the Guarantor agrees to pay to the Bank's reasonable
ATTORNEYS' OR COLLECTION FEES.
The BANK MAY ASSIGN its rights hereunder in whole or in part; and upon any
such assignment, all the terms and provisions of this Guaranty shall inure to
the benefit of such assignee to the extent so assigned. The terms used to
designate any of the parties herein shall be deemed to include the heirs, legal
representatives, successors and assigns of such parties; and the term "Bank"
shall include, in addition to the Bank, any lawful owner, holder or pledgee of
any indebtedness guaranteed hereby.
The Bank is relying and is entitled to rely upon each and all of the
provisions of this Guaranty; and accordingly, if any provision or provisions of
this instrument should be held to be invalid or ineffective, then ALL OTHER
PROVISIONS shall continue in full force and effect.
The Guarantor acknowledges that the Loan represents money which will be
advanced to the Borrower in a series of advances to be made from time to time
pursuant to the Loan Agreement. To induce the Bank to make the advances
thereunder, the Guarantor hereby agrees that in the event of the termination,
liquidation or DISSOLUTION of the BORROWER, this Guaranty shall continue in full
force and effect.
The Guarantor hereby REPRESENTS AND WARRANTS to the Bank that the FINANCIAL
STATEMENTS and information regarding the Guarantor heretofore delivered to the
Bank are true and correct in all material respects, having been applied on a
consistent basis throughout the period covered thereby, and fairly present the
financial position of the Guarantor as of the dates thereof, and that no
material adverse change has occurred in the financial condition of the Guarantor
reflected therein since the date thereof.
The Guarantor hereby REPRESENTS AND WARRANTS to the Bank that:
(A) Neither the execution and delivery of this Guaranty, nor the
consummation of any of the transactions herein or therein contemplated, nor
compliance with the terms and provisions hereof or with the terms and provisions
thereof, will materially contravene or CONFLICT with any provision of law,
statute or regulation to which Guarantor is
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2
subject or any judgment, license, order or permit applicable to Guarantor, or
any indenture, mortgage, deed of trust or other agreement or instrument to which
Guarantor is a party or by which Guarantor may be bound, or to which Guarantor
may be subject.
(B) Guarantor is NOT IN DEFAULT (and no event exists which with notice or
the passage of time could become a default) under any loan agreement, mortgage,
security agreement or other material agreement or obligation to which it is a
party or by which any of its properties is bound including but not limited to
the Loan Documents.
(C) There are NO ACTIONS, suits or legal, equitable, arbitration or
administrative proceedings pending, or to the knowledge of Guarantor, threatened
against Guarantor.
(D) All TAX RETURNS required to be filed by the Guarantor in any
jurisdiction have been filed or extended and all taxes, assessments, fees and
other governmental charges upon Guarantor or upon any of its properties, income
or franchises have been paid prior to the time that such taxes could give rise
to a lien thereon, unless protested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been established on
the books of Guarantor. The Guarantor has no knowledge of any proposed tax
assessment against Guarantor.
(E) Guarantor shall permit any authorized officer, employee or agent of the
Bank, to visit and INSPECT any of the business properties of the Guarantor,
examine Guarantor's books of record and accounts, take copies and extracts
therefrom, and inspect and discuss the procedures, finances and accounts of
Guarantor with Guarantor's accountants and auditors, all at such reasonable
times and as often as Bank may desire. Guarantor shall furnish such reports as
Bank may reasonably request.
Notwithstanding any provision in this Guaranty to the contrary, Guarantor
hereby WAIVES AND RELEASES (I) any and all rights of SUBROGATION, reimbursement,
indemnification or contribution which it may have, against others liable on all
or any part of the Loan, (ii) any and all rights to be subrogated the rights of
the Bank in any collateral or security for all or any part of the Loan, and
(iii) any and all other rights and claims of such Guarantor against Borrower or
any third party as a result of such Guarantor's payment of all or any part of
the Loan.
Capitalized terms not defined herein are used as defined in the Loan
Agreement.
The OBLIGATIONS of the Guarantor and any other guarantor of the Note
evidencing the Loan shall be JOINT AND SEVERAL. The Guarantor agrees that the
Bank, in its sole discretion, may (i) bring suit against the Guarantor and any
other guarantor of the Note evidencing the Loan jointly and severally or against
any one or more of them, (ii) compound or settle with any one or more of the
guarantors of the Note evidencing the Loan for such consideration as the Bank
may deem proper, (iii) release one or more of the guarantors of the Note
evidencing the Loan from liability thereunder, and (iv) otherwise deal with the
Guarantor and any other guarantors of the Note, or any one or more of them, in
any manner whatsoever; and that no such action shall impair the rights of the
Bank to collect the indebtedness hereby guaranteed from the Guarantor. Nothing
contained in this paragraph shall in any way affect or impair the rights or
obligations of the Guarantor with respect to any other guarantor of the Note
evidencing the Loan.
Any indebtedness of the Borrower to the Guarantor now or hereafter existing
(including, but not limited to, any rights to subrogation the Guarantor may have
as a result of any payment by the Guarantor under this Guaranty), together with
any interest thereon, shall be, and such indebtedness is hereby subordinated
until payment in full of the indebtedness of the Borrower to the Bank under the
Loan Documents and all other obligations hereunder. Until payment in full with
interest of the indebtedness of the Borrower to the Bank (and including interest
accruing on the Note after any petition under the Bankruptcy Reform Act of 1978,
as amended (the "BANKRUPTCY CODE"), which post-petition interest the parties
agree shall remain a claim that is prior and superior to any claim of the
Guarantor notwithstanding any contrary practice, custom or ruling in proceedings
under the Bankruptcy Code generally), the GUARANTOR agrees NOT to ACCEPT any
PAYMENT or satisfaction of any kind of any indebtedness of the Borrower to the
Guarantor, except with respect to the payment of any dividends declared by the
Borrower, the payment of which will not cause the Borrower to breach any
covenant under the Loan Agreement, and except with respect to any other
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3
payment for which the Bank grants its prior written consent. Further, the
Guarantor agrees that until such payment in full: (I) no Guarantor shall accept
payment from any other guarantor by way of contribution on account of any
payment made hereunder by such party to the Bank; (II) no one of them will take
any action to exercise or enforce any rights to such contribution; and (III) if
any individual or entity comprising the Guarantor should receive any payment,
satisfaction or security for any indebtedness of the Borrower to any individual
or entity comprising the Guarantor or for any contribution by any other
individual or entity comprising the Guarantor for payment made hereunder by the
recipient to the Bank at any time the Borrower is in default under the Loan
Documents, the same shall be delivered to the Bank in the form received,
endorsed or assigned as may be appropriate for application on account of, or as
security for the indebtedness of the Borrower to the Bank. This provision shall
not restrict or impair Guarantor's right to receive dividends declared by the
Borrower, which comply with the covenants under the Loan Agreement. Any lien or
charge on the Collateral (as defined in the Loan Agreement), all rights therein
and thereto, and on the profits, losses, income and distributions to be realized
therefrom, which the Guarantor may have or obtain as security for any loans or
advances to Borrower shall be, and such Lien or charge hereby is, waived.
Guarantor waives any rights Guarantor has under, or any requirements imposed by
Chapter 34 of the Texas Business & Commerce Code, as in effect on the date of
this Guaranty or as it may be amended from time to time. Guarantor waives any
rights of subrogation it may have against the Borrower.
In the event the Borrower is a corporation, joint stock association or
partnership, or is hereafter incorporated, if the indebtedness at any time
hereafter exceeds the amount permitted by law, or the Borrower is not liable
because the act of creating the obligation is ULTRA ▇▇▇▇▇, or the officers or
persons creating same acted in excess of their authority, and for these reasons
the indebtedness to the Bank which the Guarantor agrees to pay cannot be
enforced against the corporation, joint stock association or partnership, such
fact shall in no manner affect the Guarantor's liability hereunder; but the
Guarantor shall be liable hereunder, notwithstanding any finding that said
corporation, joint stock association or partnership is not liable for such
indebtedness, and to same extend as the Guarantor would have been if the
indebtedness of the Borrower had been enforceable against the Borrower.
THIS GUARANTY IS EXECUTED IN MODIFICATION AND INCREASE (BUT NOT
EXTINGUISHMENT) OF (A) THAT CERTAIN UNCONDITIONAL GUARANTY DATED EFFECTIVE AS OF
NOVEMBER 8, 1996 EXECUTED BY GUARANTOR , (B) THAT CERTAIN UNCONDITIONAL GUARANTY
EXECUTED BY GUARANTOR DATED EFFECTIVE AS OF JANUARY 1, 1997, AND (C) THAT
CERTAIN UNCONDITIONAL GUARANTY EXECUTED BY GUARANTOR DATED EFFECTIVE AS OF
JULY 5, 1997.
THIS GUARANTY AND ALL RIGHTS, OBLIGATIONS AND LIABILITIES ARISING HEREUNDER
SHALL BE CONSTRUED ACCORDING TO THE LAWS OF THE STATE OF TEXAS AND THE UNITED
STATES OF AMERICA.
THIS GUARANTY SHALL BE PERFORMABLE FOR ALL PURPOSES IN DALLAS COUNTY,
TEXAS. COURTS WITHIN THE STATE OF TEXAS SHALL HAVE JURISDICTION OVER ANY AND ALL
DISPUTES BETWEEN GUARANTOR AND BANK, WHETHER IN LAW OR EQUITY, INCLUDING, BUT
NOT LIMITED TO, ANY AND ALL DISPUTES ARISING OUT OF OR RELATING TO THIS GUARANTY
OR ANY OTHER LOAN DOCUMENT; AND VENUE IN ANY SUCH DISPUTE WHETHER IN FEDERAL OR
STATE COURT SHALL BE LAID IN DALLAS COUNTY, TEXAS. GUARANTOR HEREBY CONSENTS TO
PERSONAL JURISDICTION IN DALLAS COUNTY, TEXAS AND WAIVES ANY RIGHTS HE OR SHE
MAY HAVE TO BE SUED ELSEWHERE.
THIS GUARANTY AND THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
--------------
INITIALED FOR
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4
IN WITNESS WHEREOF, this Guaranty has been duly executed by the
undersigned, effective as of, although not necessarily on, the 24TH DAY OF
SEPTEMBER, 1997.
ADDRESS OF GUARANTOR:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇. HOMECAPITAL INVESTMENT CORPORATION,
SUITE 280 a Nevada corporation
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
By:
----------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
STATE OF TEXAS (S)
(S)
COUNTY OF DALLAS (S)
This instrument was ACKNOWLEDGED before me the ____ day of September, 1997,
by ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President of HOMECAPITAL INVESTMENT CORPORATION, a Nevada
corporation, on behalf of said corporation.
--------------------------------------------
Notary Public - State of Texas
My Commission expires: --------------------------------------------
Printed Name of Notary
----------------------
1599262.03
▇
▇▇▇▇▇▇▇ "▇" [▇▇]
ADVANCE REQUEST
FROM: HOMEOWNERS MORTGAGE & EQUITY, INC.,
D/B/A HOME, INC.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Phone (▇▇▇) ▇▇▇-▇▇▇▇
Fax (▇▇▇) ▇▇▇-▇▇▇▇
TO: GUARANTY FEDERAL BANK, F.S.B. ("BANK")
1. HOMEOWNERS MORTGAGE & EQUITY, INC., A DELAWARE CORPORATION, D/B/A HOME,
INC. ("BORROWER") hereby requests an Advance in the amount and on the
date specified from the Bank (an "ADVANCE") in the amount and on the date
herein specified, pursuant to the FIRST AMENDED AND RESTATED WORKING
CAPITAL LINE OF CREDIT AND SECURITY AGREEMENT [SERVICING SECURED] among
Borrower and the Bank, dated as of SEPTEMBER 24, 1997, as amended to date
(the "AGREEMENT"), and hereby grants to Bank, in accordance with the
provisions of that Agreement, between Borrower and the Bank, as amended
to date, a security interest and Lien in each Mortgage Loan described on
the attached SCHEDULE C-I. Capitalized terms used herein and defined in
the Agreement shall be used herein as so defined.
2. ADVANCES REQUESTED:
(i) Borrower hereby requests an Advance in the principal amount of
$__________.
(ii) Requested Advance Date: _______________, 199__.
(iii) Borrower hereby grants to the Bank a security interest in the
SERVICING RIGHTS or Excess INTEREST CERTIFICATES described on
SCHEDULE C-I attached hereto.
(iv) If this Advance Request is to be made based upon a pledge of
Excess Interest Certificates, a pro forma Excess Interest
Certificate and the private placement memorandum relating thereto
shall be attached hereto as SCHEDULE C-III.
Requirement of Agreement: Maximum of $16,666,600.00.
Requirement satisfied _______.
Requirement not satisfied _______.
3. The undersigned officer of Borrower REPRESENTS AND WARRANTS to the Bank:
(a) Borrower is entitled to receive the requested Advance under the terms
and conditions of the Agreement;
(b) all items which Borrower is required to furnish to the Bank pursuant to
the Agreement accompany this Advance Request;
(c) all Collateral offered hereby conform in all respects with the
applicable requirements set forth in the Agreement;
(d) no Event of Default has occurred and is continuing under the
Agreement;
1
(e) no change or event which with notice and/or the passage of time would
constitute an Event of Default; and
(f) attached hereto is the COMPLIANCE SCHEDULE C-II showing Borrower's
compliance as of the date hereof with the requirements of ARTICLE VII
of the Agreement.
4. Borrower REPRESENTS AND WARRANTS that:
(A) The Collateral Value as defined in
the Agreement of all Collateral
prior to this Advance is: $_________________
(B) The outstanding Advances prior to this Advance are: $_________________
(C) The Collateral Value of all Collateral pledged
to Bank after this Advance Request is: $_________________
(D) The outstanding Advances under the Note after this
Advance Request will be: $_________________
5. THE REPRESENTATIONS AND WARRANTIES OF BORROWER CONTAINED IN THE AGREEMENT
AND THOSE CONTAINED IN EACH OTHER LOAN DOCUMENT TO WHICH BORROWER IS A
PARTY ARE TRUE AND CORRECT IN ALL RESPECTS ON AND AS OF THE DATE HEREOF.
HOMEOWNERS MORTGAGE & EQUITY, INC.,
a Delaware corporation, d/b/a Home, Inc.
Date:____________, 199___ By:______________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
STATE OF TEXAS (S)
(S)
COUNTY OF ▇▇▇▇▇▇ (S)
This instrument was ACKNOWLEDGED before me the ____ day of
________________, 199___, by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Executive Vice President, of
HOMEOWNERS MORTGAGE & EQUITY, INC., a Delaware corporation, d/b/a HOME, INC., on
behalf of said corporation.
--------------------------------------------
Notary Public - State of Texas
My Commission expires: --------------------------------------------
Printed Name of Notary
----------------------
100316\1599262.03
2
SCHEDULE C-I
SERVICING RIGHTS
List of Servicing Agreements
1. Mortgage Selling and Servicing Contract with Federal National Mortgage
Association Dated March 1, 1996. (Agency Servicing Agreement)
2. ▇▇▇▇▇▇ FHA Title I Loan Trust 1995-6.
3. ▇▇▇▇▇▇ FHA Title I Loan Trust 1996-2.
4. ▇▇▇▇▇▇ FHA Title I Loan Trust 1996-3.
5.
EXCESS INTEREST CERTIFICATES
100316\1599262.03
3
[WC]
COMPLIANCE SCHEDULE C-II
FINANCIAL COVENANTS REQUIRED ACTUAL IN COMPLIANCE
[YES] OR [NO]
[*DELETE
INAPPLICABLE
ANSWER]
1) Limitation on Indebtedness
of Borrower [7.1]: _________ [YES] or [NO] *
2) No Merger [7.2]: [YES] or [NO] *
3) Fiscal Year [7.3]: [YES] or [NO] *
4) Lines of Business [7.4]: [YES] or [NO] *
5) Liquidations, etc. [7.5]: [YES] or [NO] *
6) Investments [7.6]: _________ [YES] or [NO] *
7) Operational Changes [7.7]: [YES] or [NO] *
8) Compliance with ERISA [7.8]: [YES] or [NO] *
9) Net Worth [7.9]: Not less than
6.2(A) figure
plus 7.9(B) & (C) _________ [YES] or [NO] *
10) Tangible Net Worth [7.10]: Agency Minimum _________ [YES] or [NO] *
11) Adjusted Tangible Not less than the
Net Worth [7.11]: greater of (A) ATNW
requirement for
preceding quarter
and (B) 80% of
PRESENT ATNW _________ [YES] or [NO] *
12) Debt to Adjusted Tangible Net Not more than
Worth [7.12]: 5.0 to 1.0 _________ [YES] or [NO] *
13) Minimum Liquidity [7.13]: Not less than
$500,000.00 _________ [YES] or [NO] *
14) Management [7.14]: No change [YES] or [NO] *
15) Interested Transactions [7.15]: $50,000.00 Maximum _________ [YES] or [NO] *
16) Transfer of Stock [7.16]: Maximum 35% _________ [YES] or [NO] *
4
17) Subsidiaries [7.17]: [YES] or [NO] *
18) Loss of Eligibility [7.18]: [YES] or [NO] *
20) Negative Covenants/
Collateral [7.19(W.C.)]: [YES] or [NO] *
HOMEOWNERS MORTGAGE & EQUITY, INC.,
a Delaware corporation, d/b/a HOME, INC.
By: __________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
______________________________
[Date]
STATE OF TEXAS (S)
(S)
COUNTY OF ▇▇▇▇▇▇ (S)
This instrument was ACKNOWLEDGED before me the ____ day of __________,
199__, by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Executive Vice President of HOMEOWNERS MORTGAGE &
EQUITY, INC., a Delaware corporation, d/b/a HOME, INC., on behalf of said
corporation.
--------------------------------------------
Notary Public - State of Texas
My Commission expires: --------------------------------------------
Printed Name of Notary
----------------------
100316\1599262.03
5
[WC]
EXHIBIT "D"
BORROWING BASE CERTIFICATE
Reference is made to that certain First Amended and Restated Working
Capital Line of Credit and Security Agreement [Servicing Secured] dated as of
SEPTEMBER 24, 1997 (the "LOAN AGREEMENT"), between HomeOwners Mortgage & Equity,
Inc., a Delaware corporation, d/b/a Home, Inc. ("BORROWER") and Guaranty Federal
Bank, F.S.B. Terms which are defined in the Loan Agreement and which are used
but not defined herein shall have the meanings given them in the Loan Agreement.
The undersigned, _____________________ does hereby certify that he/she has made
a thorough inquiry into all matters certified herein and, based upon such
inquiry, experience, and the advice of counsel, does hereby further certify
that:
1. Attached hereto is the BORROWING BASE SCHEDULE showing Borrower's
compliance as of the date hereof with the requirements of Loan Agreement.
2. No Net Collateral Deficit exists.
IN WITNESS WHEREOF, this instrument is executed by the undersigned as of
__________________, 199__.
_________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Executive Vice President
STATE OF TEXAS (S)
(S)
COUNTY OF ▇▇▇▇▇▇ (S)
This instrument was ACKNOWLEDGED before me the ____ day of _______________,
19__, by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, in his capacity as Executive Vice President of
HOMEOWNERS MORTGAGE & EQUITY, INC., a Delaware corporation, d/b/a HOME, INC., on
behalf of said corporation.
--------------------------------------------
Notary Public - State of Texas
My Commission expires: --------------------------------------------
Printed Name of Notary
----------------------
100316\1599262.03
1
SCHEDULE D-1
BORROWING BASE SCHEDULE
LTV (FOR WORKING CAPITAL LINE)
(A) UPB of FNMA Interest-only Strip Receivable $
(B) Most Recent Quarterly Valuation Dated (Date of Valuation)
(C) Value of FNMA Interest-only Strip Receivable (A) x (B) $
(D) (C) x .50 $
(E) Interest-only Strip Receivable FNMA $
(F) Lesser of (D) or (E) $
(G) Working Capital Principal Balance Loan to Value (G) / (F) $
2
EXHIBIT "E"
List of Servicing Contracts
1. Mortgage Selling and Servicing Contract with Federal National Mortgage
Association Dated March 1, 1996. (Agency Servicing Agreement).
2. ▇▇▇▇▇▇ FHA Title I Loan Trust 1995-6.
3. ▇▇▇▇▇▇ FHA Title I Loan Trust 1996-2.
4. ▇▇▇▇▇▇ FHA Title I Loan Trust 1996-3.
3
[WC]
EXHIBIT "F"
1 of 6
COMPLIANCE CERTIFICATE
Reference is made to that certain First Amended and Restated Working
Capital Line of Credit and Security Agreement [Servicing Secured] dated as of
SEPTEMBER 24, 1997 (the "LOAN AGREEMENT"), between HomeOwners Mortgage & Equity,
Inc., a Delaware corporation, d/b/a Home, Inc. ("BORROWER") and Guaranty Federal
Bank, F.S.B. Terms which are defined in the Loan Agreement and which are used
but not defined herein shall have the meanings given them in the Loan Agreement.
The undersigned, _____________________ does hereby certify that he/she has made
a thorough inquiry into all matters certified herein and, based upon such
inquiry, experience, and the advice of counsel, does hereby further certify
that:
1. He/she is the duly elected, qualified, and acting officer of Borrower.
2. All representations and warranties made by any Related Person in any
Loan Document delivered on or before the date hereof are true on and as of the
date hereof (except to the extent that the facts upon which such representations
are based have been changed by the transactions contemplated in the Loan
Agreement) as if such representations and warranties had been made as of the
date hereof.
3. No Event of Default exists on the date hereof and no event has
occurred and is continuing which with notice and/or opportunity to cure would
become an Event of Default.
4. Each Related Person has performed and complied with all agreements and
conditions required in the Loan Documents to be performed or complied with by it
on or prior to the date hereof.
5. Attached hereto is the COMPLIANCE SCHEDULE showing Borrower's
compliance as of the date hereof with the requirements of ARTICLE VII of the
Loan Agreement and Borrower's non-compliance as of the date hereof with the
requirements of SECTION(S) ________________ of the Loan Agreement.
6. No Net Collateral Deficit exists.
IN WITNESS WHEREOF, this instrument is executed by the undersigned as of
__________________, 1997.
_________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Executive Vice President
1
EXHIBIT "F" [WC]
2 of 6
STATE OF TEXAS (S)
(S)
COUNTY OF ▇▇▇▇▇▇ (S)
This instrument was ACKNOWLEDGED before me the ____ day of September, 1997,
by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, in his capacity as Executive Vice President of HOMEOWNERS
MORTGAGE & EQUITY, INC., a Delaware corporation, d/b/a HOME, INC., on behalf of
said corporation.
--------------------------------------------
Notary Public - State of Texas
My Commission expires: --------------------------------------------
Printed Name of Notary
----------------------
100316\1599262.03
2
EXHIBIT "F" [WC]
3 of 6
Compliance Schedule
FINANCIAL COVENANTS REQUIRED ACTUAL IN COMPLIANCE
[YES] OR [NO]
[*DELETE
INAPPLICABLE
ANSWER]
1) Limitation on Indebtedness
of Borrower [7.1]: _________ [YES] or [NO] *
2) No Merger [7.2]: [YES] or [NO] *
3) Fiscal Year [7.3]: [YES] or [NO] *
4) Lines of Business [7.4]: [YES] or [NO] *
5) Liquidations, etc. [7.5]: [YES] or [NO] *
6) Investments [7.6]: _________ [YES] or [NO] *
7) Operational Changes [7.7]: [YES] or [NO] *
8) Compliance with ERISA [7.8]: [YES] or [NO] *
9) Net Worth [7.9]: Not less than
6.2(A) figure
plus 7.9(B) & (C) _________ [YES] or [NO] *
10) Tangible Net Worth [7.10]: Agency Minimum _________ [YES] or [NO] *
11) Adjusted Tangible Not less than the
Net Worth [7.11]: greater of (A) ATNW
requirement for
preceding quarter
and (B) 80% of
PRESENT ATNW _________ [YES] or [NO] *
12) Debt to Adjusted Tangible Net Not more than
Worth [7.12]: 5.0 to 1.0 _________ [YES] or [NO] *
13) Minimum Liquidity [7.13]: Not less than
$500,000.00 _________ [YES] or [NO] *
14) Management [7.14]: No change [YES] or [NO] *
15) Interested Transactions [7.15]: $50,000.00 Maximum _________ [YES] or [NO] *
3
16) Transfer of Stock [7.16]: Maximum 35% _________ [YES] or [NO] *
17) Subsidiaries [7.17]: [YES] or [NO] *
18) Sale or pledge of servicing
contracts [7.18]: [YES] or [NO] *
19) Loss of Eligibility [7.19]: [YES] or [NO] *
20) Negative Covenants/
Collateral [7.19]: [YES] or [NO] *
HOMEOWNERS MORTGAGE & EQUITY, INC.,
a Delaware corporation, d/b/a HOME, INC.
By:__________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
______________________________
[Date]
STATE OF TEXAS (S)
(S)
COUNTY OF ▇▇▇▇▇▇ (S)
This instrument was ACKNOWLEDGED before me the ____ day of __________,
199__, by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Executive Vice President of HOMEOWNERS MORTGAGE &
EQUITY, INC., a Delaware corporation, d/b/a HOME, INC., on behalf of said
corporation.
--------------------------------------------
Notary Public - State of Texas
My Commission expires: --------------------------------------------
Printed Name of Notary
----------------------
100316\1599262.02
4
EXHIBIT "G"
Subsidiaries
1. Home Securities One L.L.C.
2. Home Securities Trust I
5
EXHIBIT "H"
(FORM OF LEGAL OPINION BY COUNSEL TO COMPANY)
on Attorney's Letterhead
[Date]
Guaranty Federal Bank, F.S.B.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
RE: FIRST AMENDED AND RESTATED WORKING CAPITAL LINE OF CREDIT AND SECURITY
AGREEMENT [SERVICING SECURED] dated SEPTEMBER 24, 1997 (the AGREEMENT") by and
between Guaranty Federal Bank, F.S.B. (the "BANK") and ___________________ (the
"COMPANY").
Ladies and Gentlemen:
We have acted as counsel to the Company in connection with the preparation,
execution and delivery of the above referenced Agreement. This Opinion Letter is
provided to you at the request of the Company pursuant to SECTION 4.1(A)(4) OF
THE AGREEMENT. Except as otherwise provided herein, capitalized terms used in
the Opinion Letter are defined as set forth in the Agreement or the Accord (see
below).
This Opinion Letter is governed by, and shall be interpreted in accordance with,
the Legal Opinion Accord (THE "ACCORD") of the ABA Section of Business Law
(1991). As a consequence, it is subject to a number of qualifications
exceptions, definitions, limitations on coverage and other limitations, all as
more particularly described in the Accord, and this Opinion Letter should be
read in conjunction therewith. The law covered by the opinions expressed herein
is limited to the Federal Law of the United States and the Law of the State of
Florida.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Agreement is enforceable against the Company.
2. Execution and delivery by the Company of, and performance of its
agreements in, the Agreement do not (i) violate the Constituent
Documents, or (ii) breach, or result in a default under, any existing
obligation of the Company under an Other Agreement, or (iii) breach or
otherwise violate any existing obligation of the Company under a Court
Order.
3. Execution and delivery by the Company of, and performance by the Company
of its agreements in, the Agreement do not violate applicable provisions
of statutory law or regulation.
4. The filing of an executed UCC Financing Statement in Texas, will give
the Bank a perfected first lien security interest in the Collateral.
5. The transactions contemplated by the Agreement do not require the
payment of any intangible taxes or documentary stamp taxes by Company or
Bank in the State of Texas.
6
The General Qualifications apply to the No Violation of Law Opinion set forth in
paragraph (3) above as well as to the Remedies Opinion set forth in paragraph
one (1) above.
We hereby confirm to you, pursuant to the request set forth in SECTION 5.5 of
the Agreement, that there are no actions or proceedings against the Company
pending or overtly threatened in writing, before any court, governmental agency
or arbitrator which (i) seek to affect the enforceability of the Agreement, or
(ii) come within the objective standards established in the Agreement for
disclosure of such matters.
A copy of this Opinion Letter may be delivered by you to syndicate participants,
potential and actual, in connection with any sale, or potential sale, of
participation interests in the warehousing line of credit established by the
Agreement. Additionally, a copy of this Opinion Letter may be delivered by you
to any state or federal regulatory entity in connection with your continued
compliance of state and federal regulations or any such regulatory examination.
Such syndicate participants and regulatory entities may rely on this Opinion
Letter as if it were addressed and had been delivered to them on the date
hereof. Subject to the foregoing, this Opinion Letter may be relied upon by you
only in connection with the Transaction any may not be used or relied upon by
you or any other person for any purpose whatsoever, except to the extent
authorized in the Accord, without in each instance our prior written consent.
Very truly yours,
_______________________________
100316\1599262.03
7
[WC]
EXHIBIT "I"
CERTIFICATE ACCOMPANYING
FINANCIAL STATEMENTS
Reference is made to that certain First Amended and Restated Working
Capital Line of Credit and Security Agreement dated as of SEPTEMBER 24, 1997 (as
from time to time amended, the "AGREEMENT"), by and between HOMEOWNERS MORTGAGE
& EQUITY, INC., A DELAWARE CORPORATION, D/B/A HOME, INC. ("BORROWER"), GUARANTY
FEDERAL BANK, F.S.B. ("BANK"), which Agreement is in full force and effect on
the date hereof. Terms which are defined in the Agreement are used herein with
the meanings given them in the Agreement.
This Certificate is furnished pursuant to SECTIONS 4.1(A)(7) OR (8) OR 6.2
of the Agreement. Together herewith Borrower is furnishing to Bank Borrower's
audited annual financial statements or unaudited monthly financial statements
(the "FINANCIAL STATEMENTS") dated ______________ (the "REPORTING DATE").
Borrower hereby represents, warrants, and acknowledges to Bank that:
(a) the officer of Borrower signing this instrument is the duly
elected, QUALIFIED and acting ________________________________
of Borrower and as such is Borrower's chief financial officer;
(b) the Financial Statements are ACCURATE and complete and satisfy
the requirements of the Agreement;
(c) attached hereto is the COMPLIANCE SCHEDULE showing Borrower's
compliance as of the Reporting Date with the requirements of
ARTICLE VII of the Agreement and Borrower's non-compliance as
of such date with the requirements of Section(s) _____________
of the Agreement;
(d) on the Reporting Date Borrower was, and on the date hereof
Borrower is, in FULL compliance with the DISCLOSURE
requirements of SECTION 6.6 of the Agreement, and no Default
otherwise existed on the Reporting Date or otherwise exists on
the date of this instrument [except for Default(s) under
Section(s) ____________________ of the Agreement, which are
more fully described on a schedule attached hereto].
THE OFFICER OF BORROWER SIGNING THIS INSTRUMENT HEREBY CERTIFIES THAT HE
HAS REVIEWED THE LOAN DOCUMENTS AND THE FINANCIAL STATEMENTS AND HAS OTHERWISE
UNDERTAKEN SUCH INQUIRY AS IS IN HIS OPINION NECESSARY TO ENABLE HIM TO EXPRESS
AN INFORMED OPINION WITH RESPECT TO THE ABOVE REPRESENTATIONS, WARRANTIES AND
ACKNOWLEDGMENTS OF BORROWER AND, TO THE BEST OF HIS KNOWLEDGE, SUCH
REPRESENTATIONS, WARRANTIES, AND ACKNOWLEDGMENTS ARE TRUE, CORRECT AND COMPLETE.
IN WITNESS WHEREOF, this instrument is executed as of
____________________, 19 ____ .
HOMEOWNERS MORTGAGE & EQUITY, INC.,
a Delaware corporation, d/b/a HOME, INC.
By: ______________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
8
STATE OF TEXAS (S)
(S)
COUNTY OF ▇▇▇▇▇▇ (S)
This instrument was ACKNOWLEDGED before me the ____ day of
____________________, 199__, by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Executive Vice President of
HOMEOWNERS MORTGAGE & EQUITY, INC., a Delaware corporation, d/b/a HOME, INC., on
behalf of said corporation.
--------------------------------------------
Notary Public - State of Texas
My Commission expires: --------------------------------------------
Printed Name of Notary
----------------------
100316\1599262.02
1
COMPLIANCE SCHEDULE
FINANCIAL COVENANTS REQUIRED ACTUAL IN COMPLIANCE
[YES] OR [NO]
[*DELETE
INAPPLICABLE
ANSWER]
1) Limitation on Indebtedness
of Borrower [7.1]: _________ [YES] or [NO] *
2) No Merger [7.2]: [YES] or [NO] *
3) Fiscal Year [7.3]: [YES] or [NO] *
4) Lines of Business [7.4]: [YES] or [NO] *
5) Liquidations, etc. [7.5]: [YES] or [NO] *
6) Investments [7.6]: _________ [YES] or [NO] *
7) Operational Changes [7.7]: [YES] or [NO] *
8) Compliance with ERISA [7.8]: [YES] or [NO] *
9) Net Worth [7.9]: Not less than
6.2(A) figure
plus 7.9(B) & (C) _________ [YES] or [NO] *
10) Tangible Net Worth [7.10]: Agency Minimum _________ [YES] or [NO] *
11) Adjusted Tangible Not less than the
Net Worth [7.11]: greater of (A) ATNW
requirement for
preceding quarter
and (B) 80% of
PRESENT ATNW _________ [YES] or [NO] *
12) Debt to Adjusted Tangible Net Not more than
Worth [7.12]: 5.0 to 1.0 _________ [YES] or [NO] *
13) Minimum Liquidity [7.13]: Not less than
$500,000.00 _________ [YES] or [NO] *
14) Management [7.14]: No change [YES] or [NO] *
15) Interested Transactions [7.15]: $50,000.00 Maximum _________ [YES] or [NO] *
16) Transfer of Stock [7.16]: Maximum 35% _________ [YES] or [NO] *
2
17) Subsidiaries [7.17]: [YES] or [NO] *
18) Loss of Eligibility [7.18]: [YES] or [NO] *
19) Negative Covenants/
Collateral [7.19]: [YES] or [NO] *
HOMEOWNERS MORTGAGE & EQUITY, INC.,
a Delaware corporation, d/b/a HOME, INC.
By: _________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
______________________________
[Date]
STATE OF TEXAS (S)
(S)
COUNTY OF ▇▇▇▇▇▇ (S)
This instrument was ACKNOWLEDGED before me the ____ day of September, 1997,
by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Executive Vice President of HOMEOWNERS MORTGAGE & EQUITY,
INC., a Delaware corporation, d/b/a HOME, INC., on behalf of said corporation.
--------------------------------------------
Notary Public - State of Texas
My Commission expires: --------------------------------------------
Printed Name of Notary
----------------------
100316\1599262.03
3
EXHIBIT "J"
PURCHASER'S ACKNOWLEDGMENT AGREEMENT
HOMEOWNERS MORTGAGE & EQUITY, INC., A DELAWARE CORPORATION, D/B/A HOME, INC.
("SELLER") has contracted to sell servicing rights to service certain
residential mortgages to _________________________________ ("PURCHASER")
pursuant to that certain PURCHASE AND SALE AGREEMENT, DATED
_____________________________ (the "SALES CONTRACT"). Seller has pledged its
right to receive any and all payments from Purchaser in connection with such
sale to GUARANTY FEDERAL BANK, F.S.B. ("GFB"). Seller hereby directs Purchaser
to make and Purchaser hereby agrees to make all payments owed under or in
connection with the Sales Contract to GFB by wire transfer under the terms of
the Sales Contract and send all such payments to GFB as follows:
BY WIRE TRANSFER, TO:
Guaranty Federal Bank, F.S.B.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Account No.: _______________
ABA No.: ▇▇▇-▇▇▇-▇▇▇
Upon payment in full of the Redemption Amount ___________________ GFB shall
execute appropriate documents providing for the release of GFB's liens and
security interests in and to such servicing rights, such releases in form and
content acceptable to GFB in its sole discretion.
This letter shall remain in full force and effect and may not be rescinded.
HomeOwners Mortgage & Equity, Inc.,
a Delaware corporation, d/b/a Home, Inc.
By: ________________________________________
▇▇▇▇ ▇▇▇▇▇▇▇,
President
Agreed And Accepted As Of the ____
Day of ________________, 199__:
Firm: ____________________________
By: ____________________________
Name: _____________________
Title: _____________________
100316\1599262.03
4
EXHIBIT "K"
EXISTING AND PROPOSED INDEBTEDNESS
EXISTING INDEBTEDNESS:
DESCRIPTION Amount
1. Revolving Warehouse Promissory Note $ 931,315.00
payable to Bank maturing June 30, 1998
2. Working Capital Line of Credit Note $ 6,800,000.00
payable to Bank maturing June 30, 1998
3. Capital Lease Obligations $ 44,905.00
4.Uncommitted revolving credit facilities $15,497,932.00
provided by FNMA for the sole purpose of financing
the origination and acquisition of Title I Loan
including the ASAP Program or ASAP Plus
Program.
.
5. Payable under securities loan agreements $20,995,000.00
with FNMA for the sole purposes of acquiring
and holding FNMA Securities
6. Other accrued expenses and liabilities $ 4,828,193.00
under clauses (ii), (iv) and (v) of Section 7.1 --------------
TOTAL $49,097,345.00
PROPOSED INDEBTEDNESS
DESCRIPTION
1. Not more than $65,000,000.00 in repurchase facilities of which
$50,000,000.00 may be used for the sole purpose of financing FNMA
Securities and $15,000,000.00 may be used for the sole purpose of RESIDUAL
FINANCING; provided however, in calculating the limits stated herein the
Existing Indebtedness listed in PARAGRAPH 5 above shall be included and
provided further that no such Indebtedness shall be incurred without the
prior written consent of Bank including a review by Bank of any proposed
written agreements relating to such Indebtedness
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EXHIBIT "L"
SUBSERVICING CONTRACTS
1. Home Improvement Loan Program Subservicing Agreement dated May 31, 1995,
between the Borrower and Compu-Link Loan Service, Inc.
2. The Agreement dated July 31, 1997, between the Borrower and Financial
Collection Agencies of Pennsylvania, Inc.
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