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EXHIBIT 10.1
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WAREHOUSING CREDIT AND SECURITY AGREEMENT
(SINGLE FAMILY MORTGAGE LOANS)
BETWEEN
BNC MORTGAGE, INC., a Delaware corporation
and
MORTGAGE ▇▇▇▇▇.▇▇▇, INC., a California corporation
AND
RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation
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Dated as of March 1, 1999
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TABLE OF CONTENTS
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1. DEFINITIONS............................................................... 1
1.1 Defined Terms................................................. 1
1.2 Other Definitional Provisions................................. 11
2. THE CREDIT................................................................ 11
2.1 The Commitment................................................ 11
2.2 Procedures for Obtaining Advances............................. 12
2.3 Note.......................................................... 14
2.4 Interest...................................................... 14
2.5 Principal Payments............................................ 16
2.6 Expiration of Commitment...................................... 19
2.7 Method of Making Payments..................................... 19
2.8 Commitment Fees and Non-Usage Fees............................ 19
2.9 Warehousing Fees.............................................. 20
2.10 Miscellaneous Charges......................................... 20
2.11 Interest Limitation........................................... 20
2.12 Increased Costs; Capital Requirements......................... 21
3. COLLATERAL................................................................ 22
3.1 Grant of Security Interest.................................... 22
3.2 Release of Security Interest in Collateral.................... 24
3.3 ▇▇▇▇-to-Market................................................ 25
3.4 Delivery of Additional Collateral or Mandatory Prepayment..... 26
3.5 Release of Collateral......................................... 27
3.6 Collection and Servicing Rights............................... 27
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3.7 Return of Collateral at End of Commitment..................... 27
4. CONDITIONS PRECEDENT...................................................... 28
4.1 Initial Advance............................................... 28
4.2 Each Advance.................................................. 31
5. REPRESENTATIONS AND WARRANTIES............................................ 32
5.1 Organization; Good Standing; Subsidiaries..................... 32
5.2 Authorization and Enforceability.............................. 32
5.3 Approvals..................................................... 33
5.4 Financial Condition........................................... 33
5.5 Litigation.................................................... 33
5.6 Compliance with Laws.......................................... 34
5.7 Regulation U.................................................. 34
5.8 Investment Company Act........................................ 34
5.9 Payment of Taxes.............................................. 34
5.10 Agreements.................................................... 35
5.11 Title to Properties........................................... 35
5.12 ERISA......................................................... 35
5.13 Eligibility................................................... 36
5.14 Place of Business............................................. 36
5.15 Special Representations Concerning Collateral................. 36
5.16 Servicing..................................................... 38
5.17 No Adverse Selection.......................................... 38
5.18 Year 2000 Compliance.......................................... 38
6. AFFIRMATIVE COVENANTS..................................................... 39
6.1 Payment of Note............................................... 39
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6.2 Financial Statements and Other Reports........................ 39
6.3 Maintenance of Existence; Conduct of Business................. 42
6.4 Compliance with Applicable Laws............................... 42
6.5 Inspection of Properties and Books............................ 42
6.6 Notice........................................................ 43
6.7 Payment of Debt, Taxes, etc................................... 43
6.8 Insurance..................................................... 44
6.9 Closing Instructions.......................................... 44
6.10 Subordination of Certain Indebtedness......................... 44
6.11 Other Loan Obligations........................................ 44
6.12 Use of Proceeds of Advances................................... 45
6.13 Special Affirmative Covenants Concerning Collateral........... 45
7. NEG COVENANTS............................................................. 46
7.1 Contingent Liabilities........................................ 46
7.2 Sale or Pledge of Servicing Contracts......................... 46
7.3 Merger; Sale of Assets; Acquisitions.......................... 46
7.4 Deferral of Subordinated Debt................................. 47
7.5 Loss of Eligibility........................................... 47
7.6 Debt to Tangible Net Worth Ratio.............................. 47
7.7 Minimum Tangible Net Worth.................................... 47
7.8 Liquidity..................................................... 47
7.9 Transactions with Affiliates.................................. 47
7.10 Quarterly Net Income.......................................... 47
7.11 Acquisition of Recourse Servicing Contracts................... 47
7.12 Special Negative Covenants Concerning Collateral.............. 48
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8. DEFAULTS; REMEDIES........................................................ 48
8.1 Events of Default............................................. 48
8.2 Remedies...................................................... 51
8.3 Application of Proceeds....................................... 55
8.4 Lender Appointed Attorney-in-Fact............................. 56
8.5 Right of Set-Off.............................................. 56
9. NOTICES................................................................... 57
10. REIMBURSEMENT OF EXPENSES; INDEMNITY...................................... 57
11. FINANCIAL INFORMATION..................................................... 58
12. MISCELLANEOUS............................................................. 58
12.1 Terms Binding Upon Successors; Survival of Representations.... 58
12.2 Assignment.................................................... 59
12.3 Amendments.................................................... 59
12.4 Governing Law................................................. 59
12.5 Participations................................................ 59
12.6 Relationship of the Parties................................... 59
12.7 Severability.................................................. 60
12.8 Operational Reviews........................................... 60
12.9 Consent to Credit References.................................. 60
12.10 Consent to Jurisdiction....................................... 60
12.11 Counterparts.................................................. 61
12.12 Entire Agreement.............................................. 61
12.13 WAIVER OF JURY TRIAL.......................................... 61
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EXHIBITS
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Exhibit A Promissory Note
Exhibit B [INTENTIONALLY OMITTED]
Exhibit C-SF Request for Advance Against Single
Family Mortgage Loans
Exhibit D-SF Procedures and Documentation for
Warehousing Single Family Mortgage
Loans
Exhibit E Schedule of Servicing Contracts
Exhibit F Subordination of Debt Agreement
Exhibit G Subsidiaries
Exhibit H Legal Opinion
Exhibit I-SF Officer's Certificate
Exhibit J Schedule of Existing Warehouse Lines
Exhibit K Funding Bank Agreement (Wire)
Exhibit L Commitment Summary Report
Exhibit M Terms Applicable to Advances Against
Eligible Loans
Exhibit N Terms of Guaranteed Obligations
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THIS WAREHOUSING CREDIT AND SECURITY AGREEMENT, dated as of March 1,
1999, between BNC MORTGAGE, INC., a Delaware corporation ("BNC"), MORTGAGE
▇▇▇▇▇.▇▇▇, INC., a California corporation ("Mortgage Logic") (BNC and Mortgage
Logic, collectively referred to as the "Borrowers"), having their principal
office at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and RESIDENTIAL FUNDING
CORPORATION, a Delaware corporation (the "Lender"), having its principal office
at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
WHEREAS, the Borrowers and the Lender desire to set forth herein the
terms and conditions upon which the Lender shall provide warehouse financing to
the Borrowers;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. DEFINITIONS.
1.1 Defined Terms. Capitalized terms defined below or
elsewhere in this Agreement (including the Exhibits hereto) shall
have the following meanings:
"Adjusted Servicing Portfolio" means, for any Person,
the Servicing Portfolio of such Person, but excluding the principal
balance of Mortgage Loans included in the Servicing Portfolio at
such date (a) which are past due for principal or interest for sixty
(60) days or more, (b) with respect to which such Person is
obligated to repurchase or indemnify the holder of the Mortgage
Loans as a result of defaults on the Mortgage Loans at any time
during the term of such Mortgage Loans, (c) for which the Servicing
Contracts are not owned by such Person free and clear of all Liens
(other than in favor of the Lender), or (d) which are serviced by
the Borrowers for others under subservicing arrangements.
"Adjusted Tangible Net Worth" means with respect to any
Person at any date, the Tangible Net Worth of such Person at such
date, excluding capitalized excess servicing fees and capitalized
servicing rights, plus one percent (1%) of the Adjusted Servicing
Portfolio, and plus deferred taxes arising from capitalized excess
servicing fees and capitalized servicing rights.
"Advance" means a disbursement by the Lender under the
Commitment pursuant to Section 2.1 of this Agreement.
"Advance Request" has the meaning set forth in Section
2.2(a) hereof.
"Affiliate" has the meaning set forth in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act.
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"Agency Security" means a Mortgage-backed Security
issued or guarantied by ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ Mac or ▇▇▇▇▇▇ Mae.
"Agreement" means this Warehousing Credit and Security
Agreement (Single Family Mortgage Loans), either as originally
executed or as it may from time to time be supplemented, modified or
amended.
"Approved Custodian" means a pool custodian or other
Person which is deemed acceptable to the Lender from time to time in
its sole discretion to hold a Mortgage Loan for inclusion in a
Mortgage Pool or to hold a Mortgage Loan as agent for an Investor
who has issued a Purchase Commitment for such Mortgage Loan.
"Borrowers" has the meaning set forth in the first
paragraph of this Agreement.
"Business Day" means any day excluding Saturday or
Sunday and excluding any day on which national banking associations
are closed for business.
"Cash Collateral Account" means a demand deposit account
maintained at the Funding Bank in the name of the Lender and
designated for receipt of the proceeds of the sale or other
disposition of the Collateral.
"Check Disbursement Account" means a demand deposit
account maintained at the Funding Bank in the name of the Borrowers
and under the control of the Lender for the clearing of checks
written by the Borrowers to fund Advances.
"Closing Date" means March 1, 1999.
"Collateral" has the meaning set forth in Section 3.1
hereof.
"Collateral Documents" has the meaning set forth in
Section 2.2(a) hereof.
"Collateral Value" means (a) with respect to any
Eligible Loan as of the date of determination, the lesser of (i) the
amount of any Advance made against such Eligible Loan under Section
2.1(c) hereof or (ii) the Fair Market Value of such Eligible Loan;
(b) in the event Pledged Mortgages have been exchanged for Agency
Securities, the lesser of (i) the amount of any Advances outstanding
against the Eligible Loans backing such Agency Securities or (ii)
the Fair Market Value of such Pledged Securities; and (c) with
respect to cash, the amount of such cash.
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"Commitment" has the meaning set forth in Section 2.1(a)
hereof.
"Commitment Amount" means Fifty Million Dollars
($50,000,000).
"Commitment Fee" means a fee payable by the Borrowers in
consideration of the Lender's issuance of the Commitment. The amount
of the Commitment Fee, if any, is set forth in Section 2.8(a)
hereof.
"Committed Purchase Price" means for an Eligible Loan
the product of the Mortgage Note Amount multiplied by (a) the price
(expressed as a percentage) as set forth in a Purchase Commitment
for such Eligible Loan or (b) in the event such Eligible Loan is to
be used to back an Agency Security, the price (expressed as a
percentage) as set forth in a Purchase Commitment for such Agency
Security.
"Credit Score" means a mortgagor's overall consumer
credit rating, represented by a single numeric credit score
calculated using the Fair, ▇▇▇▇▇ consumer credit scoring system, as
provided by a credit repository acceptable to the Lender and the
Investor that issued the Purchase Commitment covering the related
Mortgage Loan.
"Debt" means, with respect to any Person at any date,
(a) all indebtedness or other obligations of such Person which, in
accordance with GAAP, would be included in determining total
liabilities as shown on the liabilities side of a balance sheet of
such Person at such date, and (b) all indebtedness or other
obligations of such Person for borrowed money or for the deferred
purchase price of property or services; provided that for purposes
of this Agreement, there shall be excluded from Debt at any date
Subordinated Debt not due within one year of such date, loan loss
reserves and deferred taxes arising from capitalized excess
servicing fees and capitalized servicing rights.
"Default" means the occurrence of any event or existence
of any condition which, but for the giving of Notice, the lapse of
time, or both, would constitute an Event of Default.
"Depository Benefit" shall mean the compensation
received by the Lender, directly or indirectly, as a result of the
Borrowers' maintenance of Eligible Balances with a Designated Bank.
"Designated Bank" means any bank(s) designated from time
to time by the Lender as a Designated Bank, but only for as long as
the Lender has an agreement under which the Lender can receive a
Depository Benefit.
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"Designated Bank Charges" means any fees, interest or
other charges that would otherwise be payable to a Designated Bank
in connection with Eligible Balances maintained at a Designated
Bank, including Federal Deposit Insurance Corporation insurance
premiums, service charges and such other charges as may be imposed
by governmental authorities from time to time.
"Eligible Balances" means all funds of or maintained by
the Borrowers and their Subsidiaries in accounts at a Designated
Bank, less balances to support float, reserve requirements, and such
other reductions as may be imposed by governmental authorities from
time to time.
"Eligible Loan" means a Single Family Mortgage Loan
secured by a Mortgage on owner occupied real property located in one
of the states of the United States or the District of Columbia that
is designated as such on Exhibit M attached hereto and made a part
hereof.
"Eligible Mortgage Pool" means a Mortgage Pool for which
(a) an Approved Custodian has issued its initial certification (on
the basis of which an Agency Security is to be issued), (b) there
exists a Purchase Commitment covering such Agency Security, and (c)
such Agency Security will be delivered to the Lender.
"ERISA" means the Employee Retirement Income Security
Act of 1974 and all rules and regulations promulgated thereunder, as
amended from time to time and any successor statute.
"Event of Default" means any of the conditions or events
set forth in Section 8.1 hereof.
"Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, and any successor statute.
"Fair Market Value" means at any time for an Eligible
Loan or the related Agency Security (if such Eligible Loan is to be
used to back an Agency Security), (a) if such Eligible Loan or the
related Agency Security is covered by a Purchase Commitment, the
Committed Purchase Price, or (b) otherwise, the market price for
such Eligible Loan or Agency Security, determined by the Lender
based on market data for similar Mortgage Loans or Agency Securities
and such other criteria as the Lender deems appropriate.
"▇▇▇▇▇▇ Mae" means ▇▇▇▇▇▇ ▇▇▇, a corporation created
under the laws of the United States, and any successor thereto.
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"Federal Funds Rate" mean, as of any date of
determination, the effective federal funds rate (per annum) of
interest in effect on such date (or, if such date is not a Business
Day, the preceding Business Day) as published by Bridge Information
Services in its MoneyCenter System. If this federal funds rate is
not so offered or published per any Business Day, then the Federal
Funds Rate for any applicable date should mean the highest offered
federal funds rate (per annum) published for such Business Day
published in The Wall Street Journal in its regular column entitled
"Money Rates." [For use where the Lender owes funds to another
Lender and does not pay on the Business Day above.]
"FHA" means the Federal Housing Administration and any
successor thereto.
"FICA" means the Federal Insurance Contributions Act.
"FIRREA" means the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, as amended from time to time,
and the regulations promulgated and rulings issued thereunder.
"First Mortgage" means a Mortgage which constitutes a
first Lien on the property covered thereby.
"First Mortgage Loan" means a Mortgage Loan secured by a
First Mortgage.
"▇▇▇▇▇▇▇ Mac" means ▇▇▇▇▇▇▇ Mac, a corporation created
under the laws of the United States, and any successor thereto.
"Funding Bank" means The First National Bank of Chicago
or any other bank designated from time to time by the Lender.
"Funding Bank Agreement" means the letter agreement
substantially in the form of Exhibit K hereto.
"GAAP" means generally accepted accounting principles
set forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other
entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date
of determination.
"Gestation Agreement" means an agreement under which the
Borrowers agree to sell or finance (a) a Pledged Mortgage prior to
the date of purchase by an Investor, or (b) a
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Mortgage Pool prior to the date an Agency Security backed by such
Mortgage Pool is issued.
"▇▇▇▇▇▇ ▇▇▇" means the Government National Mortgage
Association, an agency of the United States government, and any
successor thereto.
"Hedging Arrangements" means, with respect to any
Person, any agreements or other arrangement (including, without
limitation, interest rate swap agreements, interest rate cap
agreements and forward sale agreements) entered into by such Person
to protect itself against changes in interest rates or the market
value of assets.
"HUD" means the Department of Housing and Urban
Development and any successor thereto.
"Indemnified Liabilities" has the meaning set forth in
Article 10 hereof.
"Internal Revenue Code" means the Internal Revenue Code
of 1986, or any subsequent federal income tax law or laws, as any of
the foregoing have been or may from time to time be amended.
"Investor" means ▇▇▇▇▇▇ Mae, ▇▇▇▇▇▇▇ Mac or a
financially responsible private institution which is deemed
acceptable by the Lender from time to time in its sole discretion
with respect to a particular category of Pledged Mortgages.
"Lender" has the meaning set forth in the first
paragraph of this Agreement.
"LIBOR" means, for each 30-day period, the rate of
interest per annum which is equal to the arithmetic mean of the U.S.
Dollar London Interbank Offered Rates for one (1) month periods of
certain U.S. banks as of 11:00 a.m. London time on the first
Business Day of each 30-day period on which the London Interbank
market is open, as published by Bridge Information Services on its
MoneyCenter system. LIBOR shall be rounded, if necessary, to the
next higher one sixteenth of one percent (1/16%). If such U.S.
dollar LIBOR rates are not so offered or published for any period,
then during such period LIBOR shall mean the London Interbank
Offered Rate for one (1) month periods published on the first
Business Day of each 30-day period on which the London Interbank
market is open, in the Wall Street Journal in its regular column
entitled "Money Rates."
"Lien" means any lien, mortgage, deed of trust, pledge,
security interest, charge or encumbrance of any kind (including any
conditional sale or other title retention
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agreement, any lease in the nature thereof, and any agreement
to give any security interest).
"Liquid Assets" means, with respect to any Person at any
date, the following unrestricted and unencumbered assets owned by
such Person on such date: cash, funds on deposit in any bank located
in the United States, investment grade commercial paper, money
market funds, and the excess, if any, of Mortgage Loans and
Mortgage-backed Securities held for sale (valued in accordance with
GAAP) excluding Mortgage Loans that are more than 30 days delinquent
(determined pursuant to a Mortgage Bankers Association of America
method for determining delinquency status as in effect on the date
hereof) over the outstanding aggregate principal amount of notes or
other debt instruments against which such Mortgage Loans or
Mortgage- backed Securities are pledged as Collateral.
"Loan Documents" means this Agreement, the Note, any
agreement of the Borrowers relating to Subordinated Debt, and each
other document, instrument or agreement executed by the Borrowers in
connection herewith or therewith, as any of the same may be amended,
restated, renewed or replaced from time to time.
"Manufactured Home" means a structure that is built on a
permanent chassis (steel frame) with the wheel assembly necessary
for transportation in one or more sections to a permanent site or
semi-permanent site and which has been built in compliance with the
National Manufactured Housing Construction and Safety Standards
established by HUD.
"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.
"Maturity Date" shall mean the earlier of: (a) the close
of business on March 1, 2000, as such date may be extended from time
to time in writing by the Lender, in its sole discretion, on which
date the Commitment shall expire of its own term and without the
necessity of action by the Lender, and (b) the date the Advances
become due and payable pursuant to Section 8.2 below.
"Miscellaneous Charges" has the meaning set forth in
Section 2.10 hereof.
"Mortgage" means a mortgage or deed of trust on improved
and substantially completed real property (including, without
limitation, real property to which a Manufactured Home has been
affixed in a manner such that the Lien of a mortgage or deed of
trust would attach to such manufactured home under applicable real
property law).
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"Mortgage-backed Securities" means securities that are
secured or otherwise backed by Mortgage Loans.
"Mortgage Loan" means any loan evidenced by a Mortgage
Note and secured by a Mortgage.
"Mortgage Note" means a promissory note secured by a
Mortgage.
"Mortgage Note Amount" means, as of the date of
determination, the then outstanding unpaid principal amount of a
Mortgage Note [or other note evidencing an Eligible Loan] (whether
or not an additional amount is available to be drawn thereunder).
"Mortgage Pool" means a pool of one or more Pledged
Mortgages on the basis of which there is to be issued a
Mortgage-backed Security.
"Multiemployer Plan" means a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA which is maintained for
employees of the Borrowers or a Subsidiary of the Borrowers.
"Non-Usage Fee" has the meaning set forth in
Section 2.8(b) hereof.
"Note" has the meaning set forth in Section 2.3 hereof.
"Notices" has the meaning set forth in Article 9 hereof.
"Obligations" means any and all indebtedness,
obligations and liabilities of the Borrowers to the Lender (whether
now existing or hereafter arising, voluntary or involuntary, whether
or not jointly owed with others, direct or indirect, absolute or
contingent, liquidated or unliquidated, and whether or not from time
to time decreased or extinguished and later increased, created or
incurred), whether or not arising out of or related to the Loan
Documents.
"Officer's Certificate" means a certificate executed on
behalf of BNC by its chief financial officer or its treasurer or by
such other officer as may be designated herein and substantially in
the form of Exhibit I-SF attached hereto.
"Operating Account" means a demand deposit account
maintained at the Funding Bank in the name of the Borrowers and
designated for funding that portion of each Eligible Loan not funded
by an Advance made against such Eligible Loan and for returning any
excess payment from an Investor for a Pledged Mortgage or Pledged
Security.
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"Participant" has the meaning set forth in Section 12.5
hereof.
"Person" means and includes natural persons,
corporations, limited liability companies, limited partnerships,
general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land
trusts, business trusts or other organizations, whether or not legal
entities, and governments and agencies and political subdivisions
thereof.
"Plans" has the meaning set forth in Section 5.12
hereof.
"Pledged Mortgages" has the meaning set forth in Section
3.1(a) hereof.
"Pledged Securities" has the meaning set forth in
Section 3.1(b) hereof.
"Purchase Commitment" means a written commitment, in
form and substance satisfactory to the Lender, issued in favor of
the Borrowers by an Investor pursuant to which that Investor commits
to purchase Mortgage Loans or Mortgage-backed Securities.
"Release Amount" has the meaning set forth in Section
3.2(g) hereof.
"RFC" means Residential Funding Corporation, a Delaware
corporation, and any successor thereto.
"Second Mortgage" means a Mortgage which constitutes a
second Lien on the property covered thereby.
"Second Mortgage Loan" means a Mortgage Loan secured by
a Second Mortgage.
"Servicing Contract" means, with respect to any Person,
the arrangement, whether or not in writing, pursuant to which such
Person has the right to service Mortgage Loans.
"Servicing Portfolio" means, as to any Person, the
unpaid principal balance of Mortgage Loans serviced by such Person
under Servicing Contracts.
"Single Family Mortgage Loan" means a Mortgage Loan
secured by a Mortgage covering improved real property containing one
to four family residences.
"Statement Date" means the date of the most recent
financial statements of the Borrowers (and, if applicable, its
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Subsidiaries, on a consolidated basis) delivered to the Lender under
the terms of this Agreement.
"Subordinated Debt" means (a) all indebtedness of the
Borrowers for borrowed money which is effectively subordinated in
right of payment to all other present and future Obligations either
(i) pursuant to a Subordination of Debt Agreement in the form of
Exhibit F hereto or (ii) otherwise on terms acceptable to the
Lender, and (b) solely for purposes of Section 7.4 hereof, all
indebtedness of the Borrowers which is required to be subordinated
by Section 4.1(b) or Section 6.10 hereof.
"Subsidiary" means any corporation, association or other
business entity in which more than fifty percent (50%) of the total
voting power or shares of stock entitled to vote in the election of
directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more of
the other Subsidiaries of that Person or a combination thereof.
"Tangible Net Worth" means with respect to any Person at
any date, the excess of the total assets of such Person over total
liabilities of such Person on such date, each to be determined in
accordance with GAAP consistent with those applied in the
preparation of the financial statements referred to in Section
4.1(a)(5) hereof, plus that portion of Subordinated Debt not due
within one year of such date; provided that, for purposes of
calculating Tangible Net Worth, there shall be excluded from total
assets advances or loans to shareholders, officers, employees or
Affiliates, investments in Affiliates, assets pledged to secure any
liabilities not included in the Debt of such Person, intangible
assets, those other assets which would be deemed by HUD to be
non-acceptable in calculating adjusted net worth in accordance with
its requirements in effect as of such date, as such requirements
appear in the "Audit Guide for Audit of Approved Non-Supervised
Mortgagees," and other assets deemed unacceptable by the Lender in
its sole discretion.
"Trust Receipt" means a trust receipt in a form approved
by and pursuant to which the Lender may deliver any document
relating to the Collateral to the Borrowers for correction or
completion.
"Unused Portion" has the meaning set forth in Section
2.8(b) hereof.
"Used Portion" has the meaning set forth in Section
2.8(b) hereof.
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"VA" means the U.S. Department of Veterans Affairs and
any successor thereto.
"Warehousing Fee" has the meaning set forth in Section
2.9 hereof.
"Wet Settlement Advance" means an Advance pursuant to
Section 2.2(b) of this Agreement in respect of the closing or
settlement of a Mortgage Loan, from the time of such Advance until
the time of subsequent delivery of the Collateral Documents as
provided in such Section and the Exhibit referenced therein.
"Wire Disbursement Account" means a demand deposit
account maintained at the Funding Bank in the name of the Lender for
the clearing of wire transfers requested by the Borrowers to fund
Advances.
"Year 2000 Problem" means the risk that computer
applications may not be able to properly perform date- sensitive
functions after December 31, 1999.
1.2 Other Definitional Provisions.
1.2(a) Accounting terms not otherwise defined
herein shall have the meanings given the terms under
GAAP.
1.2(b) Defined terms may be used in the singular
or the plural, as the context requires.
1.2(c) All references to time of day shall mean
the then applicable time in Chicago, Illinois, unless
expressly provided to the contrary.
2. THE CREDIT.
2.1 The Commitment.
2.1(a) Subject to the terms and conditions
of this Agreement and provided no Default or Event of
Default has occurred and is continuing, the Lender
agrees from time to time during the period from the
Closing Date to, but not including, the Maturity Date,
to make Advances to the Borrowers, provided the total
aggregate principal amount outstanding at any one time
of all such Advances shall not exceed the Commitment
Amount. The obligation of the Lender to make Advances
hereunder up to the Commitment Amount is hereinafter
referred to as the "Commitment." Within the Commitment,
the Borrowers may borrow, repay and reborrow. All
Advances under this
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Agreement shall constitute a single indebtedness, and
all of the Collateral shall be security for the Note and
for the performance of all the Obligations. Advances
shall be made either to BNC or to Mortgage Logic, as
shall be requested by BNC or Mortgage Logic, but each
Advance, whether made to BNC or to Mortgage Logic shall
be deemed made to or for the benefit of BNC and Mortgage
Logic, and BNC and Mortgage Logic, jointly and
severally, shall be obligated to repay any Advances made
to BNC or Mortgage Logic under the Commitment. With
respect to its obligation to repay Advances made to the
other Borrower, each Borrower agrees to the terms set
forth in Exhibit N attached hereto and made a part
hereof.
2.1(b) Advances shall be used by the
Borrowers solely for the purpose of funding the
acquisition or origination of Eligible Loans and shall
be made at the request of the Borrowers, in the manner
hereinafter provided in Section 2.2 hereof, against the
pledge of such Eligible Loans as Collateral therefor.
The limitations on the use of Advances set forth on
Exhibit M attached hereto and made a part hereof shall
be applicable. In addition, the following limitations on
the use of Advances shall be applicable:
(1) No Advance shall be made
against any Mortgage Loan which was closed
more than ninety (90) days prior to the date
of the requested Advance.
(2) No Advance shall be made
against a Mortgage Loan other than a
Mortgage Loan secured by a Mortgage on real
property located in one of the states of the
United States or the District of Columbia.
2.1(c) No Advance shall exceed the following
amount applicable to the type of Eligible Loan at the
time it is pledged to secure an Advance hereunder:
(1) For an Eligible Loan pledged
hereunder, the amount set forth on Exhibit M
attached hereto and made a part hereof.
2.2 Procedures for Obtaining Advances.
2.2(a) The Borrowers may obtain an Advance
hereunder, subject to the satisfaction of the conditions
set forth in Sections 4.1 and 4.2 hereof, upon
compliance with the procedures set forth in this Section
2.2 and in Exhibit D-SF with respect to Advances,
attached hereto and made a part hereof including the
delivery of all
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documents listed in Exhibit D-SF, as applicable (the
"Collateral Documents") to the Lender. Requests for
Advances shall be initiated by the Borrowers by
delivering to the Lender, no later than one (1) Business
Day prior to any Business Day that the Borrowers desire
to borrow hereunder, a completed and signed request for
an Advance (an "Advance Request") on the then current
form approved by the Lender. The current form in use by
the Lender is Exhibit C-SF for Advances, attached hereto
and made a part hereof. The Lender shall have the right,
on not less than three (3) Business Days' prior Notice
to the Borrowers, to modify any of said Exhibits to
conform to current legal requirements or Lender
practices, and, as so modified, said Exhibits shall be
deemed a part hereof.
2.2(b) In the case of a Wet Settlement
Advance, the Borrowers shall follow the procedures and,
at or prior to the Lender's making of such Wet
Settlement Advance, shall deliver to the Lender the
documents set forth in Exhibit D-SF hereto. In the case
of a Mortgage Loan financed through a Wet Settlement
Advance, the Borrowers shall cause all Collateral
Documents required to be delivered to the Lender
pursuant to Exhibit D-SF within seven (7) Business Days
after the date of the Wet Settlement Advance relating
thereto.
2.2(c) Before funding, the Lender shall have
a reasonable time (one (1) Business Day under ordinary
circumstances) to examine such Advance Request and the
Collateral Documents to be delivered prior to such
requested Advance, as set forth in the applicable
Exhibit hereto, and may reject such of them as do not
meet the requirements of this Agreement or of the
related Purchase Commitment.
2.2(d) The Borrowers shall hold in trust for
the Lender, and the Borrowers shall deliver to the
Lender promptly upon request, or if the recorded
Collateral Documents have not yet been returned from the
recording office, immediately upon receipt by the
Borrowers of such recorded Collateral Documents, and the
Pledged Mortgage is not being held by an Investor for
purchase or has not been redeemed from pledge, the
following: (1) the originals of the Collateral Documents
for which copies are required to be delivered to the
Lender pursuant to Exhibit D-SF, (2) the original
lender's ALTA Policy of Title Insurance or an equivalent
thereto, and (3) any other documents relating to a
Pledged Mortgage which the Lender may request,
including, without limitation, documentation evidencing
the FHA Commitment to Insure or the VA Guaranty of any
Pledged Mortgage which is either
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FHA insured or VA guaranteed, the appraisal, Private
Mortgage Insurance Certificate, if applicable, the
Regulation Z Statement, certificates of casualty or
hazard insurance, credit information on the maker of
each such Mortgage Note, a copy of a HUD-1 or
corresponding purchase advice and other documents of all
kinds which are customarily desired for inspection or
transfer incidental to the purchase of any Mortgage Note
by an Investor and any additional documents which are
customarily executed by the seller of a Mortgage Note to
an Investor.
2.2(e) To make an Advance, the Lender shall
cause the Funding Bank to credit either the Wire
Disbursement Account or the Check Disbursement Account
upon compliance by the Borrowers with the terms of the
Loan Documents. The Lender shall determine in its sole
discretion the method by which Advances and other
amounts on deposit in the Wire Disbursement Account are
disbursed by the Funding Bank to or for the account of
the Borrowers.
2.2(f) If, pursuant to the authorization
given by the Borrowers in the Funding Bank Agreement,
for the purpose of funding a Mortgage Loan against which
the Lender has made an Advance in accordance with a
Request for Advance (i) the Lender debits the Borrowers'
Operating Account at the Funding Bank to the extent
necessary to cover a wire to be initiated by the Lender,
or (ii) the Lender directs the Funding Bank to honor a
check drawn by the Borrowers on their Check Disbursement
Account at the Funding Bank, and such debit or direction
results in an overdraft, the Lender may make an
additional Advance to fund such overdraft.
2.3 Note. The Borrowers' Obligations shall be evidenced
by the promissory note (the "Note") 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 hereby incorporated herein.
2.4 Interest.
2.4(a) Except as otherwise provided in
Section 2.4(e) hereof, the unpaid amount of each Advance
against an Eligible Loan shall bear interest at the
rate(s) per annum set forth on Exhibit M attached hereto
and made a part hereof.
2.4(b) The Borrowers are entitled to receive
a benefit in the form of an "Earnings Credit" on the
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portion of the Eligible Balances maintained in time
deposit accounts with a Designated Bank, and the
Borrowers are entitled to receive a benefit in the form
of an "Earnings Allowance" on the portion of the
Eligible Balances maintained in demand deposit accounts
with a Designated Bank. Any Earnings Allowance shall be
used first and any Earnings Credit shall be used second
as a credit against accrued Designated Bank Charges, any
other Miscellaneous Charges and fees, including, but not
limited to Commitment Fees, Non-Usage Fees and
Warehousing Fees, and may be used, at the Lender's
option, to reduce accrued interest. Any Earnings
Allowance not used during the month in which the benefit
was received shall be accumulated for use and must be
used within six (6) months of the month in which the
benefit was received. Any Earnings Credit not used
during the month in which the benefit was received shall
be used to provide a cash benefit to the Borrowers. The
Lender's determination of the Earnings Credit and the
Earnings Allowance for any month shall be determined by
the Lender in its sole discretion and shall be
conclusive and binding absent manifest error. In no
event shall the benefit received by the Borrowers exceed
the Depository Benefit.
Either party hereto may terminate the
benefits provided for in this Section effective
immediately upon Notice to the other party, if the
terminating party shall have determined (which
determination shall be conclusive and binding absent
manifest error) at any time that any applicable law,
rule, regulation, order or decree or any interpretation
or administration thereof by any governmental authority
charged with the interpretation or administration
thereof, or compliance by such party with any request or
directive (whether or not having the force of law) of
any such authority, shall make it unlawful or impossible
for such party to continue to offer or receive the
benefits provided for in this Section.
2.4(c) Interest shall be computed on the
basis of a 360-day year and applied to the actual number
of days elapsed in each interest calculation period and
shall be payable monthly in arrears, on the first day of
each month, commencing with the first month following
the Closing Date and on the Maturity Date.
2.4(d) If, for any reason, no interest is
due on an Advance, the Borrowers agree to pay to the
Lender an administrative fee equal to one day of
interest on such Advance at the rate of interest
applicable to such Advance, as in effect on the date of
such Advance.
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Administrative and other fees shall be due and payable
in the same manner as interest is due and payable
hereunder.
2.4(e) Upon Notice to the Borrowers, after
the occurrence and during the continuation of an Event
of Default, the unpaid amount of each Advance shall bear
interest until paid in full at a per annum rate of
interest (the "Default Rate") equal to four percent (4%)
in excess of the rate of interest otherwise applicable
to such Advance pursuant to any other subsection of this
Section 2.4 or, if no rate is applicable, the highest
rate then applicable to any outstanding Advances.
2.4(f) The floating rates of interest
provided for in this Section 2.4 will be adjusted as of
the effective date of each change in the applicable
index. The Lender's determination of such rates as of
any date of determination shall be conclusive and
binding, absent manifest error.
2.5 Principal Payments.
2.5(a) The outstanding principal amount of
all Advances shall be payable in full on the Maturity
Date.
2.5(b) The Borrowers shall have the right to
prepay the outstanding Advances in whole or in part,
from time to time, without premium or penalty.
2.5(c) The Borrowers shall pay the Lender,
without the necessity of prior demand or notice from the
Lender, and the Borrowers authorize the Lender to cause
the Funding Bank to charge the Borrowers' Operating
Account for, the amount of any outstanding Advance
against a specific Pledged Mortgage, upon the earliest
occurrence of any of the following events:
(1) One (1) Business Day elapses
from the date an Advance was made and the
Pledged Mortgage which was to have been
funded by such Advance is not closed and
funded.
(2) Ten (10) Business Days
elapse from the date a Collateral Document
was delivered to the Borrowers for
correction or completion under a Trust
Receipt, if such Collateral Document has not
been returned to the Lender.
(3) On the date on which a
Pledged Mortgage is determined to have been
originated based on untrue, incomplete or
inaccurate information, whether or not the
Borrowers had knowledge of such
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misrepresentation or incorrect information,
or the Pledged Mortgage is defaulted and
remains in default for a period of sixty
(60) days or more.
(4) If the outstanding Advances
against Pledged Mortgages of a specific
Mortgage Loan type exceed the aggregate
Purchase Commitments for such Mortgage Loan
type.
(5) For a Mortgage Loan covered
by a Purchase Commitment at the time pledged
hereunder three (3) Business Days after the
mandatory delivery date of the related
Purchase Commitment and the specific Pledged
Mortgage or the Pledged Security backed
thereby was not delivered under the Purchase
Commitment prior to such mandatory delivery
date, or the Purchase Commitment is
terminated; unless in each case, such
Pledged Mortgage or Pledged Security is
eligible for delivery to an Investor under a
comparable Purchase Commitment acceptable to
the Lender.
(6) Upon sale or other
disposition of the Pledged Mortgage or, if a
Pledged Mortgage is included in an Eligible
Mortgage Pool, upon sale or other
disposition of the related Agency
Securities.
(7) On the date on which the
Borrowers know, or receive notice from the
Lender, that one or more of the
representations and warranties set forth in
Section 5.15 were inaccurate or incomplete
in any material respect on any date when
made or deemed made.
2.5(d) Upon Notice to the Borrowers by the
Lender, the Borrowers shall pay to the Lender, and the
Borrowers authorize the Lender to cause the Funding Bank
to charge the Borrowers' Operating Account for, the
amount of any outstanding Advance against a specific
Pledged Mortgage upon the earliest occurrence of any of
the following events:
(1) For any Pledged Mortgage,
the number of days set forth for the
applicable type of Eligible Loan on Exhibit
M attached hereto and made a part hereof as
the "Warehouse Period" elapse from the date
of the initial Advance made by the Lender
against such Pledged Mortgage.
(2) For any Pledged Mortgage
secured by a Second Mortgage, payment of any
Lien prior to such
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Pledged Mortgage is delinquent, and remains
delinquent for a period of sixty (60) days
or more.
(3) Forty-five (45) days elapse
from the date the Pledged Mortgage was
delivered to an Investor or an Approved
Custodian for examination and purchase or
inclusion in a Mortgage Pool, without the
purchase being made or an Eligible Mortgage
Pool being initially certified, or upon
rejection of the Pledged Mortgage as
unsatisfactory by an Investor or an Approved
Custodian.
(4) Seven (7) Business Days
elapse from the date a Wet Settlement
Advance was made without receipt by the
Lender of all Collateral Documents relating
to such Pledged Mortgage, or such Collateral
Documents, upon examination by the Lender,
are found not to be in compliance with the
requirements of this Agreement or the
related Purchase Commitment.
(5) With respect to any Pledged
Mortgage, any of the items described in
Section 2.2(d), upon examination by the
Lender, are found not to be in compliance
with the requirements of this Agreement or
the related Purchase Commitment.
2.5(e) The outstanding amount of any Advance
made pursuant to Section 2.2(f) shall be payable in full
within one (1) Business Day after the date of such
Advance.
2.5(f) In addition to the payments required
pursuant to Sections 2.5(d) and 2.5(e), if the principal
amount of any Pledged Mortgage is prepaid in whole or in
part while an Advance is outstanding against such
Pledged Mortgage, the Borrowers shall be obligated to
pay to the Lender, without the necessity of prior demand
or notice from the Lender, and the Borrowers authorizes
the Lender to cause the Funding Bank to charge the
Borrowers' Operating Account for the amount of such
prepayment, to be applied to such Advance.
2.5(g) The proceeds of the sale or other
disposition of Pledged Mortgages and Pledged Securities
shall be paid directly by the Investor to the Cash
Collateral Account. The Borrowers shall give Notice to
the Lender (telephonically, to be followed by written
notice) of the Pledged Mortgages or Pledged Securities
for which proceeds have been received. Upon receipt of
such Notice the Advances against such Pledged Mortgages
or Pledged Securities shall be repaid from such proceeds
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and such Pledged Mortgages or Pledged Securities shall
be considered to have been redeemed from pledge. The
Lender is entitled to rely upon the Borrowers'
affirmation that deposits in the Cash Collateral Account
represent payment from Investors for the purchase of
Pledged Mortgages or Pledged Securities as specified by
the Borrowers. In the event that the payment from an
Investor for the purchase of Pledged Mortgages or
Pledged Securities is less than the outstanding Advances
against such Pledged Mortgages or the Mortgage Loans
backing Pledged Securities, the Lender is authorized to
cause the Funding Bank to charge the Borrowers'
Operating Account for an amount equal to such
deficiency. Provided no Default or Event of Default
exists, the Lender shall return any excess payment from
an Investor for Pledged Mortgages or Pledged Securities
to the Borrowers.
2.6 Expiration of Commitment. The Commitment shall
expire on the Maturity Date.
2.7 Method of Making Payments.
2.7(a) Except as otherwise specifically
provided herein, all payments hereunder shall be made to
the Lender not later than the close of business on the
date when due unless such date is a non-Business Day, in
which case, such payment shall be due on the first
Business Day thereafter, and shall be made in lawful
money of the United States of America in immediately
available funds transferred via wire to accounts
designated by the Lender from time to time.
2.7(b) After the occurrence and during the
continuance of an Event of Default, and without the
necessity of prior demand or notice from the Lender, the
Borrowers authorize the Lender to cause the Funding Bank
to charge the Borrowers' Operating Account for any
Obligations due and owing the Lender.
2.8 Commitment Fees and Non-Usage Fees.
2.8(a) The Borrowers agree to pay to the
Lender a Commitment Fee in the amount of 0.125% per
annum of the Commitment Amount which Commitment Fee
shall be paid in advance on the Closing Date.
2.8(b) At the end of each calendar quarter,
during the term hereof, the Lender shall determine the
average usage of the Commitment by calculating the
arithmetic daily average of the Advances outstanding
during such calendar quarter (or, during the first such
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calendar quarter, from the Closing Date through the end
of such calendar quarter). The Lender shall then
subtract such quarterly average usage (the "Used
Portion") from the Commitment Amount (and the result
thereof shall be known as the "Unused Portion"). If the
Unused Portion is greater than 50% of the Commitment
Amount, the Borrowers shall pay in arrears, within
thirty (30) days after the end of each calendar quarter,
a Non-Usage Fee (the "Non-Usage Fee") equal to 0.125%
per annum on the total amount of the Unused Portion of
the Commitment Amount during such calendar quarter. If
the Maturity Date of the Commitment is other than the
last day of a quarter, the Borrowers shall pay the
prorated portion of the quarterly Non-Usage Fee due from
the beginning of the then current calendar quarter to
and including the Maturity Date. For the purposes
hereof, quarters shall be defined as beginning April 1,
July 1, October 1 and January 1. In the absence of
manifest error, the calculation by the Lender of the
amount of any Non-Usage Fee shall be conclusive. If the
Commitment terminates at the request of the Borrowers or
as a result of an Event of Default, the Non-Usage Fee
shall be due and owing through the last day of the
current quarter.
2.9 Warehousing Fees. The Borrowers agree, at the time
of each Advance, to pay to the Lender a Warehousing Fee in the
amount of Twenty-Two Dollars ($22.00) for each Mortgage Loan pledged
as Collateral for such Advance. Warehousing Fees are due when
incurred, but shall not be delinquent if paid within fifteen (15)
days after receipt of an invoice or an account analysis statement
from the Lender.
2.10 Miscellaneous Charges. The Borrowers agree to
reimburse the Lender for miscellaneous charges and expenses
(collectively, "Miscellaneous Charges") incurred by or on behalf of
the Lender in connection with the handling and administration of
Advances, and to reimburse the Lender for Miscellaneous Charges
incurred by or on behalf of the Lender in connection with the
handling and administration of the Collateral. For the purposes
hereof, Miscellaneous Charges shall include, but not be limited to,
costs for UCC, tax lien and judgment searches conducted by the
Lender, filing fees, charges for wire transfers, check processing
charges, charges for security delivery fees, charges for overnight
delivery of Collateral to Investors, the Funding Bank's service
charges and Designated Bank Charges. Miscellaneous Charges are due
when incurred, but shall not be delinquent if paid within fifteen
(15) days after receipt of an invoice or an account analysis
statement from the Lender.
2.11 Interest Limitation. All agreements between the
Borrowers and the Lender are hereby expressly limited so that
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in no contingency or event whatsoever, whether by reason of
acceleration of maturity of this Agreement or the Note or otherwise,
shall the amount paid or agreed to be paid to the Lender for the
use, forbearance, loaning or retention of the Advances secured by
this Agreement exceed the maximum permissible under applicable law.
If from any circumstances whatsoever, fulfillment of any provisions
hereof or of the Note, or any other document securing this Agreement
at any time given shall involve transcending the limit of validity
prescribed by law, then, the obligation to be fulfilled shall
automatically be reduced to the limit of such validity, and if from
any circumstances the Lender should ever receive as interest an
amount which would exceed the highest lawful rate of interest, such
amount which would be in excess of interest shall be applied to the
reduction of the principal balance secured by the Note and not to
the payment of interest thereunder. This provision shall control
every other provision of all agreements between the Borrowers and
Lender and shall also be binding upon and available to any
subsequent holder of the Note.
2.12 Increased Costs; Capital Requirements. In the event
any applicable law, order, regulation or directive issued by any
governmental or monetary authority, or any change therein or in the
governmental or judicial interpretation or application thereof, or
compliance by the Lender with any request or directive (whether or
not having the force of law) by any governmental or monetary
authority:
2.12(a) Does or shall subject the Lender to
any tax of any kind whatsoever with respect to this
Agreement or any Advances made hereunder, or change the
basis of taxation on payments to the Lender of
principal, fees, interest or any other amount payable
hereunder (except for change in the rate of tax on the
overall gross or net income of the Lender by the
jurisdiction in which the Lender's principal office is
located);
2.12(b) Does or shall impose, modify or hold
applicable any reserve, capital requirement, special
deposit, compulsory loan or similar requirement against
assets held by, or deposits or other liabilities in or
for the account of, advances or loans by, or other
credit extended by, or any other acquisition of funds
by, any office of the Lender which are not otherwise
included in the determination of the interest rate as
calculated hereunder;
and the result of any of the foregoing is to increase the cost to
the Lender of making, renewing or maintaining any Advance or to
reduce any amount receivable in respect thereof or to reduce the
rate of return on the capital of the Lender or any
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Person controlling the Lender as it relates to credit facilities in
the nature of that evidenced by this Agreement, then, in any such
case, the Borrowers shall promptly pay any additional amounts
necessary to compensate the Lender for such additional cost or
reduced amounts receivable or reduced rate of return as determined
by the Lender with respect to this Agreement or Advances made
hereunder. If the Lender becomes entitled to claim any additional
amounts pursuant to this Section, it shall notify the Borrowers in
writing of the event by reason of which it has become so entitled
and the Borrowers shall pay such amount within fifteen (15) days
thereafter. A certificate as to any additional amount payable
pursuant to the foregoing sentence containing the calculation
thereof in reasonable detail submitted by the Lender to the
Borrowers shall be conclusive in the absence of manifest error. The
obligations of the Borrowers under this Section shall survive the
payment of all other Obligations and the termination of this
Agreement.
3. COLLATERAL.
3.1 Grant of Security Interest. As security for the
payment of the Note and for the performance of all of the Borrowers'
Obligations, the Borrowers hereby assign and transfer to the Lender
all right, title and interest in and to and grants a security
interest to the Lender in the following described property (the
"Collateral"):
3.1(a) All Mortgage Loans, including all
Mortgage Notes and Mortgages evidencing or securing such
Mortgage Loans, which from time to time are delivered or
caused to be delivered to the Lender (including delivery
to a third party on behalf of the Lender), come into the
possession, custody or control of the Lender for the
purpose of assignment or pledge or in respect of which
an Advance has been made by the Lender hereunder,
including without limitation all Mortgage Loans in
respect of which Wet Settlement Advances have been made
by the Lender (the "Pledged Mortgages").
3.1(b) All Mortgage-backed Securities which
are from time to time created in whole or in part on the
basis of the Pledged Mortgages or are delivered or
caused to be delivered to, or are otherwise in the
possession of the Lender or its agent, bailee or
custodian as assignee, or pledged to the Lender, or for
such purpose are registered by book-entry in the name of
the Lender (including delivery to or registration in the
name of a third party on behalf of the Lender) hereunder
or in respect of which from time to time an Advance has
been made by the Lender hereunder (the "Pledged
Securities").
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3.1(c) All private mortgage insurance and
all commitments issued by the FHA or VA to insure or
guarantee any Mortgage Loans included in the Pledged
Mortgages; all Purchase Commitments held by the
Borrowers covering the Pledged Mortgages or the Pledged
Securities and all proceeds resulting from the sale
thereof to Investors pursuant thereto; and all personal
property, contract rights, servicing and servicing fees
and income or other proceeds, amounts and payments
payable to the Borrowers as compensation or
reimbursement, accounts and general intangibles of
whatsoever kind relating to the Pledged Mortgages, the
Pledged Securities, said FHA commitments or VA
commitments and the Purchase Commitments, and all other
documents or instruments relating to the Pledged
Mortgages and the Pledged Securities, including, without
limitation, any interest of the Borrowers in any fire,
casualty or hazard insurance policies and any awards
made by any public body or decreed by any court of
competent jurisdiction for a taking or for degradation
of value in any eminent domain proceeding as the same
relate to the Pledged Mortgages.
3.1(d) All right, title and interest of the
Borrowers in and to all escrow accounts, documents,
instruments, files, surveys, certificates,
correspondence, appraisals, computer programs, tapes,
discs, cards, accounting records (including all
information, records, tapes, data, programs, discs and
cards necessary or helpful in the administration or
servicing of the Collateral) and other information and
data of the Borrowers relating to the Collateral.
3.1(e) All right, title and interest of the
Borrowers in and to any Hedging Arrangements entered
into to protect the Borrowers against changes in the
value of Pledged Mortgages or Pledged Securities,
including, without limitation, all rights to payment
arising under such Hedging Arrangements.
3.1(f) All now existing or hereafter
acquired cash delivered to or otherwise in the
possession of the Lender or its agent, bailee or
custodian or designated on the books and records of the
Borrowers as assigned and pledged to the Lender.
3.1(g) All cash and non-cash proceeds of the
Collateral, including all dividends, distributions and
other rights in connection with, and all additions to,
modifications of and replacements for, the Collateral,
and all products and proceeds of the Collateral,
together with whatever is receivable or received when
the Collateral or proceeds thereof are sold, collected,
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exchanged or otherwise disposed of, whether such
disposition is voluntary or involuntary, including,
without limitation, all rights to payment with respect
to any cause of action affecting or relating to the
Collateral or proceeds thereof.
3.2 Release of Security Interest in Collateral.
3.2(a) Pledged Mortgages shall be released
from the Lender's security interest only against payment
to the Lender of the Release Amount in connection with
such Pledged Mortgages.
3.2(b) If Pledged Mortgages are to be
transferred to a pool custodian or to ▇▇▇▇▇▇▇ Mac or
▇▇▇▇▇▇ Mae for inclusion in a Mortgage Pool, the
Lender's security interest in such Pledged Mortgages
shall be released only against payment to the Lender of
the Release Amount in connection with such Pledged
Mortgages. If the Lender's security interest in the
Pledged Mortgages comprising the Mortgage Pool is not
released prior to the issuance of the Mortgage-backed
Security, then the Mortgage-backed Security, when
issued, shall be a Pledged Security. The Lender's
security interest shall continue in such Pledged
Mortgages and the Pledged Security. The Lender shall be
entitled to possession of such Pledged Security in the
manner provided below.
3.2(c) If Pledged Mortgages are transferred
to an Approved Custodian and included in an Eligible
Mortgage Pool, the Lender's security interest in the
Pledged Mortgages comprising the Eligible Mortgage Pool
shall be released upon the issuance of the Agency
Security, which shall be a Pledged Security. The
Lender's security interest in such Pledged Security
shall be released only against payment to the Lender of
the Release Amount in connection with the Pledged
Mortgages backing such Pledged Security. The Lender
shall be entitled to possession of such Pledged Security
in the manner provided below.
3.2(d) The Lender shall have the exclusive
right to the possession of the Pledged Securities or, if
the Pledged Securities are issued in book-entry form or
issued in certificated form and delivered to a clearing
corporation (as such term is defined in the Uniform
Commercial Code of Minnesota) or its nominee, the Lender
shall have the right to have the Pledged Securities
registered in the name of a securities intermediary (as
such term is defined in the Uniform Commercial Code of
Minnesota) in an account containing only customer
securities and credited to an account of the Lender. The
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Lender shall have the right to cause delivery of the
Pledged Securities to be made to the Investor or the
Pledged Securities credited to the account of the
Investor or the Investor's designee only against payment
therefor. The Borrowers acknowledge that the Lender may
enter into one or more standing arrangements with other
financial institutions with respect to Pledged
Securities issued in book entry form or issued in
certificated form and delivered to a clearing
corporation, pursuant to which such Pledged Securities
are registered in the name of such financial
institution, as agent or securities intermediary for the
Lender, and the Borrowers agree upon request of the
Lender to execute and deliver to such other financial
institutions the Borrowers' written concurrence in any
such standing arrangements.
3.2(e) Prior to the occurrence of an Event
of Default, the Borrowers may redeem a Pledged Mortgage
or Pledged Security from the Lender's security interest
by notifying the Lender of its intention to redeem such
Pledged Mortgage or Pledged Security from pledge and
either (a) paying, or causing an Investor to pay, to the
Lender, for application to prepayment of the principal
balance of the Note, the Release Amount in connection
with such Pledged Mortgage or Pledged Security, or (b)
delivering substitute Collateral which, in addition to
being acceptable to the Lender in its sole discretion
will, when included with the Collateral, result in a
Collateral Value of all Collateral held by the Lender
which is at least equal to the aggregate outstanding
Advances.
3.2(f) Following the occurrence of a Default
or Event of Default, the Lender may, with no liability
to the Borrowers or any Person, continue to release its
security interest in any Pledged Mortgage or Pledged
Security against payment of the Release Amount in
connection with such Pledged Mortgage or Pledged
Security.
3.2(g) The amount (the "Release Amount") to
be paid by the Borrowers to obtain the release of the
Lender's security interest in a Pledged Mortgage shall
be (i) prior to the occurrence of an Event of Default,
the principal amount of the Advances made against such
Pledged Mortgage, and (ii) from and after the occurrence
and during the continuance of an Event of Default, the
Committed Purchase Price of such Pledged Mortgage or, if
there is no Purchase Commitment therefor, the amount
paid to the Lender in a commercially reasonable
disposition thereof.
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3.3 ▇▇▇▇-to-Market. If at any time the aggregate
outstanding principal balance of Advances made against uncommitted
Subprime First Mortgage Loans exceeds ninety-eight percent (98%) of
the Fair Market Value or Advances made against uncommitted Subprime
Second Mortgage Loans exceeds ninety-five percent (95%) of the Fair
Market Value of the Pledged Mortgages and Pledged Securities, then
pledged hereunder, the Borrowers shall within two (2) Business Days
after Notice by the Lender either (a) repay the Advances made
against uncommitted Subprime First Mortgage Loans and uncommitted
Subprime Second Mortgage Loans in an amount sufficient to reduce the
aggregate principal balance thereof to or below ninety-eight percent
(98%) and ninety-five percent (95%), respectively, of the Fair
Market Value of such Pledged Mortgages and Pledged Securities or (b)
pledge to the Lender additional Mortgage Loans owned by the
Borrowers, or other property of a type and with a value satisfactory
to the Lender in its sole discretion, with a Fair Market Value
sufficient to increase the Fair Market Value of the Pledged
Mortgages, the Pledged Securities and such other assets to any
amount such that ninety-eight percent (98%) and ninety-five percent
(95%), of the aggregate principal balance of Advances made against
uncommitted Subprime First Mortgage Loans and uncommitted Subprime
Second Mortgage Loans, respectively, does not exceed such Fair
Market Value. The Borrowers authorize the Lender, without the
requirement of prior demand or notice from the Lender, to cause the
Funding Bank to charge the Borrowers' accounts for the amount of any
prepayment required under this Section 3.3. Such prepayments shall
be applied first, to the Advances made against uncommitted Subprime
Second Mortgage Loans, and second, to the Advances made against
uncommitted Subprime First Mortgage Loans, ratably in accordance
with the outstanding principal balance of each Advance made against
uncommitted Subprime First Mortgage Loans. The Lender may at any
time, and shall no less frequently than once each month, calculate
the Fair Market Value of the Pledged Mortgages and Pledged
Securities, and the Borrowers shall provide to the Lender such
information concerning the Pledged Mortgages and the Pledged
Securities as the Lender may request in connection with such
calculation.
3.4 Delivery of Additional Collateral or Mandatory
Prepayment. At any time that the aggregate Collateral Value of the
Pledged Mortgages and Pledged Securities then pledged hereunder is
less than the aggregate amount of the Advances then outstanding
hereunder, the Lender may request, and the Borrowers shall within
two (2) Business Days after Notice by the Lender (a) deliver to the
Lender for pledge hereunder additional Mortgage Loans, and/or cash,
at the Borrower's option, with a Collateral Value sufficient to
cover the difference between the Collateral Value of the Pledged
Mortgages and Pledged Securities pledged and the aggregate
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amount of Advances outstanding hereunder, and/or (b) repay the
Advances in an amount sufficient to reduce the aggregate balance
thereof outstanding to or below the Collateral Value of the Pledged
Mortgages and Pledged Securities pledged hereunder.
3.5 Release of Collateral.
3.5(a) The Lender may deliver documents
relating to the Collateral to the Borrowers for
correction or completion pursuant to a Trust Receipt.
3.5(b) Prior to the occurrence of a Default
or Event of Default, upon delivery by the Borrowers to
the Lender of shipping instructions pursuant to Exhibit
D-SF, the Lender will promptly transmit Pledged
Mortgages or Pledged Securities and all related loan
documents or pool documents to the applicable Investor,
Approved Custodian or other party.
3.5(c) Upon receipt of Notice from the
Borrowers under Section 2.5(g) hereof, and repayment of
the Release Amount with respect to a Pledged Mortgage
identified by the Borrowers, any Collateral Documents
relating to the redeemed Pledged Mortgage or Mortgage
Loan backing a Pledged Security which have not been
delivered to an Investor or Approved Custodian shall
promptly be released by the Lender to the Borrowers.
3.6 Collection and Servicing Rights. So long as no Event
of Default shall have occurred and be continuing, the Borrowers
shall be entitled to service and receive and collect directly all
sums payable to the Borrowers in respect of the Collateral other
than proceeds of any Purchase Commitment or proceeds of the sale of
any Collateral. Following the occurrence of any Event of Default,
the Lender or its designee shall thereafter be entitled to service
and receive and collect all sums payable to the Borrowers in respect
of the Collateral, and in such case (a) the Lender or its designee
in its discretion may, in its own name, in the name of the Borrowers
or otherwise, demand, ▇▇▇ for, collect or receive any money or
property at any time payable or receivable on account of or in
exchange for any of the Collateral, but shall be under no obligation
to do so, (b) the Borrowers shall, if the Lender so requests, hold
in trust for the benefit of the Lender and forthwith pay to the
Lender at its office designated by Notice hereunder, all amounts
thereafter received by the Borrowers upon or in respect of any of
the Collateral, advising the Lender as to the source of such funds,
and (c) all amounts so received and collected by the Lender shall be
held by it as part of the Collateral.
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3.7 Return of Collateral at End of Commitment. If (a)
the Commitment shall have expired or been terminated, and (b)
no Advances, interest or other Obligations shall be
outstanding and unpaid, the Lender shall deliver or release
its security interest and shall deliver all Collateral in its
possession to the Borrowers at the Borrowers' expense. The
receipt of the Borrowers for any Collateral released or
delivered to the Borrowers pursuant to any provision of this
Agreement shall be a complete and full acquittance for the
Collateral so returned, and the Lender shall thereafter be
discharged from any liability or responsibility therefor.
4. CONDITIONS PRECEDENT.
4.1 Initial Advance. The obligation of the Lender to
make the initial Advance under this Agreement is subject to the
satisfaction, in the sole discretion of the Lender, on or before the
date thereof of the following conditions precedent:
4.1(a) The Lender shall have received the
following, all of which must be satisfactory in form and
content to the Lender, in its sole discretion:
(1) The Note and this Agreement
duly executed by the Borrowers.
(2) BNC's articles of
incorporation as certified by the Secretary
of State of BNC's incorporation, bylaws
certified by the corporate secretary of BNC,
and certificates of good standing dated no
less recently than ninety (90) days prior to
the date of this Agreement and a
certification from the Franchise Tax Board
of the State of California stating that BNC
is in good standing with the Franchise Tax
Board.
(3) A resolution of the board of
directors of BNC, certified as of the date
of this Agreement by its corporate
secretary, authorizing the execution,
delivery and performance of this Agreement
and the other Loan Documents, and all other
instruments or documents to be delivered by
BNC pursuant to this Agreement.
(4) A certificate of BNC's
corporate secretary as to the incumbency and
authenticity of the signatures of the
officers of BNC executing this Agreement and
the other Loan Documents and each Advance
Request and all other instruments or
documents to be delivered pursuant hereto
(the
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Lender being entitled to rely thereon until
a new such certificate has been furnished to
the Lender).
(5) Financial statements of BNC
and its Subsidiaries, on a consolidated and
consolidating basis containing a balance
sheet as of June 30, 1998, and related
statements of income, changes in
stockholders' equity and cash flows for the
period ended on such date, all prepared in
accordance with GAAP applied on a basis
consistent with prior periods and audited by
independent certified public accountants of
recognized standing acceptable to the
Lender.
(6) Financial statements of BNC
and its Subsidiaries, on a consolidated and
consolidating basis containing a balance
sheet as of , related statements of income
and changes in stockholders' equity for the
period ended on such date prepared in
accordance with GAAP applied on a basis
consistent with the BNC's most recent
audited financial statements.
(7) Mortgage Logic's articles of
incorporation as certified by the Secretary
of State of the Mortgage Logic's
incorporation, bylaws certified by the
corporate secretary of Mortgage Logic, and
certificates of good standing dated no less
recently than ninety (90) days prior to the
date of this Agreement and a certification
from the Franchise Tax Board of the State of
California stating that Mortgage Logic is in
good standing with the Franchise Tax Board.
(8) A resolution of the board of
directors of Mortgage Logic, certified as of
the date of this Agreement by its corporate
secretary, authorizing the execution,
delivery and performance of this Agreement
and the other Loan Documents, and all other
instruments or documents to be delivered by
Mortgage Logic pursuant to this Agreement.
(9) A certificate of Mortgage
Logic's corporate secretary as to the
incumbency and authenticity of the
signatures of the officers of Mortgage Logic
executing this Agreement and the other Loan
Documents and each Advance Request and all
other instruments or documents to be
delivered pursuant hereto (the Lender being
entitled to rely thereon until a new such
certificate has been furnished to the
Lender).
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(10) A favorable written opinion
of counsel to BNC and Mortgage Logic (or of
separate counsel at the option of BNC and
Mortgage Logic), dated as of the date of
this Agreement substantially in the form of
Exhibit H attached hereto, addressed to the
Lender.
(11) A Uniform Commercial Code,
tax lien and judgment searches of the
appropriate public records for BNC and
Mortgage Logic, which search shall not have
disclosed the existence of any prior Lien on
the Collateral other than in favor of the
Lender or as permitted hereunder.
(12) Copies of the certificates,
documents or other written instruments which
evidence the Borrowers' eligibility
described in Section 5.13 hereof, all in
form and substance satisfactory to the
Lender.
(13) Copies of the Borrowers'
errors and omissions insurance policy or
mortgage impairment insurance policy and
blanket bond coverage policy, or
certificates in lieu of policies, all in
form and content satisfactory to the Lender,
showing compliance by the Borrowers as of
the date of this Agreement with the related
provisions of Section 6.8 hereof.
(14) Executed financing
statements in recordable form covering the
Collateral and ready for filing in all
jurisdictions required by the Lender.
(15) Receipt by the Lender of
any fees due on the date hereof, including,
but not limited to, Commitment Fees and
document production fees.
(16) Evidence that all accounts
necessary into which Advances will be funded
have been established at the Funding Bank
and receipt of a fully executed Funding Bank
Agreement.
(17) An agreement among the
Borrowers, the Lender and ▇▇▇▇▇▇ ▇▇▇,
pursuant to which ▇▇▇▇▇▇ Mae agrees to send
all cash proceeds of Mortgage Loans sold by
the Borrowers to ▇▇▇▇▇▇ ▇▇▇ to the Cash
Collateral Account.
4.1(b) All directors, officers and
shareholders of the Borrowers, all Affiliates of the
Borrowers or of any Subsidiary of BNC or Mortgage Logic,
to whom or to
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any of whom the Borrowers shall be indebted as of the
date of this Agreement, which indebtedness has a term of
more than one (1) year or is in excess of One Hundred
Thousand Dollars ($100,000) shall have subordinated such
indebtedness to the Obligations, by executing a
Subordination of Debt Agreement, in the form of Exhibit
F hereto; and the Lender shall have received an executed
copy of any such Subordination of Debt Agreement,
certified by the corporate secretary of the each
Borrower to be true and complete and in full force and
effect as of the date of the Advance.
4.2 Each Advance. The obligation of the Lender to make
the initial and each subsequent Advance under this Agreement is
subject to the satisfaction, in the sole discretion of the Lender,
as of the date of each such Advance, of the following additional
conditions precedent:
4.2(a) The Borrowers shall have delivered to
the Lender the Advance Request, Collateral Documents,
and documents relating to Wet Settlement Advances,
called for under, and shall have satisfied the
procedures set forth in, Section 2.2 hereof and the
applicable Exhibits hereto described in that Section,
according to the type of the requested Advance. All
items delivered to the Lender shall be satisfactory to
the Lender in form and content, and the Lender may
reject such of them as do not meet the requirements of
this Agreement or of the related Purchase Commitment.
4.2(b) The Lender shall have received
evidence satisfactory to it as to the making and/or
continuation of any book entry or the due filing and
recording in all appropriate offices of all financing
statements and other instruments as may be necessary to
perfect the security interest of the Lender in the
Collateral under the Uniform Commercial Code or other
applicable law.
4.2(c) The representations and warranties of
the Borrowers contained in Article 5 hereof shall be
accurate and complete in all material respects as if
made on and as of the date of each Advance.
4.2(d) The Borrowers shall have performed
all agreements to be performed by it hereunder, and
after giving effect to the requested Advance, there
shall exist no Default or Event of Default hereunder.
4.2(e) The Borrowers shall not have incurred
any material liabilities, direct or contingent, other
than in the ordinary course of its business, since the
Statement Date.
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4.2(f) The Lender shall have received from
counsel for the Borrowers, if requested by the Lender in
its sole discretion, an updated opinion, in form and
substance satisfactory to the Lender, addressed to the
Lender and dated as of the date of such Advance,
covering such of the matters as the Lender may
reasonably request.
Delivery of an Advance Request by the Borrowers shall be
deemed a representation by the Borrowers that all conditions set
forth in this Section 4.2 shall have been satisfied as of the date
of such Advance.
5. REPRESENTATIONS AND WARRANTIES.
The Borrowers hereby represent and warrant to the
Lender, as of the date of this Agreement and as of the date of each
Advance Request and the making of each Advance, that:
5.1 Organization; Good Standing; Subsidiaries. Each of
the Borrowers and each Subsidiary of the Borrowers is a
corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its
incorporation, has the full legal power and authority to own
its property and to carry on its business as currently
conducted and is duly qualified as a foreign corporation to do
business and is in good standing in each jurisdiction in which
the transaction of its business makes such qualification
necessary, except in jurisdictions, if any, where a failure to
be in good standing has no material adverse effect on the
business, operations, assets or financial condition of the
Borrowers or any such Subsidiary. For the purposes hereof,
good standing shall include qualification for any and all
licenses and payment of any and all taxes required in the
jurisdiction of its incorporation and in each jurisdiction in
which the Borrowers transacts business. The Borrowers have no
Subsidiaries except as set forth on Exhibit G hereto. Exhibit
G sets forth with respect to each such Subsidiary, its name,
address, place of incorporation, each state in which it is
qualified as a foreign corporation, and the percentage
ownership of its capital stock by the Borrowers.
5.2 Authorization and Enforceability. The Borrowers have
the power and authority to execute, deliver and perform this
Agreement, the Note and all other Loan Documents to which the
Borrowers are a party and to make the borrowings hereunder. The
execution, delivery and performance by the Borrowers of this
Agreement, the Note and all other Loan Documents to which the
Borrowers are a party and the making of the borrowings hereunder and
thereunder, have been duly and validly authorized by all necessary
corporate action on the part of the Borrowers (none of which actions
has been modified
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or rescinded, and all of which actions are in full force and effect)
and do not and will not conflict with or violate any provision of
law, of any judgments binding upon the Borrowers, or of the articles
of incorporation or by-laws of the Borrowers, 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 Borrowers other than the Lien on the Collateral
granted hereunder, or result in or require the acceleration of any
indebtedness of the Borrowers pursuant to any agreement, instrument
or indenture to which the Borrowers are a party or by which the
Borrowers or their property may be bound or affected. This
Agreement, the Note and all other Loan Documents contemplated hereby
or thereby constitute legal, valid, and binding obligations of the
Borrowers or of the Guarantor, respectively, enforceable in
accordance with their respective terms, except as limited by
bankruptcy, insolvency or other such laws affecting the enforcement
of creditors' rights and by general principles of equity.
5.3 Approvals. The execution and delivery of this
Agreement, the Note and all other Loan Documents and the performance
of the Borrowers' obligations hereunder and thereunder and the
validity and enforceability hereof and thereof do not require any
license, consent, approval or other action of any state or federal
agency or governmental or regulatory authority other than those
which have been obtained and remain in full force and effect.
5.4 Financial Condition. The balance sheet of BNC and
its Subsidiaries, on a consolidated and consolidating basis, as of
the Statement Date, and the related statements of income and changes
in stockholders' equity for the fiscal period ended on the Statement
Date, heretofore furnished to the Lender, fairly present the
financial condition of BNC and its Subsidiaries as of the Statement
Date and the results of its operations for the fiscal period ended
on the Statement Date. The Borrowers had, on the Statement Date, no
known material liabilities, direct or indirect, fixed or contingent,
matured or unmatured, or liabilities for taxes, long-term leases or
unusual forward or long-term commitments not disclosed by, or
reserved against in, said balance sheet and related statements, and
at the present time there are no material unrealized or anticipated
losses from any loans, advances or other commitments of the
Borrowers except as heretofore disclosed to the Lender in writing.
Said financial statements were prepared in accordance with GAAP
applied on a consistent basis throughout the periods involved. Since
the Statement Date, there has been no material adverse change in the
business, operations, assets or financial condition of the Borrowers
(and their Subsidiaries), nor are the Borrowers aware of any state
of facts which (with or without notice or
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lapse of time or both) would or could result in any such material
adverse change.
5.5 Litigation. There are no actions, claims, suits or
proceedings pending or, to the knowledge of the Borrowers,
threatened or reasonably anticipated against or affecting the
Borrowers or any Subsidiary of the Borrowers in any court or before
any arbitrator or before any government commission, board, bureau or
other administrative agency which, if adversely determined, may
reasonably be expected to result in any material and adverse change
in the business, operations, assets or financial condition of the
Borrowers as a whole, or which would affect the validity or
enforceability of this Agreement, the Note or any other Loan
Document.
5.6 Compliance with Laws. Neither of the Borrowers and
none of their Subsidiaries are in violation of any provision of any
law, or of any judgment, award, rule, regulation, order, decree,
writ or injunction of any court or public regulatory body or
authority which might have a material adverse effect on the
business, operations, assets or financial condition of the Borrowers
and their Subsidiaries as a whole or which would affect the validity
or enforceability of this Agreement, the Note or any other Loan
Document.
5.7 Regulation U. The Borrowers are not engaged
principally, or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying Margin
Stock, and no part of the proceeds of any Advances made hereunder
will be used to purchase or carry any Margin Stock or to extend
credit to others for the purpose of purchasing or carrying any
Margin Stock.
5.8 Investment Company Act. Neither of the Borrowers are
an "investment company" or controlled by an "investment company"
within the meaning of the Investment Company Act of 1940, as
amended.
5.9 Payment of Taxes. The Borrowers and each of their
Subsidiaries has filed or caused to be filed all federal, state and
local income, excise, property and other tax returns with respect to
the operations of the Borrowers and their Subsidiaries which are
required to be filed, all such returns are true and correct, and the
Borrowers and each of their Subsidiaries have paid or caused to be
paid all taxes as shown on such returns or on any assessment, to the
extent that such taxes have become due, including, but not limited
to, all FICA payments and withholding taxes, if appropriate. The
amounts reserved, as a liability for income and other taxes payable,
in the financial statements described in Section 5.4 hereof are
sufficient for payment of all unpaid federal, state and local
income, excise, property and other taxes, whether or not
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disputed, of the Borrowers and their Subsidiaries accrued for or
applicable to the period and on the dates of such financial
statements and all years and periods prior thereto and for which
either Borrower or any of their Subsidiaries may be liable in their
own right or as transferee of the assets of, or as successor to, any
other Person. No tax Liens have been filed and no material claims
are being asserted with respect to any such taxes, fees or charges.
5.10 Agreements. Neither of the Borrowers and none of
their Subsidiaries of the Borrowers are a party to any agreement,
instrument or indenture or subject to any restriction materially and
adversely affecting its business, operations, assets or financial
condition, except as disclosed in the financial statements described
in Section 5.4 hereof. Neither of the Borrowers and none of the
Subsidiaries of the Borrowers are in default in the performance,
observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement, instrument, or indenture
which default could have a material adverse effect on the business,
operations, properties or financial condition of the Borrowers and
their Subsidiaries as a whole. No holder of any material
indebtedness of the Borrowers or any of their Subsidiaries has given
notice of any asserted default thereunder, and no liquidation or
dissolution of the Borrowers or of any of their Subsidiaries and no
receivership, insolvency, bankruptcy, reorganization or other
similar proceedings relative to the Borrowers or of any of their
Subsidiaries or any of their properties is pending, or to the
knowledge of the Borrowers, threatened.
5.11 Title to Properties. Each of the Borrowers and each
Subsidiary of the Borrowers has good, valid, insurable (in the case
of real property) and marketable title to all of its properties and
assets (whether real or personal, tangible or intangible) reflected
on the financial statements described in Section 5.4 hereof, except
for such properties and assets as have been disposed of since the
date of such financial statements as no longer used or useful in the
conduct of its business or as have been disposed of in the ordinary
course of business.
5.12 ERISA. All plans ("Plans") of a type described in
Section 3(3) of ERISA in respect of which either of the Borrowers or
any Subsidiary of the Borrowers is an "Employer," as defined in
Section 3(5) of ERISA, are in substantial compliance with ERISA, and
none of such Plans is insolvent or in reorganization, has an
accumulated or waived funding deficiency within the meaning of
Section 412 of the Internal Revenue Code, and none of the Borrowers
and none of their Subsidiaries has incurred any material liability
(including any material contingent liability) to or on account of
any
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such Plan pursuant to Sections 4062, 4063, 4064, 4201 or 4204 of
ERISA; and no proceedings have been instituted to terminate any such
Plan, and no condition exists which presents a material risk to any
of the Borrowers or any of their Subsidiaries of incurring a
liability to or on account of any such Plan pursuant to any of the
foregoing Sections of ERISA. No Plan or trust forming a part thereof
has been terminated since September 1, 1974.
5.13 Eligibility. The Borrowers are approved and
qualified and in good standing as a lender or seller/servicer, as
set forth below, and meet all requirements applicable to their
status as such:
5.13(a) RFC approved seller/servicer of
Mortgage Loans, eligible to originate, purchase, hold,
sell and service Mortgage Loans to be sold to RFC.
5.14 Place of Business. The principal place of business
of the Borrowers is ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
5.15 Special Representations Concerning Collateral. The
Borrowers hereby represent and warrant to the Lender, as of the date
of this Agreement and as of the date of each Advance Request and the
making of each Advance, that:
5.15(a) The Borrowers are the legal and
equitable owner and holder, free and clear of all Liens
(other than Liens granted hereunder), of the Pledged
Mortgages and the Pledged Securities. All Pledged
Mortgages, Pledged Securities and Purchase Commitments
have been duly authorized and validly issued to the
Borrowers, and all of the foregoing items of Collateral
comply with all of the requirements of this Agreement,
and have been and will continue to be validly pledged or
assigned to the Lender, subject to no other Liens.
5.15(b) The Borrowers have, and will
continue to have, the full right, power and authority to
pledge the Collateral pledged and to be pledged by it
hereunder.
5.15(c) Any Mortgage Loan and any related
document included in the Pledged Mortgages (1) has been
duly executed and delivered by the parties thereto at a
closing held not more than ninety (90) days prior to the
date of the Advance Request for such Mortgage Loan, (2)
has been made in compliance with all requirements of the
Real Estate Settlement Procedures Act, Equal Credit
Opportunity Act, the federal Truth-In-Lending Act and
all other applicable laws and regulations, (3) is and
will continue to be valid and enforceable in accordance
with its terms, without defense or offset, (4) has not
been
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modified or amended except in writing, which writing is
part of the Collateral Documents, nor any requirements
thereof waived, (5) has been evaluated or appraised in
accordance with Title XI of FIRREA, and (6) complies and
will continue to comply with the terms of this Agreement
and, if applicable, with the related Purchase Commitment
held by the Borrowers. Each Mortgage Loan other than a
Home Equity Loan has been fully advanced in the face
amount thereof, each First Mortgage is a first Lien on
the premises described therein and each Second Mortgage
is secured by a second Lien on the premises described
therein, and has or will have a title insurance policy,
in American Land Title Association form or equivalent
thereof, from a recognized title insurance company,
insuring the priority of the Lien of the Mortgage and
meeting the usual requirements of Investors purchasing
such Mortgage Loans.
5.15(d) No default has occurred and is
continuing for more than sixty (60) days under any
Mortgage Loan included in the Pledged Mortgages without
the Advance against such Pledged Mortgage having been
repaid in accordance with Section 2.5(c)(3) hereof,
provided, however, that with respect to Pledged
Mortgages which have already been pledged as Collateral
hereunder, if any default has occurred, the Borrowers
will promptly notify the Lender.
5.15(e) The Borrowers have complied and will
continue to comply in all material respects with all
laws, rules and regulations in respect of the FHA
insurance or VA guaranty of each Mortgage Loan included
in the Pledged Mortgages designated by the Borrowers as
an FHA insured or VA guaranteed Mortgage Loan, and such
insurance or guarantee is and will continue to be in
full force and effect.
5.15(f) All fire and casualty policies
covering the premises encumbered by each Mortgage
included in the Pledged Mortgages (1) name and will
continue to name the Borrowers and its successors and
assigns as the insured under a standard mortgagee
clause, (2) are and will continue to be in full force
and effect, and (3) afford and will continue to afford
insurance against fire and such other risks as are
usually insured against in the broad form of extended
coverage insurance from time to time available.
5.15(g) Pledged Mortgages secured by
premises located in a special flood hazard area
designated as such by the Director of the Federal
Emergency Management Agency are and shall continue to be
covered by special
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flood insurance under the National Flood Insurance
Program.
5.15(h) Each Pledged Mortgage against which
an Advance is made on the basis of a Purchase Commitment
meets all requirements of such Purchase Commitment. The
Borrowers shall assure that Pledged Mortgages which are
intended to be used in the formation of Mortgage-backed
Securities shall comply or, prior to the formation of
any such Mortgage-backed Security, shall comply with the
requirements of the governmental instrumentality,
department, agency or other Person issuing or
guaranteeing such Mortgage-backed Security. The
Borrowers shall assure that Uncommitted Mortgage Loans
pledged hereunder meet all requirements of one or more
Investors with which the Borrowers have agreements or
other arrangements to sell similar Mortgage Loans.
5.15(i) For Pledged Mortgages which will be
used to back ▇▇▇▇▇▇ Mae Mortgage-backed Securities, the
Borrowers have received from ▇▇▇▇▇▇ ▇▇▇ a Confirmation
Notice or Confirmation Notices for Request Additional
Commitment Authority and for Request Pool Numbers, and
there remains available thereunder a commitment on the
part of ▇▇▇▇▇▇ Mae sufficient to permit the issuance of
▇▇▇▇▇▇ ▇▇▇ Mortgage-backed Securities in an amount at
least equal to the amount of such Pledged Mortgages
designated by the Borrowers as the Mortgage Loans to be
used to back such ▇▇▇▇▇▇ Mae Mortgage-backed Securities;
each such Confirmation Notice is in full force and
effect; each of such Pledged Mortgages has been assigned
by the Borrowers to one of such Pool Numbers and a
portion of the available ▇▇▇▇▇▇ ▇▇▇ Commitment has been
allocated thereto by the Borrowers, in an amount at
least equal to such Pledged Mortgages; and each such
assignment and allocation has been reflected in the
books and records of the Borrowers.
5.15(j) Each Pledged Mortgage secured by
real property to which a Manufactured Home is affixed
will create a valid Lien on such Manufactured Home that
will have priority over any other Lien on such
Manufactured Home, whether or not arising under
applicable real property law.
5.16 Servicing. Attached hereto as Exhibit E is a true
and complete list of the Borrowers' Servicing Portfolio. All of the
Borrowers' Servicing Contracts are in full force and effect and,
except as otherwise indicated, are unencumbered by Liens. No default
or event which, with notice or lapse of time or both, would become a
default, exists under any such Servicing Contract.
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5.17 No Adverse Selection. The Borrowers have not
selected the Collateral in a manner so as to affect adversely
the Lender's interests.
5.18 Year 2000 Compliance. The Borrowers have conducted
a comprehensive review and assessment of the Borrowers' computer
applications and made inquiry of the Borrowers' key suppliers,
vendors, customers, and Investors with respect to the "Year 2000
Problem" and, based on that review and inquiry, the Borrowers do not
believe the Year 2000 Problem will result in a material adverse
change in the Borrowers' business condition (financial or
otherwise), operations, properties or prospects, or ability to repay
the credit.
6. AFFIRMATIVE COVENANTS.
The Borrowers hereby covenant and agree that, so long as
the Commitment is outstanding or there remain any Obligations to be
paid or performed under this Agreement or under any other Loan
Document, the Borrowers shall:
6.1 Payment of Note. Punctually pay or cause to be paid
all Obligations payable hereunder and under the Note in accordance
with the terms hereof and thereof.
6.2 Financial Statements and Other Reports. Deliver to
the Lender:
6.2(a) As soon as available and in any event
within thirty (30) days after the end of each calendar
month of BNC, statements of income and changes in
stockholders' equity of BNC and its Subsidiaries, on a
consolidated and consolidating basis for the immediately
preceding month and for the period from the beginning of
the fiscal year to the end of such calendar month, and
the related balance sheet as of the end of the
immediately preceding month, all in reasonable detail
and certified as to the fairness of presentation by the
chief financial officer of BNC, subject, however, to
year-end audit adjustments.
6.2(b) As soon as available and in any event
within ninety (90) days after the close of each fiscal
year of BNC, statements of income, changes in
stockholders' equity and cash flow of BNC and its
Subsidiaries, on a consolidated and consolidating basis
for such year, and the related balance sheet as of the
end of such year (setting forth in comparative form the
corresponding figures for the preceding fiscal year),
all in reasonable detail and accompanied by an opinion
(which opinion shall not be qualified due to possible
failure to
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take all appropriate steps to successfully address Year
2000 Problem) in form and substance satisfactory to the
Lender and prepared by an accounting firm reasonably
satisfactory to the Lender, or other independent
certified public accountants of recognized standing
selected by BNC and acceptable to the Lender, as to said
financial statements and a certificate signed by the
chief financial officer of BNC stating that said
financial statements fairly present the financial
condition and results of operations of BNC and its
Subsidiaries as of the end of, and for, such year.
6.2(c) Together with each delivery of
financial statements required in this Section 6.2, an
Officer's Certificate substantially in the form of
Exhibit I-SF hereto: (1) setting forth in reasonable
detail all calculations necessary to show that BNC and
its Subsidiaries are in compliance with the requirements
of Sections 7.6, 7.7, 7.8, 7.9 and 7.10 hereof as of the
end of such month or year (or, if the Borrowers are not
in compliance, showing the extent of non-compliance and
specifying the period of non-compliance and what actions
the Borrowers have taken, are taking or propose to take
with respect thereto); (2) certifying that the Borrowers
were, as of the end of the period, in compliance and in
good standing with applicable HUD, ▇▇▇▇▇▇ Mae, or
Investor net worth requirements; (3) certifying that the
representation set forth in Section 5.18 hereof is true
and correct as of the date of such certificate or, if
such representation is not true and correct as of such
date, specifying the nature of the problem and what
action the Borrowers have taken, are taking and propose
to take with request thereto, and (4) stating that the
signers have reviewed the terms of this Agreement and
have made, or caused to be made under their supervision,
a review in reasonable detail of the transactions and
conditions of the Borrowers (and, if applicable, their
Subsidiaries) during the accounting period covered by
such financial statements and that such review has not
disclosed the existence during or at the end of such
accounting period, and that the signers do not have
knowledge of the existence as of the date of the
Officer's Certificate, of any Default or Event of
Default, or if any Default or Event of Default existed
or exists, specifying the nature and period of the
existence thereof and what action the Borrowers have
taken, are taking and propose to take with respect
thereto.
6.2(d) As soon as available and in any event
within thirty (30) days after the end of each calendar
month, a commitment summary and pipeline report
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substantially in the form of Exhibit L (the "Commitment
Summary Report") dated as of the end of such month.
6.2(e) As soon as available and in any event
within thirty (30) days after the end of each calendar
month, a consolidated report (the "Servicing Portfolio
Report") as of the end of the calendar month detailing,
as to all Mortgage Loans the servicing rights to which
are owned by the Borrowers (specified by investor type,
recourse and non-recourse) regardless of whether such
Mortgage Loans are Pledged Mortgages and which report
shall indicate Mortgage Loans which (A) are current and
in good standing, (B) are more than 30, 60 or 90 days
past due, respectively, (C) are, for Mortgage Loans
serviced with recourse, more than three hundred sixty
(360) days past due, (D) are the subject of pending
bankruptcy or foreclosure proceedings, or (E) have been
converted (through foreclosure or other proceedings in
lieu thereof) by the Borrowers into real estate owned by
the Borrowers.
6.2(f) As soon as available and in any event
within thirty (30) days after the end of each calendar
month, a consolidated report (the "Loan Production
Report") as of the end of such month, presenting the
total dollar volume and the number of Mortgage Loans
originated or purchased during such month and the fiscal
year to date, specified by property type and loan type
(e.g. FHA, ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ Mac,
Conventional, etc.)
6.2(g) As soon as available and in any event
within thirty (30) days after the end of each calendar
month, a delinquency report (the "Delinquency Report")
as of the end of such month, itemizing which Mortgage
Loans owned by the Borrowers or financed under a credit
facility of the Borrowers are more than 30, 60 and 90
days delinquent and indicating under which credit
facility of the Borrowers each Mortgage Loan is
financed.
6.2(h) Reports in respect of the Pledged
Mortgages and Pledged Securities, in such detail and at
such times as the Lender in its discretion may
reasonably request at any time or from time to time.
6.2(i) As soon as available and in any event
within fifteen (15) days of filing, copies of all
regular or periodic financial and other reports, if any,
which the Borrowers shall file with the Securities and
Exchange Commission or any governmental agency successor
thereto, copies of any audits completed by ▇▇▇▇▇▇ Mae,
▇▇▇▇▇▇ ▇▇▇ or ▇▇▇▇▇▇▇ Mac and copies of the Mortgage
Bankers'
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Financial Reporting Forms (▇▇▇▇▇▇▇ Mac Form 1055/▇▇▇▇▇▇
Mae Form 1002) which the Borrowers are required to have
filed, as the Lender may reasonably request.
6.2(j) As soon as available and in any event
within sixty (60) days after the end of each calendar
year, annual financial projections for the upcoming
fiscal year.
6.2(k) As soon as available and in any event
within thirty (30) days after the end of each calendar
month, a report detailing any and all repurchase or
rejected Mortgage Loan requests as well as any and all
indemnification agreements entered into by the
Borrowers.
6.2(l) From time to time, with reasonable
promptness, such further information regarding the
business, operations, properties or financial condition
of the Borrowers as the Lender may reasonably request.
6.3 Maintenance of Existence; Conduct of Business.
Preserve and maintain their corporate existence in good standing and
all of their rights, privileges, licenses and franchises necessary
or desirable in the normal conduct of its business, including,
without limitation, their eligibility as lender, seller/servicer and
issuer described under Section 5.13 hereof; conduct their business
in an orderly and efficient manner; maintain a net worth of
acceptable assets as required for maintaining the Borrowers'
eligibility as lender, seller/servicer and issuer described under
Section 5.13 hereof; and make no change in the nature or character
of their business or engage in any business in which they were not
engaged on the date of this Agreement.
6.4 Compliance with Applicable Laws. Comply with the
requirements of all applicable laws, rules, regulations and orders
of any governmental authority, a breach of which could materially
adversely affect their business, operations, assets, or financial
condition, except where contested in good faith and by appropriate
proceedings.
6.5 Inspection of Properties and Books. Permit
authorized representatives of the Lender or any Participant to
discuss the business, operations, assets and financial condition of
the Borrowers and their Subsidiaries with their officers and
employees and to examine their books of account and make copies or
extracts thereof, all at such reasonable times as the Lender or any
Participant may request. The Borrowers will provide their
accountants with a copy of this Agreement promptly after the
execution hereof and will instruct their accountants to answer
candidly any and all questions that the officers of the Lender or
any Participant
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or any authorized representatives of the Lender or any Participant
may address to them in reference to the financial condition or
affairs of the Borrowers and their Subsidiaries. The Borrowers may
have their representatives in attendance at any meetings between the
officers or other representatives of the Lender or any Participant
and the Borrowers' accountants held in accordance with this
authorization.
6.6 Notice. Give prompt Notice to the Lender of (a) any
action, suit or proceeding instituted by or against the Borrowers or
any of their Subsidiaries in any federal or state court or before
any commission or other regulatory body (federal, state or local,
domestic or foreign) which action, suit or proceeding has at issue
in excess of One Hundred Thousand Dollars ($100,000), or any such
proceedings threatened against the Borrowers or any of their
Subsidiaries in a writing containing the details thereof, except for
foreclosure and collection actions instituted by the Company on
Mortgage Loans to the extent no claim is made against the Company in
such actions, (b) the filing, recording or assessment of any
federal, state or local tax Lien against the Borrowers, or any of
their assets or any of their Subsidiaries, (c) the occurrence of any
Event of Default hereunder or the occurrence of any Default and
continuation thereof for five (5) days, (d) the suspension,
revocation or termination of the Borrower's eligibility, in any
respect, as approved lender, seller/servicer or issuer as described
under Section 5.13 hereof, (e) the transfer, loss or termination of
any Servicing Contract to which the Borrowers are a party, or which
is held for the benefit of the Borrowers, and the reason for such
transfer, loss or termination, if known to the Borrowers, and (f)
any other action, event or condition of any nature which may lead to
or result in a material adverse effect upon the business,
operations, assets, or financial condition of the Borrowers and
their 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 Borrowers or any of their
Subsidiaries is a party or to which the Borrowers or any of their
Subsidiaries, their properties, or assets may be subject.
6.7 Payment of Debt, Taxes, etc. Pay and perform all
obligations and indebtedness of the Borrowers, and cause to be paid
and performed all obligations and indebtedness of their
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 Borrowers or their 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
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such properties or any part thereof; provided, however, that the
Borrowers and their Subsidiaries shall not be required to pay taxes,
assessments or governmental charges or levies or claims for labor,
materials or supplies for which the Borrowers or their Subsidiaries
shall have obtained an adequate bond or adequate insurance or which
are being contested in good faith and by proper proceedings which
are being reasonably and diligently pursued and for which proper
reserves have been created.
6.8 Insurance. Maintain (a) errors and omissions
insurance or mortgage impairment insurance and blanket bond
coverage, with such companies and in such amounts as satisfy
prevailing requirements applicable to a lender, seller/servicer and
issuer described under Section 5.13 hereof, and (b) liability
insurance and fire and other hazard insurance on its properties,
with responsible insurance companies approved by the Lender, in such
amounts and against such risks as is customarily carried by similar
businesses operating in the same vicinity; and (c) within thirty
(30) days after Notice from the Lender, obtain such additional
insurance as the Lender shall reasonably require, all at the sole
expense of the Borrowers. Copies of such policies shall be furnished
to the Lender without charge upon request of the Lender.
6.9 Closing Instructions. Indemnify and hold the Lender
harmless from and against any loss, including reasonable attorneys'
fees and costs, attributable to the failure of a title insurance
company, agent or approved attorney to comply with the disbursement
or instruction letter or letters of the Borrowers relating to any
Mortgage Loan.
6.10 Subordination of Certain Indebtedness. Cause any
indebtedness of the Borrowers, incurred after the date of this
Agreement, to any shareholder, director or officer of the
Borrowers, or to any Affiliate of the Borrowers or of any
Subsidiary of the Borrowers, which indebtedness has a term of
more than one (1) year or is in excess of One Hundred Thousand
Dollars ($100,000) to be subordinated to all Obligations by
the execution of a Subordination of Debt Agreement in the form
of Exhibit F hereto and deliver to the Lender an executed copy
of said Agreement, certified by the respective corporate
secretary of the Borrowers to be true and complete and in full
force and effect.
6.11 Other Loan Obligations. Perform all material
obligations under the terms of each loan agreement, note, mortgage,
security agreement or debt instrument by which the Borrowers are
bound or to which any of their property is subject, and promptly
notify the Lender in writing of a declared default under or the
termination, cancellation,
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reduction or nonrenewal of any of its other lines of credit or
agreements with any other lender. Exhibit J hereto is a true and
complete list of all such lines of credit or agreements as of the
date hereof and the Borrowers hereby agree to give the Lender at
least thirty (30) days Notice before entering into any additional
lines of credit.
6.12 Use of Proceeds of Advances. Use the proceeds of
each Advance solely for the purpose set forth in Section 2.1(b) for
Advances of that type.
6.13 Special Affirmative Covenants Concerning
Collateral.
6.13(a) Warrant and defend the right, title
and interest of the Lender in and to the Collateral
against the claims and demands of all Persons
whomsoever.
6.13(b) Service or cause to be serviced all
Mortgage Loans in accordance with the standard
requirements of the issuers of Purchase Commitments
covering the same and all applicable FHA and VA
requirements, including without limitation taking all
actions necessary to enforce the obligations of the
obligors under such Mortgage Loans. The Borrowers shall
service or cause to be serviced all Mortgage Loans
backing Pledged Securities in accordance with applicable
governmental requirements and requirements of issuers of
Purchase Commitments covering the same. The Borrowers
shall hold all escrow funds collected in respect of
Pledged Mortgages and Mortgage Loans backing Pledged
Securities in trust, without commingling the same with
non-custodial funds, and apply the same for the purposes
for which such funds were collected.
6.13(c) Execute and deliver to the Lender
such Uniform Commercial Code financing statements with
respect to the Collateral as the Lender may request. The
Borrowers shall also execute and deliver to the Lender
such further instruments of sale, pledge or assignment
or transfer, and such powers of attorney, as required by
the Lender, and shall do and perform all matters and
things necessary or desirable to be done or observed,
for the purpose of effectively creating, maintaining and
preserving the security and benefits intended to be
afforded the Lender under this Agreement. The Lender
shall have all the rights and remedies of a secured
party under the Uniform Commercial Code of Minnesota, or
any other applicable law, in addition to all rights
provided for herein.
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6.13(d) Notify the Lender within two (2)
Business Days of any default under, or of the
termination of, any Purchase Commitment relating to any
Pledged Mortgage, Eligible Mortgage Pool or Pledged
Security.
6.13(e) Promptly comply in all respects with
the terms and conditions of all Purchase Commitments,
and all extensions, renewals and modifications or
substitutions thereof or thereto. The Borrowers will
cause to be delivered to the Investor the Pledged
Mortgages and Pledged Securities to be sold under each
Purchase Commitment not later than the mandatory
delivery date thereof.
6.13(f) Maintain, at its principal office or
in a regional office approved by the Lender, or in the
office of a computer service bureau engaged by the
Borrowers and approved by the Lender, and, upon request,
make available to the Lender the originals, or copies in
any case where the originals have been delivered to the
Lender or to an Investor, of its Mortgage Notes and
Mortgages included in Pledged Mortgages, Mortgage-backed
Securities delivered to the Lender as Pledged
Securities, Purchase Commitments, and all related
Mortgage Loan documents and instruments, and all files,
surveys, certificates, correspondence, appraisals,
computer programs, tapes, discs, cards, accounting
records and other information and data relating to the
Collateral.
7. NEGATIVE COVENANTS.
The Borrowers hereby covenant and agree that, so long as
the Commitment is outstanding or there remain any Obligations to be
paid or performed, the Borrowers shall not, either directly or
indirectly, without the prior written consent of the Lender:
7.1 Contingent Liabilities. Assume, guarantee, endorse,
or otherwise become contingently liable for the obligation of any
Person other than the Borrowers, except by endorsement of negotiable
instruments for deposit or collection in the ordinary course of
business.
7.2 Sale or Pledge of Servicing Contracts. Sell, pledge
or grant a security interest in any existing or future
Servicing Contracts of the Borrowers other than to the Lender,
excepting therefrom any such Servicing Contracts pledged as
collateral for mortgage warehouse lines of credit, except as
otherwise expressly permitted in this Agreement, or omit to
take any action required to keep all such Servicing Contracts
in full force and effect; provided, however, that if no
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Default or Event of Default has occurred and is continuing,
servicing on individual Mortgage Loans may be sold concurrently with
and incidental to the sale of such Mortgage Loans (with servicing
released) in the ordinary course of the Borrowers' business.
7.3 Merger; Sale of Assets; Acquisitions. (a) Liquidate,
dissolve, consolidate or merge, (b) sell any substantial part of its
assets, or (c) acquire any substantial part of the assets of another
if, after giving effect to such acquisition, (i) an Event of Default
or Default would exist or (ii) any material change in the senior
management of the Borrowers would occur.
7.4 Deferral of Subordinated Debt. Pay in advance of the
stated maturity thereof any Subordinated Debt of the Borrowers or,
if a Default or Event of Default hereunder shall have occurred, make
any payment of any kind thereafter on such Subordinated Debt until
all Obligations have been paid and performed in full and any
applicable preference period has expired.
7.5 Loss of Eligibility. Take any action that would
cause the Borrowers to lose all or any part of their status as an
eligible lender, seller/servicer and issuer as described under
Section 5.13 hereof.
7.6 Debt to Tangible Net Worth Ratio. Permit the ratio
of Debt (excluding, for this purpose only, Debt arising under the
Hedging Arrangements, to the extent of assets arising under the same
Hedging Arrangements) to Tangible Net Worth of BNC and its
Subsidiaries, on a consolidated and consolidating basis, at any time
to exceed 15 to 1.
7.7 Minimum Tangible Net Worth. Permit Tangible Net
Worth of BNC and its Subsidiaries, on a consolidated and
consolidating basis, at any time to be less than Twenty-Five Million
Dollars ($25,000,000) and of each Subsidiary, on an unconsolidated
basis, at any time to be less than One Dollar ($1.00).
7.8 Liquidity. Permit the Liquid Assets of BNC and its
Subsidiaries, on a consolidated and consolidating basis, at any time
to be less than Ten Million Dollars ($10,000,000).
7.9 Transactions with Affiliates. Directly or indirectly
(a) make any loan, advance, extension of credit or capital
contribution to any of its Affiliates, (b) transfer, sell, pledge,
assign or otherwise dispose of any of its assets to or on behalf of
such Affiliates, (c) merge or consolidate with or purchase or
acquire assets from such Affiliates, or (d) pay management fees to
or on behalf of such Affiliates.
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7.10 Quarterly Net Income. Permit the net income of BNC
for any fiscal quarter, beginning with the quarter ending June 1999,
to be less than zero.
7.11 Acquisition of Recourse Servicing Contracts.
Acquire Servicing Contracts under which the Borrowers are obligated
to repurchase or indemnify the holder of the Mortgage Loans as a
result of defaults on the Mortgage Loans at any time during the term
of such Mortgage Loans.
7.12 Special Negative Covenants Concerning Collateral.
7.12(a) The Borrowers shall not amend or
modify, or waive any of the terms and conditions of, or
settle or compromise any claim in respect of, any
Pledged Mortgages or Pledged Securities.
7.12(b) The Borrowers shall not sell,
assign, transfer or otherwise dispose of, or grant any
option with respect to, or pledge or otherwise encumber
(except pursuant to this Agreement or as permitted
herein) any of the Collateral or any interest therein.
7.12(c) The Borrowers shall not make any
compromise, adjustment or settlement in respect of any
of the Collateral or accept other than cash in payment
or liquidation of the Collateral.
8. DEFAULTS; REMEDIES.
8.1 Events of Default. The occurrence of any of the
following conditions or events shall be an event of default ("Event
of Default"):
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 within ten (10) days
after the due date; or failure to pay, within any
applicable grace period, any other Obligations of the
Borrowers due the Lender; or
8.1(b) Failure of the Borrowers or any of
their Subsidiaries to pay, or any default in the payment
of any principal or interest on, any other indebtedness
or in the payment of any contingent obligation within
any period of grace provided; breach or default with
respect to any other material term of any other
indebtedness or of any loan agreement, mortgage,
indenture or other agreement relating thereto, if the
effect of such breach
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or default 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 Borrowers or
their Subsidiaries in the aggregate amount of One
Hundred Thousand Dollars ($100,000) or more to become or
be declared due prior to its stated maturity (upon the
giving or receiving of notice, lapse of time, both, or
otherwise); or
8.1(c) Failure of the Borrowers to perform
or comply with any term or condition applicable to them
contained in Sections 6.3, 6.12 and 6.13 or in any
Section of Article 7 of this Agreement; or
8.1(d) Any of the Borrowers' representations
or warranties made or deemed made herein or in any other
Loan Document (other than the representations and
warranties set forth in Section 5.15 hereof), or in any
statement or certificate at any time given by the
Borrowers in writing pursuant hereto or thereto shall be
inaccurate or incomplete in any material respect on the
date as of which made or deemed made; or
8.1(e) The Borrowers shall default in the
performance of or compliance with any term contained in
this Agreement or any other Loan Document other than
those referred to above in Subsections 8.1(a), 8.1(c) or
8.1(d) and such default shall not have been remedied or
waived within thirty (30) days after the earliest of (i)
receipt by the Borrowers of Notice from the Lender of
such default, (ii) receipt by the Lender of Notice from
the Borrowers of such default, or (iii) the date the
Borrowers should have notified the Lender of such
default pursuant to Section 6.6(c); or
8.1(f) (1) A court having jurisdiction shall
enter a decree or order for relief in respect of the
Borrowers, any Subsidiary of the Borrowers in an
involuntary case under any applicable bankruptcy,
insolvency or other similar law in respect of the
Borrowers, any Subsidiary of the Borrowers now or
hereafter in effect, which decree or order is not
stayed; the Borrowers, any Subsidiary of the Borrowers
shall consent to the entry of any such decree or order;
or a filing of a voluntary case under any applicable
bankruptcy, insolvency or other similar law in respect
of the Borrowers, any Subsidiary of the Borrowers has
occurred; or any other similar relief shall be granted
under any applicable federal or state law; or (2) the
filing of an involuntary case in respect of the
Borrowers, any Subsidiary of the Borrowers under any
applicable bankruptcy, insolvency or other similar law;
or a decree or order of a court having jurisdiction for
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the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar
powers over the Borrowers, any Subsidiary of the
Borrowers, or over all or a substantial part of their
respective property, shall have been entered; or the
involuntary appointment of an interim or permanent
receiver, trustee or other custodian of the Borrowers,
any Subsidiary of the Borrowers 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
Borrowers, any Subsidiary of the Borrowers, and the
continuance of any such events in Subsection (2) above
for sixty (60) days unless dismissed, bonded off or
discharged; or
8.1(g) The Borrowers, any Subsidiary of the
Borrowers shall consent to the appointment of or taking
possession by a receiver, trustee or other custodian for
all or a substantial part of their property; the making
by the Borrowers, any Subsidiary of the Borrowers of any
assignment for the benefit of creditors; or the
inability or failure of the Borrowers, any Subsidiary of
the Borrowers, or the admission by the Borrowers, any
Subsidiary of the Borrowers in writing of their
inability, to pay their debts as such debts become due;
or
8.1(h) Failure of the Borrowers to perform
any contractual obligations which they may have to
repurchase Mortgage Loans, if such obligations in the
aggregate exceed Five Hundred Thousand Dollars
($500,000); or
8.1(i) Any money judgment, writ or warrant
of attachment, or similar process involving in any case
an amount in excess of One Hundred Thousand Dollars
($100,000) shall be entered or filed against the
Borrowers or any of their Subsidiaries or any of their
respective assets and shall remain undischarged,
unvacated, unbonded or unstayed for a period of thirty
(30) days or in any event later than five (5) days prior
to the date of any proposed sale thereunder; or
8.1(j) Any order, judgment or decree shall
be entered against the Borrowers decreeing the
dissolution or split up of the Borrowers and such order
shall remain undischarged or unstayed for a period in
excess of twenty (20) days; or
8.1(k) Any Plan maintained by the Borrowers
or any of its Subsidiaries shall be terminated within
the meaning of Title IV of ERISA or a trustee shall be
appointed by an appropriate United States district court
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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 Borrowers' liability or any such Subsidiary's
liability (after giving effect to the tax consequences
thereof) to the Pension Benefit Guaranty Corporation (or
any successor thereto) for unfunded guaranteed vested
benefits under the Plan exceeds the then current value
of assets accumulated in such Plan by more than
Twenty-Five Thousand Dollars ($25,000) (or in the case
of a termination involving the Borrowers or any of their
Subsidiaries as a "substantial employer" (as defined in
Section 4001(a)(2) of ERISA) the withdrawing employer's
proportionate share of such excess shall exceed such
amount); or
8.1(l) The Borrowers or any of their
Subsidiaries as employer under a Multiemployer Plan
shall have made a complete or partial withdrawal from
such Multiemployer Plan and the plan sponsor of such
Multiemployer Plan shall have notified such withdrawing
employer that such employer has incurred a withdrawal
liability in an annual amount exceeding Twenty-Five
Thousand Dollars ($25,000); or
8.1(m) The Borrowers shall purport to
disavow their obligations hereunder or shall contest the
validity or enforceability hereof; or the Lender's
security interest on any portion of the Collateral shall
become unenforceable or otherwise impaired; provided
that, subject to the Lender's approval, no Event of
Default shall occur as a result of such impairment if
all Advances made against any such Collateral shall be
paid in full within ten (10) days of the date of such
impairment; or
8.1(n) Any Lien for any taxes, assessments
or other governmental charges (i) is filed against the
Borrowers or any of their property, or is otherwise
enforced against the Borrowers or any of their property,
or (ii) obtains priority that is equal or greater than
the priority of the Lender's security interest in any of
the Collateral; or
8.1(o) A material adverse change occurs, or
is reasonably likely to occur, in the business condition
(financial or otherwise), operations, properties or
prospects of the Borrowers, or in the ability of the
Borrowers to repay the Obligations.
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8.2 Remedies.
8.2(a) Upon the occurrence of any Event of
Default described in Sections 8.1(f) or 8.1(g), the
Commitment shall be terminated and the unpaid principal
amount of and accrued interest on the Note and all other
Obligations shall automatically become due and payable,
without presentment, demand or other requirements of any
kind, all of which are hereby expressly waived by the
Borrowers.
8.2(b) Upon the occurrence of any Event of
Default, other than those described in Sections 8.1(f)
and 8.1(g), the Lender may, by Notice to the Borrowers,
terminate the Commitment and/or declare all Obligations
to be immediately due and payable, whereupon the same
shall forthwith become due and payable, together with
all accrued interest thereon, and the obligation of the
Lender to make any Advances shall thereupon terminate.
8.2(c) Upon the occurrence of any Event of
Default, the Lender may also do any of the following:
(1) Foreclose upon or otherwise
enforce its security interest in and Lien on
the Collateral to secure all payments and
performance of the Obligations in any manner
permitted by law or provided for hereunder.
(2) Notify all obligors in
respect of Collateral that the Collateral
has been assigned to the Lender and that all
payments thereon are to be made directly to
the Lender or such other party as may be
designated by the Lender; settle,
compromise, or release, in whole or in part,
any amounts owing on the Collateral, any
such obligor or any Investor or any portion
of the Collateral, on terms acceptable to
the Lender; enforce payment and prosecute
any action or proceeding with respect to any
and all Collateral; and where any such
Collateral is in default, foreclose on and
enforce security interests in such
Collateral by any available judicial
procedure or without judicial process and
sell property acquired as a result of any
such foreclosure.
(3) Act, or contract with a
third party to act, as servicer or
subservicer of each item of Collateral
requiring servicing and perform all
obligations required in connection with
Servicing Contracts and Purchase
Commitments, such third party's fees to be
paid by the Borrowers.
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(4) Require the Borrowers to
assemble the Collateral and/or books and
records relating thereto and make such
available to the Lender at a place to be
designated by the Lender.
(5) Enter onto property where
any Collateral or books and records relating
thereto are located and take possession
thereof with or without judicial process;
and obtain access to the Borrowers' data
processing equipment, computer hardware and
software relating to the Collateral and to
use all of the foregoing and the information
contained therein in any manner the Lender
deems necessary for the purpose of
effectuating its rights under this Agreement
and any other Loan Document.
(6) Prior to the disposition of
the Collateral, prepare it for disposition
in any manner and to the extent the Lender
deems appropriate.
(7) Exercise all rights and
remedies of a secured creditor under the
Uniform Commercial Code of Minnesota or
other applicable law, including, but not
limited to, selling or otherwise disposing
of the Collateral, or any part thereof, at
one or more public or private sales, whether
or not such Collateral is present at the
place of sale, for cash or credit or future
delivery, on such terms and in such manner
as the Lender may determine, including,
without limitation, sale pursuant to any
applicable Purchase Commitment. If notice is
required under such applicable law, the
Lender will give the Borrowers not less than
ten (10) days' notice of any such public
sale or of the date after which any private
sale may be held. The Borrowers agree that
ten (10) days' notice shall be reasonable
notice. The Lender may, without notice or
publication, adjourn any public or private
sale or cause the same to be adjourned from
time to time by announcement at the time and
place fixed for the sale, and such sale may
be made at any time or place to which the
same may be so adjourned. In case of any
sale of all or any part of the Collateral on
credit or for future delivery, the
Collateral so sold may be retained by the
Lender until the selling price is paid by
the purchaser thereof, but the Lender shall
not incur any liability in case of the
failure of such purchaser to take up and pay
for the Collateral so sold and, in case of
any such failure, such Collateral may
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again be sold upon like notice. The Lender
may, however, instead of exercising the
power of sale herein conferred upon it,
proceed by a suit or suits at law or in
equity to collect all amounts due upon the
Collateral or to foreclose the pledge of and
sell the Collateral or any portion thereof
under a judgment or decree of a court or
courts of competent jurisdiction, or both.
(8) Proceed against the
Borrowers on the Note.
8.2(d) The Lender shall incur no liability
as a result of the sale or other disposition of the
Collateral, or any part thereof, at any public or
private sale or disposition. The Borrowers hereby waive
(to the extent permitted by law) any claims they may
have against the Lender arising by reason of the fact
that the price at which the Collateral may have been
sold at such private sale was less than the price which
might have been obtained at a public sale or was less
than the aggregate amount of the outstanding Advances
and the unpaid interest accrued thereon, even if the
Lender accepts the first offer received and does not
offer the Collateral to more than one offeree. Any sale
of Collateral pursuant to the terms of a Purchase
Commitment, or any other disposition of Collateral
arranged by the Borrowers, whether before or after the
occurrence of an Event of Default, shall be deemed to
have been made in a commercially reasonable manner.
8.2(e) The Borrowers acknowledge that
Mortgage Loans and Mortgage-backed Securities are
collateral of a type which is customarily sold on a
recognized market. The Borrowers waive any right they
may have to prior notice of the sale of any Pledged
Mortgage or Pledged Security, and agrees that the Lender
may purchase any Pledged Mortgages or Pledged Securities
at a private sale of such Collateral.
8.2(f) The Borrowers specifically waive and
releases (to the extent permitted by law) any equity or
right of redemption, all rights of redemption, stay or
appraisal which the Borrowers have or may have under any
rule of law or statute now existing or hereafter
adopted, and any right to require the Lender to (1)
proceed against any Person, (2) proceed against or
exhaust any of the Collateral or pursue its rights and
remedies as against the Collateral in any particular
order, or (3) pursue any other remedy in its power. The
Lender shall not be required to take any steps necessary
to preserve any rights of the Borrowers against holders
of mortgages
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prior in lien to the Lien of any Mortgage included in
the Collateral or to preserve rights against prior
parties.
8.2(g) The Lender may, but shall not be
obligated to, advance any sums or do any act or thing
necessary to uphold and enforce the Lien and priority
of, or the security intended to be afforded by, any
Mortgage included in the Collateral, including, without
limitation, payment of delinquent taxes or assessments
and insurance premiums. All advances, charges, costs and
expenses, including reasonable attorneys' fees and
disbursements, incurred or paid by the Lender in
exercising any right, power or remedy conferred by this
Agreement, or in the enforcement hereof, together with
interest thereon, at the Default Rate, from the time of
payment until repaid, shall become a part of the
principal balance outstanding hereunder and under the
Note.
8.2(h) No failure on the part of the Lender
to exercise, and no delay in exercising, any right,
power or remedy provided hereunder, at law or in equity
shall operate as a waiver thereof; nor shall any single
or partial exercise by the Lender of any right, power or
remedy provided hereunder, at law or in equity preclude
any other or further exercise thereof or the exercise of
any other right, power or remedy. Without intending to
limit the foregoing, all defenses based on the statute
of limitations are hereby waived by the Borrowers to the
extent permitted by law. The remedies herein provided
are cumulative and are not exclusive of any remedies
provided at law or in equity.
8.2(i) The Lender is hereby granted a
non-exclusive license or other right to use, without
charge, the Borrowers' computer programs, other
programs, labels, patents, copyrights, rights of use of
any name, trade secrets, trade names, trademarks,
service marks and advertising matter, or any property of
a similar nature, as it pertains to the Collateral, in
advertising for sale and selling any Collateral, and the
Borrowers' rights under all licenses and all other
agreements related to the foregoing shall inure to the
Lender's benefit until the Obligations are paid in full.
8.3 Application of Proceeds. The proceeds of any sale,
disposition or other enforcement of the Lender's security interest
in all or any part of the Collateral shall be applied by the Lender
to the Obligations in such order as the Lender, in its sole and
absolute discretion, shall determine from and after the indefensible
payment to the Lender of all of the Obligations, any remaining
proceeds shall be paid:
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First, to the payment of the costs and expenses of such
sale or enforcement, including reasonable compensation to the
Lender's agents and counsel, and all expenses, liabilities and
advances made or incurred by or on behalf of the Lender in
connection therewith;
Second, to the payment of interest accrued and unpaid on
the Note;
Third, to the payment of any other Obligations due
(other than principal and interest) under this Agreement and the
Loan Documents;
Fourth, to the payment of the outstanding principal
balance of the Note;
Fifth, to any remaining Obligations; and
Finally, to the payment to the Borrowers, or to their
successors or assigns, or as a court of competent jurisdiction may
direct, of any surplus then remaining from such proceeds.
If the proceeds of any such sale, disposition or other
enforcement are insufficient to cover the costs and expenses of such
sale, as aforesaid, and the payment in full of all Obligations, the
Borrowers shall remain liable for any deficiency.
8.4 Lender Appointed Attorney-in-Fact. The Lender is
hereby appointed the attorney-in-fact of the Borrowers, with full
power of substitution, for the purpose of carrying out the
provisions hereof and taking any action and executing any
instruments which the Lender may deem necessary or advisable to
accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable and coupled with an interest.
Without limiting the generality of the foregoing, the Lender shall
have the right and power to give notices of its security interest in
the Collateral to any Person, either in the name of the Borrowers or
in their own name, to endorse all Pledged Mortgages or Pledged
Securities payable to the order of the Borrowers, to change or cause
to be changed the book-entry registration or name of subscriber or
Investor on any Pledged Security, or to receive, endorse and collect
all checks made payable to the order of the Borrowers representing
any payment on account of the principal of or interest on, or the
proceeds of sale of, any of the Pledged Mortgages or Pledged
Securities and to give full discharge for the same.
8.5 Right of Set-Off. If the Borrowers 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
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under this Agreement, the Lender shall have the right, at any time
and from time to time, without notice, to set-off and to appropriate
or apply any and all property or indebtedness of any kind at any
time held or owing by the Lender to or for the credit or the account
of the Borrowers against and on account of the Obligations of the
Borrowers under the Note and this Agreement, irrespective of whether
or not the Lender shall have made any demand hereunder and whether
or not said Obligations shall have matured.
9. NOTICES.
All notices, demands, consents, requests and other
communications required or permitted to be given or made hereunder
(collectively, "Notices") shall, except as otherwise expressly
provided hereunder, be in writing and shall be delivered in person
or telecopied or mailed, first class or delivered by overnight
courier, return receipt requested, postage prepaid, addressed to the
respective parties hereto at their respective addresses hereinafter
set forth or, as to any such party, at such other address as may be
designated by it in a Notice to the other. All Notices shall be
conclusively deemed to have been properly given or made when duly
delivered, in person, by telecopy or by overnight courier, or if
mailed, on the date of receipt as noted on the return receipt,
addressed as follows:
if to the Borrowers: BNC Mortgage, Inc.
Mortgage ▇▇▇▇▇.▇▇▇, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇, V.P.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Lender: Residential Funding Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇, Director
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
10. REIMBURSEMENT OF EXPENSES; INDEMNITY.
The Borrowers shall: (a) pay a documentation production fee of Five
Thousand Dollars ($5,000) in connection with the preparation and negotiation of
this Agreement; (b) pay such additional documentation production fees as the
Lender may require and all out-of-pocket costs and expenses of the Lender,
including, without limitation, reasonable fees, service charges and
disbursements of counsel (including allocated costs of internal counsel), in
connection with the amendment, enforcement and
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administration of this Agreement, the Note, and other Loan Documents and the
making and repayment of the Advances and the payment of interest thereon; (c)
indemnify, pay, and hold harmless the Lender and any holder of the Note from and
against, any and all present and future stamp, documentary and other similar
taxes with respect to the foregoing matters and save the Lender and the holder
or holders of the Note harmless from and against any and all liabilities with
respect to or resulting from any delay or omission to pay such taxes; and (d)
indemnify, pay and hold harmless the Lender and any of its officers, directors,
employees or agents and any subsequent holder of the Note (collectively called
the "Indemnitees") from and against any and all liabilities, obligations,
losses, damages, penalties, judgments, suits, costs, expenses and disbursements
of any kind or nature whatsoever (including without limitation, the reasonable
fees and disbursements of counsel of the Indemnitees (including allocated costs
of internal counsel) in connection with any investigative, administrative or
judicial proceeding, whether or not such Indemnitees shall be designated a party
thereto) which may be imposed upon, incurred by or asserted against such
Indemnitees in any manner relating to or arising out of this Agreement, the
Note, or any other Loan Document or any of the transactions contemplated hereby
or thereby (the "Indemnified Liabilities"); provided, however, that the
Borrowers shall have no obligation hereunder with respect to Indemnified
Liabilities arising from the gross negligence or willful misconduct of any such
Indemnitees. To the extent that the undertaking to indemnify, pay and hold
harmless as set forth in the preceding sentence may be unenforceable because it
is violative of any law or public policy, the Borrowers shall contribute the
maximum portion which it is permitted to pay and satisfy under applicable law,
to the payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnitees or any of them. The agreement of the Borrowers contained in this
Subsection (d) shall survive the expiration or termination of this Agreement and
the payment in full of the Note. Attorneys' fees and disbursements incurred in
enforcing, or on appeal from, a judgment pursuant hereto shall be recoverable
separately from and in addition to any other amount included in such judgment,
and this clause is intended to be severable from the other provisions of this
Agreement and to survive and not be merged into such judgment.
11. FINANCIAL INFORMATION.
All financial statements and reports furnished to the
Lender hereunder shall be prepared in accordance with GAAP, applied
on a basis consistent with that applied in preparing the financial
statements as at the end of and for the last fiscal year ended
(except to the extent otherwise required to conform to good
accounting practice).
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12. MISCELLANEOUS.
12.1 Terms Binding Upon Successors; Survival of
Representations. The terms and provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns. All representations,
warranties, covenants and agreements herein contained on the part of
the Borrowers shall survive the making of any Advance and the
execution of the Note, and shall be effective so long as the
Commitment is outstanding hereunder or there remain any Obligations
to be paid or performed.
12.2 Assignment. This Agreement may not be assigned by
the Borrowers. This Agreement and the Note, along with the Lender's
security interest in any or all of the Collateral, may, at any time,
be transferred or assigned, in whole or in part, by the Lender, and
any assignee thereof may enforce this Agreement, the Note and such
security interest.
12.3 Amendments. Except as otherwise provided in this
Agreement, this Agreement may not be amended, modified or
supplemented unless such amendment, modification or supplement is
set forth in a writing signed by the parties hereto.
12.4 Governing Law. This Agreement and the other Loan
Documents shall be governed by the laws of the State of Minnesota,
without reference to its principles of conflicts of laws.
12.5 Participations. The Lender may at any time sell,
assign or grant participations in, or otherwise transfer to any
other Person (a "Participant"), all or part of the Obligations.
Without limitation of the exclusive right of the Lender to collect
and enforce such Obligations, the Borrowers agree that each
disposition will give rise to a debtor-creditor relationship of the
Borrowers to the Participant, and the Borrowers authorize each
Participant, upon the occurrence of an Event of Default, to proceed
directly by right of setoff, banker's lien, or otherwise, against
any assets of the Borrowers which may be in the hands of such
Participant. The Borrowers authorize the Lender to disclose to any
prospective Participant and any Participant any and all information
in the Lender's possession concerning the Borrowers, this Agreement
and the Collateral.
12.6 Relationship of the Parties. This Agreement
provides for the making of Advances by the Lender, in its capacity
as a lender, to the Borrowers, in their capacity as a borrower, and
for the payment of interest, repayment of principal by the Borrowers
to the Lender, and for the payment of certain fees by the Borrowers
to the Lender. The relationship between the Lender and the Borrowers
are limited to that of creditor/secured party, on the one hand, and
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debtor, on the other hand. The provisions herein for compliance with
financial covenants and delivery of financial statements are
intended solely for the benefit of the Lender to protect its
interests as lender in assuring payments of interest and repayment
of principal and payment of certain fees, and nothing contained in
this Agreement shall be construed as permitting or obligating the
Lender to act as a financial or business advisor or consultant to
the Borrowers, as permitting or obligating the Lender to control the
Borrowers or to conduct the Borrowers' operations, as creating any
fiduciary obligation on the part of the Lender to the Borrowers, or
as creating any joint venture, agency, or other relationship between
the parties hereto other than as explicitly and specifically stated
in this Agreement. The Borrowers acknowledge that they have 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 Borrowers further acknowledge that
they are experienced with respect to financial and credit matters
and have made their own independent decisions to apply to the Lender
for credit and to execute and deliver this Agreement.
12.7 Severability. If any provision of this Agreement
shall be declared to be illegal or unenforceable in any respect,
such illegal or unenforceable provision shall be and become
absolutely null and void and of no force and effect as though such
provision were not in fact set forth herein, but all other
covenants, terms, conditions and provisions hereof shall
nevertheless continue to be valid and enforceable.
12.8 Operational Reviews. From time to time upon
request, the Borrowers shall permit the Lender or its representative
access to their premises and records, for the purpose of conducting
a review of the Borrowers' general mortgage business methods,
policies, and procedures, auditing loan files and reviewing
financial and operational aspects of the Borrowers' business.
12.9 Consent to Credit References. The Borrowers hereby
consent to the disclosure of information regarding the Borrowers and
their relationships with the Lender to Persons making credit
inquiries to the Lender. This consent is revocable by the Borrowers
at any time upon Notice to the Lender as provided in Section 9
hereof.
12.10 Consent to Jurisdiction. The Borrowers hereby
agree that any action or proceeding under the Loan Documents, the
Note or any document delivered pursuant hereto may be commenced
against it in any court of competent jurisdiction within the State
of Minnesota, by service of process upon the
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Borrowers by first class registered or certified mail, return
receipt requested, addressed to the Borrowers at their address last
known to the Lender. The Borrowers agree that any such suit, action
or proceeding arising out of or relating to this Agreement or any
other such document may be instituted in the Hennepin County State
District Court or in the United States District Court for the
District of Minnesota at the option of the Lender; and the Borrowers
hereby waive any objection to the jurisdiction or venue of any such
court with respect to, or the convenience of any court as a forum
for, any such suit, action or proceeding. Nothing herein shall
affect the right of the Lender to accomplish service of process in
any other manner permitted by law or to commence legal proceedings
or otherwise proceed against the Borrowers in any other jurisdiction
or court.
12.11 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an
original, but all such counterparts shall together constitute but
one and the same instrument.
12.12 Entire Agreement. This Agreement, the Note and the
other Loan Documents represent the final agreement among the parties
hereto and thereto with respect to the subject matter hereof and
thereof, and may not be contradicted by evidence of prior or
contemporaneous oral agreements among such parties. There are no
oral agreements among the parties with respect to the subject matter
hereof and thereof.
12.13 WAIVER OF JURY TRIAL. THE BORROWERS AND THE LENDER
EACH HEREBY (a) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF
ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (b) WAIVES ANY RIGHT TO
TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR
HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY
GIVEN, KNOWINGLY AND VOLUNTARILY, BY THE BORROWERS AND THE LENDER,
AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE
AND EACH ISSUE AS TO WHICH THE RIGHT OF A JURY TRIAL WOULD OTHERWISE
ACCRUE. THE LENDER AND THE BORROWERS ARE EACH HEREBY AUTHORIZED AND
REQUESTED TO SUBMIT THIS AGREEMENT TO ANY COURT HAVING JURISDICTION
OVER THE SUBJECT MATTER AND THE PARTIES HERETO, SO AS TO SERVE AS
CONCLUSIVE EVIDENCE OF THE FOREGOING WAIVER OF THE RIGHT TO JURY
TRIAL. FURTHER, THE BORROWERS AND THE LENDER EACH HEREBY CERTIFIES
THAT NO REPRESENTATIVE OR AGENT OF THE OTHER PARTY, INCLUDING THE
OTHER PARTY'S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO
ANY OF ITS REPRESENTATIVES OR AGENTS THAT THE OTHER PARTY WILL NOT
SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
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BNC MORTGAGE, INC., a Delaware
corporation
By:
----------------------------------
Its:
----------------------------------
MORTGAGE ▇▇▇▇▇.▇▇▇, INC., a
California corporation
By:
----------------------------------
Its:
----------------------------------
RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation
By:
----------------------------------
Its: Director
STATE OF _______________ )
) ss
COUNTY OF ______________ )
On , 1999, before me, a Notary Public,
personally appeared , the
of BNC MORTGAGE, INC., a Delaware corporation, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to the within instrument and acknowledged to me that
he/she executed the same in his/her authorized capacity, and that by his/her
signature on the instrument the person, or the entity upon behalf of which the
person acted, executed the instrument.
WITNESS my hand and official seal.
-------------------------------
Notary Public
(SEAL) My Commission Expires:
--------
STATE OF _______________ )
) ss
COUNTY OF ______________ )
On , 1999, before me, a Notary Public,
personally appeared , the
of MORTGAGE ▇▇▇▇▇.▇▇▇, INC., a California corporation, personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person whose name is subscribed to the within instrument and acknowledged to me
that he/she
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executed the same in his/her authorized capacity, and that by his/her signature
on the instrument the person, or the entity upon behalf of which the person
acted, executed the instrument.
WITNESS my hand and official seal.
-------------------------------
Notary Public
(SEAL) My Commission Expires:
--------
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70
STATE OF _______________ )
) ss
COUNTY OF ______________ )
On , 1999, before me, a Notary Public, personally appeared , the
Director of RESIDENTIAL FUNDING CORPORATION, a Delaware corporation, personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person whose name is subscribed to the within instrument and acknowledged to me
that he/she executed the same in his/her authorized capacity, and that by
his/her signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.
WITNESS my hand and official seal.
-------------------------------
Notary Public
(SEAL) My Commission Expires:
--------
64