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MASTER LOAN AND SECURITY AGREEMENT
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Dated as of October 16, 1997
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FIDELITY MORTGAGE FUNDING, INC.
as Borrower
and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MORTGAGE CAPITAL INC.
as Lender
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TABLE OF CONTENTS
RECITALS 1
SECTION 1. DEFINITIONS AND ACCOUNTING MATTERS 1
1.01 Certain Defined Terms 1
1.02 Accounting Terms and Determinations 8
SECTION 2. LOANS, NOTE AND PREPAYMENTS 9
2.01 Loans 9
2.02 Notes 9
2.03 Procedure for Borrowing 9
2.04 Limitation on Types of Loans; Illegality 10
2.05 Repayment of Loans; Interest 11
2.06 Mandatory Prepayments or Pledge 11
SECTION 3. PAYMENTS; COMPUTATIONS; ETC. 11
3.01 Payments 11
3.02 Computations 12
3.03 U.S. Taxes 12
SECTION 4. COLLATERAL SECURITY 13
4.01 Collateral; Security Interest 13
4.02 Further Documentation 14
4.03 Changes in Locations, Name, etc. 14
4.04 Lender's Appointment as Attorney-in-Fact 14
4.05 Performance by Lender of Borrower's Obligations 15
4.06 Proceeds 15
4.07 Remedies 16
4.08 Limitation on Duties Regarding Presentation of Collateral 16
4.09 Powers Coupled with an Interest 17
4.10 Release of Security Interest 17
SECTION 5. CONDITIONS PRECEDENT 17
5.01 Initial Loan 17
5.02 Initial and Subsequent Loans 18
SECTION 6. REPRESENTATIONS AND WARRANTIES 19
6.01 Existence 19
6.02 Financial Condition 19
6.03 Litigation 20
6.04 No Breach 20
6.05 Action 20
6.06 Approvals 20
6.07 Margin Regulations 21
6.08 Taxes 21
6.09 Investment Company Act 21
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6.10 Collateral; Collateral Security 21
6.11 Chief Executive Office 22
6.12 Location of Books and Records 22
6.13 Hedging 22
6.14 True and Complete Disclosure 22
6.15 Tangible Net Worth 22
6.16 ERISA 22
SECTION 7. COVENANTS OF THE BORROWER 22
7.01 Financial Statements 22
7.02 Litigation 24
7.03 Existence, etc. 25
7.04 Prohibition of Fundamental Changes 25
7.05 Borrowing Base Deficiency 25
7.06 Notices 25
7.07 Hedging 26
7.08 Reports 26
7.09 Underwriting Guidelines 26
7.10 Transactions with Affiliates 26
7.11 Limitation on Liens 26
7.12 Limitation on Guarantees 27
7.13 Limitation on Distributions 27
7.14 Maintenance of Tangible Net Worth 27
7.15 Maintenance of Ratio of Total Indebtedness to Tangible
Net Worth 27
7.16 Maintenance of Profitability 27
7.17 Servicing Tape 27
SECTION 8. EVENTS OF DEFAULT 27
SECTION 9. REMEDIES UPON DEFAULT 29
SECTION 10. NO DUTY OF LENDER 29
SECTION 11. MISCELLANEOUS 29
11.01 Waiver 29
11.02 Notices 30
11.03 Indemnification and Expenses 30
11.04 Amendments 31
11.05 Successors and Assigns 31
11.06 Survival 31
11.07 Captions 31
11.08 Counterparts 31
11.09 Loan Agreement Constitutes Security Agreement; Governing Law 31
11.10 Submission to Jurisdiction; Waivers 31
11.11 Waiver of Jury Trial 32
11.12 Acknowledgments 32
11.13 Hypothecation or Pledge of Loans 32
11.14 Servicing 32
11.15 Periodic Due Diligence Review 33
11.16 Intent 34
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SCHEDULES
SCHEDULE 1 Representations and Warranties re: Mortgage Loans
SCHEDULE 2 Filing Jurisdictions and Offices
EXHIBITS
EXHIBIT A Form of Promissory Note
EXHIBIT B Form of Custodial Agreement
EXHIBIT C Form of Opinion of Counsel to Borrower
EXHIBIT D Form of Request for Borrowing
EXHIBIT E-1 Form of Borrower's Release Letter
EXHIBIT E-2 Form of Warehouse Lender's Release Letter
EXHIBIT F Underwriting Guidelines
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MASTER LOAN AND SECURITY AGREEMENT
MASTER LOAN AND SECURITY AGREEMENT, dated as of October 16, 1997,
between FIDELITY MORTGAGE FUNDING, INC., a Delaware corporation (the
"Borrower"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MORTGAGE CAPITAL INC., a Delaware corporation
(the "Lender").
RECITALS
The Borrower has requested that the Lender from time to time make
revolving credit loans to it to finance certain residential mortgage loans owned
by the Borrower, and the Lender is prepared to make such loans upon the terms
and conditions hereof. Accordingly, the parties hereto agree as follows:
Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the following terms shall
have the following meanings (all terms defined in this Section 1.01 or in other
provisions of this Loan Agreement in the singular to have the same meanings when
used in the plural and vice versa):
"'A' Credit Mortgage Loan" shall mean a Mortgage Loan made by the
Borrower to a Mortgagor with an 'A' credit history which is underwritten in
accordance with the Borrower's Underwriting Guidelines for 'A' Credit Mortgage
Loans.
"Affiliate" shall mean (i) with respect to the Lender, MS & Co. and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, Discover & Co., and (ii) with respect to the
Borrower, any "affiliate" of the Borrower as such term is defined in the
Bankruptcy Code.
"Affiliate Guaranty" shall mean that certain Affiliate Guaranty dated
as of October 16, 1997, made by Resource America Inc. in favor of the Lender, as
amended from time to time.
"Affiliated Party" shall mean the collective reference to the Borrower
and the Guarantor.
"Applicable Collateral Percentage" shall mean (i) with respect to
Eligible Mortgage Loans (other than Delinquent Mortgage Loans), ninety-five
percent (95%) and (ii) with respect to Eligible Mortgage Loans that are
Delinquent Mortgage Loans, eighty-five percent (85%).
"Applicable Margin" shall mean: (i) 0.90% or (ii) in the event that MS
& Co. acts as sole or lead underwriter or placement agent in a Securitization
Transaction, then with respect to all Eligible Mortgage Loans delivered during
the ninety (90) days subsequent to the closing date of such Securitization
Transaction, 0.80%.
"'B' Credit Mortgage Loan" shall mean a Mortgage Loan made by the
Borrower to a Mortgagor with a 'B' credit history which is underwritten in
accordance with the Borrower's Underwriting Guidelines for 'B' Credit Mortgage
Loans.
"Bankruptcy Code" shall mean the United States Bankruptcy Code of
1978, as amended from time to time.
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"Borrower" shall have the meaning provided in the heading hereof.
"Borrowing Base" shall mean the aggregate Collateral Value of all
Eligible Mortgage Loans.
"Borrowing Base Deficiency" shall have the meaning provided in Section
2.06 hereof.
"Business Day" shall mean any day other than (i) a Saturday or
Sunday or (ii) a day on which the New York Stock Exchange, the Federal Reserve
Bank of New York or the Custodian is authorized or obligated by law or executive
order to be closed.
"Capital Expanditures" shall mean, as to any Person for any period,
the aggregate amount paid or accrued by such Person and its Afffliates for the
rental, lease, purchase (including by way of the acquisition of securities of
any Person), construction or use of any Property during such period, the value
or cost of which, in accordance with GAAP, would appear on such Person's
consolidated balance sheet in the category of property, plant or equipment at
the end of such period.
"Capital Lease Obligations" shall mean, for any Person, all obligations
of such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) Property to the extent such obligations are required
to be classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP, and, for purposes of this Loan Agreement, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP.
"'C' Credit Mortgage Loan" shall mean a Mortgage Loan made by the
Borrower to a Mortgagor with a 'C' credit history which is underwritten in
accordance with the Borrower's Underwriting Guidelines for 'C' Credit Mortgage
Loans.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral" shall have the meaning provided in Section 4.01(b) hereof.
"Collateral Value" shall mean, with respect to each Mortgage Loan, the
lesser of (a) the Applicable Collateral Percentage of the Market Value of such
Mortgage Loan, and (b) 98% of the outstanding principal balance of such Mortgage
Loan; provided, that,
(i) the Collateral Value shall be deemed to be zero with respect to
each Mortgage Loan (1) in respect of which there is a breach of a
representation and warranty set forth on Schedule 1 (assuming
each representation and warranty is made as of the date
Collateral Value is determined), (2) in respect of which there is
a delinquency in the payment of principal and/or interest which
continues for a period in excess of 59 days (without regard to
any applicable grace periods), (3) which remains pledged to the
Lender hereunder later than 95 days after the date on which it is
first included in the Collateral, (4) which has been released
from the possession of the Custodian under the Custodial
Agreement to the Borrower for a period in excess of 14 days, or
(5) which is a Wet-Ink Mortgage Loan with respect to which the
original Mortgage Loan Documents have not been received by the
Custodian on the second Business Day following the Funding Date;
(ii) the aggregate Collateral Value of Mortgage Loans which are 'C'
Credit Mortgage Loans or 'D' Credit Mortgage Loans may not exceed
35% of the Maximum Credit;
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(iii) the aggregate Collateral Value of Mortgage Loans which are Second
Lien Mortgage Loans may not exceed 10% of the aggregate principal
balance of the Loans outstanding;
(iv) the aggregate Collateral Value of Mortgage Loans which are
Wet-Ink Mortgage Loans may not exceed 20% of the Maximum Credit;
(v) the aggregate Collateral Value of Mortgage Loans which are
Delinquent Mortgage Loans may not exceed 5% of the aggregate
principal balance of the Loans outstanding.
"Custodial Agreement" shall mean the Custodial Agreement, dated as of
the date hereof, among the Borrower, the Custodian and the Lender, substantially
in the form of Exhibit B hereto, as the same shall be modified and supplemented
and in effect from time to time.
"Custodian" shall mean Norwest Bank Minnesota, National Association, as
custodian under the Custodial Agreement, and its successors and permitted
assigns thereunder.
"'D' Credit Mortgage Loan" shall mean a Mortgage Loan made by the
Borrower to a Mortgagor with a 'D' credit history which is underwritten in
accordance with the Borrower's Underwriting Guidelines for 'D' Credit Mortgage
Loans.
"Default" shall mean an Event of Default or an event that with notice
or lapse of time or both would become an Event of Default.
"Delinquent Mortgage Loan" shall mean an Eligible Mortgage Loan which
is more than 29 days, but less than or equal to 59 days delinquent.
"Dollars" and "S" shall mean lawful money of the United States of
America.
"Due Diligence Review" shall mean the performance by the Lender of any
or all of the reviews permitted under Section 11.15 hereof with respect to any
or all of the Mortgage Loans, as desired by the Lender from time to time.
"Effective Date" shall mean the date upon which the conditions
precedent set forth in Section 5.01 shall have been satisfied.
"Eligible Mortgage Loan" shall mean a Mortgage Loan secured by a first
or second mortgage lien on a one-to-four family residential property, as to
which the representations and warranties in Section 6.10 and Part I of Schedule
1 hereof are correct and which is either an 'A' Credit Mortgage Loan, a 'B'
Credit Mortgage Loan, a 'C' Credit Mortgage Loan, or a 'D' Credit Mortgage Loan.
"ERISA' shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiflate" shall mean any corporation or trade or business that
is a member of any group of organizations (i) described in Section 414(b) or (c)
of the Code of which the Borrower is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and
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Section 412(c)(11) of the Code and the lien created under Section 302(f) of
ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the
Code of which the Borrower is a member.
"Eurodollar Rate" shall mean, with respect to each day a Loan is
outstanding (or if such day is not a Business Day, the next succeeding Business
Day), the rate per annum equal to the rate appearing at page 5 of the Telerate
Screen as one-month LIBOR on such date, and if such rate shall not be so quoted,
the rate per annum at which the Lender is offered Dollar deposits at or about
10:00 A.M., New York City time, on such date by prime banks in the interbank
eurodollar market where the eurodollar and foreign currency exchange operations
in respect of its Loans are then being conducted for delivery on such day for a
period of 30 days and in an amount comparable to the amount of the Loans to be
outstanding on such day.
"Event of Default" shall have the meaning provided in Section 8 hereof.
"Federal Funds Rate" shall mean, for any day, the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the Lender from three
federal funds brokers of recognized standing selected by it.
"First Lien Mortgage Loan" shall mean an Eligible Mortgage Loan secured
by the lien on the Mortgaged Property, subject to no prior liens on such
Mortgaged Property.
"Funding Date" shall mean the date on which a Loan is made hereunder.
"GAAP" shall mean generally accepted accounting principles as in effect
from time to time in the United States.
"Governmental Authority" shall mean any nation or government, any state
or other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government and any court or arbitrator having jurisdiction over the Borrower,
any of its Subsidiaries or any of its properties.
"Guarantee" shall mean, as to any Person, any obligation of such
Person directly or indirectly guaranteeing any Indebtedness of any other Person
or in any manner providing for the payment of any Indebtedness of any other
Person or otherwise protecting the holder of such Indebtedness against loss
(whether by virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, or to take-or-pay or otherwise);
provided that the term "Guarantee" shall not include (i) endorsements for
collection or deposit in the ordinary course of business, or (ii) obligations to
make servicing advances for delinquent taxes and insurance or other obligations
in respect of a Mortgaged Property, to the extent required by the Lender. The
amount of any Guarantee of a Person shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Guarantee is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith. The terms "Guarantee" and "Guaranteed" used as verbs shall have
correlative meanings.
"Guarantor" shall mean Resource America Inc., or any successor in
interest under the Affiliate Guaranty.
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"Indebtedness" shall mean, for any Person: (a) obligations created,
issued or incurred by such Person for borrowed money (whether by loan, the
issuance and sale of debt securities or the sale of Property to another Person
subject to an understanding or agreement, contingent or otherwise, to repurchase
such Property from such Person); (b) obligations of such Person to pay the
deferred purchase or acquisition price of Property or services, other than trade
accounts payable (other than for borrowed money) arising, and accrued expenses
incurred, in the ordinary course of business so long as such trade accounts
payable are payable within 90 days of the date the respective goods are
delivered or the respective services are rendered; (c) Indebtedness of others
secured by a Lien on the Property of such Person, whether or not the respective
Indebtedness so secured has been assumed by such Person; (d) obligations
(contingent or otherwise) of such Person in respect of letters of credit or
similar instruments issued or accepted by banks and other financial institutions
for account of such Person; (e) Capital Lease Obligations of such Person; (f)
obligations of such Person under repurchase agreements or like arrangements; (g)
Indebtedness of others Guaranteed by such Person; (h) all obligations of such
Person incurred in connection with the acquisition or carrying of fixed assets
by such Person; and (i) Indebtedness of general partnerships of which such
Person is a general partner.
"Interest Rate Protection Agreement" shall mean, with respect to any or
all of the Mortgage Loans, any short sale of US Treasury Security, or futures
contract, or mortgage related security, or Eurodollar futures contract, or
options related contract, or interest rate swap, cap or collar agreement or
similar arrangements providing for protection against fluctuations in interest
rates or the exchange of nominal interest obligations, either generally or under
specific contingencies, entered into by the Borrower with MS & Co. or its
affiliate, and reasonably acceptable to the Lender.
"Lender" shall have the meaning provided in the heading hereto.
"Lien" shall mean any mortgage, lien, pledge, charge, security interest
or similar encumbrance.
"Loan" shall have the meaning provided in Section 2.01(a) hereof.
"Loan Agreement" shall mean this Master Loan and Security Agreement, as
the same may be amended, supplemented or otherwise modified from time to time.
"Loan Documents" shall mean, collectively, this Loan Agreement, the
Note, the Affiliate Guaranty and the Custodial Agreement.
"Market Value" shall mean, as of any date in respect of an Eligible
Mortgage Loan, the price at which such Eligible Mortgage Loan could readily be
sold as determined in good faith by the Lender. The Lender's determination of
Market Value shall be conclusive upon the parties absent manifest error on the
part of the Lender.
"Material Adverse Effect" shall mean a material adverse effect on (a)
the Property, business, operations, financial condition or prospects of the
Borrower, (b) the ability of the Borrower to perform its obligations under any
of the Loan Documents to which it is a party, (c) the validity or enforceability
of any of the Loan Documents, (d) the rights and remedies of the Lender under
any of the Loan Documents, (e) the timely payment of the principal of or
interest on the Loans or other amounts payable in connection therewith or (f)
the Collateral.
"Maximum Credit" shall mean $15,000,000.
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"Mortgage" shall mean the mortgage, deed of trust or other instrument
securing a Mortgage Note, which creates a first or second lien on the fee in
real property securing the Mortgage Note.
"Mortgage File" shall have the meaning assigned thereto in the
Custodial Agreement.
"Mortgage Loan" shall mean a mortgage loan which the Custodian has been
instructed to hold for the Lender pursuant to the Custodial Agreement, and which
Mortgage Loan includes, without limitation, (i) a Mortgage Note and related
Mortgage and (ii) all right, title and interest of the Borrower in and to the
Mortgaged Property covered by such Mortgage.
"Mortgage Loan Documents" shall mean, with respect to a Mortgage Loan,
the documents comprising the Mortgage File for such Mortgage Loan.
"Mortgage Loan Schedule" shall have the meaning assigned thereto in the
Custodial Agreement.
"Mortgage Loan Schedule and Exception Report" shall mean the mortgage
loan schedule and exception report prepared by the Custodian pursuant to the
Custodial Agreement.
"Mortagae Loan Tape" shall mean a computer-readable electronic
transmission containing the following information with respect to each Mortgage
Loan, to be delivered by the Borrower to the Lender pursuant to Section 2.03(a)
hereof: (i) a field detailing whether the Mortgage Loan is an 'A' Credit
Mortgage Loan, a 'B' Credit Mortgage Loan, a 'C' Credit Mortgage Loan, or a 'D'
Credit Mortgage Loan; (ii) a field indicating whether the Mortgage Loan is a
Second Lien Mortgage Loan; (iii) a field indicating whether the Mortgage Loan is
a Wet-Ink Mortgage Loan, and (iv) such other fields as shall be mutually agreed
upon by the Borrower and the Lender.
"Mortgage Note" shall mean the original executed promissory note or
other evidence of the indebtedness of a mortgagor/borrower with respect to a
Mortgage Loan.
"Mortgaged Property" shall mean the real property (including all
improvements, buildings, fixtures, building equipment and personal property
thereon and all additions, alterations and replacements made at any time with
respect to the foregoing) and all other collateral securing repayment of the
debt evidenced by a Mortgage Note.
"Mortgagor" shall mean the obligor on a Mortgage Note.
"MS & Co." shall mean ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated, a registered
broker-dealer.
"Multiemployer Plan" shall mean a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been or are required to be
made by the Borrower or any ERISA Affiliate and that is covered by Title IV of
ERISA.
"Net Income" shall mean, for any period, the net income of the Borrower
for such period as determined in accordance with GAAP.
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"Note" shall mean the promissory note provided for by Section 2.02(a)
hereof for Loans and any promissory note delivered in substitution or exchange
therefor, in each case as the same shall be modified and supplemented and in
effect from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, limited liability company, trust,
unincorporated association or government (or any agency, instrumentality or
political subdivision thereof).
"Plan" shall mean an employee benefit or other plan established or
maintained by the Borrower or any ERISA Affiliate and covered by Title IV of
ERISA, other than a Multiemployer Plan.
"Post-Default Rate" shall mean, in respect of any principal of any Loan
or any other amount under this Loan Agreement, the Note or any other Loan
Document that is not paid when due to the Lender (whether at stated maturity, by
acceleration, by mandatory prepayment or otherwise), a rate per annum during the
period from and including the due date to but excluding the date on which such
amount is paid in full equal to 2% per annum plus the Prime Rate.
"Prime Rate" shall mean the prime rate announced to be in effect from
time to time, as published as the average rate in The Wall Street Journal.
"Property" shall mean any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Regulations G.T.U and X" shall mean Regulations G, T, U and X of the
Board of Governors of the Federal Reserve System (or any successor), as the same
may be modified and supplemented and in effect from time to time.
"Responsible Officer" shall mean, as to any Person, the chief executive
officer or, with respect to financial matters, the chief financial officer of
such Person.
"Second Lien Mortgage Loan" shall mean an Eligible Mortgage Loan
secured by the lien on the Mortgaged Property, subject to one prior lien on such
Mortgaged Property.
"Secured Obligations" shall have the meaning provided in Section
4.01(c) hereof.
"Securitization Transaction" shall mean a securitization transaction
backed by Mortgage Loans underwritten or placed on behalf of the Borrower which
transaction has received an investment grade rating from any
nationally-recognized rating agency and otherwise conforms to the current
standards of institutional securitization applicable to mortgage loans
substantially similar in nature to the Mortgage Loans.
"Servicer" shall have the meaning provided in Section 11.14(c) hereof.
"Servicing Agreement" shall have the meaning provided in Section
11.14(c) hereof.
"Servicing Records" shall have the meaning provided in Section 11.14(b)
hereof.
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"Settlement Agent" shall mean, with respect to any Loan, the entity
reasonably satisfactory to the Lender, (which may be a title company, escrow
company or attorney in accordance with local law and practice in the
jurisdiction where the related Wet-Ink Mortgage Loan is being originated) to
which the proceeds of such Loan are to be wired pursuant to the instructions of
the Lender.
"Subsidiary" shall mean, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions, of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.
"Tangible Net Worth" shall mean, as of a particular date,
(a) all amounts which would be included under capital or subordinated
debt on a balance sheet of the Borrower at such date, determined in
accordance with GAAP, less
(b) (i) amounts owing to the Borrower from Affiliates and (ii)
intangible assets in excess of $1,000,000 representing start-up costs,
determined in accordance with GAAP.
"Termination Date" shall mean October 16, 1998 or such earlier date on
which this Loan Agreement shall terminate in accordance with the provisions
hereof or by operation of law.
"Test Period" shall have the meaning provided in Section 7.16 hereof.
"Total Indebtedness" shall mean, for any period, the aggregate
Indebtedness of the Borrower during such period less the amount of any
nonspecific balance sheet reserves maintained in accordance with GAAP.
"True Sale Certification" shall mean a certification substantially in
the form of Exhibit G hereto.
"Underwriting Guidelines" shall mean the underwriting guidelines
attached as Exhibit E hereto.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
effect on the date hereof in the State of New York; provided that if by reason
of mandatory provisions of law, the perfection or the effect of perfection or
non-perfection of the security interest in any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than New York,
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection.
1.02 Accounting Terms and Determinations. Except as otherwise expressly
provided herein, all accounting term used herein shall be interpreted, and all
financial statements and certificates and reports as to financial matters
required to be delivered to the Lender hereunder shall be prepared, in
accordance with GAAP.
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Section 2. Loans, Note and Prepayments.
2.01 Loans.
(a) The Lender agrees to consider from time to time the Borrower's
requests that the Lender make, on the terms and conditions of this Loan
Agreement, loans (individually, a "Loan" and, collectively, the "Loans") to the
Borrower in Dollars, from and including the Effective Date to and including the
Termination Date in an aggregate principal amount at any one time outstanding up
to but not exceeding the Maximum Credit as in effect from time to time. This
Loan Agreement is not a commitment to lend but rather sets forth the procedures
to be used in connection with periodic requests for Loans. The Borrower hereby
acknowledges that the Lender is under no obligation to agree to make, or to
make, any Loan pursuant to this Loan Agreement.
(b) Subject to the terms and conditions of this Loan Agreement, during
such period the Borrower may borrow, repay and reborrow hereunder.
(c) In no event shall a Loan be made when any Default or Event of
Default has occurred and is continuing.
2.02 Notes.
(a) The Loans made by the Under shall be evidenced by a single
promissory note of the Borrower substantially in the form of Exhibit A hereto
(the "Note"), dated the date hereof, payable to the Lender in a principal amount
equal to the amount of the Maximum Credit as originally in effect and otherwise
duly completed. The Lender shall have the right to have its Note subdivided, by
exchange for promissory notes of lesser denominations or otherwise.
(b) The date, amount and interest rate of each Loan made by the Lender
to the Borrower, and each payment made on account of the principal thereof,
shall be recorded by the Lender on its books and, prior to any transfer of the
Note, endorsed by the Lender on the schedule attached to the Note or any
continuation thereof; provided that the failure of the Lender to make any such
recordation or endorsement shall not affect the obligations of the Borrower to
make a payment when due of any amount owing hereunder or under the Note in
respect of the Loans.
2.03 Procedure for Borrowing.
(a) The Borrower may request a borrowing hereunder, on any Business Day
during the period from and including the Effective Date to and including the
Termination Date, by delivering to the Lender, with a copy to the Custodian, an
irrevocable written request for borrowing, substantially in the form of
Exhibit D attached hereto, which request must be received by the Lender prior to
3:00 p.m., New York City time, one (1) Business Day prior to the requested
Funding Date. Such request for borrowing shall (i) attach a schedule identifying
the Eligible Mortgage Loans that the Borrower proposes to pledge to the Lender
and to be included in the Borrowing Base in connection with such borrowing, (ii)
specify the requested Funding Date, (iii) include a Mortgage Loan Tape
containing information with respect to the Eligible Mortgage Loans that the
Borrower proposes to pledge to the Lender and to be included in the Borrowing
Base in connection with such borrowing, and (iv) attach an officer's certificate
signed by a Responsible Officer of the Borrower as required by Section 5.02(b)
hereof.
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(b) Upon the Borrower's request for a borrowing pursuant to Section
2.03(a), the Lender may at its sole option, assuming all conditions precedent
set forth in Section 5.01 and 5.02 have been met and provided no Default shall
have occurred and be continuing, make a Loan to the Borrower on the requested
Funding Date, in the amount so requested.
(c) The Borrower shall release to the Custodian no later than 12:00
p.m., New York City time, one (1) Business Day prior to the requested Funding
Date, the Mortgage File pertaining to each Eligible Mortgage Loan (other than a
Wet-Ink Mortgage Loan) to be pledged to the Lender and included in the Borrowing
Base on such requested Funding Date, in accordance with the terms and conditions
of the Custodial Agreement.
(d) Pursuant to the Custodial Agreement, if the Custodian has received
such Mortgage File by 12:00 p.m., New York City time, on the Funding Date, then
on the Funding Date, the Custodian will deliver, to the Lender and the Borrower,
via facsimile and by modem, no later than 3:00 p.m., New York City time, a Trust
Receipt (as defined in the Custodial Agreement) in respect of all Mortgage Loans
(except Wet-Ink Mortgage Loans) pledged to the Lender on such Funding Date, and
a Mortgage Loan Schedule and Exception Report (as so defined) covering all
Wet-Ink Mortgage Loans so pledged. Subject to Section 5 hereof, such borrowing
will then be made available to the Borrower by the Lender transferring, via wire
transfer, to the following account of the Borrower: Jefferson Bank, for the A/C
of Fidelity Mortgage Funding, Inc. Warehouse Account, Account No. 004274598, ABA
No. 031 901 482, Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, prior to the close of business on such
Funding Date, in the aggregate amount of such borrowing in funds immediately
available to the Borrower.
2.04 Limitation on Types of Loans; Illegality. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any Eurodollar
Rate:
(a) the Lender determines, which determination shall be conclusive,
that quotations of interest rates for the relevant deposits referred to in
the definition of "Eurodollar Rate" in Section 1.01 hereof are not being
provided in the relevant amounts or for the relevant maturities for purposes
of determining rates of interest for Loans as provided herein; or
(b) the Lender determines, which determination shall be conclusive,
that the relevant rate of interest referred to in the definition of
"Eurodollar Rate" in Section 1.01 hereof upon the basis of which the rate of
interest for Loans is to be determined is not likely adequately to cover the
cost to the Lender of making or maintaining Loans; or
(c) it becomes unlawful for the Lender to honor its obligation to make
or maintain Loans hereunder using a Eurodollar Rate;
then the Lender shall give the Borrower prompt notice thereof and, so
long as such condition remains in effect, the Lender shall be under no
obligation to make additional Loans, and the Borrower shall, either prepay all
such Loans as may be outstanding or pay interest on such Loans at a rate per
annum equal to the Federal Funds Rate plus 1%.
2.05 Repayment of Loan; Interest.
(a) The Borrower hereby promises to repay in full on the Termination
Date the then aggregate outstanding principal amount of the Loans.
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(b) The Borrower hereby promises to pay to the Lender interest on the
unpaid principal amount of each Loan for the period from and including the date
of such Loan to but excluding the date such Loan shall be paid in full, at a
rate per annum equal to the Eurodollar Rate plus the Applicable Margin.
Notwithstanding the foregoing, the Borrower hereby promises to pay to the Lender
interest at the applicable Post-Default Rate on any principal of any Loan and on
any other amount payable by the Borrower hereunder or under the Note that shall
not be paid in full when due (whether at stated maturity, by acceleration or by
mandatory prepayment or otherwise) for the period from and including the due
date thereof to but excluding the date the same is paid in full. The Lender
shall provide prompt notice to the Borrower that such Post-Default Rate is being
applied to such outstanding amount. Accrued interest on each Loan shall be
payable monthly on the first Business Day of each month and for the last month
of the Loan Agreement on the first Business Day of such last month and on the
Termination Date, except that interest payable at the Post-Default Rate shall
accrue daily and shall be payable upon such accrual. Promptly after the
determination of any interest rate provided for herein or any change therein,
the Lender shall give notice thereof to the Borrower.
(c) It is understood and agreed that, unless and until a Default shall
have occurred and be continuing, the Borrower shall be entitled to the proceeds
of the Mortgage Loans pledged to the Lender hereunder.
2.06 Mandatory Prepayments or Pledge.
If at any time the aggregate outstanding principal amount of Loans
exceeds the Borrowing Base (a "Borrowing Base Deficiency"), as determined by the
Lender and notified to the Borrower on any Business Day, the Borrower shall no
later than one Business Day after receipt of such notice, either prepay the
Loans in part or in whole or pledge additional Eligible Mortgage Loans (which
Collateral shall be in all respects acceptable to the Lender) to the Lender,
such that after giving effect to such prepayment or pledge the aggregate
outstanding principal amount of the Loans does not exceed the Borrowing Base.
Section 3. Payments; Computations; Etc,
3.01 Payments.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest and other amounts to be made by the Borrower under this Loan
Agreement and the Note, shall be made in Dollars, in immediately available
funds, without deduction, set-off or counterclaim, to the Lender at the
following account maintained by the Lender: Account No. ▇▇▇▇▇▇▇▇, for the
account of MSMCI, Citibank, N.A., ABA No. ▇▇▇▇▇▇▇▇▇, Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, not
later than 1:00 p.m., New York City time, on the date on which such payment
shall become due (and each such payment made after such time on such due date
shall be deemed to have been made on the next succeeding Business Day). The
Borrower acknowledges that it has no rights of withdrawal from the foregoing
account.
(b) Except to the extent otherwise expressly provided herein, if the
due date of any payment under this Loan Agreement or the Note would otherwise
fall on a day that is not a Business Day, such date shall be extended to the
next succeeding Business Day, and interest shall be payable for any principal so
extended for the period of such extension.
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3.02 Computations. Interest on the Loans shall be computed on the basis
of a 360-day year for the actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable.
3.03 U.S. Taxes.
(a) The Borrower agrees to pay to the Lender such additional amounts as
are necessary in order that the net payment of any amount due to the Lender
hereunder after deduction for or withholding in respect of any U.S. Tax (as
defined below) imposed with respect to such payment (or in lieu thereof, payment
of such U.S. Tax by the Lender), will not be less than the amount stated herein
to be then due and payable; provided that the foregoing obligation to pay such
additional amounts shall not apply:
(i) to any payment to the Lender hereunder unless the Lender is
entitled to submit a Form 1001 (relating to the Lender and entitling it to a
complete exemption from withholding on all interest to be received by it
hereunder in respect of the Loans) or Form 4224 (relating to all interest to
be received by the Lender hereunder in respect of the Loans), or
(ii) to any U. S. Tax imposed solely by reason of the failure by the
Lender to comply with applicable certification, information, documentation
or other reporting requirements concerning the nationality, residence,
identity or connections with the United States of America of the Lender if
such compliance is required by statute or regulation of the United States of
America as a precondition to relief or exemption from such U.S. Tax.
For the purposes of this Section 3.03, (x) "Form 1001" shall mean Form 1001
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States of America, (y) "Form 4224" shall mean Form 4224
(Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States) of the Department of the
Treasury of the United States of America (or in relation to either such Form
such successor and related form as may from time to time be adopted by the
relevant taxing authorities of the United States of America to document a claim
to which such Form relates), and (z) "U.S. Taxes" shall mean any present or
future tax, assessment or other charge or levy imposed by or on behalf of the
United States of America or any taxing authority thereof or therein.
(b) Within 30 days after paying any such amount to the Lender, and
within 30 days after it is required by law to remit such deduction or
withholding to any relevant taxing or other authority, the Borrower shall
deliver to the Lender evidence satisfactory to the Lender of such deduction,
withholding or payment (as the case may be).
(c) The Lender represents and warrants to the Borrower that on the date
hereof the Lender is either incorporated under the laws of the United States or
a State thereof or is entitled to submit a Form 1001 (relating to the Lender and
entitling it to a complete exemption from withholding on all interest to be
received by it hereunder in respect of the Loans) or Form 4224 (relating to all
interest to be received by the Lender hereunder in respect of the Loans).
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Section 4. Collateral Security.
4.01 Collateral: Security Interest.
(a) Pursuant to the Custodial Agreement, the Custodian shall hold the
Mortgage Loan Documents as exclusive bailee and agent for the Lender pursuant to
terms of the Custodial Agreement and shall deliver to the Lender Trust Receipts
(as defined in the Custodial Agreement) each to the effect that it has reviewed
such Mortgage Loan Documents in the ▇▇▇▇▇ and to the extent required by the
Custodial Agreement and identifying any deficiencies in such Mortgage Loan
Documents as so reviewed.
(b) All of the Borrower's right, title and interest in, to and under
each of the following items of property, whether now owned or hereafter
acquired, now existing or hereafter created and wherever located, is hereinafter
referred to as the Collateral:
(i) all Mortgage Loans;
(ii) all Mortgage Loan Documents, including without limitation all
promissory notes, and all Servicing Records (as defined in Section 11.14(b)
below), servicing agreements and any other collateral pledged or otherwise
relating to such Mortgage Loans, together with all files, documents,
instruments, surveys, certificates, correspondence, appraisals, computer
programs, computer storage media, accounting records and other books and
records relating thereto;
(iii) all mortgage guaranties and insurance (issued by governmental
agencies or otherwise) and any mortgage insurance certificate or other
document evidencing such mortgage guaranties or insurance relating to any
Mortgage Loan and all claim and payments thereunder;
(iv) all other insurance policies and insurance proceeds relating to
any Mortgage Loan or the related Mortgaged Property;
(v) all Interest Rate Protection Agreements;
(vi) all "general intangibles" as defined in the Uniform Commercial
Code relating to or constituting any and all of the foregoing; and
(vii) any and all replacements, substitutions, distributions on or
proceeds of any and all of the foregoing.
(c) The Borrower hereby assigns, pledges and grants a security interest
in all of its right, title and interest in, to and under the Collateral to the
Lender to secure the repayment of principal of and interest on all Loans and all
other amounts owing to the Lender hereunder, under the Note and under the other
Loan Documents (collectively, the "Secured Obligations"). The Borrower agrees to
▇▇▇▇ its computer records and tapes to evidence the interests granted to the
Lender hereunder.
4.02 Further Documentation. At any time and from time to time, upon the
written request of the Lender, and at the sole expense of the Borrower, the
Borrower will promptly and duly execute and deliver, or will promptly cause to
be executed and delivered, such further instruments and documents and take such
further action as the Lender may reasonably request for the purpose of obtaining
or preserving the full benefits of this Loan Agreement and of the rights and
powers herein
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granted, including, without limitation, the filing of any financing or
continuation statements under the Uniform Commercial Code in effect in any
jurisdiction with respect to the Liens created hereby. The Borrower also hereby
authorizes the Lender to file any such financing or continuation statement
without the signature of the Borrower to the extent permitted by applicable law.
A carbon, photographic or other reproduction of this Loan Agreement shall be
sufficient as a financing statement for filing in any jurisdiction.
4.03 Changes in Locations, Name, etc. The Borrower shall not (i) change
the location of its chief executive office/chief place of business from that
specified in Section 6 hereof or (ii) change its name, identity or corporate
structure (or the equivalent) or change the location where it maintains its
records with respect to the Collateral unless it shall have given the Lender at
least 30 days prior written notice thereof and shall have delivered to the
Lender all Uniform Commercial Code financing statements and amendments thereto
as the Lender shall request and taken all other actions deemed necessary by the
Lender to continue its perfected status in the Collateral with the same or
better priority.
4.04 Lender's Appointment as Attorney-in-Fact.
(a) The Borrower hereby irrevocably constitutes and appoints the Lender
and any officer or agent thereof, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in the
place and stead of the Borrower and in the name of the Borrower or in its own
name, from time to time in the Lender's discretion, for the purpose of carrying
out the terms of this Loan Agreement, to take any and all appropriate action and
to execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Loan Agreement, and, without
limiting the generality of the foregoing, the Borrower hereby gives the Lender
the power and right, on behalf of the Borrower, without assent by, but with
notice to, the Borrower, if an Event of Default shall have occurred and be
continuing, to do the following:
(i) in the name of the Borrower or its own name, or otherwise, to take
possession of and endorse and collect any checks, drafts, notes, acceptances
or"other instruments for the payment of moneys due under any mortgage
insurance or with respect to any other Collateral and to file any claim or
to take any other action or proceeding in any court of law or equity or
otherwise deemed appropriate by the Lender for the purpose of collecting any
and all such moneys due under any such mortgage insurance or with respect to
any other Collateral whenever payable;
(ii) to pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral; and
(iii) (A) to direct any party liable for any payment under any
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Lender or as the Lender shall direct; (B) to ask
or demand for, collect, receive payment of and receipt for, any and all
moneys, claims and other amounts due or to become due at any time in respect
of or arising out of any Collateral; (C) to sign and endorse any invoices,
assignments, verifications, notices and other documents in connection with
any of the Collateral; (D) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect the Collateral or any thereof and to enforce any other right in
respect of any Collateral; (E) to defend any suit, action or proceeding
brought against the Borrower with respect to any Collateral; (F) to settle,
compromise or adjust any suit, action or
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proceeding described in clause (E) above and, in connection therewith, to
give such discharges or releases as the Lender may deem appropriate; and (G)
generally, to sell, transfer, pledge and make any agreement with respect to
or otherwise deal with any of the Collateral as fully and completely as
though the Lender were the absolute owner thereof for all purposes, and to
do, at the Lender's option and the Borrower's expense, at any time, and from
time to time, all acts and things which the Lender deems necessary to
protect, preserve or realize upon the Collateral and the Lender's Liens
thereon and to effect the intent of this Loan Agreement, all as fully and
effectively as the Borrower might do.
The Borrower hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
(b) The Borrower also authorizes the Lender, at any time and from time
to time, to execute, in connection with any sale provided for in Section 4.07
hereof, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral.
(c) The powers conferred on the Lender are solely to protect the
Lender's interests in the Collateral and shall not impose any duty upon the
Lender to exercise any such powers. The Lender shall be accountable only for
amounts that it actually receives as a result of the exercise of such powers,
and neither the Lender nor any of its officers, directors, or employees shall be
responsible to the Borrower for any act or failure to act hereunder, except for
its own gross negligence or willful misconduct.
4.05 Performance by Lender of Borrower's Obligations. If the Borrower
fails to perform or comply with any of its agreements contained in the Loan
Documents and the Lender may itself perform or comply, or otherwise cause
performance or compliance, with such agreement, the expenses of the Lender
incurred in connection with such performance or compliance, together with
interest thereon at a rate per annum equal to the Post-Default Rate, shall be
payable by the Borrower to the Lender on demand and shall constitute Secured
Obligations.
4.06 Proceeds. If an Event of Default shall occur and be continuing,
(a) all proceeds of Collateral received by the Borrower consisting of cash,
checks and other near-cash items shall be held by the Borrower in trust for the
Lender, segregated from other funds of the Borrower, and shall forthwith upon
receipt by the Borrower be turned over to the Lender in the exact form received
by the Borrower (duly endorsed by the Borrower to the Lender, if required) and
(b) any and all such proceeds received by the Lender (whether from the Borrower
or otherwise) may, in the sole discretion of the Lender, be held by the Lender
as collateral security for, and/or then or at any time thereafter may be applied
by the Lender against, the Secured Obligations (whether matured or unmatured),
such application to be in such order as the Lender shall elect. Any balance of
such proceeds remaining after the Secured Obligations shall have been paid in
full and this Loan Agreement shall have been terminated shall be paid over to
the Borrower or to whomsoever may be lawfully entitled to receive the same. For
purposes hereof, proceeds shall include, but not be limited to, all principal
and interest payments, all prepayments and payoffs, insurance claims,
condemnation awards, sale proceeds, real estate owned rents and any other income
and all other amounts received with respect to the Collateral.
4.07 Remedies. If an Event of Default shall occur and be continuing,
the Lender may exercise, in addition to all other rights and remedies granted to
it in this Loan Agreement and in any other instrument or agreement securing,
evidencing or relating to the Secured Obligations, all rights and remedies of a
secured party under the Uniform Commercial Code. Without limiting the generality
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of the foregoing, the Lender without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon the Borrower or any other Person
(each and all of which demands, presentments, protests, advertisements and
notices are hereby waived), may in such circumstances forthwith collect,
receive, appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, lease, assign, give option or options to purchase, or
otherwise dispose of and deliver the Collateral or any part thereof (or contract
to do any of the foregoing), in one or more parcels or as an entirety at public
or private sale or sales, at any exchange, broker's board or office of the
Lender or elsewhere upon such terms and conditions as it may deem advisable and
at such prices as it may deem best, for cash or on credit or for future delivery
without assumption of any credit risk. The Lender shall have the right upon any
such public sale or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of the Collateral so
sold, free of any right or equity of redemption in the Borrower, which right or
equity is hereby waived or released. The Borrower further agrees, at the
Lender's request, to assemble the Collateral and make it available to the Lender
at places which the Lender shall reasonably select, whether at the Borrower's
premises or elsewhere. The Lender shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred therein or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Lender hereunder, including
without limitation reasonable attorneys' fees and disbursements, to the payment
in whole or in part of the Secured Obligations, in such order as the Lender may
elect, and only after such application and after the payment by the Lender of
any other amount required or permitted by any provision of law, including
without limitation Section 9-504(l)(c) of the Uniform Commercial Code, need the
Lender account for the surplus, if any, to the Borrower. To the extent permitted
by applicable law, the Borrower waives all claims, damages and demands it may
acquire against the Lender arising out of the exercise by the Lender of any of
its rights hereunder, other than those claims, damages and demands arising from
the gross negligence or willful misconduct of the Lender. If any notice of a
proposed sale or other disposition of Collateral shall be required by law, such
notice shall be deemed reasonable and proper if given at least 10 days before
such sale or other disposition. The Borrower shall remain liable for any
deficiency (plus accrued interest thereon as contemplated pursuant to Section
2.05(b) hereof) if the proceeds of any sale or other disposition of the
Collateral are insufficient to pay the Secured Obligations and the fees and
disbursements of any attorneys employed by the Lender to collect such
deficiency.
4.08 Limitation on Duties Regarding Presentation of Collateral. The
Lender's duty with respect to the custody, safekeeping and physical preservation
of the Collateral in its possession, under Section 9-207 of the Uniform
Commercial Code or otherwise, shall be to deal with it in the same manner as the
Lender deals with similar property for its own account. Neither the Lender nor
any of its directors, officers or employees shall be liable for failure to
demand, collect or realize upon all or any part of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of the Borrower or otherwise.
4.09 Powers Coupled with an Interest. All authorizations and agencies
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
4.10 Release of Secure Interest. Upon termination of this Loan
Agreement and repayment to the Lender of all Secured Obligations and the
performance of all obligations under the Loan Documents the Lender shall release
its security interest in any remaining Collateral.
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Section 5. Conditions Precedent.
5.01 Initial Loan. The obligation of the Lender to make its initial
Loan hereunder is subject to the satisfaction, immediately prior to or
concurrently with the making of such Loan, of the condition precedent that the
Lender shall have received all of the following documents, each of which shall
be satisfactory to the Lender and its counsel in form and substance:
(a) Loan Documents.
(i) Note. The Note, duly completed and executed;
(ii) Custodial Agreement. The Custodial Agreement, duly executed and
delivered by the Borrower and the Custodian. In addition, the Borrower shall
have taken such other action as the Lender shall have requested in order to
perfect the security interests created pursuant to the Loan Agreement;
(b) Organzational Documents. A good standing certificate and certified
copies of the charter and by-laws (or equivalent documents) of each Affiliated
Party and of all corporate or other authority for each Affiliated Party with
respect to the execution, delivery and performance of the Loan Documents and
each other document to be delivered by each Affiliated Party from time to time
in connection herewith (and the Lender may conclusively rely on such certificate
until it receives notice in writing from any Afffliiated Party to the contrary);
(c) Legal Opinion. A legal opinion of counsel to each Affiliated Party,
substantially in the form attached hereto as Exhibit C;
(d) Mortgage Loan Schedule and Exception Report. A Mortgage Loan
Schedule and Exception Report, dated the Effective Date, from the Custodian,
duly completed;
(e) Servicing Agreement. Any Servicing Agreement, certified as a true,
correct and complete copy of the original, with the letter of the applicable
Servicer consenting to termination of such Servicing Agreement upon the
occurrence of an Event of Default attached;
(f) Affiliate Guaranty. The Affiliate Guaranty, duly executed by the
Guarantor; and
(g) Other Documents. Such other documents as the Lender may reasonably
request.
5.02 Initial and Subsequent Loans. The making of each Loan to the
Borrower (including the initial Loan) on any Business Day is subject to the
satisfaction of the following further conditions precedent, both immediately
prior to the making of such Loan and also after giving effect thereto and to the
intended use thereof:
(a) no Default or Event of Default shall have occurred and be
continuing;
(b) both immediately prior to the making of such Loan and also after
giving effect thereto and to the intended use thereof, the representations
and warranties made by the Borrower in Section 6 hereof, and elsewhere in
each of the Loan Documents, shall be true and
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complete on and as of the date of the making of such Loan in all material
respects (in the case of the representations and warranties in Section 6.10
and Schedule 1, solely with respect to Mortgage Loans included in the
Borrowing Base) with the same force and effect as if made on and as of such
date (or, if any such representation or warranty is expressly stated to have
been made as of a specific date, as of such specific date). The Lender shall
have received an officer's certificate signed by a Responsible Officer of
the Borrower certifying as to the truth and accuracy of the above, which
certificate shall specifically include a statement that the Borrower is in
compliance with all governmental licenses and authorizations and is
qualified to do business and in good standing in all required jurisdictions.
(c) the aggregate outstanding principal amount of the Loans shall not
exceed the Borrowing Base;
(d) subject to the Lender's right to perform one or more Due Diligence
Reviews pursuant to Section 11.15 hereof, the Lender shall have completed
its due diligence review of the Mortgage Loan Documents for each Loan and
such other documents, records, agreements, instruments, mortgaged properties
or information relating to such Loans as the Lender in its sole discretion
deems appropriate to review and such review shall be satisfactory to the
Lender in its sole discretion;
(e) the Lender shall have received from the Custodian a Trust Receipt
with exceptions as are acceptable to the Lender in its sole discretion in
respect of Eligible Mortgage Loans to be pledged hereunder on such Business
Day and a Mortgage Loan Schedule and Exception Report, in each case dated
such Business Day and duly completed;
(f) the Lender shall have received from the Borrower a Warehouse
Lender's Release Letter substantially in the form of Exhibit E-2 hereto (or
such other form acceptable to the Lender) or a Seller's Release Letter
substantially in the form of Exhibit E-1 hereto (or such other form
acceptable to the Lender) covering each Mortgage Loan to be pledged to the
Lender;
(g) the Lender shall have received from the Borrower a true sale
opinion and true sale certification, in forms acceptable to the Lender, with
respect to any Mortgage Loans acquired by the Borrower from an Affiliate;
and
(h) none of the following shall have occurred and/or be continuing:
(i) an event or events shall have occurred resulting in the effective
absence of a "repo market" or comparable "lending market" for financing debt
obligations secured by mortgage loans or securities for a period of (or
reasonably expected to be) at least 30 consecutive days or an event or
events shall have occurred resulting in the Lender not being able to finance
any Loans through the "repo market" or "lending market" with traditional
counterparties at rates which would have been reasonable prior to the
occurrence of such event or events;
(ii) an event or events shall have occurred resulting in the effective
absence of a "securities market" for securities backed by mortgage loans for
a period of (or reasonably expected to be) at least 30 consecutive days or
an event or events shall have occurred resulting
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in the Lender not being able to sell securities backed by mortgage loans at
prices which would have been reasonable prior to such event or events; or
(iii) there shall have occurred a material adverse change in the
financial condition of the Lender which effects (or can reasonably be
expected to effect) materially and adversely the ability of the Lender to
fund its obligations under this Loan Agreement.
Each request for a borrowing by the Borrower hereunder shall constitute a
certification by the Borrower that all the conditions set forth in this Section
5 (except with respect to Section 5.02(h) herein) have been satisfied (both as
of the date of such notice, request or confirmation and as of the date of such
borrowing).
Section 6. Representations and Warranties. The Borrower represents and
warrants to the Lender that throughout the term of this Loan Agreement:
6.01 Existence. The Borrower (a) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, (b) has all requisite corporate or other power, and has all
governmental licenses, authorizations, consents and approvals necessary to own
its assets and carry on its business as now being or as proposed to be
conducted, except where the lack of such licenses, authorizations, consents and
approvals would not be reasonably likely to have a material adverse effect on
its Property, business or financial condition or prospects; and (c) is qualified
to do business and is in good standing in all other jurisdictions in which the
nature of the business conducted by it makes such qualification necessary,
except where failure so to qualify would not be reasonably likely (either
individually or in the aggregate) to have a material adverse effect on its
Property, business or financial condition or prospects.
6.02 Financial Condition. Each Affiliated Party has heretofore
furnished to the Lender a copy of (a) its consolidated balance sheet and the
consolidated balance sheets of its consolidated Subsidiaries for the first three
quarterly fiscal periods of the fiscal year of the Affiliated Party ended June
30, 1997 and the related consolidated statements of income and retained earnings
and of cash flows for the Affiliated Party and its consolidated Subsidiaries for
such quarterly fiscal periods, setting forth in each case in comparative form
the figures for the previous year, (b) its consolidated balance sheet and the
consolidated balance sheets of its consolidated Subsidiaries for such fiscal
year and the related consolidated statements of income and retained earnings and
of cash flows for the Affiliated Party and its consolidated Subsidiaries for
such fiscal year, setting forth in each case in comparative form the figures for
the previous year, with the opinion thereon of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP and (c) its
consolidated balance sheet and the consolidated balance sheets of its
consolidated Subsidiaries for the quarterly fiscal periods of the Affiliated
Party ended September 30, 1995, and September 30, 1996 and the related
consolidated statements of income and retained earnings and of cash flows for
the Affiliated Party and its consolidated Subsidiaries for such quarterly fiscal
periods, setting forth in each case in comparative form the figures for the
previous year. All such financial statements are complete and correct and fairly
present, in all material respects, the consolidated financial condition of the
Affiliated Party and its Subsidiaries and the consolidated results of their
operations as at such dates and for such fiscal periods, all in accordance with
GAAP applied on a consistent basis. Since September 30, 1997, there has been no
material adverse change in the consolidated business, operations or financial
condition of the Affiliated Party and its consolidated Subsidiaries taken as a
whole from that set forth in said financial statements.
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6.03 Litigation. There are no actions, suits, arbitrations,
investigations or proceedings pending or, to its knowledge, threatened against
either Affiliated Party or any of their respective Subsidiaries or affecting any
of the Property of any of them before any Governmental Authority (i) as to which
individually or in the aggregate there is a reasonable likelihood of an adverse
decision which would be reasonably likely to have a material adverse effect on
its Property, business or financial condition or prospects or (ii) which
questions the validity or enforceability of any of the Loan Documents or any
action to be taken in connection with the transactions contemplated hereby.
6.04 No Breach. Neither (a) the execution and delivery of the Loan
Documents nor (b) the consummation of the transactions therein contemplated in
compliance with the terms and provisions thereof will conflict with or result in
a breach of the charter or by-laws of either Affiliated Party, or any applicable
law, rule or regulation, or any order, writ, injunction or decree of any
Governmental Authority, or any Servicing Agreement or other material agreement
or instrument to which either Affiliated Party or any of their respective
Subsidiaries is a party or by which any of them or any of their Property is
bound or to which any of them is subject, or constitute a default under any such
material agreement or instrument or result in the creation or imposition of any
Lien (except for the Liens created pursuant to this Loan Agreement) upon any
Property of either Affiliated Party or any of their respective Subsidiaries
pursuant to the terms of any such agreement or instrument.
6.05 Action. Each Affiliated Party has all necessary corporate or other
power, authority and legal right to execute, deliver and perform its obligations
under each of the Loan Documents; the execution, delivery and performance by
each Affiliated Party of each of the Loan Documents have been duly authorized by
all necessary corporate or other action on its part; and each Loan Document has
been duly and validly executed and delivered by each Affiliated Party and
constitutes a legal, valid and binding obligation of the Affiliated Party,
enforceable against such Affiliated Party in accordance with its terms.
6.06 Approvals. No authorizations, approvals or consents of, and no
filings or registrations with, any Governmental Authority or any securities
exchange are necessary for the execution, delivery or performance by any
Affiliated Party of the Loan Documents or for the legality, validity or
enforceability thereof, except for filings and recordings in respect of the
Liens created pursuant to this Loan Agreement.
6.07 Margin Regulations. Neither the making of any Loan hereunder, nor
the use of the proceeds thereof, will violate or be inconsistent with the
provisions of Regulation G, T, U or X.
6.08 Taxes. Each Affiliated Party and their respective Subsidiaries
have filed all Federal income tax returns and all other material tax returns
that are required to be filed by them and have paid all taxes due pursuant to
such returns or pursuant to any assessment received by any of them, except for
any such taxes as are being appropriately contested in good faith by appropriate
proceedings diligently conducted and with respect to which adequate reserves
have been provided. The charges, accruals and reserves on the books of each
Affiliated Party and their respective Subsidiaries in respect of taxes and other
governmental charges are, in the opinion of each Affiliated Party, adequate.
6.09 Investment Company Act. Neither the Affiliated Party nor any of
its Subsidiaries is an "investment company", or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
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6.10 Collateral; Collateral Security.
(a) The Borrower has not assigned, pledged, or otherwise conveyed or
encumbered any Mortgage Loan to any other Person, and immediately prior to the
pledge of such Mortgage Loan to the Lender, the Borrower was the sole owner of
such Mortgage Loan and had good and marketable title thereto, free and clear of
all Liens, in each case except for Liens to be released simultaneously with the
Liens granted in favor of the Lender hereunder.
(b) The provisions of this Loan Agreement are effective to create in
favor of the Lender a valid security interest in all right, title and interest
of the Borrower in, to and under the Collateral.
(c) Upon receipt by the Custodian of each Mortgage Note, endorsed in
blank by a duly authorized officer of the Borrower, the Lender shall have a
fully perfected first priority security interest therein, in the Mortgage Loan
evidenced thereby and in the Borrower's interest in the related Mortgaged
Property.
(d) Upon the filing of financing statements on Form UCC-1 naming the
Lender as "Secured Party" and the Borrower as "Debtor", and describing the
Collateral, in the jurisdictions and recording offices listed on Schedule 2
attached hereto, the security interests granted hereunder in the Collateral will
constitute fully perfected first priority security interests under the Uniform
Commercial Code in all right, title and interest of the Borrower in, to and
under such Collateral which can be perfected by filing under the Uniform
Commercial Code.
6.11 Chief Executive Office. The Borrower's chief executive office on
the Effective Date is located at ▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇.
6.12 Location of Books and Records. The location where the Borrower
keeps its books and records, including all computer tapes and records relating
to the Collateral is its chief executive office.
6.13 Hedging. Either the Borrower has not entered into Interest Rate
Protection Agreements or the Borrower has notified the Lender in writing of the
Borrower's policy with respect to Interest Rate Protection Agreements.
6.14 True and Complete Disclosure. The information, reports, financial
statements, exhibits and schedules furnished in writing by or on behalf of the
Borrower to the Lender in connection with the negotiation, preparation or
delivery of this Loan Agreement and the other Loan Documents or included herein
or therein or delivered pursuant hereto or thereto, when taken as a whole, do
not contain any untrue statement of material fact or omit to state any material
fact necessary to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading. All written
information furnished after the date hereof by or on behalf of the Borrower to
the Lender in connection with this Loan Agreement and the other Loan Documents
and the transactions contemplated hereby and thereby will be true, complete and
accurate in every material respect, or (in the case of projections) based on
reasonable estimates, on the date as of which such information is stated or
certified. There is no fact known to a Responsible Officer of the Borrower,
after due inquiry, that could reasonably be expected to have a Material Adverse
Effect that has not been disclosed herein, in the other Loan Documents or in a
report, financial statement, exhibit, schedule, disclosure letter or
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other writing furnished to the Lender for use in connection with the
transactions contemplated hereby or thereby.
6.15 Tangible Net Worth. On the Effective Date, the Tangible Net Worth
of the Borrower is not less than $4,500,000.
6.16 ERISA. Each Plan to which the Borrower or its Subsidiaries make
direct contributions, and, to the knowledge of the Borrower, each other Plan and
each Multiemployer Plan, is in compliance in all material respects with, and has
been administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or State law. No event or
condition has occurred and is continuing as to which the Borrower would be under
an obligation to furnish a report to the Lender under Section 7.01(d) hereof.
Section 7. Covenants of the Borrower. The Borrower covenants and agrees
with the Lender that, so long as any Loan is outstanding and until payment in
full of all Secured Obligations:
7.01 Financial Statements. The Borrower shall deliver to the Lender:
(a) as soon as available and in any event within 45 days after the end
of each of the first three quarterly fiscal periods of each fiscal year of
each Affiliated Party, the unaudited consolidated balance sheets of each
Affiliated Party and their respective consolidated Subsidiaries as at the
end of such period and the related unaudited consolidated statements of
income and retained earnings and of cash flows for each Affiliated Party and
their consolidated Subsidiaries for such period and the portion of the
fiscal year through the end of such period, setting forth in each case in
comparative form the figures for the previous year, accompanied by a
certificate of a Responsible Officer of each Affiliated Party, which
certificate shall state that said consolidated financial statements fairly
present the consolidated financial condition and, results of operations of
the respective Affiliated Party and their respective consolidated
Subsidiaries in accordance with GAAP, consistently applied, as at the end
of, and for, such period (subject to normal year-end audit adjustments);
(b) as soon as available and in any event within 90 days after the end
of each fiscal year of each Affiliated Party, the consolidated balance
sheets of each Affiliated Party and their respective consolidated
Subsidiaries as at the end of such fiscal year and the related consolidated
statements of income and retained earnings and of cash flows for each
Affiliated Party and their respective consolidated Subsidiaries for such
year, setting forth in each case in comparative form the figures for the
previous year, accompanied by an opinion thereon of independent certified
public accountants of recognized national standing, which opinion shall not
be qualified as to scope of audit or going concern and shall state that said
consolidated financial statements fairly present the consolidated financial
condition and results of operations of such Affiliated Party and its
consolidated Subsidiaries as at the end of, and for, such fiscal year in
accordance with GAAP, and a certificate of such accountants stating that, in
making the examination necessary for their opinion, they obtained no
knowledge, except as specifically stated, of any Default or Event of
Default;
(C) from time to time such other information regarding the financial
condition, operations, or business of each Affiliated Party as the Lender
may reasonably request; and
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(d) as soon as reasonably possible, and in any event within thirty (30)
days after a Responsible Officer of either Affiliated Party knows, or with
respect to any Plan or Multiemployer Plan to which either Affiliated Party
or any of their respective Subsidiaries makes direct contributions, has
reason to believe, that any of the events or conditions specified below with
respect to any Plan or Multiemployer Plan has occurred or exists, a
statement signed by a senior financial officer of the Affiliated Party
setting forth details respecting such event or condition and the action, if
any, that the Affiliated Party or its ERISA Affiliate proposes to take with
respect thereto (and a copy of any report or notice required to be filed
with or given to PBGC by the Affiliated Party or an ERISA Affiliate with
respect to such event or condition):
(i) any reportable event, as defined in Section 4043(b) of ERISA
and the regulations issued thereunder, with respect to a Plan, as to
which PBGC has not by regulation waived the requirement of Section
4043(a) of ERISA that it be notified within thirty (30) days of the
occurrence of such event (provided that a failure to meet the minimum
funding standard of Section 412 of the Code or Section 302 of ERISA,
including without limitation the failure to make on or before its due
date a required installment under Section 412(m) of the Code or Section
302(e) of ERISA, shall be a reportable event regardless of the issuance
of any waivers in accordance with Section 412(d) of the Code); and any
request for a waiver under Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041(c) of ERISA of a notice
of intent to terminate any Plan or any action taken by the Borrower or
an ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by either Affiliated Party or any
ERISA Affiliate of a notice from a Multiemployer Plan that such action
has been taken by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer Plan
by either Affiliated Party or any ERISA Affiliate that results in
liability under Section 4201 or 4204 of ERISA (including the obligation
to satisfy secondary liability as a result of a purchaser default) or
the receipt by either Affiliated Party or any ERISA Affiliate of notice
from a Multiemployer Plan that it is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA or that it intends to
terminate or has terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against either Affiliated Party or any ERISA
Affiliate to enforce Section 515 of ERISA, which proceeding is not
dismissed within 30 days; and
(vi) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result
in the loss of tax-exempt status of the trust of which such Plan is a
part if the Affiliated Party or an ERISA Affiliate fails to provide
timely security to such Plan in accordance with the provisions of said
Sections.
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The Borrower will furnish to the Lender, at the time it furnishes each set of
financial statements pursuant to paragraphs (a) and (b) above, a certificate of
a Responsible Officer of the Borrower to the effect that, to the best of such
Responsible Officer's knowledge, each Affiliated Party during such fiscal period
or year has observed or performed all of its covenants and other agreements, and
satisfied every condition, contained in this Loan Agreement and the other Loan
Documents to be observed, performed or satisfied by it, and that such
Responsible Officer has obtained no knowledge of any Default or Event of Default
except as specified in such certificate (and, if any Default or Event of Default
has occurred and is continuing, describing the same in reasonable detail and
describing the action the Affiliated Party has taken or proposes to take with
respect thereto).
7.02 Litigation. The Borrower will promptly, and in any event within 10
days after service of process on any of the following, give to the Lender notice
of all legal or arbitrable proceedings affecting any Affiliated Party or any of
their respective Subsidiaries that questions or challenges the validity or
enforceability of any of the Loan Documents or as to which there is a reasonable
likelihood of adverse determination which would result in a Material Adverse
Effect.
7.03 Existence, etc. The Borrower will:
(a) preserve and maintain its legal existence and all of its material
rights, privileges, licenses and franchises (provided that nothing in this
Section 7.03(a) shall prohibit any transaction expressly permitted under
Section 7.04 hereof);
(b) comply with the requirements of all applicable laws, rules,
regulations orders of Governmental Authorities (including, without
limitation, all environmental laws) if failure to comply with such
requirements would be reasonably likely (either individually or in the
aggregate) to have a material adverse effect on its Property, business or
financial condition, or prospects;
(c) keep adequate records and books of account, in which complete
entries will be made in accordance with GAAP consistently applied;
(d) not move its chief executive office from the address referred to in
Section 6.11 unless it shall have provided the Lender 30 days' prior
written notice of such change;
(e) pay and discharge all taxes, assessments and governmental charges
or levies imposed on it or on its income or profits or on any of its
Property prior to the date on which penalties attach thereto, except for any
such tax, assessment, charge or levy the payment of which is being contested
in good faith and by proper proceedings and against which adequate reserves
are being maintained; and
(f) permit representatives of the Lender, during normal business hours,
to examine, copy and make extracts from its books and records, to inspect
any of its Properties, and to discuss its business and affairs with its
officers, all to the extent reasonably requested by the Lender.
7.04 Prohibition of Fundamental Changes. The Borrower shall not enter
into any transaction of merger or consolidation or amalgamation, or liquidate,
wind up or dissolve itself (or suffer any liquidation, winding up or
dissolution) or sell all or substantially all of its assets; provided, that the
Borrower may merge or consolidate with (a) any wholly owned subsidiary of the
Borrower, or
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(b) any other Person if the Borrower is the surviving corporation; and provided
further, that if after giving effect thereto, no Default would exist hereunder.
7.05 Borrowing Base Deficiency. If at any time there exists a Borrowing
Base Deficiency the Borrower shall cure same in accordance with Section 2.06
hereof.
7.06 Notices. The Borrower shall give notice to the Lender:
(a) promptly upon receipt of notice or knowledge of the occurrence of
any Default or Event of Default;
(b) with respect to any Mortgage Loan pledged to the Lender hereunder,
immediately upon receipt of any principal prepayment (in full or partial) of
such pledged Mortgage Loan;
(c) with respect to any Mortgage Loan pledged to the Lender hereunder,
immediately upon receipt of notice or knowledge that the underlying
Mortgaged Property has been damaged by waste, fire, earthquake or earth
movement, windstorm, flood, tornado or other casualty, or otherwise damaged
so as to affect adversely the Collateral Value of such pledged Mortgage
Loan; and
(d) promptly upon receipt of notice or knowledge of (i) any default
related to any Collateral, (ii) any Lien or security interest (other than
security interests created hereby or by the other Loan Documents) on, or
claim asserted against, any of the Collateral or (iii) any event or change
in circumstances which could reasonably be expected to have a material
adverse effect on the Property, business or financial condition or prospects
of the Borrower.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer of the Borrower setting forth details of the occurrence
referred to therein and stating what action the Borrower has taken or proposes
to take with respect thereto.
7.07 Hedging. As soon as the Borrower's policy with respect to Interest
Rate Protection Agreements has been enacted, the Borrower shall promptly deliver
to the Lender a written summary thereof and shall thereafter maintain Interest
Rate Protection Agreements in compliance therewith. The Borrower shall deliver
to the Lender monthly a written summary of the notional amount of all
outstanding Interest Rate Protection Agreements.
7.08 Reports. The Borrower shall provide the Lender with a quarterly
report, which report shall include, among other items, a summary of the
Borrower's delinquency and loss experience with respect to mortgage loans
serviced by the Borrower, any Servicer or any designee of either, plus any such
additional reports as the Lender may reasonably request with respect to the
Borrower's or any Servicer's servicing portfolio or pending originations of
mortgage loans.
7.09 Underwriting Guidelines. Without the prior written consent of the
Lender, the Borrower shall not amend or otherwise modify the Underwriting
Guidelines.
7.10 Transactions with Affiliates. The Borrower will not enter into
any transaction, including without limitation any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise permitted under this Loan Agreement, (b) in
the ordinary course of the Borrower's business and (c) upon fair and reasonable
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terms no less favorable to the Borrower than it would obtain in a comparable
arm's length transaction with a Person which is not an Affiliate, or make a
payment that is not otherwise permitted by this Section 7.10 to any Affiliate.
In no event shall the Borrower pledge to the Lender hereunder any Mortgage Loan
acquired by the Borrower from an Affiliate of the Borrower, unless the Borrower
has delivered to the Lender a true sale opinion, in form acceptable to the
Lender and a True Sale Certification, substantially in the form attached hereto
as Exhibit G, in connection therewith.
7.11 Limitation on Liens. The Borrower will defend the Collateral
against, and will take such other action as is necessary to remove, any Lien,
security interest or claim on or to the Collateral, other than the security
interests created under this Loan Agreement, and the Borrower will defend the
right, title and interest of the Lenders in and to any of the Collateral against
the claims and demands of all persons whomsoever.
7.12 Limitation on Guarantees. The Borrower shall not create, incur,
assume or suffer to exist any Guarantees.
7.13 Limitation on Distributions. After the occurrence and during the
continuation of any Event of Default, the Borrower shall not make any payment on
account of, or set apart assets for, a sinking or other analogous fund for the
purchase, redemption, defeasance, retirement or other acquisition of any equity
or partnership interest of the Borrower, whether now or hereafter outstanding,
or make any other distribution in respect thereof, either directly or
indirectly, whether in cash or property or in obligations of the Borrower.
7.14 Maintenance of Tangible Net Worth. The Borrower shall not permit
Tangible Net Worth at any time to be less than $3,500,000.
7.15 Maintenance of Ratio of Total Indebtedness to Tangible Net Worth.
The Borrower shall not permit the ratio of Total Indebtedness to Tangible Net
Worth at any time to be greater than 10:1.
7.16 Maintenance of Profitability. The Borrower shall not permit, for
any period of three consecutive fiscal quarters (each such period, a "Test
Period"), Net Income for such Test Period, before income taxes for such Test
Period and distributions made during such Test Period, to be less than $1.00.
7.17 Servicing Tape. The Borrower shall provide to the Lender on a
monthly basis a computer readable magnetic tape or an electronic transmission
containing servicing information, including without limitation those fields
specified by the Lender from time to time, on a loan-by-loan basis and in the
aggregate, with respect to the Mortgage Loans serviced hereunder by the Borrower
or any Servicer.
Section 8. Events of Default. Each of the following events shall
constitute an event of default (an "Event of Default") hereunder:
(a) the Borrower shall default in the payment of any principal of or
interest on any Loan when due (whether at stated maturity, upon acceleration
or at mandatory prepayment); or
(b) any Affiliated Party shall default in the payment of any other
amount payable by it hereunder or under any other Loan Document after
notification by the Lender of such default, and such default shall have
continued unremedied for five Business Days; or
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(c) any representation, warranty or certification made or deemed made
herein or in any other Loan Document by the Borrower or any certificate
furnished to the Lender pursuant to the provisions hereof or thereof shall
prove to have been false or misleading in any material respect as of the
time made or furnished (other than the representations and warranties set
forth in Schedule 1, which shall be considered solely for the purpose of
determining the Collateral Value of the Mortgage Loans; unless the Borrower
shall have made any such representations and warranties with knowledge that
they were materially false or misleading at the time made); or
(d) the Borrower shall fail to comply with the requirements of Section
7.03(a), Section 7.04, Section 7.05, Section 7.06, or Sections 7.09 through
7.17 hereof, or the Borrower shall otherwise fail to comply with the
requirements of Section 7.03 hereof and such default shall continue
unremedied for a period of five Business Days; or any Affiliated Party shall
fail to observe or perform any other covenant or agreement contained in this
Loan Agreement or any other Loan Document and such failure to observe or
perform shall continue unremedied for a period of seven Business Days; or
(e) a final judgment or judgments for the payment of money in excess of
$500,000 in the aggregate shall be rendered against any Affiliated Party or
any of its Subsidiaries by one or more courts, administrative tribunals or
other bodies having jurisdiction and the same shall not be discharged (or
provision shall not be made for such discharge) or bonded, or a stay of
execution thereof shall not be procured, within 60 days from the date of
entry thereof, and the Affiliated Party or any such Subsidiary shall not,
within said period of 60 days, or such longer period during which execution
of the same shall have been stayed or bonded, appeal therefrom and cause the
execution thereof to be stayed during such appeal; or
(f) any Affiliated Party shall admit in writing its inability to pay
its debts as such debts become due; or
(g) any Affiliated Party or any of their respective Subsidiaries shall
(i) apply for or consent to the appointment of, or the taking of possession
by, a receiver, custodian, trustee, examiner or liquidator or the like of
itself or of all or a substantial part of its property, (ii) make a general
assignment for the benefit of its creditors, (iii) commence a voluntary
case under the Bankruptcy Code, (iv) file a petition seeking to take
advantage of any other law relating to bankruptcy, insolvency,
reorganization, liquidation, dissolution, arrangement or winding-up, or
composition or readjustment of debts, (v) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against
it in an involuntary case under the Bankruptcy Code or (vi) take any
corporate or other action for the purpose of effecting any of the foregoing;
or
(h) a proceeding or case shall be commenced, without the application
or consent of any Affiliated Party or any of their respective Subsidiaries,
in any court of competent jurisdiction, seeking (i) its reorganization,
liquidation, dissolution, arrangement or winding-up, or the composition or
readjustment of its debts, (ii) the appointment of, or the taking of
possession by, a receiver, custodian, trustee, examiner, liquidator or the
like of the Affiliated Party or any such Subsidiary or of all or any
substantial part of its property, or (iii) similar relief in respect of the
Affiliated Party or Subsidiary under any law relating to bankruptcy,
insolvency, reorganization, liquidation, dissolution, arrangement or
winding-up, or composition or adjustment of debts, and such proceeding or
case shall continue undismissed, or an order,
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judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of 60 or more
days; or an order for relief against the Affiliated Party or Subsidiary
shall be entered in an involuntary case under the Bankruptcy Code; or
(i) the Custodial Agreement or any Loan Document shall for whatever
reason be terminated or cease to be in full force and effect, or the
enforceability thereof shall be contested by any Affiliated Party; or
(j) the Borrower shall grant, or suffer to exist, any Lien on any
Collateral except the Liens contemplated hereby; or the Liens contemplated
hereby shall cease to be first priority perfected Liens on the Collateral in
favor of the Lender or shall be Liens in favor of any Person other than the
Lender; or
(k) any materially adverse change in the Property, business, financial
condition or prospects of any Affiliated Party or any of its Subsidiaries
shall occur, in each case as determined by the Lender in its sole
discretion, or any other condition shall exist which, in the Lender's sole
discretion, constitutes a material impairment of any Affiliated Party's
ability to perform its obligations under this Loan Agreement, the Note or
any other Loan Document.
Section 9. Remedies Upon Default.
(a) Upon the occurrence of one or more Events of Default other than
those referred to in Section 8(g) or (h), the Lender may immediately declare the
principal amount of the Loans then outstanding under the Note to be immediately
due and payable, together with all interest thereon and fees and expenses
accruing under this Loan Agreement. Upon the occurrence of an Event of Default
referred to in Sections 8(g) or (h), such amounts shall immediately and
automatically become due and payable without any further action by any Person.
Upon such declaration or such automatic acceleration, the balance then
outstanding on the Note shall become immediately due and payable, without
presentment, demand, protest or other formalities of any kind, all of which are
hereby expressly waived by the Borrower.
(b) Upon the occurrence of one or more Events of Default, the Lender
shall have the right to obtain physical possession of the Servicing Records and
all other files of the Borrower relating to the Collateral and all documents
relating to the Collateral which are then or may thereafter come in to the
possession of the Borrower or any third party acting for the Borrower and the
Borrower shall deliver to the Lender such assignments as the Lender shall
request. The Lender shall be entitled to specific performance of all agreements
of the Borrower contained in this Loan Agreement.
Section 10. No Duty of Lender. The powers conferred on the Lender
hereunder are solely to protect the Lender's interests in the Collateral and
shall not impose any duty upon it to exercise any such powers. The Lender shall
be accountable only for amounts that it actually receives as a result of the
exercise of such powers, and neither it nor any of its officers, directors,
employees or agents shall be responsible to the Borrower for any act or failure
to act hereunder, except for its or their own gross negligence or willful
misconduct.
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Section II. Miscellaneous.
11.01 Waiver. No failure on the part of the Lender to exercise and no
delay in exercising, and no course of dealing with respect to, any right, power
or privilege under any Loan Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege under any
Loan Document preclude any other or further exercise thereof or the exercise of
any other right, power or privilege. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
11.02 Notices. Except as otherwise expressly permitted by this Loan
Agreement, all notices, requests and other communications provided for herein
and under the Custodial Agreement (including without limitation any
modifications of, or waivers, requests or consents under, this Loan Agreement)
shall be given or made in writing (including without limitation by telex or
telecopy) delivered to the intended recipient at the "Address for Notices"
specified below its name on the signature pages hereof or thereof); or, as to
any party, at such other address as shall be designated by such party in a
written notice to each other party. Except as otherwise provided in this Loan
Agreement and except for notices given under Section 2 (which shall be effective
only on receipt), all such communications shall be deemed to have been duly
given when transmitted by telex or telecopy or personally delivered or, in the
case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
11.03 Indemnification and Expenses.
(a) The Borrower agrees to hold the Lender harmless from and indemnify
the Lender against all liabilities, losses, damages, judgments, costs and
expenses of any kind which may be imposed on, incurred by or asserted against
the Lender (collectively, the "Costs") relating to or arising out of this Loan
Agreement, the Note, any other Loan Document or any transaction contemplated
hereby or thereby, or any amendment, supplement or modification of, or any
waiver or consent under or in respect of, this Loan Agreement, the Note, any
other Loan Document or any transaction contemplated hereby or thereby, that, in
each case, results from anything other than the Lender's gross negligence or
willful misconduct. Without limiting the generality of the foregoing, the
Borrower agrees to hold the Lender harmless from and indemnify the Lender
against all Costs relating to or arising out of any breach, violation or alleged
breach or violation of any consumer credit laws, including without limitation
the Truth in Lending Act and/or the Real Estate Settlement Procedures Act. In
any suit, proceeding or action brought by the Lender in connection with any
Mortgage Loan for any sum owing thereunder, or to enforce any provisions of any
Mortgage Loan, the Borrower will save, indemnify and hold the Lender harmless
from and against all expense, loss or damage suffered by reason of any defense,
set-off, counterclaim, recoupment or reduction or liability whatsoever of the
account debtor or obligor thereunder, arising out of a breach by the Borrower of
any obligation thereunder or arising out of any other agreement, indebtedness or
liability at any time owing to or in favor of such account debtor or obligor or
its successors from the Borrower. The Borrower also agrees to reimburse the
Lender as and when billed by the Lender for all the Lender's costs and expenses
incurred in connection with the enforcement or the preservation of the Lender's
rights under this Loan Agreement, the Note, any other Loan Document or any
transaction contemplated hereby or thereby, including without limitation the
reasonable fees and disbursements of its counsel. The Borrower hereby
acknowledges that, notwithstanding the fact that the Note is secured by the
Collateral, the obligation of the Borrower under the Note is a recourse
obligation of the Borrower.
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(b) The Borrower agrees to pay as and when billed by the Lender all of
the out-of-pocket costs and expenses incurred by the Lender in connection with
the development, preparation and execution of, and any amendment, supplement or
modification to, this Loan Agreement, the Note, any other Loan Document or any
other documents prepared in connection herewith or therewith. The Borrower
agrees to pay to the Lender, immediately upon closing, all of the out-of-pocket
costs and expenses incurred in connection with the consummation and
administration of the transactions contemplated hereby and thereby including
without limitation (i) all the reasonable fees, disbursements and expenses of
counsel to the Lender not to exceed $10,000 and (ii) all the due diligence,
inspection, testing and review costs and expenses incurred by the Lender with
respect to Collateral under this Loan Agreement, including, but not limited to,
those costs and expenses incurred by the Lender pursuant to Sections 11.03(a),
11.14 and 11.15 hereof.
11.04 Amendments. Except as otherwise expressly provided in this Loan
Agreement, any provision of this Loan Agreement may be modified or supplemented
only by an instrument in writing signed by the Borrower and the Lender and any
provision of this Loan Agreement may be waived by the Lender.
11.05 Successors and Assigns. This Loan Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
11.06 Survival. The obligations of the Borrower under Sections 3.03 and
11.03 hereof shall survive the repayment of the Loans and the termination of
this Loan Agreement. In addition, each representation and warranty made or
deemed to be made by a request for a borrowing, herein or pursuant hereto shall
survive the making of such representation and warranty, and the Lender shall not
be deemed to have waived, by reason of making any Loan, any Default that may
arise because any such representation or warranty shall have proved to be false
or misleading, notwithstanding that the Lender may have had notice or knowledge
or reason to believe that such representation or warranty was false or
misleading at the time such Loan was made.
11.07 Captions. The table of contents and captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Loan Agreement.
11.08 Counterparts. This Loan Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Loan Agreement by
signing any such counterpart.
11.09 Loan Agreement Constitutes Security Agreement; Governing Law.
This Loan Agreement shall be governed by New York law without reference to
choice of law doctrine, and shall constitute a security agreement within the
meaning of the Uniform Commercial Code.
11.10 SUBMISSION TO JURISDICTION; WAIVERS. THE BORROWER HEREBY
IRREVOCABLY AND UNCONDITIONALLY:
(A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS LOAN AGREEMENT, THE NOTE AND THE OTHER LOAN
DOCUMENTS, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT
THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE
STATE OF NEW
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YORK, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;
(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH
COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT MAY
NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY
SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT
COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
(C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY
BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR
ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET
FORTH UNDER ITS SIGNATURE BELOW OR AT SUCH OTHER ADDRESS OF WHICH THE
LENDER SHALL HAVE BEEN NOTIFIED; AND
(D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE
OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO
▇▇▇ IN ANY OTHER JURISDICTION.
11.11 WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE LENDER HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS LOAN AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
11.12 Acknowledgments. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Loan Agreement, the Note and the other Loan Documents;
(b) the Lender has no fiduciary relationship to the Borrower, and the
relationship between the Borrower and the Lender is solely that of debtor
and creditor; and
(c) no joint venture exists between the Lender and the Borrower.
11.13 Hypothecation or Pledge of Loans. The Lender shall have free and
unrestricted use of all Collateral and nothing in this Loan Agreement shall
preclude the Lender from engaging in repurchase transactions with the Collateral
or otherwise pledging, repledging, transferring, hypothecating, or
rehypothecating the Collateral. Nothing contained in this Loan Agreement shall
obligate the Lender to segregate any Collateral delivered to the Lender by the
Borrower.
11.14 Servicing.
(a) The Borrower covenants to maintain or cause the servicing of the
Mortgage Loans to be maintained in conformity with accepted and prudent
servicing practices in the industry for the same type of mortgage loans as the
Mortgage Loans and in a manner at least equal in quality to the
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servicing the Borrower provides for mortgage loans which it owns. In the event
that the preceding language is interpreted as constituting one or more servicing
contracts, each such servicing contract shall terminate automatically upon the
earliest of (i) an Event of Default, (ii) the date on which all the Secured
Obligations have been paid in full or (iii) the transfer of servicing approved
by the Borrower.
(b) If the Mortgage Loans are serviced by the Borrower, (i) the
Borrower agrees that the Lender is the collateral assignee of all servicing
records, including but not limited to any and all servicing agreements, files,
documents, records, data bases, computer tapes, copies of computer tapes, proof
of insurance coverage, insurance policies, appraisals, other closing
documentation, payment history records, and any other records relating to or
evidencing the servicing of Mortgage Loans (the "Servicing Records"), and (ii)
the Borrower grants the Lender a security interest in all servicing fees and
rights relating to the Mortgage Loans and all Servicing Records to secure the
obligation of the Borrower or its designee to service in conformity with this
Section and any other obligation of the Borrower to the Lender. The Borrower
covenants to safeguard such Servicing Records and to deliver them promptly to
the Lender or its designee (including the Custodian) at the Lender's request.
(c) If the Mortgage Loans are serviced by a third party servicer (such
third party servicer, the "Servicer"), the Borrower (i) shall provide a copy of
the servicing agreement to the Lender, which shall be in form and substance
acceptable to the Lender (the "Servicing Agreement"); and (ii) hereby
irrevocably assigns to the Lender and the Lender's successors and assigns all
right, title, interest of the Borrower in, to and under, and the benefits of,
any Servicing Agreement with respect to the Mortgage Loans.
(d) If the servicer of the Mortgage Loans is the Borrower or the
Servicer is an Affiliate of the Borrower, the Borrower shall provide to the
Lender a letter from the Borrower or the Servicer, as the case may be, to the
effect that upon the occurrence of an Event of Default, the Lender may terminate
any Servicing Agreement and transfer servicing to its designee, at no cost or
expense to the Lender, it being agreed that the Borrower will pay any and all
fees required to terminate the Servicing Agreement and to effectuate the
transfer of servicing to the designee of the Lender.
(e) After the Funding Date, until the pledge of any Mortgage Loan is
relinquished by the Custodian, the Borrower will have no right to modify or
alter the terms of such Mortgage Loan and the Borrower will have no obligation
or right to repossess such Mortgage Loan or substitute another Mortgage Loan,
except as provided in the Custodial Agreement.
(f) In the event the Borrower or its Affiliate is servicing the
Mortgage Loans, the Borrower shall permit the Lender to inspect the Borrower's
or its Affiliate's servicing facilities, as the case may be, for the purpose of
satisfying the Lender that the Borrower or its Affiliate, as the case may be,
has the ability to service the Mortgage Loans as provided in this Loan
Agreement.
11.15 Periodic Due Diligence Review. The Borrower acknowledges that the
Lender has the right to perform continuing due diligence reviews with respect to
the Mortgage Loans, for purposes of verifying compliance with the
representations, warranties and specifications made hereunder, or otherwise, and
the Borrower agrees that upon reasonable (but no less than three (3) Business
Day's, unless a Default shall have occurred and be continuing) prior notice to
the Borrower, the Lender or its authorized representatives will be permitted
during normal business hours to examine, inspect, and make copies and extracts
of, the Mortgage Files and any and all documents, records, agreements,
instruments or information relating to such Mortgage Loans in the possession or
under the
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control of the Borrower and/or the Custodian. Such Due Diligence Reviews by the
Lender may be limited by the Borrower to two (2) Due Diligence Reviews per year
unless a Default shall have occurred and be continuing. The Borrower also shall
make available to the Lender a knowledgeable financial or accounting officer for
the purpose of answering questions respecting the Mortgage Files and the
Mortgage Loans. Without limiting the generality of the foregoing, the Borrower
acknowledges that the Lender may make Loans to the Borrower based solely upon
the information provided by the Borrower to the Lender in the Mortgage Loan Tape
and the representations, warranties and covenants contained herein, and that the
Lender, at its option, has the right at any time to conduct a partial or
complete due diligence review on some or all of the Mortgage Loans securing such
Loan, including without limitation ordering new credit reports and new
appraisals on the related Mortgaged Properties and otherwise re-generating the
information used to originate such Mortgage Loan. The Lender may underwrite such
Mortgage Loans itself or engage a mutually agreed upon third party underwriter
to perform such underwriting. The Borrower agrees to cooperate with the Lender
and any third party underwriter in connection with such underwriting, including,
but not limited to, providing the Lender and any third party underwriter with
access to any and all documents, records, agreements, instruments or information
relating to such Mortgage Loans in the possession, or under the control, of the
Borrower. The Borrower further agrees that the Borrower shall reimburse the
Lender for any and all out-of-pocket costs and expenses incurred by the Lender
in connection with the Lender's activities pursuant to this Section 11.15 ("Due
Diligence Costs"); provided that such Due Diligence Costs shall not exceed
$4,500 per year unless a Default shall have occurred and be continuing (the
"Due Diligence Cap").
11.16 Intent. The parties recognize that each Loan is a "securities
contract" as that term is defined in Section 741 of Title 11 of the United
States Code, as amended.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement
to be duly executed and delivered as of the day and year first above written.
BORROWER
FIDELITY MORTGAGE FUNDING, INC.
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
Title: President
Address for Notices:
▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
LENDER
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MORTGAGE
CAPITAL INC.
By
---------------------------------
Title:
Address for Notices:
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement
to be duly executed and delivered as of the day and year first above written.
BORROWER
FIDELITY MORTGAGE FUNDING, INC.
By
---------------------------
Title:
Address for Notices:
▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:___________________
Telecopier No.:______________
Telephone No.:_______________
LENDER
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MORTGAGE
CAPITAL INC.
By
---------------------------------
Title: Vice President
Address for Notices:
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Schedule 1
REPRESENTATIONS AND WARRANTIES RE: MORTGAGE LOANS
Part I. Eligible Mortgage Loans
As to each residential Mortgage Loan included in the Borrowing Base on
a Funding Date (and the related Mortgage, Mortgage Note, Assignment of Mortgage
and Mortgaged Property), the Borrower shall be deemed to make the following
representations and warranties to the Lender as of such date and as of each date
Collateral Value is determined (certain defined terms used herein and not
otherwise defined in the Loan Agreement appearing in Part II to this
Schedule 1):
(a) Mortgage Loans as Described. The information set forth in the
Mortgage Loan Schedule with respect to the Mortgage Loan is complete, true and
correct in all material respects.
(b) Payments Current. Except with respect to Delinquent Mortgage Loans,
all payments required to be made up to the Funding Date for the Mortgage Loan
under the terms of the Mortgage Note have been made and credited. No payment
required under the Mortgage Loan is delinquent in excess of 59 days. The first
Monthly Payment shall be made, or shall have been made, with respect to the
Mortgage Loan on its Due Date or within the grace period, all in accordance with
the terms of the related Mortgage Note.
(c) No Outstanding Charges. There are no defaults in complying with the
terms of the Mortgage securing the Mortgage Loan, and all taxes, governmental
assessments, insurance premiums, water, sewer and municipal charges, leasehold
payments or ground rents which previously became due and owing have been paid,
or an escrow of funds has been established in an amount sufficient to pay for
every such item which remains unpaid and which has been assessed but is not yet
due and payable. Neither the Borrower nor the Qualified Originator from which
the Borrower acquired the Mortgage Loan has advanced funds, or induced,
solicited or knowingly received any advance of funds by a party other than the
Mortgagor, directly or indirectly, for the payment of any amount required under
the Mortgage Loan, except for interest accruing from the date of the Mortgage
Note or date of disbursement of the proceeds of the Mortgage Loan, whichever is
earlier, to the day which precedes by one month the Due Date of the first
installment of principal and interest thereunder.
(d) Original Terms Unmodified. The terms of the Mortgage Note and
Mortgage have not been impaired, waived, altered or modified in any respect,
from the date of origination; except by a written instrument which has been
recorded, if necessary to protect the interests of the Lender, and which has
been delivered to the Custodian and the terms of which are reflected in the
Mortgage Loan Schedule. The substance of any such waiver, alteration or
modification has been approved by the title insurer, to the extent required, and
its terms are reflected on the Mortgage Loan Schedule. No Mortgagor in respect
of the Mortgage Loan has been released, in whole or in part, except in
connection with an assumption agreement approved by the title insurer, to the
extent required by such policy, and which assumption agreement is part of the
Mortgage File delivered to the Custodian and the terms of which are reflected in
the Mortgage Loan Schedule.
Schedule 1-35-
(e) No Defenses. The Mortgage Loan is not subject to any right of
rescission, set-off, counterclaim or defense, including without limitation the
defense of usury, nor will the operation of any of the terms of the Mortgage
Note or the Mortgage, or the exercise of any right thereunder, render either the
Mortgage Note or the Mortgage unenforceable, in whole or in part and no such
right of rescission, set-off, counterclaim or defense has been asserted with
respect thereto, and no Mortgagor in respect of the Mortgage Loan was a debtor
in any state or Federal bankruptcy or insolvency proceeding at the time the
Mortgage Loan was originated other than as permitted under the Underwriting
Guidelines. The Borrower has no knowledge nor has it received any notice that
any Mortgagor in respect of the Mortgage Loan is a debtor in any state or
federal bankruptcy or insolvency proceeding.
(f) Hazard Insurance. The Mortgaged Property is insured by a fire and
extended perils insurance policy, issued by a Qualified Insurer, and such other
hazards as are customary in the area where the Mortgaged Property is located,
and to the extent required by the Borrower as of the date of origination
consistent with the Underwriting Guidelines, against earthquake and other risks
insured against by Persons operating like properties in the locality of the
Mortgaged Property, in an amount not less than the greatest of (i) 100% of the
replacement cost of all improvements to the Mortgaged Property, (ii) either (A)
the outstanding principal balance of the Mortgage Loan with respect to each
First Lien Mortgage Loan or (B) with respect to each Second Lien Mortgage Loan,
the sum of the outstanding principal balance of the First Lien Mortgage Loan and
the outstanding principal balance of the Second Lien Mortgage Loan, or (iii) the
amount necessary to avoid the operation of any co-insurance provisions with
respect to the Mortgaged Property, and consistent with the amount that would
have been required as of the date of origination in accordance with the
Underwriting Guidelines. If any portion of the Mortgaged Property is in an area
identified by any federal Governmental Authority as having special flood
hazards, and flood insurance is available, a flood insurance policy meeting the
current guidelines of the Federal Insurance Administration is in effect with a
generally acceptable insurance carrier, in an amount representing coverage not
less than the least of (1) the outstanding principal balance of the Mortgage
Loan, (2) the full insurable value of the Mortgaged Property, and (3) the
maximum amount of insurance available under the Flood Disaster Protection Act of
1973, as amended. All such insurance policies (collectively, the "hazard
insurance policy") contain a standard mortgagee clause naming the Borrower, its
successors and assigns (including without limitation, subsequent owners of the
Mortgage Loan), as mortgagee, and may not be reduced, terminated or canceled
without 30 days' prior written notice to the mortgagee. No such notice has been
received by the Borrower. All premiums on such insurance policy have been paid.
The related Mortgage obligates the Mortgagor to maintain all such insurance and,
at such Mortgagor's failure to do so, authorizes the mortgagee to maintain such
insurance at the Mortgagor's cost and expense and to seek reimbursement therefor
from such Mortgagor. Where required by state law or regulation, the Mortgagor
has been given an opportunity to choose the carrier of the required hazard
insurance, provided the policy is not a "master" or "blanket" hazard insurance
policy covering a condominium, or any hazard insurance policy covering the
common facilities of a planned unit development. The hazard insurance policy is
the valid and binding obligation of the insurer and is in full force and effect.
The Borrower has not engaged in, and has no knowledge of the Mortgagor's having
engaged in, any act or omission which would impair the coverage of any such
policy, the benefits of the endorsement provided for herein, or the validity and
binding effect of either including, without limitation, no unlawful fee,
commission, kickback or other unlawful compensation or value of any kind has
been or will be received, retained or realized by any attorney, firm or other
Person, and no such unlawful items have been received, retained or realized by
the Borrower.
Schedule 1-36-
(g) Compliance with Applicable Laws. Any and all requirements of any
federal, state or local law including, without limitation, usury,
truth-in-lending, real estate settlement procedures, consumer credit protection,
equal credit opportunity or disclosure laws applicable to the Mortgage Loan have
been complied with, the consummation of the transactions contemplated hereby
will not involve the violation of any such laws or regulations, and the Borrower
shall maintain or shall cause its agent to maintain in its possession, available
for the inspection of the Lender, and shall deliver to the Lender, upon demand,
evidence of compliance with all such requirements.
(h) No Satisfaction of Mortgage. The Mortgage has not been satisfied,
canceled, subordinated or rescinded, in whole or in part, and the Mortgaged
Property has not been released from the lien of the Mortgage, in whole or in
part, nor has any instrument been executed that would effect any such release,
cancellation, subordination or rescission. The Borrower has not waived the
performance by the Mortgagor of any action, if the Mortgagor's failure to
perform such action would cause the Mortgage Loan to be in default, nor has the
Borrower waived any default resulting from any action or inaction by the
Mortgagor.
(i) Location and Typee of Mortgaged Property. The Mortgaged Property is
located in an Acceptable State as identified in the Mortgage Loan Schedule and
consists of a single parcel of real property with a detached single family
residence erected thereon, or a two- to four-family dwelling, or an individual
condominium unit in a low-rise condominium project, or an individual unit in a
planned unit development or a de minimis planned unit development, provided,
however, that any condominium unit or planned unit development shall conform
with the applicable FNMA and FHLMC requirements regarding such dwellings and
that no residence or dwelling is a mobile home or a manufactured dwelling (other
than Acceptable Manufactured Housing). No Mortgaged Property is secured by a
Mixed Use Mortgage Loan, and no portion of the Mortgaged Property is used for
commercial purposes.
(j) Valid First or Second Lien. The Mortgage is a valid, subsisting,
enforceable and perfected (A) first lien and first priority security interest
with respect to each Mortgage Loan which is indicated by such Borrower to be a
First Lien Mortgage Loan (as reflected on the Mortgage Loan Tape), or (B) second
lien and second priority security interest with respect to each Mortgage Loan
which is indicated by such Borrower to be a Second Lien Mortgage Loan (as
reflected on the Mortgage Loan Tape), in either case, on the real property
included in the Mortgaged Property, including all buildings on the Mortgaged
Property and all installations and mechanical, electrical, plumbing, heating and
air conditioning systems located in or annexed to such buildings, and all
additions, alterations and replacements made at any time with respect to the
foregoing. The lien of the Mortgage is subject only to:
(1) the lien of current real property taxes and assessments not yet due
and payable;
(2) covenants, conditions and restrictions, rights of way, easements
and other matters of the public record as of the date of recording
acceptable to prudent mortgage lending institutions generally and
specifically referred to in the lender's title insurance policy delivered to
the originator of the Mortgage Loan and (a) referred to or otherwise
considered in the appraisal made for the originator of the Mortgage Loan or
(b) which do not adversely affect the Appraised Value of the Mortgaged
Property set forth in such appraisal;
Schedule 1-37-
(3) other matters to which like properties are commonly subject which
do not materially interfere with the benefits of the security intended to be
provided by the Mortgage or the use, enjoyment, value or marketability of
the related Mortgaged Property; and
(4) with respect to each Mortgage Loan which is indicated by such
Borrower to be a Second Lien Mortgage Loan (as reflected on the Mortgage
Loan Tape) a prior mortgage lien on the Mortgaged Property.
Any security agreement, chattel mortgage or equivalent document related to and
delivered in connection with the Mortgage Loan establishes and creates a valid,
subsisting and enforceable (A) first lien and first priority security interest
with respect to each Mortgage Loan which is indicated by such Borrower to be a
First Lien Mortgage Loan (as reflected on the Mortgage Loan Tape), or (B) second
lien and second priority security interest with respect to each Mortgage Loan
which is indicated by such Borrower to be a Second Lien Mortgage Loan (as
reflected on the Mortgage Loan Tape), in either case, on the property described
therein and the Borrower has full right to pledge and assign the same to the
Lender. The Mortgaged Property was not, as of the date of origination of the
Mortgage Loan, subject to a mortgage, deed of trust, deed to secure debt or
other security instrument creating a lien subordinate to the lien of the
Mortgage.
(k) Validity of Mortgage Documents. The Mortgage Note and the Mortgage
and any other agreement executed and delivered by a Mortgagor or guarantor, if
applicable, in connection with a Mortgage Loan are genuine, and each is the
legal, valid and binding obligation of the maker thereof enforceable in
accordance with its terms. All parties to the Mortgage Note, the Mortgage and
any other such related agreement had legal capacity to enter into the Mortgage
Loan and to execute and deliver the Mortgage Note, the Mortgage and any such
agreement, and the Mortgage Note, the Mortgage and any other such related
agreement have been duly and properly executed by such related parties. No
fraud, error, omission, misrepresentation, negligence or similar occurrence with
respect to a Mortgage Loan has taken place on the part of any Person,
including, without limitation, the Mortgagor, any appraiser, any builder or
developer, or any other party involved in the origination of the Mortgage Loan.
The Borrower has reviewed all of the documents constituting the Servicing File
and has made such inquiries as it deems necessary to make and confirm the
accuracy of the representations set forth herein.
(l) Full Disbursement of Proceeds. The Mortgage Loan has been closed
and the proceeds of the Mortgage Loan have been fully disbursed and there is no
further requirement for future advances thereunder, and any and all
requirements as to completion of any on-site or off-site improvement and as to
disbursements of any escrow funds therefor have been complied with. All costs,
fees and expenses incurred in making or closing the Mortgage Loan and the
recording of the Mortgage were paid, and the Mortgagor is not entitled to any
refund of any amounts paid or due under the Mortgage Note or Mortgage.
(m) Ownership. The Borrower is the sole owner and holder of the
Mortgage Loan. The Mortgage Loan is not assigned or pledged, and the Borrower
has good, indefeasible and marketable title thereto, and has full right to
transfer, pledge and assign the Mortgage Loan to the Lender free and clear of
any encumbrance, equity, participation interest, lien, pledge, charge, claim or
security interest, and has full right and authority subject to no interest or
participation of, or agreement with, any other party, to assign, transfer and
pledge each Mortgage Loan pursuant to this Loan Agreement and following the
pledge of each Mortgage Loan, the Lender will hold such Mortgage Loan
Schedule 1-38-
free and clear of any encumbrance, equity, participation interest, lien, pledge,
charge, claim or security interest except any such security interest created
pursuant to the terms of this Loan Agreement.
(n) Doing Business. All parties which have had any interest in the
Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or,
during the period in which they held and disposed of such interest, were) (i) in
compliance with any and all applicable licensing requirements of the laws of the
state wherein the Mortgaged Property is located, and (ii) either (A) organized
under the laws of such state, (B) qualified to do business in such state, (C) a
federal savings and loan association, a savings bank or a national bank having a
principal office in such state, or (D) not doing business in such state.
(o) CLTV. No Mortgage Loan has a CLTV greater than 100%.
(p) Title Insurance. The Mortgage Loan is covered by either (i) an
attorney's opinion of title and abstract of title, the form and substance of
which is acceptable to prudent mortgage lending institutions making mortgage
loans in the area wherein the Mortgaged Property is located or (ii) an ALTA
lender's title insurance policy or other generally acceptable form of policy or
insurance acceptable to FNMA or FHLMC and each such title insurance policy is
issued by a title insurer acceptable to FNMA or FHLMC and qualified to do
business in the jurisdiction where the Mortgaged Property is located, insuring
the Borrower, its successors and assigns, as to the first (or second, if the
Mortgage Loan is a Second Lien Mortgage Loan) priority lien of the Mortgage in
the original principal amount of the Mortgage Loan (or to the extent a Mortgage
Note provides for negative amortization, the maximum amount of negative
amortization in accordance with the Mortgage), subject only to the exceptions
contained in clauses (1), (2), (3) and, with respect to each Mortgage Loan which
is indicated by the Borrower to be a Second Lien Mortgage Loan (as reflected on
the Mortgage Loan Schedule) clause (4) of paragraph (j) of this Part I of
Schedule 1, and in the case of adjustable rate Mortgage Loans, against any loss
by reason of the invalidity or unenforceability of the lien resulting from the
provisions of the Mortgage providing for adjustment to the Mortgage Interest
Rate and Monthly Payment. Where required by state law or regulation, the
Mortgagor has been given the opportunity to choose the carrier of the required
mortgage title insurance. Additionally, such lender's title insurance policy
affirmatively insures ingress and egress and against encroachments by or upon
the Mortgaged Property or any interest therein. The title policy does not
contain any special exceptions (other than the standard exclusions) for zoning
and uses and has been marked to delete the standard survey exception or to
replace the standard survey exception with a specific survey reading. The
Borrower, its successors and assigns, are the sole insureds of such lender's
title insurance policy, and such lender's title insurance policy is valid and
remains in full force and effect and will be in force and effect upon the
consummation of the transactions contemplated by this Loan Agreement. No claims
have been made under such lender's title insurance policy, and no prior holder
or servicer of the related Mortgage, including the Borrower, has done, by act or
omission, anything which would impair the coverage of such lender's title
insurance policy, including, without limitation, no unlawful fee, commission,
kickback or other unlawful compensation or value of any kind has been or will be
received, retained or realized by any attorney, firm or other Person, and no
such unlawful items have been received, retained or realized by the Borrower.
(q) No Defaults. There is no default, breach, violation or event of
acceleration existing under the Mortgage or the Mortgage Note (other than
Mortgage Loans for which payments are delinquent for no more than fifty-nine
(59) days) and no event has occurred which, with the passage of time or with
notice and the expiration of any grace or cure period, would constitute a
default, breach, violation or event of acceleration, and neither the Borrower
nor its predecessors have waived any
Schedule 1-39-
default, breach, violation or event of acceleration. With respect to each
Mortgage Loan which is indicated by such Borrower to be a Second Lien Mortgage
Loan (as reflected on the Mortgage Loan Schedule) (i) the prior mortgage is in
full force and effect, (ii) there is no default, breach, violation or event of
acceleration existing under such prior mortgage or the related mortgage note,
(iii) no event which, with the passage of time or with notice and the expiration
of any grace or cure period, would constitute a default, breach, violation or
event of acceleration thereunder, and either (A) the prior mortgage contains, a
provision which allows or (B) applicable law requires, the mortgagee under the
Second Lien Mortgage Loan to receive notice of, and affords such mortgagee an
opportunity to cure any default by payment in full or otherwise under the prior
mortgage.
(r) No Mechanics' Liens. There are no mechanics' or similar liens or
claims which have been filed for work, labor or material (and no rights are
outstanding that under the law could give rise to such liens) affecting the
Mortgaged Property which are or may be liens prior to, or equal or coordinate
with, the lien of the Mortgage.
(s) Location of Improvements: No Encroachments. All improvements which
were considered in determining the Appraised Value of the Mortgaged Property lie
wholly within the boundaries and building restriction lines of the Mortgaged
Property, and no improvements on adjoining properties encroach upon the
Mortgaged Property. No improvement located on or being part of the Mortgaged
Property is in violation of any applicable zoning and building law, ordinance or
regulation.
(t) Origination: Payment Terms. The Mortgage Loan was originated by or
in conjunction with a mortgagee approved by the Secretary of Housing and Urban
Development pursuant to Sections 203 and 211 of the National Housing Act, a
savings and loan association, a savings bank, a commercial bank, credit union,
insurance company or similar banking institution which is supervised and
examined by a federal or state authority. Principal payments on the Mortgage
Loan commenced no more than 60 days after funds were disbursed in connection
with the Mortgage Loan. The Mortgage Interest Rate is adjusted, with respect to
adjustable rate Mortgage Loans, on each Interest Rate Adjustment Date to equal
the Index plus the Gross Margin (rounded up or down to the nearest .125%),
subject to the Mortgage Interest Rate Cap. The Mortgage Note is payable in equal
monthly installments of principal and interest, which installments of interest,
with respect to adjustable rate Mortgage Loans, are subject to change due to the
adjustments to the Mortgage Interest Rate on each Interest Rate Adjustment Date,
with interest calculated and payable in arrears, sufficient to amortize the
Mortgage Loan fully by the stated maturity date, over an original term of not
more than 30 years from commencement of amortization. The due date of the first
payment under the Mortgage Note is no more than 60 days from the date of the
Mortgage Note.
(U) Customary Provisions. The Mortgage Note has a stated maturity. The
Mortgage contains customary and enforceable provisions such as to render the
rights and remedies of the holder thereof adequate for the realization against
the Mortgaged Property of the benefits of the security provided thereby,
including, (i) in the case of a Mortgage designated as a deed of trust, by
trustee's sale, and (ii) otherwise by judicial foreclosure. Upon default by a
Mortgagor on a Mortgage Loan and foreclosure on, or trustee's sale of, the
Mortgaged Property pursuant to the proper procedures, the holder of the Mortgage
Loan will be able to deliver good and merchantable title to the Mortgaged
Property. There is no homestead or other exemption available to a Mortgagor
which would interfere with the right to sell the Mortgaged Property at a
trustee's sale or the right to foreclose the Mortgage.
Schedule 1-40-
(v) Conformance with Underwriting Guidelines and Agency Standards. The
Mortgage Loan was underwritten in accordance with the Underwriting Guidelines.
The Mortgage Note and Mortgage are on forms similar to those used by FHLMC or
FNMA and the Borrower has not made any representations to a Mortgagor that are
inconsistent with the mortgage instruments used.
(w) Occupancy of the Mortgaged Property. As of the Funding Date the
Mortgaged Property is lawfully occupied under applicable law. All inspections,
licenses and certificates required to be made or issued with respect to all
occupied portions of the Mortgaged Property and, with respect to the use and
occupancy of the same, including but not limited to certificates of occupancy
and fire underwriting certificates, have been made or obtained from the
appropriate authorities. The Borrower has not received notification from any
governmental authority that the Mortgaged Property is in material non-compliance
with such laws or regulations, is being used, operated or occupied unlawfully or
has failed to have or obtain such inspection, licenses or certificates, as the
case may be. The Borrower has not received notice of any violation or failure
to conform with any such law, ordinance, regulation, standard, license or
certificate. The Mortgagor represented at the time of origination of the
Mortgage Loan that the Mortgagor would occupy the Mortgaged Property as the
Mortgagor's primary residence.
(x) No Additional Collateral. The Mortgage Note is not and has not been
secured by any collateral except the lien of the corresponding Mortgage and the
security interest of any applicable security agreement or chattel mortgage
referred to in clause (y) above.
(y) Deeds of Trust. In the event the Mortgage constitutes a deed of
trust, a trustee, authorized and duly qualified under applicable law to serve as
such, has been properly designated and currently so serves and is named in the
Mortgage, and no fees or expenses are or will become payable by the Custodian or
the Lender to the trustee under the deed of trust, except in connection with a
trustee's sale after default by the Mortgagor.
(z) Delivery of Mortgage Documents. The Mortgage Note, the Mortgage,
the Assignment of Mortgage and any other documents required to be delivered
under the Custodial Agreement for each Mortgage Loan have been delivered to the
Custodian. The Borrower or its agent is in possession of a complete, true and
accurate Mortgage File in compliance with the Custodial Agreement, except for
such documents the originals of which have been delivered to the Custodian.
(aa) Transfer of Mortgage Loans. The Assignment of Mortgage is in
recordable form and is acceptable for recording under the laws of the
jurisdiction in which the Mortgaged Property is located.
(bb) Due-On-Sale. The Mortgage contains an enforceable provision for
the acceleration of the payment of the unpaid principal balance of the Mortgage
Loan in the event that the Mortgaged Property is sold or transferred without the
prior written consent of the mortgagee thereunder.
(cc) No Buydown Provisions; No Graduated Payments or Contingent
Interests. The Mortgage Loan does not contain provisions pursuant to which
Monthly Payments are paid or partially paid with funds deposited in any separate
account established by the Borrower, the Mortgagor, or anyone on behalf of the
Mortgagor, or paid by any source other than the Mortgagor nor does it contain
any other similar provisions which may constitute a "buydown" provision. The
Mortgage Loan is not
Schedule 1-41-
a graduated payment mortgage loan and the Mortgage Loan does not have a shared
appreciation or other contingent interest feature.
(dd) Consolidation of Future Advances. Any future advances made to the
Mortgagor prior to the Cut-off Date have been consolidated with the principal
amount secured by the Mortgage, and the secured principal amount, as
consolidated, bears a single interest rate and single repayment term. The lien
of the Mortgage securing the consolidated principal amount is expressly insured
as having (A) first lien priority with respect to each Mortgage Loan which is
indicated by such Borrower to be a First Lien Mortgage Loan (as reflected on the
Mortgage Loan Schedule), or (B) second lien priority with respect to each
Mortgage Loan which is indicated by such Borrower to be a Second Lien Mortgage
Loan (as reflected on the Mortgage Loan Schedule), in either case, by a title
insurance policy, an endorsement to the policy insuring the mortgagee's
consolidated interest or by other title evidence acceptable to FNMA and FHLMC.
The consolidated principal amount does not exceed the original principal amount
of the Mortgage Loan.
(ee) Mortgage Property Undamaged. The Mortgaged Property is undamaged
by waste, fire, earthquake or earth movement, windstorm, flood, tornado or other
casualty so as to affect adversely the value of the Mortgaged Property as
security for the Mortgage Loan or the use for which the premises were intended
and each Mortgaged Property is in good repair. There have not been any
condemnation proceedings with respect to the Mortgaged Property and the Borrower
has no knowledge of any such proceedings.
(ff) Collection Practices: Escrow Deposits Interest Rate Adjustments.
The origination and collection practices used by the originator, each servicer
of the Mortgage Loan and the Borrower with respect to the Mortgage Loan have
been in all respects in compliance with Accepted Servicing Practices, applicable
laws and regulations, and have been in all respects legal and proper. With
respect to escrow deposits and Escrow Payments, (other than with respect to each
Mortgage Loan which is indicated by such Borrower to be a Second Lien Mortgage
Loan and for which the mortgagee under the prior mortgage lien is collecting
Escrow Payments (as reflected on the Mortgage Loan Schedule), all such payments
are in the possession of, or under the control of, the Borrower and there exist
no deficiencies in connection therewith for which customary arrangements for
repayment thereof have not been made. All Escrow Payments have been collected in
full compliance with state and federal law. An escrow of funds is not prohibited
by applicable law and has been established in an amount sufficient to pay for
every item that remains unpaid and has been assessed but is not yet due and
payable. No escrow deposits or Escrow Payments or other charges or payments due
the Borrower have been capitalized under the Mortgage or the Mortgage Note. All
Mortgage Interest Rate adjustments have been made in strict compliance with
state and federal law and the terms of the related Mortgage Note. Any interest
required to be paid pursuant to state, federal and local law has been properly
paid and credited.
(gg) Other Insurance Policies. No action, inaction or event has
occurred and no state of facts exists or has existed that has resulted or will
result in the exclusion from, denial of, or defense to coverage under any
applicable special hazard insurance policy, PMI Policy or bankruptcy bond,
irrespective of the cause of such failure of coverage. In connection with the
placement of any such insurance, no commission, fee, or other compensation has
been or will be received by the Borrower or by any officer, director, or
employee of the Borrower or any designee of the Borrower or any corporation in
which the Borrower or any officer, director, or employee had a financial
interest at the time of placement of such insurance.
Schedule 1-42-
(hh) Soldiers' and Sailors' Civil Relief Act. The Mortgagor has not
notified the Borrower, and the Borrower has no knowledge, of any relief
requested or allowed to the Mortgagor under the Soldiers' and Sailors' Civil
Relief Act of 1940.
(ii) Appraisal. The Mortgage File contains an appraisal of the related
Mortgaged Property signed prior to the approval of the Mortgage Loan application
by a qualified appraiser, duly appointed by the Borrower, who had no interest,
direct or indirect in the Mortgaged Property or in any loan made on the security
thereof, and whose compensation is not affected by the approval or disapproval
of the Mortgage Loan, and the appraisal and appraiser both satisfy the
requirements of FNMA or FHLMC and Title XI of the Federal Institutions Reform,
Recovery, and Enforcement Act of 1989 as amended and the regulations promulgated
thereunder, all as in effect on the date the Mortgage Loan was originated.
(jj) Disclosure Materials. The Mortgagor has executed a statement to
the effect that the Mortgagor has received all disclosure materials required by
applicable law with respect to the making of adjustable rate mortgage loans, and
the Borrower maintains such statement in the Mortgage File.
(kk) Construction or Rehabilitation of Mortgaged Property. No Mortgage
Loan was made in connection with the construction or rehabilitation of a
Mortgaged Property or facilitating the trade-in or exchange of a Mortgaged
Property.
(ll) No Defense to Insurance Coverage. No action has been taken or
failed to be taken, no event has occurred and no state of facts exists or has
existed on or prior to the Funding Date (whether or not known to the Borrower on
or prior to such date) which has resulted or will result in an exclusion from,
denial of, or defense to coverage under any private mortgage insurance
(including, without limitation, any exclusions, denials or defenses which would
limit or reduce the availability of the timely payment of the full amount of the
loss otherwise due thereunder to the insured) whether arising out of actions,
representations, errors, omissions, negligence, or fraud of the Borrower, the
related Mortgagor or any party involved in the application for such coverage,
including the appraisal, plans and specifications and other exhibits or
documents submitted therewith to the insurer under such insurance policy, or for
any other reason under such coverage, but not including the failure of such
insurer to pay by reason of such insurer's breach of such insurance policy or
such insurer's financial inability to pay.
(mm) Capitalization of Interest. The Mortgage Note does not by its
terms provide for the capitalization or forbearance of interest.
(nn) No Equity Participation. No document relating to the Mortgage Loan
provides for any contingent or additional interest in the form of participation
in the cash flow of the Mortgaged Property or a sharing in the appreciation of
the value of the Mortgaged Property. The indebtedness evidenced by the Mortgage
Note is not convertible to an ownership interest in the Mortgaged Property or
the Mortgagor and the Borrower has not financed nor does it own directly or
indirectly, any equity of any form in the Mortgaged Property or the Mortgagor.
(oo) Proceeds of Mortgage Loan. The proceeds of the Mortgage Loan have
not been and shall not be used to satisfy, in whole or in part, any debt owed or
owing by the Mortgagor to the Borrower or any Affiliate or correspondent of the
Borrower.
Schedule 1-43-
(pp) Withdrawn Mortgage Loans. If the Mortgage Loan has been released
to the Borrower pursuant to a Request for Release as permitted under Section 5
of the Custodial Agreement, then the promissory note relating to the Mortgage
Loan was returned to the Custodian within 10 days (or if such tenth day was not
a Business Day, the next succeeding Business Day).
(qq) Origination Date. The Origination Date is no earlier than nine
months prior to the date the Mortgage Loan is first included in the Borrowing
Base.
(rr) No Exception. The Custodian has not noted any material exceptions
on an Exception Report (as defined in the Custodial Agreement) with respect to
the Mortgage Loan which would materially adversely affect the Mortgage Loan or
the Lender's security interest, granted by the Borrower, in the Mortgage Loan.
(ss) Qualified Originator. The Mortgage Loan has been originated by,
and, if applicable, purchased by the Borrower from, a Qualified Originator.
(tt) Mortgage Submitted for Recordation. The Mortgage either has been
or will promptly be submitted for recordation in the appropriate governmental
recording office of the jurisdiction where the Mortgaged Property is located.
(uu) Wet-Ink Mortgage Loans. With respect to each Mortgage Loan that is
a Wet-Ink Mortgage Loan, the Settlement Agent has been instructed in writing by
the Borrower to hold the related Mortgage Loan Documents as agent and bailee for
the Lender and to promptly forward such Mortgage Loan Documents to the Custodian
for receipt within two (2) Business Days following the applicable Funding Date.
Schedule 1-44-
Part II Defined Terms
In addition to terms defined elsewhere in the Loan Agreement, the
following terms shall have the following meanings when used in this Schedule 1:
"Acceptable Manufactured Housing" shall mean a fully attached
manufactured home which is considered and treated as "real estate" under
applicable state law.
"Acceptable State" shall mean any state notified by the Borrower to the
Lender from time to time and approved in writing by the Lender, which approval
has not been revoked by the Lender in their sole discretion, any such notice of
revocation to be given no later than 10 Business Days prior to its intended
effective date.
"Accepted Servicing Practices" shall mean, with respect to any Mortgage
Loan, those mortgage servicing practices of prudent mortgage lending
institutions which service mortgage loans of the same type as such Mortgage
Loans in the jurisdiction where the related Mortgaged Property is located.
"ALTA" means the American Land Title Association.
"Appraised Value" shall mean the value set forth in an appraisal made
in connection with the origination of the related Mortgage Loan as the value of
the Mortgaged Property.
"Best's" means Best's Key Rating Guide, as the same shall be amended
from time to time.
"Combined LTV" or "CLTV" shall mean with respect to any Mortgage Loan,
the ratio of (a) the outstanding principal balance as of the related Cut-off
Date of (i) the Mortgage Loan plus (ii) the mortgage loan constituting the first
lien to (b) the Appraised Value of the Mortgaged Property.
"Cut-off Date" means the first day of the month in which the related
Funding Date occurs.
"Debt Service Ratio" means with respect to any Eligible Multifamily
Mortgage Loan or Eligible Commercial Mortgage Loan, as of any date of
determination and for any period, the applicable "Debt Service Coverage" ratio
determined in accordance with, and defined in, the Underwriting Guidelines.
"Due Date" means the day of the month on which the Monthly Payment is
due on a Mortgage Loan, exclusive of any days of grace.
"Escrow Payments" means with respect to any Mortgage Loan, the amounts
constituting ground rents, taxes, assessments, water rates, sewer rents,
municipal charges, mortgage insurance premiums, fire and hazard insurance
premiums, condominium charges, and any other payments required to be escrowed
by the Mortgagor with the mortgagee pursuant to the Mortgage or any other
document.
Schedule 1-45-
"FHLMC" means the Federal Home Loan Mortgage Corporation, or any
successor thereto.
"FNMA" means the Federal National Mortgage Association, or any
successor thereto.
"Gross Margin" means with respect to each adjustable rate Mortgage
Loan, the fixed percentage amount set forth in the related Mortgage Note.
"Ground Lease" means a lease for all or any portion of the real
property comprising the Mortgaged Property, the lessee's interest in which is
held by the Mortgagor of the related Mortgage Loan.
"Index" means with respect to each adjustable rate Mortgage Loan, the
index set forth in the related Mortgage Note for the purpose of calculating the
interest rate thereon.
"Insurance Proceeds" means with respect to each Mortgage Loan, proceeds
of insurance policies insuring the Mortgage Loan or the related Mortgaged
Property.
"Interest Rate Adjustment Date" means with respect to each adjustable
rate Mortgage Loan, the date, specified in the related Mortgage Note and the
Mortgage Loan Schedule, on which the Mortgage Interest Rate is adjusted.
"Loan-to-Value Ratio" or "LTV" means with respect to any Mortgage Loan,
the ratio of the original outstanding principal amount of the Mortgage Loan to
the lesser of (a) the Appraised Value of the Mortgaged Property at origination
or (b) if the Mortgaged Property was purchased within 12 months of the
origination of the Mortgage Loan, the purchase price of the Mortgaged Property.
"Mixed Use Mortgage Loan" shall mean a Mortgage Loan secured by a
Mortgaged Property that is used primarily for residential purposes, but which is
also used for non-residential purposes.
"Monthly Payment" means the scheduled monthly payment of principal and
interest on a Mortgage Loan as adjusted in accordance with changes in the
Mortgage Interest Rate pursuant to the provisions of the Mortgage Note for an
adjustable rate Mortgage Loan.
"Mortgage Interest Rate" means the annual rate of interest borne on a
Mortgage Note, which shall be adjusted from time to time with respect to
adjustable rate Mortgage Loans.
"Mortagage Interest Rate Cap" means with respect to an adjustable rate
Mortgage Loan, the limit on each Mortgage Interest Rate adjustment as set forth
in the related Mortgage Note.
"Mortgagee" means the Borrower or any subsequent holder of a Mortgage
Loan.
"Origination Date" shall mean, with respect to each Mortgage Loan, the
date of the Mortgage Note relating to such Mortgage Loan, unless such
information is not provided by the Borrower with respect to such Mortgage Loan,
in which case the Origination Date shall be deemed to be the date that is 40
days prior to the date of the first payment under the Mortgage Note relating to
such Mortgage Loan.
Schedule 1-46-
"PMI Policy" or "Primary Insurance Policy" means a policy of primary
mortgage guaranty insurance issued by a Qualified Insurer.
"Qualified Insurer" means an insurance company duly qualified as such
under the laws of the states in which the Mortgaged Property is located, duly
authorized and licensed in such states to transact the applicable insurance
business and to write the insurance provided, and approved as an insurer by FNMA
and FHLMC and whose claims paying ability is rated in the two highest rating
categories by any of the rating agencies with respect to primary mortgage
insurance and in the two highest rating categories by Best's with respect to
hazard and flood insurance.
"Qualified Originator" means an originator of Mortgage Loans reasonably
acceptable to the Lender.
"Servicing File" means with respect to each Mortgage Loan, the file
retained by the Borrower consisting of originals of all documents in the
Mortgage File which are not delivered to a Custodian and copies of the Mortgage
Loan Documents set forth in Section 2 of the Custodial Agreement.
Schedule 1-47-
Schedule 2
FILING JURISDICTIONS AND OFFICES
Secretary of the Commonwealth of Pennsylvania
Prothonotary of ▇▇▇▇▇▇▇▇▇▇ County
EXHIBIT-A
[FORM OF PROMSSORY NOTE]
$15,000,000 October 16, ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
FOR VALUE RECEIVED, FIDELITY MORTGAGE FUNDING, INC., a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of ▇▇▇▇▇▇
▇▇▇▇▇▇▇ MORTGAGE CAPITAL INC. (the "Lender"), at the principal office of the
Lender at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, in lawful money of the
United States, and in immediately available funds, the principal sum of FIFTEEN
MILLION DOLLARS ($15,000,000) (or such lesser amount as shall equal the
aggregate unpaid principal amount of the Loans made by the Lender to the
Borrower under the Loan Agreement), on the dates and in the principal amounts
provided in the Loan Agreement, and to pay interest on the unpaid principal
amount of each such Loan, at such office, in like money and funds, for the
period commencing on the date of such Loan until such Loan shall be paid in
full, at the rates per annum and on the dates provided in the Loan Agreement.
The date, amount and interest rate of each Loan made by the Lender to
the Borrower, and each payment made on account of the principal thereof, shall
be recorded by the Lender on its books and, prior to any transfer of this Note,
endorsed by the Lender on the schedule attached hereto or any continuation
thereof, provided, that the failure of the Lender to make any such recordation
or endorsement shall not affect the obligations of the Borrower to make a
payment when due of any amount owing under the Loan Agreement or hereunder in
respect of the Loans made by the Lender.
This Note is the Note referred to in the Master Loan and Security
Agreement dated as of October 16, 1997 (as amended, supplemented or otherwise
modified and in effect from time to time, the "Loan Agreement") between the
Borrower and the Lender, and evidences Loans made by the Lender thereunder.
Terms used but not defined in this Note have the respective meanings assigned to
them in the Loan Agreement.
The Borrower agrees to pay all the Lender's costs of collection and
enforcement (including reasonable attorneys' fees and disbursements of Lender's
counsel) in respect of this Note when incurred, including, without limitation,
reasonable attorneys' fees through appellate proceedings.
Notwithstanding the pledge of the Collateral, the Borrower hereby
acknowledges, admits and agrees that the Borrower's obligations under this Note
are recourse obligations of the Borrower to which the Borrower pledges its full
faith and credit.
The Borrower, and any endorsers or guarantors hereof, (a) severally
waive diligence, presentment, protest and demand and also notice of protest,
demand, dishonor and nonpayments of this Note, (b) expressly agree that this
Note, or any payment hereunder, may be extended from time to time, and consent
to the acceptance of further Collateral, the release of any Collateral for this
Note, the release of any party primarily or secondarily liable hereon, and (c)
expressly agree that it will not be necessary for the Lender, in order to
enforce payment of this Note, to first institute or exhaust the Lender's
remedies against the Borrower or any other party liable hereon or against any
Collateral for this Note. No extension of time for the payment of this Note, or
any installment hereof, made by agreement by the Lender with any person now or
hereafter liable for the payment of this Note, shall
affect the liability under this Note of the Borrower, even if the
Borrower is not a party to such agreement; provided, however, that the Lender
and the Borrower, by written agreement between them, may affect the liability of
the Borrower.
Any reference herein to the Lender shall be deemed to include and apply
to every subsequent holder of this Note. Reference is made to the Loan Agreement
for provisions concerning optional and mandatory prepayments, Collateral,
acceleration and other material terms affecting this Note.
This Note shall be governed by and construed under the laws of the
State of New York (without reference to choice of law doctrine) whose laws the
Borrower expressly elects to apply to this Note. The Borrower agrees that any
action or proceeding brought to enforce or arising out of this Note may be
commenced in the Supreme Court of the State of New York, Borough of Manhattan,
or in the District Court of the United States for the Southern District of New
York.
FIDELITY MORTGAGE FUNDING, INC.
By:____________________________
Name:
Title:
A-2
