EXHIBIT 10.6(h)
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SUBORDINATE CERTIFICATE FINANCING AGREEMENT
By and Between
DLJ MORTGAGE CAPITAL, INC.,
as Lender,
and
BNC MORTGAGE, INC.,
as Borrower
Dated as of March __, 1998
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TABLE OF CONTENTS
Page
Section 1. Definitions.................................................. 1
Section 2. Loan......................................................... 8
Section 3. Purpose of this Agreement.................................... 12
Section 4. Pledge and Security.......................................... 13
Section 5. Representations and Warranties............................... 13
Section 6. Collateral Amount Maintenance................................ 18
Section 7. Borrower Covenants........................................... 18
Section 8. Events of Default............................................ 23
Section 9. Remedies Upon Default........................................ 25
Section 10. Indemnification.............................................. 27
Section 11. Power of Attorney............................................ 27
Section 12. Participation; Assignments................................... 27
Section 13. Notices...................................................... 28
Section 14. No Oral Modifications; Successors and Assigns................ 28
Section 15. Severability of Provisions................................... 29
Section 16. No Waiver.................................................... 29
Section 17. Governing Law; Agreement Constitutes Security Agreement...... 29
Section 18. Jurisdiction................................................. 29
Section 19. Integration.................................................. 29
Section 20. Advice from Independent Counsel.............................. 29
Section 21. Judicial Interpretation...................................... 30
EXHIBITS:
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Exhibit A Instruction Letter
Exhibit B Secured Note
Exhibit C Scheduled Cumulative Prepayments
Exhibit D Subsidiaries of Borrower
Exhibit E Subordinate Certificates
SUBORDINATE CERTIFICATE FINANCING AGREEMENT
This SUBORDINATE CERTIFICATE FINANCING AGREEMENT (this "Agreement"), dated
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as of ______, 1998, by and among DLJ MORTGAGE CAPITAL, INC. ("Lender"), and BNC
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MORTGAGE, INC., ("Borrower").
WHEREAS, the Lender wishes to lend, and the Borrower wishes to borrow in
one or more advances, subject to certain terms and conditions, moneys in
connection with the financing of Subordinate Certificates owned by the Borrower,
and certain other collateral described herein and pledged pursuant hereto; and
WHEREAS, the parties desire to agree upon the terms and conditions
governing such financing facility;
NOW, THEREFORE, in consideration of the covenants and agreements contained
herein and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions. Capitalized terms used in this Agreement shall
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have the meanings set forth below. Capitalized terms used without definition
shall have the meanings set forth in the Pooling and Servicing Agreement, giving
no effect to future amendments and modifications, unless otherwise defined
elsewhere in this Agreement.
"Advance" means each advance of funds made hereunder to be secured by the
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Collateral pursuant to the terms hereof.
"Affiliate" means, when used with respect to any specified Person, any
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other Person directly or indirectly controlling, controlled by, or under common
control with, such Person. Control shall mean the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise and "controlling" and "controlled" shall have meanings
correlative thereto.
"Amortization Period" shall mean the period beginning on the earlier of (i)
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the Step-up Date or (ii) the first Payment Date on or after the occurrence of a
Trigger Event, and ending on the termination of this Agreement.
"Borrower Party" means the Borrower or a Holding Company thereof.
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"Business Day" means any day other than (a) a Saturday or a Sunday, and (b)
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any day on which banking institutions in the State of New York are authorized or
required by law or regulation, executive order or governmental decree to be
closed.
"Capital Markets Transaction" has the meaning specified therefor in Section
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2(i).
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"Cash Receipts" has the meaning specified therefor in Section 2(f).
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"Change in Control" means, with respect to the Borrower, (i) except in the
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case of a merger or reorganization in which the Borrower is the surviving
entity, the sale, transfer or other disposition of more than forty-nine percent
(49%) of the shares of common stock of the Borrower or, if applicable, preferred
stock being made to a Person that, prior to such sale, transfer or other
disposition; (ii) except in the case of a merger or reorganization in which the
Borrower is the surviving entity, the sale, lease or other transfer, in one or
more series of transactions (other than transactions similar to the
Securitization Transaction), of all or substantially all of the assets of the
Borrower to any other Person or group (as such term is defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended) (each, a "Group");
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(iii) the adoption of a plan relating to the liquidation or dissolution of the
Borrower; or (iv) the consummation of any transaction or series of transactions
the result of which is that any Person or Group beneficially owns, directly or
indirectly, a majority interest of the total aggregate voting power of all
classes of the Borrower's voting stock, warrants and/options to acquire such
voting stock, calculated on a fully diluted basis.
"Collateral" means any collateral pledged by the Borrower to the Lender as
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described in Section 4.
"Cross-Collateralized Facility" means any financing facility extended to
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the Borrower by DLJ Mortgage Capital, Inc. as lender, other than this Agreement.
"Cumulative Net Losses" means with respect to each Securitization
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Transaction and any mortgage loan group the sum of all Realized Losses incurred
since the Cut-off Date.
"Cut-Off Date" means the cut-off date for the Securitization Transactions.
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"Delinquency Amortization Amount" means, at any time, an amount equal to
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1/12th of the Facility Balance immediately prior to the Principal Acceleration
Date.
"Delinquency Rate" shall be, with respect to any Distribution Date in any
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Securitization Transaction, a rate equal to (i) the aggregate unpaid principal
balance of the Mortgage Loans that are contractually 90 or more days delinquent
as of the close of business on the last day of the preceding Due Period
(including any Mortgage Loans in foreclosure and the unpaid principal balance of
any REO Properties) divided by (ii) the aggregate unpaid principal balance of
the Mortgage Loans as of the end of the immediately preceding Due Period.
"Delinquency Trigger" shall have occurred if on any Distribution Date in
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any Securitization Transaction the three month rolling average Delinquency Rate
(concluding as of the close of business on the last day of the preceding Due
Period) exceeds 10%.
"Determination Period" means, in connection with the calculation of the
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LIBOR Rate, one month.
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"Distribution Date" means the 25th day of each calendar month, or if such
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25th day is not a Business Day, the next succeeding Business Day, commencing on
_______, 1998.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
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amended from time to time, and the regulations and rulings thereunder.
"Event of Default" has the meaning specified therefor in Section 8.
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"Facility Balance" means, as of any date, the sum of (a) the Loan Balance,
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and (b) any other fees or expenses owing to Lender hereunder including any
unpaid and overdue Interest Amount from prior Payment Dates.
"Funding Date" means the Initial Funding Date and each later date or dates
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on which an Advance is made after all conditions hereunder to the making of the
Advance have been satisfied as determined by the Lender in its sole discretion.
"GAAP" means United States generally accepted accounting principles,
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consistently applied, as in effect from time to time.
"Hedging Contract" means any instrument or agreement acquired or entered
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into by the Borrower from time to time for the purpose of hedging risks
associated with the Subordinate Certificates.
"Holding Company" means any Person formed to own all of the capital stock
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of the Borrower.
"Hypothecation" has the meaning specified in Section 12(a).
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"Indebtedness" has the meaning specified in Section 9(a)(i).
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"Indemnified Amounts" has the meaning specified in Section 10.
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"Indemnified Parties" has the meaning specified in Section 10.
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"Independent Accountants" means a "big-six" independent certified public
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accounting firm or other accounting firm acceptable to Lender in its sole
discretion.
"Initial Funding Date" means _______, 1998.
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"Instruction Letter" has the meaning specified in Section 2(a)(vii).
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"Interest Amount" means, with respect to any Payment Date, the aggregate
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amount of interest on the Facility Balance computed on a daily basis for the
related Monthly Period computed as the product of (i) the Interest Rate in
effect on each day of such period, and (ii) the Facility Balance on each day of
such Monthly Period.
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"Interest Rate" means, as of any date of determination, to the extent
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permitted by applicable law, the per annum percentage rate, calculated daily,
equal to the sum of the LIBOR Rate and (1) prior to the Step-up Date, [two and
one half percentage points (2.50%)] and (2) on and after the Step-up Date,
[three and one half percentage points (3.50%)], computed in each case on the
basis of the actual days elapsed and a 360 day year; provided, however, that
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upon the occurrence and during the continuation of an Event of Default, the
Interest Rate shall be equal to the sum of the [LIBOR Rate and four and one half
percentage points (4.50%)].
"Interest Reset Period" means the period commencing on and including a
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Distribution Date (or commencing on and including the Funding Date in the case
of the initial Interest Reset Period) to but excluding the next succeeding
Distribution Date. The final Interest Reset Period shall terminate on and shall
include the date of the final payment to the Lender of all amounts due
hereunder.
"LIBOR Rate" means, with respect to each Interest Reset Period, the London
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interbank offered rate for United States dollar deposits having a duration equal
to the Determination Period determined by Lender on the Rate Determination Date
immediately preceding the commencement of such Interest Reset Period as follows:
(a) On each Rate Determination Date, Lender shall determine the LIBOR
Rate as of 11:00 A.M. (London time) on such Rate Determination Date on the
basis of the quotations thereof which appears on Telerate Page 3750;
(b) If on any Rate Determination Date, the LIBOR Rate does not appear
on Telerate Page 3750, Lender shall determine the LIBOR Rate on the basis
of quotations provided by Reference Banks on such Rate Determination Date
to prime banks in the London interbank market. The LIBOR Rate as determined
by Lender is the arithmetic mean of such quotations;
(c) If on any Rate Determination Date at least two of the Reference
Banks provide quotations, the LIBOR Rate shall be determined in accordance
with clause (b) above on the basis of the offered quotations of those
Reference Banks providing such quotations; and
(d) If on the Rate Determination Date only one or none of the
Reference Banks provides such offered quotations, the LIBOR Rate shall be:
(i) the rate per annum (rounded, as aforesaid) that Lender determines
to be either (A) the arithmetic mean of the offered quotations
that leading banks in the City of New York reasonably selected by
Lender on a non-discriminatory basis are quoting at or about
11:00 A.M. New York City time on the relevant Rate Determination
Date for loans in U.S. Dollars to leading banks active in the
London interbank eurodollar market for a period equal to the
related Determination Period or those of them (being at least two
in number) to which such offered quotations are, in the opinion
of Lender, being so quoted, or (B) in the event that Lender can
determine no
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such arithmetic mean, the arithmetic mean of the offered
quotations that leading banks in the City of New York reasonably
selected by Lender on a non-discriminatory basis are quoting at
or about 11:00 A.M. (London time) on such Rate Determination Date
to leading banks active in the London interbank eurodollar market
for Dollar deposits having a duration equal to the Determination
Period; or
(ii) if the banks selected as aforesaid by Lender are not quoting as
described in clause (i) above, the LIBOR Rate for such
Distribution Date shall be the LIBOR Rate as determined on the
previous Rate Determination Date.
"Lien" means any interest in property securing an obligation owed to, or
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claim by, any Person other than the owner of the property, whether such interest
shall be based on the common law, civil law, statute, civil code or contract,
whether or not such interest shall be recorded or perfected and whether or not
such interest shall be contingent upon the occurrence of some future event or
events or the existence of some future circumstance or circumstances, and
including the lien, privilege, security interest or other encumbrance arising
from a mortgage, deed of trust, hypothecation, cession, transfer, assignment,
pledge, adverse claim or charge, conditional sale or trust receipt, or from a
lease, consignment or bailment for security purposes.
"Loan" has the meaning specified therefor in Section 2(a).
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"Loan Balance" means, as of any date, (a) the amount advanced on the
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Initial Funding Date, plus (b) the amount advanced on each subsequent Funding
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Date, less (c) payments of principal applied hereunder with respect thereto.
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"London Business Day" means any day on which dealings in deposits in United
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States dollars are transacted in the London interbank market.
"Loss Event" shall have occurred if on any Distribution Date, Cumulative
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Net Losses exceed [1.0%] of the Maximum Collateral Amount.
"Market Value" means as of any date, with respect to each Subordinate
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Certificate, the price at which the Subordinate Certificate could readily be
sold as reasonably determined by the Lender acting in good faith. The Market
Value of each Subordinate Certificate shall also take into account the market
value (both positive and negative) as determined by the Lender in its sole
discretion of any Hedging Contracts purchased by the Borrower and pledged to the
Lender as security for the obligations of the Borrower hereunder; provided that
any final settlement payments due under any such Hedging Contracts shall be
excluded from such calculation.
"Margin Deficit" has the meaning specified in Section 6(a).
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"Material Adverse Change" means, with respect to the Borrower, a material
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adverse change in, or effect upon, any of (i) the financial condition, business,
performance, operations, properties, or profits of the Borrower, (ii) the
legality, validity or enforceability of this Agreement, the Secured Note or any
Related Documents, or (iii) the Collateral.
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"Maturity Date" means the earlier to occur of (x) the Facility Balance
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being reduced to zero, or (y) the first anniversary of the Initial Funding Date.
"Maximum Collateral Amount" means with respect to any Securitization
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Transaction the aggregate initial principal balance of the Mortgage Loans in the
related loan group, including any Prefunding Amounts.
"Maximum Facility Balance" means $5 million.
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"Monthly Period" means, with respect to any Payment Date, the period from
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and including the preceding Payment Date (or in the case of the first Payment
Date for the initial Advance, from and including the related Funding Date) to
and excluding the applicable Payment Date.
"Monthly Principal Payment" means, with respect to each Payment Date
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commencing on the earliest of (i) the Step-up Date or (ii) the first Payment
Date on or after the occurrence of a Trigger Event, an amount equal to either
(A) the greater of (1) 1/12th of the Loan Balance on the related Step-up Date or
Trigger Event, whichever is applicable, or (2) the Cash Receipts after the
payment of interest due on the Loan on such Payment Date or (B) commencing on
the Principal Acceleration Date, the greater of (1) the amount specified in
clause (A) above or (2) the Delinquency Amortization Amount.
"Mortgage Loans" means the mortgage loans subject to the Securitization
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Transaction.
"Multiemployer Plan" means any Plan that is a "multiemployer plan" as
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defined in section 4001(a)(3) of ERISA.
"Net Equity" means the shareholders' equity of the Borrower, determined in
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accordance with GAAP.
"Participant" has the meaning specified in Section 12(a).
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"Payment Date" shall mean a Distribution Date.
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"Person" means any legal person, including any individual, corporation,
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limited liability company, partnership, joint venture, estate, association,
joint stock company, trust, unincorporated organization or government or any
agency or political subdivision thereof, or any other entity.
"Plan" means an "employee benefit plan" (as defined in Section 3(3) of
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ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Borrower or any of its Affiliates
or with respect to which the Borrower or any of its Affiliates may have any
liability.
"Pool" means the pool of Mortgage Loans subject to each Securitization
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Transaction.
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"Pooling and Servicing Agreements" means the Pooling and Servicing
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Agreement, entered into among ______________as company, _____________, as master
servicer and __________ as trustee pursuant to which a Subordinate Certificate
has been issued.
"Prepayment Trigger" shall have occurred if on any Distribution Date for
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any Securitization Transaction and any mortgage loan group the aggregate
cumulative Principal Prepayments in respect of the Mortgage Loans in such
mortgage loan group from the period beginning on the Cut-off Date and ending at
the end of the immediately preceding Due Period exceeds the Scheduled Cumulative
Prepayments listed on Exhibit C for such Payment Date.
"Principal Acceleration Date" means the first Payment Date on which the
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Delinquency Trigger for any Securitization Transaction and any mortgage loan
group has occurred with respect to three (3) consecutive Distribution Dates.
"Rate Determination Date" means, with respect to any day in an Interest
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Reset Period, the second London Business Day prior to such day.
"Reference Banks" means two major banks in the London interbank market as
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selected by Lender. Each Reference Bank shall be a leading bank engaged in
transactions in Eurodollar deposits in the international Eurocurrency market
with an established place of business in London and which has been designated as
such by Lender and is able and willing to provide such quotations to Lender on
each Rate Determination Date. If any Reference Bank designated by Lender fails
to meet the qualifications of a Reference Bank, Lender will use its best effort
to designate an alternative Reference Bank.
"Related Document" means, as applicable, any document executed in
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connection herewith or with a Securitization Transaction, or related hereto or
thereto.
"Restricted Payment" means, as applied to any Person,
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(i) any dividend or other distribution (including any distribution of
properties, assets, cash, rights, obligations or securities),
direct or indirect, on account of any shares of capital stock of
such Person now or hereafter outstanding or any securities
convertible into or exercisable or exchangeable for such shares
of capital stock, except for a dividend payable to all of the
holders of such Person's common stock solely in shares of common
stock; and
(ii) any redemption, retirement, purchase or other acquisition, direct
or indirect, of any shares of capital stock of such Person now or
hereafter outstanding or any securities convertible into or
exercisable or exchangeable for such shares of capital stock.
"Revolving Period" shall mean the period beginning on the Initial Funding
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Date and ending on the day immediately preceding the commencement of the
Amortization Period.
"Secured Note" means the promissory note in the form attached hereto as
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Exhibit B hereto.
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"Securitization Transaction" means each of the securitization transactions
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pursuant to which a Subordinate Certificate was issued.
"Scheduled Cumulative Prepayments" means with respect to each
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Securitization Transaction and mortgage loan group the cumulative prepayments
listed on the scheduled attached hereto as Exhibit C.
"Step-up Date" means ________, _______..
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"Subordinate Certificate" means the subordinate regular interest only
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certificates listed on Exhibit E hereto issued pursuant to the Securitization
Transactions and made subject to this Agreement and any and all proceeds
thereof.
"Telerate Page 3750" means the display so designated on the Dow ▇▇▇▇▇
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Telerate Service (or such other page as may replace that page on that service
for the purpose of displaying comparable rates or prices).
"Trigger Event" shall mean the occurrence of (i) a Delinquency Trigger,
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(ii) a Loss Event, or (iii) a Prepayment Trigger.
"Trustee" means "Trustee" as defined in the applicable Pooling and
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Servicing Agreement.
"Unmatured Event of Default" means any event which, with the giving of
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notice or the lapse of time or both, would become an Event of Default.
"Withdrawal Liability" shall have the meaning given such term under Part I
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of Subtitle E of Title IV of ERISA.
Section 2. Loan. (a) Subject to the terms and conditions of this
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Agreement, on the Initial Funding Date, and on each subsequent Funding Date, the
Borrower hereby agrees to borrow from Lender and Lender hereby agrees to lend to
the Borrower on a best reasonable efforts basis up to $5,000,000.00 in one or
more Advances, provided that the Loan Balance both prior to and following any
Advance shall not exceed the lesser of (x) 70% of the Market Value of the
Collateral and (y) the Maximum Facility Balance. The Loan shall be evidenced by
the Secured Note. The Loan shall be collateralized by, among other things the
Collateral, as set forth in Section 4. Prior to making the Advance on the
Initial Funding Date, the Borrower shall fulfill the following conditions
precedent:
(i) The representations and warranties of the Borrower in Section 5
hereof shall be true and correct:
(ii) No Event of Default or Unmatured Event of Default shall have
occurred and be continuing;
(iii) The Borrower shall have delivered to the Lender the certificate
or certificates evidencing the Subordinate Certificates as
applicable, with all
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necessary bond powers or transfer instruments executed in blank
or in the name specified by the Lender by the appropriate
officers of the Borrower, and such other documents as may be
required to transfer the Subordinate Certificates of record
pursuant to the Pooling and Servicing Agreement and/or as the
Lender shall require to perfect its first priority security
interest in the Subordinate Certificates, including, without
limitation, signature guarantees;
(iv) The Lender shall have received a certificate of the Secretary
of the Borrower certifying as to the following: (A) its
certificate of incorporation, (B) its bylaws, (C) the
resolutions of its board of directors approving the definitive
agreements, documents, and instruments necessary to consummate
the transactions contemplated hereby, and (D) the names and
true signatures of the officers authorized on its behalf to
sign the definitive agreements, documents and instruments;
(v) The Lender shall have received a good standing certificate (or
its equivalent) for the Borrower issued by the Secretary of
State of the jurisdiction of the Borrower's incorporation;
(vi) The Lender shall have received a search report provided in
writing to the Lender by one of the national UCC search firms,
listing all effective financing statements that name the
Borrower as debtor or seller and that are filed in the
jurisdiction of the Borrower's chief executive offices and in
such other jurisdictions as the Lender shall request;
(vii) (A) The Borrower shall have (1) notified the Trustee in
connection with the related Securitization Transactions of the
pledge of the Subordinate Certificates hereunder and (2)
instructed the Trustee to pay all amounts payable to the
holders of the Subordinate Certificates to an account specified
by the Lender, and (B) the Trustee shall have acknowledged in
writing the instructions set forth in clause (A) above, and a
copy of the fully executed Instruction Letter shall be
delivered to the Lender. Such notification and instruction
shall be in the form of Exhibit A hereto (each, an "Instruction
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Letter");
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(viii) The Lender shall have received an original fully executed copy
of this Agreement and the Secured Note;
(ix) The Lender shall have received acknowledgment copies of
effective financing statements of the Borrower (Form UCC-1 or
Form UCC-3, as appropriate), filed on or prior to the date of
the Loan and naming the Borrower, as "debtor," the Lender, as
"secured party," and describing the Collateral as the
"collateral";
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(x) The Lender shall have received such other and further documents
and legal opinions as the Lender in its sole discretion shall
require; and
(xi) The Lender shall receive the following, each dated as of such
date and in form and substance satisfactory to the Lender and
its counsel:
(1) Favorable authority and enforceability opinions of counsel
to the Borrower concerning this Agreement and the Secured
Note; and
(2) Favorable security interest opinions of counsel to the
Borrower concerning the Collateral pledged hereunder.
(xii) The Borrower shall have delivered evidence sufficient to the
satisfaction of the Lender, in its sole discretion, that the
amount of such requested Advance is necessary to the extent that
the Borrower does not have sufficient cash, in excess of
reasonable reserves that are established by Borrower in its
annual business plan and that are reasonably acceptable to
Lender, available in its operation or investment accounts to
fund the retention by the Borrower of the Subordinate
Certificates absent such requested Advance.
(b) Prior to making an Advance on each subsequent Funding Date, the
Borrower shall fulfill the following conditions precedent:
(i) The representations and warranties of the Borrower in Section 5
hereof shall be true and correct:
(ii) No Event of Default or Unmatured Event of Default shall have
occurred and be continuing;
(iii) The Borrower shall have delivered to the Lender the certificate
or certificates evidencing the Subordinate Certificates, with
all necessary bond powers or transfer instruments executed in
blank or in the name specified by the Lender by the appropriate
officers of the Borrower, and such other documents as may be
required to transfer the Subordinate Certificates of record
pursuant to the Pooling and Servicing Agreement and/or as the
Lender shall require to perfect its first priority security
interest in the Subordinate Certificates, including, without
limitation, signature guarantees;
(iv) (A) The Borrower shall have (1) notified the Trustee in
connection with the related Securitization Transactions of the
pledge of the Subordinate Certificates hereunder and (2)
instructed the Trustee to pay all amounts payable to the holders
of the Subordinate Certificates to an account specified by the
Lender, and (B) the Trustee shall have acknowledged in
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writing the instructions set forth in clause (A) above, and a
copy of the fully executed Instruction Letter shall be delivered
to the Lender;
(v) The Lender shall have received acknowledgment copies of
effective financing statements of the Borrower (Form UCC-1 or
Form UCC-3, as appropriate), filed on or prior to the date of
the Loan and naming the Borrower, as "debtor," the Lender, as
"secured party," and describing the Collateral as the
"collateral"; and
(vi) No Capital Markets Transaction shall have occurred.
(vii) The Borrower shall have delivered evidence sufficient to the
satisfaction of the Lender, in its sole discretion, that the
amount of such requested Advance is necessary to the extent that
the Borrower does not have sufficient cash, in excess of
reasonable reserves that are established by Borrower in its
annual business plan and that are reasonably acceptable to
Lender, available in its operating or investment accounts to
fund the retention by the Borrower of the Subordinate
Certificates absent such requested Advance.
(c) No Advance shall be made hereunder following the first anniversary of
the Initial Funding Date.
(d) The Loan shall mature and shall be due and payable in full, together
with accrued and unpaid interest thereon at the Interest Rate, on the Maturity
Date, unless all amounts due and payable hereunder are earlier declared due and
payable as provided herein.
(e) The Borrower shall timely make any payment of interest and principal
and any other sum which becomes due and payable, whether by acceleration or
otherwise (including any mandatory prepayment), under the terms of this
Agreement and the Secured Note and under any other document evidencing or
securing Indebtedness of the Borrower to the Lender or any of the Lender's
affiliates.
(f) If no Event of Default shall have occurred, on each Payment Date all
amounts received (i) from the Trustee with respect to the Collateral on such
Payment Date and (ii) from the Borrower in connection herewith (in either case,
the "Cash Receipts") shall be applied without duplication, as follows:
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(i) first, to the Lender the amount required to pay or reimburse
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the Lender for any fees or expenses owing to Lender hereunder;
(ii) second, to the Lender the amount required to pay the Interest
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Amount;
(iii) third, to the Lender the amount required to pay the Monthly
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Principal Payment;
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(iv) fourth, if the Loan Balance is greater than zero and there exists
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a Margin Deficit, to the Lender in reduction of the Loan Balance,
the lesser of (x) any and all remaining amounts, and (y) the
Margin Deficit; and
(v) fifth, to the Borrower (by wire transfer on such Payment Date
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pursuant to instructions provided to the Lender at least one (1)
Business Day prior to such Payment Date) any and all remaining
amounts, if any; provided, however, that if the Borrower do not
notify the Lender at least one (1) Business Day prior to such
Payment Date as to the amount to be remitted to the Borrower
pursuant to this clause fifth and Cash Receipts from the Trustee
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are not received by noon, New York City time, on such Payment
Date, the Lender shall make such remittance on the Business Day
following the date on which the Lender receives such Cash
Receipts.
(g) In the event that the Cash Receipts on any Payment Date are not
sufficient to make a full payment of the amounts set forth in clauses (i)
through (iv) of Section 2(f), the Borrower shall immediately pay to the Lender
on the applicable Payment Date the amount of such deficiency (which amount shall
be treated hereunder as a Cash Receipt).
(h) If the Borrower shall have paid or agreed to pay any interest on the
Facility Balance in excess of that permitted by law, then it is the express
intent of the parties hereto with respect thereto that (i) to the extent
possible given the term of the Facility Balance, all excess amounts previously
paid or to be paid by the Borrower be applied to reduce the Facility Balance and
the provisions thereof immediately be deemed reformed and the amounts thereafter
collectible thereunder reduced, without the necessity of the execution of any
new document, so as to comply with the then applicable law, but so as to permit
the recovery of the fullest amount otherwise called for thereunder, and (ii) to
the extent that the reduction of the Facility Balance and the reformation of the
provisions thereof described in the immediately preceding clause (i) are not
possible given the term of the Facility Balance, such excess amount shall be
deemed to have been paid with respect to the Facility Balance as a result of an
error and upon the Lender obtaining actual knowledge of an error, such amount
shall be refunded to the Borrower.
(i) At the Lender's option, all proceeds from the Borrower's material debt
market transactions other than home equity loan securitizations in the normal
course of the Borrower's business (a "Capital Markets Transaction") shall be
applied toward payment of the Secured Note.
(j) If the Facility Balance shall not have been repaid prior to the Step-up
Date, the Borrower agrees to pay to the Lender on the Step-up Date by wire
transfer of immediately available funds an additional fee in the amount of
[1.50%] times the amount of the Maximum Facility Balance.
Section 3. Purpose of this Agreement.
-------------------------
(a) The Borrower agrees that the Loan shall be used for general corporate
purposes as permitted hereunder.
12
(b) The Borrower does not own, and will not, and will not permit any
subsidiary to, directly or indirectly, use any part of the proceeds of the Loan
for the purpose of purchasing or carrying any "margin stock" within the meaning
of Regulation G (12 CFR Part 207) of the Board of Governors of the Federal
Reserve System (herein called a "margin security") or for the purpose of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any margin security or for any other purpose which might cause the Loan
to be considered a "purpose credit" within the meaning of said Regulation G or
cause this Agreement or any of the other Related Documents to violate Regulation
G or any other regulation of the Board of Governors of the Federal Reserve
System, or any other applicable law, statute, regulation, rule or order.
Section 4. Pledge and Security. The Borrower hereby pledges all of its
-------------------
right, title, and interest in, to and under and grants a first lien on, and
security interest in, all of the following property, whether now owned or
hereafter acquired, now existing or hereafter created and wherever located
(collectively, the "Collateral") to the Lender to secure the repayment of
----------
principal and interest on the Loan and payment and performance of all other
amounts or obligations owing to the Lender pursuant to this Agreement, the
Secured Note and any Related Documents:
(a) Subordinate Certificates;
(b) any Hedging Contracts relating to the Subordinate Certificates;
(c) any and all collateral subject to any Cross-Collateralized
Facility, subject only to the prior interest of the Lender under
such facility; and
(d) all proceeds, payments, income and profits of, and records and
files relating to any and all of any of the foregoing.
The Subordinate Certificates, together with any applicable transfer instruments,
have been simultaneously delivered to the Lender or to a Person designated by
Lender for the purpose of perfecting the Lender's security interest therein.
The Borrower hereby authorizes the Lender to register the Subordinate
Certificates in the Lender's name or in the name of the Lender's nominee at any
time in its sole discretion and regardless of whether the Borrower has defaulted
in the performance of the Borrower's obligations hereunder.
Section 5. Representations and Warranties.
------------------------------
(a) The Borrower represents and warrants to the Lender as follows, as of
the date hereof (which representations and warranties shall be deemed repeated
on each Funding Date and at all times thereafter until the Borrower has
satisfied in full all of its obligations hereunder as though made on and as of
such date or times):
(i) it has the corporate power and authority and the legal right to
execute and deliver, to perform its obligations under, and to grant
the Lien on the Collateral pursuant to this Agreement, the Secured
Note and all Related Documents and has taken all necessary action to
authorize its execution, delivery and performance of, and grant
13
of the Lien on the Collateral pursuant to, this Agreement, the
Secured Note and all Related Documents;
(ii) this Agreement, the Secured Note and all Related Documents constitute
its legal, valid and binding obligation, enforceable against it in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally;
(iii) the consummation of the transactions contemplated by this Agreement,
the Secured Note and all Related Documents and the fulfillment of the
terms hereof and thereof will not in a material manner (i) conflict
with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time or both) a
default under, its related certificate of incorporation or bylaws, or
any contract, agreement, indenture, loan agreement, mortgage, deed of
trust, or other agreement or instrument to which it is a party or by
which it or any of its assets is bound and which would result in a
Material Adverse Change, (ii) result in the creation or imposition of
any Lien, adverse claim or other encumbrance upon any of its assets
pursuant to the terms of any such contract, agreement, indenture,
loan agreement, receivables purchase agreement, mortgage, deed of
trust, or other agreement or instrument, other than as expressly
created under this Agreement, or (iii) violate any law or order, rule
or regulation applicable to it of any court or of any federal or
state regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over it or any of its assets and
which would result in a Material Adverse Change;
(iv) it is not in default with respect to any order or decree of any court
or any order, regulation or demand of any federal, state, municipal
or governmental agency which would result in a Material Adverse
Change;
(v) no litigation, proceeding or investigation is pending or, to the best
of its knowledge, threatened against it which litigation, proceeding
or investigation is likely to have consequences that could prohibit
its entering into this Agreement, the Secured Note and all Related
Documents or that which is likely to cause a Material Adverse Change;
(vi) all actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses
required to be taken, given or obtained, as the case may be, by or
from any federal, state or other governmental authority or agency,
that are necessary in connection with its execution, delivery and
performance of this Agreement, the Secured Note and all Related
Documents, have been duly taken, given or obtained, as the case may
be, are in full force and effect on the date hereof, are not subject
to any pending proceedings or appeals (administrative, judicial or
otherwise) and either the time within which any appeal therefrom may
be taken or review thereof may be obtained has expired or no review
thereof may be obtained or appeal therefrom taken, and are adequate
to authorize the consummation of the transactions contemplated by
this Agreement,
14
the Secured Note and all Related Documents and the performance of
its obligations hereunder and thereunder;
(vii) it is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the character of the assets
owned or leased or the nature of the activities conducted makes such
qualification or licensing necessary, except for those jurisdictions
in which the failure to be so qualified or licensed or to be in good
standing has not resulted in, and could not be expected to cause a
Material Adverse Change;
(viii) there has been no change in its assets, liabilities or financial
condition which have been in the aggregate, materially adverse to
it, and no condition or event has occurred which has resulted in, or
could reasonably be expected to result in, a Material Adverse
Change, and it is solvent as of the date hereof; and it will neither
be rendered insolvent by the transactions contemplated by this
Agreement, the Secured Note and all Related Documents. The Borrower
does not contemplate the commencement of insolvency, bankruptcy,
liquidation or consolidation proceedings or the appointment of a
receiver, liquidator, conservator, trustee or similar official in
respect of the Borrower or any of its assets;
(ix) its principal place of business, chief executive office and location
of books and records regarding Collateral is set forth in Section
13;
(x) it has good and valid title to all of its properties and assets. It
enjoys peaceful and undisturbed possession under all leases under
which it will operate on and all of such leases are valid,
subsisting and in full force and effect;
(xi) it has all material licenses as are adequate for the conduct of its
businesses as now conducted and now proposed to be conducted. Each
such license is in full force and effect, and it has materially
performed all obligations with respect thereto required of it. No
material default in its performance or observance of its obligations
thereunder has occurred which permits, or after notice or lapse of
time or both would permit, the revocation or termination of any such
license or which has resulted in, or could reasonably be expected to
result in, a Material Adverse Change;
(xii) none of this Agreement, the Secured Note, and all Related Documents,
or any financial statements, reports, certificates or other
information furnished by the Borrower or any of its officers to the
Lender in connection with this Agreement, the Secured Note or any
Related Documents contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements contained herein or therein not misleading. All such
financial statements have been prepared in accordance with GAAP.
There is no fact known to its executive officers which has resulted
in, or is likely to result in, a Material Adverse Change which has
not been set forth in this Agreement, the Secured Note and all
Related Documents or otherwise disclosed to the Lender;
15
(xiii) no dispute involving its employees or any of its relationships
with its employees has resulted in, or is likely to result in, a
Material Adverse Change. Its relationships with its creditors are
satisfactory commercial working relationships and its executive
officers have not received notice or otherwise become aware during
the preceding 12-month period that any such lender has terminated
a financing relationship (other than in accordance with the
scheduled expiration thereof) with it in a manner which has
resulted in, or is likely to result in, a Material Adverse Change.
Its executive officers are not aware of any intention of any such
creditor to take any such action;
(xiv) the Subordinate Certificates have been validly issued, and is
fully paid and non-assessable and not subject to preemptive
rights, and the Subordinate Certificates have been offered, issued
and sold in compliance with all applicable laws and (A) there are
no outstanding rights, options, warrants or agreements for the
purchase from, or sale or issuance, in connection with the
Subordinate Certificates; (B) there are no agreements on the part
of the Borrower to issue, sell or distribute the Subordinate
Certificates; and (C) the Borrower has no obligation (contingent
or otherwise) to purchase, redeem or otherwise acquire any
securities or any interest therein or to pay any dividend or make
any distribution in respect of the Subordinate Certificates;
(xv) the Borrower has no subsidiaries other than those listed on
Exhibit D hereto (except for certain special purpose entities
formed for the purpose of effecting the Borrower's
securitizations);
(xvi) the Borrower is the record and beneficial owner of, and has good
and marketable title to the Collateral, free of any and all Liens
or options in favor of, or claims of, any other Person other than
the Lender, except the Lien created by this Agreement;
(xvii) on the Funding Date, the Lien granted pursuant to this Agreement
will constitute a valid, perfected first priority Lien on the
Collateral, enforceable as such against all creditors of the
Borrower and any Persons purporting to purchase any Collateral
from the Borrower;
(xviii) all of the representations and warranties of the Borrower or any
Affiliate thereof in the Pooling and Servicing Agreement are true
and correct;
(xix) The Borrower and its Affiliates has operated and administered each
Plan in compliance with all applicable laws. Neither the Borrower
nor any of its Affiliates has incurred any liability pursuant to
Title I or IV of ERISA or the penalty or excise tax provisions of
the Code relating to employee benefit plans (as defined in section
3 of ERISA), and no event, transaction or condition has occurred
or exists that could be expected to result in the incurrence of
any such liability by the Borrower or any of its Affiliates, or in
the imposition of any Lien on any of the rights or assets of the
Borrower or any of its Affiliates, in either case pursuant to
Title I or IV of ERISA or to such penalty or excise tax provisions
or to section
16
401(a)(29) or 412 of the Code. The Borrower and its Affiliates have
not incurred withdrawal liabilities (and are not subject to
contingent withdrawal liabilities) under section 4201 or 4204 of
ERISA in respect of Multiemployer Plans. The Borrower and its
Affiliates have made all required contributions to Multiemployer
Plans. Neither the Borrower nor any of its Affiliates has incurred,
nor would expect to incur, any Withdrawal Liability upon a complete
or partial withdrawal from any Multiemployer Plan. No Multiemployer
Plan is, or is expected to be, insolvent, in reorganization or
terminated within the meaning of Title IV of ERISA; and
(xx) the Borrower is not, and will not become as a result of the
transactions contemplated hereby or by the Securitization
Transaction, an "investment company" or a company "controlled" by
an "investment company," within the meaning of the Investment
Company Act of 1940, as amended.
(xxi) all federal, state, local and foreign tax returns, reports and
statements required to be filed by the Borrower have been filed
with the appropriate governmental authority and all charges and
other impositions shown thereon to be due and payable have been
paid prior to the date on which any fine, penalty, interest or late
charge may be added thereto for nonpayment thereof, or any such
fine, penalty, interest, late charge or loss has been paid. The
Borrower has paid when due and payable all charges required to be
paid by it. Proper and accurate amounts have been withheld by
Borrower from its employees for all periods in full and complete
compliance with the tax, social security and unemployment
withholding provisions of applicable federal, state, local and
foreign law and such withholdings have been timely paid to the
respective governmental agencies. The Borrower has not executed or
filed with the Internal Revenue Service or any other governmental
authority any agreement or other document extending, or having the
effect of extending, the period for assessment or collection of any
charges. The Borrower has not agreed or been requested to make any
adjustment under Section 481(a) of the Internal Revenue Code by
reason of a change in accounting method or otherwise. The Borrower
does not have any obligation under any written tax sharing
agreement.
(xxii) The Borrower is not a "foreign person" within the meaning of
Section 1445(f)(3) of the Internal Revenue Code.
(xxiii) As of the most recent Distribution Date, the Borrower has disclosed
to the Lender all liquidated loan losses which are allocable to the
transaction contemplated by the Pooling and Servicing Agreements,
which, for any reason, have yet to be reflected on the most
recently delivered servicer statement.
(xxv) All the information supplied by the Borrower to the Lender on or
prior to the Funding Date, including, but not limited to, any
delinquency, foreclosure, real estate owned and loss information,
is true and correct in all material respects.
17
(xxvi) Upon receipt by the Lender or Lender's designee of the Subordinate
Certificates and for so long as the Lender maintains actual
physical possession of the Subordinate Certificates, the Lender
shall have, for the benefit of the Lender, a fully-perfected first
priority security interest in the Subordinate Certificates.
(b) Upon discovery by the Borrower of any breach of any of the
representations and warranties listed in this Section 5, the Borrower shall
promptly give notice of such discovery to the Lender.
(c) It is understood and agreed that the representations and warranties set
forth in this Section 5 or deemed to be made hereunder shall survive the
execution of this Agreement.
Section 6. Collateral Amount Maintenance.
-----------------------------
(a) The Lender shall ▇▇▇▇ to market the Subordinate Certificates from time
to time in its sole discretion, but at least monthly. If at any time 70% of the
aggregate Market Value of the Subordinate Certificates is less than the Facility
Balance (a "Margin Deficit"), then Lender may by notice to the Borrower require
--------------
the Borrower to cure such Margin Deficit by delivering cash or such other
additional collateral as is acceptable to the Lender in its sole discretion, to
Lender within two (2) Business Days of notice thereof.
(b) Notice required pursuant to subsection (a) may be given by any means
of telecopier or telegraphic transmission. A notice for the payment of a Margin
Deficit received before 9:00 a.m. on a Business Day, local time, of the party
receiving the notice, must be met not later than 5:00 p.m. on the Business Day
on which the notice was given, local time, of the party receiving the notice.
Any notice given on a Business Day after 9:00 a.m., local time, of the party
receiving the notice, shall be met not later than 2:00 p.m. (New York time) on
the second Business Day thereafter. The failure of Lender, on any one or more
occasions, to exercise its rights under subsection (a) of this Section 6 shall
not change or alter the terms and conditions to which this Agreement is subject
or limit the right of the Lender to do so at a later date. A failure or delay by
Lender to exercise its rights under subsection (a) of this Section 6 shall not
limit Lender's rights under this Agreement or otherwise existing by law or in
any way create additional rights for the Borrower.
Section 7. Borrower Covenants.
------------------
(a) The Borrower shall promptly deliver to the Lender (i) any report
received by or required to be delivered by the Borrower pursuant to the Pooling
and Servicing Agreement and any other Related Document at the same time as
required thereunder, including, without limitation, any trustee's report and any
reports delivered to related surety companies; (ii) any notice of transfer of
servicing; and (iii) any other such document or information as the Lender may
reasonably request from time to time.
(b) The Borrower shall permit the Lender to inspect its books and records
relating to the Mortgage Loans, the Securitization Transaction, the Subordinate
Certificates and other matters
18
relating to the transactions contemplated hereby, upon reasonable prior notice
and during normal business hours.
(c) If the Borrower shall, as a result of its ownership of the Subordinate
Certificates, become entitled to receive or shall receive any rights, whether in
addition to, in substitution of, as a conversion of, or in exchange for the
Subordinate Certificates, or otherwise in respect thereof, the Borrower shall
accept the same as the Lender's agent, hold the same in trust for the Lender and
deliver the same forthwith to the Lender in the exact form received, duly
indorsed by the Borrower to the Lender, if required, together with an undated
bond power covering such certificate duly executed in blank and with, if the
Lender so requests, signature guaranteed, to be held by the Lender hereunder as
additional collateral security for the Indebtedness. If any sums of money or
property so paid or distributed in respect of the Subordinate Certificates shall
be received by the Borrower, the Borrower shall, until such money or property is
paid or delivered to the Lender, hold such money or property in trust for the
Lender, segregated from other funds of the Borrower, as additional collateral
security for the Indebtedness.
(d) Without the prior written consent of the Lender, the Borrower will not
(i) vote to enable, or take any other action to permit, any rights afforded it
as holder of the Subordinate Certificates under the Pooling and Servicing
Agreement, or (ii) sell, assign, transfer, exchange or otherwise dispose of, or
grant any option with respect to the Collateral, or (iii) create, incur or
permit to exist any Lien or option in favor of, or any claim of any Person other
than the Lender with respect to, any of the Collateral, or any interest therein,
except for the Lien provided for by this Agreement, the Secured Note and all
Related Documents. The Borrower will defend the right, title and interest of
the Lender in and to the Collateral against the claims and demands of all
Persons whomsoever.
(e) 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 such further instruments and documents and take such
further actions as the Lender may reasonably request for the purposes of
obtaining or preserving the full benefits of this Agreement, the Secured Note
and all Related Documents and of the rights and powers herein granted. If any
amount payable under or in connection with any of the Collateral shall be or
become evidenced by any promissory note, other instrument or chattel paper, such
note, instrument or chattel paper shall be immediately delivered to the Lender,
duly endorsed in a manner satisfactory to the Lender, to be held as Collateral
pursuant to this Agreement, the Secured Note and all Related Documents.
(f) The Borrower agrees to pay, and to save the Lender harmless from, any
and all liabilities with respect to, or resulting from any delay in paying, any
and all stamp, excise, sales or other taxes which may be payable or determined
to be payable with respect to any of the Collateral or in connection with any of
the transactions contemplated by this Agreement, the Secured Note and all
Related Documents, other than income taxes of the Lender.
(g) Each Borrower Party shall deliver to the Lender:
(i) as soon as available and in any event within 60 days after the end
of each quarterly accounting period in each fiscal year (other
than the last quarterly
19
accounting period of each such fiscal year), its balance sheet
as of the end of such period and the related statements of
operations, shareholders' equity, and cash flows for such period
and for the portion of such fiscal year ended on the last day of
such period, in each case setting forth in comparative form the
corresponding figures for the same period and portion of the
next preceding fiscal year, all in reasonable detail and
certified by its chief financial officer to fairly present the
financial position and the results of its operations,
shareholders' equity and cash flows as of the respective dates
and for the respective period indicated and to have been
prepared in accordance with GAAP, subject to normal year-end and
audit adjustments;
(ii) as soon as available and in any event within 120 days after the
end of each of its fiscal years, its balance sheet as of the end
of such year and the related statements of operations,
shareholders' equity, and cash flows for such year, in each case
setting forth in comparative form the corresponding figures for
the next preceding fiscal year, all in reasonable detail and
accompanied by the standard unqualified report (which shall not
contain any additional explanatory paragraph concerning
uncertainties or other matters) on such financial statements of
its Independent Accountants, together with a separate
certificate of such accountants which shall state whether or not
their examination has disclosed the existence, during or at the
end of the fiscal year covered by such financial statements
and/or the date of such certificate, of any "reportable
condition" (as defined in Statement on Auditing Standards No. 60
issued by the Auditing Standards Board of the American Institute
of Certified Public Accountants) in its internal control
structure or any of its subsidiaries;
(iii) on the last day of the first month in each quarter, or
simultaneously with each delivery of financial statements
pursuant to Sections 7(g)(i) and 7(g)(ii) in the case of the
certificate required to be delivered pursuant to clause
7(g)(iii)(B)(y) below, a certificate signed by its chief
executive officer, chief financial officer, treasurer or senior
vice president of finance which shall state that, after due
inquiry,
(A) the signers do not have knowledge of the existence, during
such period or as at the date of such certificate, of any
material default or event of default under this Agreement,
the Secured Note and all Related Documents, or, if such is
not the case, specifying in reasonable detail the nature and
period of existence thereof and what action it has taken, is
taking and proposes to take with respect thereto; and
(B) an officer's certificate demonstrating in reasonable detail
(x) whether or not any Trigger Event or Loss Event has
occurred and (y) the Borrower's compliance with the
financial covenants contained in this Agreement;
20
(iv) as promptly as practicable (but in any event not later than
five (5) Business Days) after receipt thereof, copies of all
reports or written comments (including, without limitation,
audit reports, management letters and any other reports or
communications with respect to the internal control structure)
submitted by the Independent Accountants;
(v) as promptly as practicable (but in any event not later than
three (3) Business Days) after it becomes aware of the
occurrence of any condition or event which has resulted in, or
could reasonably be expected to result in, a Material Adverse
Change, a certificate of a responsible officer specifying in
reasonable detail the nature and period of existence thereof,
what action it has taken, is taking and proposes to take with
respect thereto and the date, if any, on which it is estimated
the same will be remedied;
(vi) not later than 11:00 a.m., New York City time, on the Business
Day after it becomes aware thereof, a report setting forth any
material changes or developments in its business, taken as a
whole, including, without limitation, any material changes,
developments or defaults under any uncured payment default; and
(viii) such other information as, from time to time, may reasonably
be requested by the Lender.
(h) The Borrower shall (i) at all times keep proper books of record and
account in which full, true and correct entries shall be made of its
transactions in accordance with GAAP; and (ii) set aside on its books from its
earnings for each fiscal year all such proper reserves as shall be required in
accordance with GAAP.
(i) The Borrower shall:
(i) pay and discharge promptly as they become due and payable all
taxes, assessments and other governmental charges or levies
imposed upon it or its income or upon any of its assets as well
as all claims of any kind which, if unpaid, might by law become a
Lien upon its property; provided, however, that shall it not be
-------- -------
required to pay any such tax, assessment, charge, levy or claim
if the amount, applicability or validity thereof shall currently
be contested in good faith by appropriate proceedings and if it
shall have set aside on its books such reserves, if any, with
respect thereto as are required by GAAP and deemed adequate by it
and its Independent Accountants; provided, further, that it shall
-------- -------
pay any such tax, assessment, charge, levy or claim prior to the
commencement of any proceeding to foreclose any Lien securing the
same;
(ii) do or cause to be done all things necessary to preserve and
maintain in full force and effect its corporate existence, and
all licenses material to its business;
21
(iii) maintain and keep its assets in good repair, working order and
condition, ordinary wear and tear excepted, so that the
business carried on in connection therewith may be properly and
advantageously conducted at all times; and
(iv) comply with the requirements of all applicable laws, statutes,
rules, regulations and orders of, and all applicable
restrictions imposed by, all governmental authorities having
jurisdiction over its operations respect of the conduct of its
business and the ownership of its property; provided, however,
-------- -------
that it shall not be required by reason of this Section
7(i)(iv) to comply therewith at any time while it shall be
contesting its obligation to do so in good faith by appropriate
proceedings, and if it shall have set aside on its books such
reserves, if any, with respect thereto as are required by GAAP.
(j) The Borrower shall not, without the consent of the Lender, which
consent may be withheld in its sole discretion, directly or indirectly, make or
commit to make any Restricted Payment which would cause an Event of Default or
an Unmatured Event of Default.
(k) The Borrower shall not permit as of any date of determination (i) its
Net Equity to be less than [$_________], or (ii) the ratio of its aggregate
liabilities to shareholders' equity to exceed 10 to 1.
(l) The Borrower shall not engage in any transaction (including, without
limitation, the purchase, sale or exchange of any assets or the rendering of any
services), with an Affiliate or significant creditor thereof unless such
transaction is fair and reasonable to it and no less favorable to it than would
be obtained in a comparable arm's length transaction with a non-Affiliated
Person.
(m) Without the Lender's prior written consent, the Borrower shall not
consummate any merger or consolidation with any Person or sell all or
substantially all of its assets (other than in a transaction similar to the
Securitization Transaction), unless the surviving entity by law or by agreement
in favor of the Lender assumes the Borrower's obligations under this Agreement,
the Secured Note and all Related Documents and such transaction would not result
in or cause an Event of Default or an Unmatured Event of Default.
(n) The Borrower shall promptly, and in any event within five (5) days
after service of process, give to the Lender notice of all legal or arbitral
proceedings affecting or that could cause a Material Adverse Change.
(o) The Borrower shall not amend the Pooling and Servicing Agreement or
any Related Documents without first obtaining the written consent of the Lender.
(p) The Borrower shall notify the Lender as soon as possible, but in no
event later than one (1) Business Day after obtaining actual knowledge thereof,
if any event has occurred that constitutes an Event of Default or an Unmatured
Event of Default.
22
(q) As soon as possible after the Funding Date, the Borrower shall instruct
all counterparties on Hedging Contracts relating to the Subordinate Certificates
to recognize the Lender as the pledgee of such Hedging Contracts for all
purposes under such Hedging Contracts, and shall execute any and all documents
necessary or desirable to effect the foregoing.
Section 8. Events of Default. Each of the following shall constitute an
-----------------
"Event of Default" hereunder:
----------------
(a) Failure of any Borrower Party to make any payment of interest or
principal or any other fee, expense, or any other amount owing to the Lender,
which has become due whether by acceleration or otherwise under the terms of the
Secured Note, this Agreement or any other document or instrument evidencing or
securing indebtedness of such Borrower Party to the Lender which failure is not
remedied within two (2) Business Days, in the case of the failure to make any
payment of principal, or three (3) Business Days, in the case of the failure to
make any other payment.
(b) Assignment or attempted assignment by the Borrower of this Agreement or
any rights hereunder, except as provided in Section 14, or the granting by any
Borrower Party of any security interest, lien or other encumbrance on any
Collateral to other than the Lender.
(c) The filing against any Borrower Party of a petition for liquidation,
reorganization, arrangement or adjudication as a bankrupt or similar relief
under the bankruptcy, insolvency or similar laws of the United States or any
state or territory thereof or of any foreign jurisdiction as to which such
Borrower Party fails to secure dismissal within 60 days of such filing, or the
appointment of a receiver, conservator, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of any Borrower Party, or of
any substantial part of its property, the ordering or the winding-up or
liquidation of its affairs, or the entry of a decree or order for relief by a
court having jurisdiction in the premises in respect of such Borrower Party, in
any involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect.
(d) Commencement by any Borrower Party of a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or the consent by any Borrower Party, to the entry of an order for
relief in an involuntary case under any such law or to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of such Borrower Party or of any
substantial part of its property, or the making by such Borrower Party of any
general assignment for the benefit of creditors, or the failure of any Borrower
Party generally to pay its debts as such debts become due, or the taking of
corporate action by any Borrower Party in furtherance of any of the foregoing.
(e) Any material and adverse change in the financial condition or
operations of any Borrower Party, or the existence of any other condition which,
Lender reasonably determines constitutes an impairment of the Borrower's ability
to perform its obligations under this Agreement or under the Secured Note or any
other Borrower Party's obligations to Lender and which condition is not remedied
within ten days or, if the condition cannot be fully remedied
23
within said ten days, substantial progress (which shall be in Lender's sole
determination) has not been made within said ten (10) days toward remedy of the
condition.
(f) The occurrence of an "Event of Default" (as defined in any Facility)
under any Cross-Collateralized Facility.
(g) A breach by the Borrower of any covenant set forth herein, or of the
terms and provisions of any other agreement between the Borrower and Lender, in
any case, which condition is not remedied within ten (10) days, or in the case
of a Margin Deficit, two (2) Business Day, other than breaches otherwise
referred to in this Section 8.
(h) Any change in the identity of the servicer under the Pooling and
Servicing Agreements to the extent not previously approved by the Lender.
(i) A default by any Borrower Party on any of their debt instruments,
financing facilities, or other financing agreements or agreement with any Person
other than the Lender, if the then aggregate outstanding principal amount
thereof exceeds $5,000,000.
(j) A representation or warranty of the Borrower in this Agreement, the
Secured Note or any Related Document shall prove to be incorrect in any material
respect and not cured within ten (10) Business Days.
(k) A Change in Control.
(l) Standard & Poor's Ratings Services or Fitch Investors Service, L.P.
shall have materially downgraded its initial rating, which initial rating was
not a hostile rating, issued in respect of any rated series or issue of
mortgage-backed securities made in connection with a Securitization Transaction
or any other rated series or issue of mortgage-backed securities made in
connection with a Cross-Collateralized Facility in which any Borrower Party was
either the originator, seller, and/or servicer.
(m) Any Borrower Party records one or more valuation adjustments that on a
cumulative basis results in an allowance to, decrease in, or write-down of 20%
or more of the book value of the Subordinate Certificates.
(n) The failure of the Lender to have a perfected security interest in
first-priority position in any Collateral.
(o) The Delinquency Rate on any Securitization Transaction is greater than
18% on a three-month rolling average.
(p) A Loss Event.
(q) Any provision of this Agreement or the Secured Note shall for any
reason cease to be valid or enforceable in accordance with its terms, or any
security interest created hereunder
24
shall cease to be a valid and perfected first priority security interest, except
as otherwise permitted hereunder, in any of the Collateral purported to be
covered thereby.
(r) The Borrower admits its inability to perform fully when due any
obligation of the Borrower to any broker, dealer, bank or other financial
institution in respect of a transaction involving securities, commodities or
other instruments (regardless of whether the Lender has any right, title or
interest therein).
(s) If a judgment for the payment of money affecting all or a substantial
part of the Borrower's business or property shall be entered or rendered against
the Borrower and such judgment shall not have been discharged in full or
effectively stayed.
(t) If any statement of the Borrower's financial condition prepared by the
Borrower or at its request shall indicate that, or if the Borrower acknowledges
that, the Borrower has a negative net worth or is insolvent.
Section 9. Remedies Upon Default. (a) Upon the happening of one or more
---------------------
Events of Default:
(i) the Lender may immediately declare the principal of and accrued
and unpaid interest on the Secured Note, any and all amounts due by the
Borrower to the Lender under this Agreement, the Secured Note and Related
Documents to be immediately due and payable, together with all fees and
expenses due and payable to the Lender hereunder and thereunder and, to
the extent permitted by applicable law, interest on all of the foregoing
at the Interest Rate (collectively, the "Indebtedness"); provided,
------------ --------
however, that upon the occurrence of one of the Events of Default
-------
referred to in Sections 8(c) and 8(d), such amounts shall immediately and
automatically become due and payable without any further action by any
person or entity; provided, further, that upon such declaration or
-------- -------
automatic acceleration, the balance of all outstanding Indebtedness shall
become immediately due and payable without presentation, demand or further
notice of any kind and Lender may apply all Cash Receipts against all
Indebtedness until it is paid in full, in such order of priority as the
Lender in its sole discretion shall determine;
(ii) if an Event of Default shall occur and be continuing, the Lender
may exercise, in addition to all other rights and remedies granted in this
Agreement, the Secured Note and all Related Documents and in any other
instrument or agreement securing, evidencing or relating to the
Indebtedness, all rights and remedies of a secured party under the Uniform
Commercial Code as in effect in the State of New York. Without limiting
the generality of the foregoing, the Lender, without demand of performance
or other demand, presentment, protest, advertisement or notice of any kind
(except any notice required by law referred to below) to or upon the
Borrower, any Borrower Party or any other Person (all and each of which
demands, defenses, 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,
assign, give an 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 at public or private
25
sale or sales, in the over-the-counter market, 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 of the Borrower, which right or equity is
hereby waived or released (provided such waiver or release is permitted by
applicable law). The Lender shall apply any proceeds from time to time
held by it and 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 Indebtedness, 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 by any provision of law, including, without
limitation, Section 9-504(1)(c) of the Uniform Commercial Code as in
effect in the State of New York, need the Lender account for the surplus,
if any, to the Borrower. 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. Provided Lender disposes of the Collateral in the
manner proscribed by law, the Borrower shall remain liable for any
deficiency if the proceeds of any sale or other disposition of Collateral
are insufficient to pay the Indebtedness, the fees and disbursements of
any attorneys employed by the Lender in connection with the Indebtedness
and all other expenses of the Lender in connection therewith;
(iii) the Lender may terminate this Agreement, suspend its
obligations to advance funds pursuant hereto and/or pursuant to any other
lending or repurchase arrangement with any Borrower Party;
(iv) the Lender may cause any and all collections whether hereunder
or under any other lending or repurchase arrangement with any Borrower
Party on deposit in a servicing account or reserve account and all
payments required to be made on the Subordinate Certificate thereafter to
be paid to the Lender to reduce the Indebtedness until paid in full; and
(v) the Lender may dispose of or otherwise deal with the
Collateral in such manner as the Lender, in its sole and absolute
discretion, deems necessary or desirable to maximize the likelihood of
repayment in full of the Indebtedness.
(b) If the Lender becomes the beneficial owner of the Subordinate
Certificates following an Event of Default, the Lender shall add the amount of
any federal, state and local income tax liability that arises from excess
inclusions with respect to the Subordinate Certificates that may be allocated to
the Lender as the holder thereof to the Loan Balance.
26
Section 10. Indemnification. (a) The Borrower hereby agrees to indemnify
---------------
the Lender, the Lender's designee and each of its officers, directors, employees
and agents ("Indemnified Parties") from and against any and all liabilities,
-------------------
obligations, losses, damages, penalties, actions, judgments, suits, taxes (other
than income taxes of the Lender), fees, costs, expenses (including reasonable
attorneys fees and disbursements) or disbursements (all of the foregoing,
collectively "Indemnified Amounts") which may at any time (including, without
-------------------
limitation, such time as this Agreement, the Secured Note or any other Related
Document shall no longer be in effect and the Indebtedness shall have been paid
in full) be imposed on or asserted against any Indemnified Party in any way
whatsoever arising out of or in connection with, or relating to, this Agreement,
the Secured Note or any other Related Document or any transactions thereunder or
any action taken or omitted to be taken by any Indemnified Party under or in
connection with any of the foregoing; provided, that Borrower shall not be
--------
liable for Indemnified Amounts resulting from the negligence or willful
misconduct of any Indemnified Party.
(b) Costs and Expenses. The Borrower and Lender each hereby agree to bear
------------------
their own costs and expenses incurred in connection with (i) negotiation,
preparation, execution and delivery of this Agreement, the Secured Note and the
other Related Documents, (ii) the negotiation, preparation, execution and
delivery of any amendments to any of them, (iii) the administration (including
periodic auditing) of this Agreement, the Secured Note and the other Related
Documents and the transactions contemplated hereby and thereby, and (iv) the
enforcement of this Agreement, the Secured Note or any other Related Documents,
or any actual or claimed breach hereunder or thereunder.
(c) The provisions of Section 10(a) shall survive the termination of this
Agreement.
Section 11. Power of Attorney. The Borrower hereby (a) authorizes the
-----------------
Lender, at the Borrower's expense, to file such financing statement or
statements relating to the Collateral without the Borrower's signature thereon
as the Lender at its option may deem appropriate, and (b) appoints the Lender as
the Borrower's attorney-in-fact to execute any such financing statement or
statements in the Borrower's name and to perform all other acts which the Lender
deems appropriate to perfect and continue the security interest granted hereby
and to protect, preserve and realize upon the Collateral, including, but not
limited to, the right to endorse notes, complete blanks in documents and sign
assignments on behalf of the Borrower as its attorney-in-fact. This Power of
Attorney is coupled with an interest and is irrevocable without the Lender's
consent.
Section 12. Participation; Assignments. (a) The Lender may sell, pledge,
--------------------------
sell subject to a repurchase arrangement, or otherwise hypothecate (any such
event, a "Hypothecation") to one or more entities (each, a "Participant")
------------- -----------
participating interests in (i) the Facility Balance owing to the Lender, (ii)
the Secured Note held by the Lender, (iii) Subordinate Certificates, and (iv)
any other interest of the Lender hereunder, without notice to, or the consent
of, any Borrower Party. In the event of any Hypothecation by the Lender of a
participating interest to a Participant, the Lender shall be obligated to act as
the sole representative of any and all Participants and shall be entitled to
unilaterally exercise all of the rights, and perform all of the obligations of,
the Lender hereunder.
27
(b) The Lender may assign this Agreement or any of its rights or
obligations hereunder without notice to, or the consent of, the Borrower. The
Borrower shall not assign this Agreement or any of its rights or obligations
hereunder without the prior written consent of the Lender.
Section 13. Notices. Except as otherwise specified in this Agreement,
-------
all demands, notices and communications relating to this Agreement shall be in
writing and shall be deemed to have been duly given if mailed, by registered or
certified mail, return receipt requested, or by overnight courier, or, if by
other means, when received by the other party or parties at the address shown
below, or such other address as may hereafter be furnished to the other party or
parties by like notice. Any such demand, notice or communication hereunder shall
be deemed to have been received on the date delivered to or received at the
premises of the addressee (as evidenced, in the case of registered or certified
mail, by the date noted on the return receipt).
If to Borrower:
BNC Mortgage, Inc
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ______________
Telephone: ______________
If to the Lender:
DLJ Mortgage Capital, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: [▇▇▇▇ ▇▇▇▇▇]
Telephone: [(▇▇▇) ▇▇▇-▇▇▇▇]
with a copy to:
General Counsel's Office
DLJ Mortgage Capital, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Section 14. No Oral Modifications; Successors and Assigns. No provisions
---------------------------------------------
of this Agreement shall be waived or modified except by a writing duly signed by
the authorized agents of the parties hereto. This Agreement shall be binding
upon the successors and assigns of the parties hereto. This Agreement shall not
be assignable by Borrower, provided, however, that the Borrower may assign all
of its rights, duties and obligations to a wholly owned subsidiary of the
Borrower provided further that (x) the Lender consents to the assignment in
writing, and (y) the Borrower enters into an unconditional guaranty in form and
substance acceptable to the Lender in its sole capacity.
28
Section 15. Severability of Provisions. If any one or more of the
--------------------------
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
Section 16. No Waiver. No delay or omission of the Lender to exercise
---------
any right or remedy accruing under this Agreement (including upon any Event of
Default) shall impair any such right or remedy or constitute a waiver of any
such right or remedy or an acquiescence therein. Every right and remedy given by
this Agreement or by law to the Lender may be exercised from time to time, and
as often as may be deemed expedient, as permitted under the terms hereof, by the
Lender.
Section 17. Governing Law; Agreement Constitutes Security Agreement.
-------------------------------------------------------
This Agreement is intended by the parties hereto to be governed by the laws
of the State of New York, without regard to principles of conflicts of law, and
to constitute a security agreement within the meaning of the New York Uniform
Commercial Code.
Section 18. Jurisdiction.
------------
The parties hereby irrevocably submit to the jurisdiction of any federal
court sitting in New York, New York in any action or proceeding arising out of
or relating to this Agreement, the Secured Note or any other Related Document,
and the parties hereby irrevocably agree that all claims in respect of such
action or proceeding may be heard and determined in such federal court. The
parties hereby irrevocably waive, to the fullest extent it may effectively do
so, the defense of an inconvenient forum to the maintenance of such action or
proceeding and irrevocably consent to the service of any summons and complaint
and any other process by the mailing of copies of such process to them at their
respective address specified in Section 13. The parties hereby agree that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Section 18 shall affect the right of the Lender
to serve legal process in any other manner permitted by law or affect the right
of the Lender to bring any action or proceeding against the Borrower or its
property in the courts of other jurisdictions.
Section 19. Integration. This Agreement, each Pooling and Servicing
-----------
Agreement, the Secured Note and the other Related Documents together contain a
final and complete integration of all prior expressions by the parties with
respect to the subject matter hereof and thereof and shall constitute the entire
agreement among the parties with respect to such subject matter, superseding all
prior oral or written understandings.
Section 20. Advice from Independent Counsel. The parties understand that
-------------------------------
this Agreement, the Secured Note and each of the other Related Documents to
which it is a party is a legally binding agreement that may affect such party's
rights. Each party represents to the other that it has received legal advice
from counsel of its choice regarding the meaning and legal
29
significance of this Agreement, the Secured Note and each of the other Related
Documents to which it is a party and that it is satisfied with its legal counsel
and the advice received from it.
Section 21. Judicial Interpretation. Should any provision of this
-----------------------
Agreement, the Secured Note or any of the other Related Documents require
judicial interpretation, it is agreed that a court interpreting or construing
the same shall not apply a presumption that the terms hereof shall be more
strictly construed against any Person by reason of the rule of construction that
a document is to be construed more strictly against the Person who itself or
through its agent prepared the same, it being agreed that all parties have
participated in the preparation of this Agreement, the Secured Note and each of
the Related Documents.
[SIGNATURE PAGE FOLLOWS]
30
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
BNC MORTGAGE, INC.
By:_______________________
Name:
Title:
DLJ MORTGAGE CAPITAL, INC.
By:_______________________
Name:
Title:
31
Exhibit A
FORM OF INSTRUCTION LETTER
[One per Pooling Agreement]
[Custodian]
[Custodian's Address]
Dear Ladies and Gentlemen:
Pursuant to Section 2(a)(vii) of the Subordinate Certificate Financing
Agreement dated as of ______, 1998 (the "Agreement") by and among DLJ Mortgage
---------
Capital, Inc., as Lender (the "Lender") BNC Mortgage, Inc., as Borrower (the
------
"Borrower"), the Borrower hereby notifies you under the Pooling and Servicing
---------
Agreement, dated as of _______________, 1998, by and among ______________ and
you (the "Pooling and Servicing Agreement") that, pursuant to the Agreement, the
-------------------------------
Borrower has pledged to the Lender all of the Borrower's right, title and
interest in and to the Class __ Certificate issued pursuant to the Pooling and
Servicing Agreement.
Pursuant to Section 2(a)(vii) of the Agreement, the Borrower hereby
instructs you to pay by wire transfer all amounts to be received by it pursuant
to the Pooling and Servicing Agreement and payable thereunder to the registered
owner of any of such Class ___ Certificates, to the Lender as specified below,
unless otherwise instructed by the Lender from time to time to you. Such
payments to the Lender shall be made by you on the same day on which such
amounts would otherwise be payable by you to such owner. The payment
instructions contained herein shall remain effective until the Lender otherwise
instructs you.
The Lender's wire instructions for purposes of all payments related to such
Class ___ Certificates are:
Bank: [Chase NYC/DLJ Mtge Cap Corp.]
ABA #: [▇▇▇▇▇▇▇▇▇]
Account #: [▇▇▇-▇▇▇-▇▇▇]
Attention: [▇▇▇▇▇ ▇▇▇▇]
Re: BNC Mortgage, Inc.
Very truly yours,
BNC MORTGAGE, INC.
By:______________________________
Name:
Title:
Acknowledged and Agreed by:
[Custodian's Name], as the Trustee
By:____________________________
Name:
Title:
cc:
DLJ Mortgage Capital, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: [▇▇▇▇ ▇▇▇▇▇]
Telephone: [(▇▇▇) ▇▇▇-▇▇▇▇]
2
Exhibit B
SECURED NOTE
_________________________ __, 1998
FOR VALUE RECEIVED, the undersigned, BNC MORTGAGE, INC., (the
"Borrower") a ______________ corporation, whose address is ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
---------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, promises to pay to the order of DLJ MORTGAGE
CAPITAL, INC., a Delaware corporation, whose address is ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "Lender") on or before the Maturity Date,
------
in lawful money of the United States of America, the principal sum of
$5,000,000.00 plus interest, as follows:
DEFINITIONS. Unless otherwise defined, capitalized terms used herein
-----------
have the meanings assigned to them in the Subordinate Certificate Financing
Agreement dated as of March __, 1998 (the "Agreement") by and among the Lender
---------
and the Borrower named therein.
GENERAL TERMS. (i) Principal is payable in accordance with the
-------------
Agreement, provided the Facility Balance outstanding on the Maturity Date shall
be due and payable on the Maturity Date.
(ii) Interest shall accrue daily on the Facility Balance a rate per
annum equal at the Interest Rate computed in accordance with the Agreement.
MAXIMUM RATE OF INTEREST: If the Borrower shall have paid or agreed to
------------------------
pay any interest on the Facility Balance in excess of that permitted by law,
then it is intended with respect thereto that (i) to the extent possible given
the term of the Facility Balance, all excess amounts previously paid or to be
paid by the Borrower be applied to reduce the Facility Balance and the
provisions thereof immediately be deemed reformed and the amounts thereafter
collectible thereunder reduced, without the necessity of the execution of any
new document, so as to comply with the then applicable law, but so as to permit
the recovery of the fullest amount otherwise called for thereunder and (ii) to
the extent that the reduction of the Facility Balance and the reformation of the
provisions thereof described in the immediately preceding clause (i) are not
possible given the term of the Facility Balance, such excess amount shall be
deemed to have been paid with respect to the Facility Balance as a result of an
error and upon the Lender obtaining actual knowledge of such error, such amount
shall be refunded to the Borrower.
SECURITY: This Note is issued pursuant to the Agreement and is secured
--------
by a pledge of the Collateral described therein.
DEFAULTS: Upon the happening of an Event of Default, the Lender shall
--------
have all rights and remedies set forth in the Agreement.
The failure to exercise any of the rights and remedies set forth in
the Agreement shall not constitute a waiver of the right to exercise the same or
any other option at any subsequent time in respect of the same event or any
other event. The acceptance by the Lender of any payment hereunder which is less
than payment in full of all amounts due and payable at the time of such payment
shall not constitute a waiver of the right to exercise any of the foregoing
rights and remedies at that time or at any subsequent time or nullify any prior
exercise of any such rights and remedies without the express consent of Lender,
except as and to the extent otherwise provided by law.
WAIVERS: The Borrower waives diligence, presentment, protest and
-------
demand and also notice of protest, demand, dishonor and nonpayment of this Note,
and expressly agrees that this Note, or any payment hereunder, may be extended
from time to time, and consents 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 that it will not be necessary for the Lender, in
order to enforce payment of this Note, to first institute or exhaust Lender's
remedies against the Borrower or any other party liable hereon or against any
collateral for this Note. None of the foregoing shall affect the liability of
the Borrower and any indorsers or guarantors hereof. 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, the Lender and the
Borrower, by written agreement among them, may affect the liability of the
Borrower.
TERMINOLOGY: If more than one party joins in the execution of this
-----------
Note, the covenants and agreements herein contained shall be the joint and
several obligation of each and all of them and of their respective heirs,
executors, administrators, successors and assigns, and relative words herein
shall be read as if written in the plural when appropriate. Any reference
herein to the Lender shall be deemed to include and apply to every subsequent
holder of this Note. Words of masculine or neuter import shall be read as if
written in the neuter or masculine or feminine when appropriate.
AGREEMENT: Reference is made to the Agreement for provisions as to
---------
mandatory prepayments, collateral and acceleration.
THIS NOTE IS GOVERNED BY THE PROVISIONS OF THE AGREEMENT WHICH IS
INCORPORATED HEREIN BY REFERENCE, AND IN THE EVENT ANY TERMS OF THIS NOTE ARE
INCONSISTENT WITH THE TERMS OF THE AGREEMENT, THE TERMS OF THE AGREEMENT SHALL
GOVERN THIS NOTE. NOTWITHSTANDING THE FOREGOING SENTENCE, NO REFERENCE HEREIN
TO THE AGREEMENT AND NO PROVISION OF THIS NOTE OR OF THE AGREEMENT SHALL ALTER
OR IMPAIR THE OBLIGATION OF THE BORROWER, WHICH IS ABSOLUTE AND UNCONDITIONAL,
TO PAY THE PRINCIPAL OF AND INTEREST ON THIS NOTE AT THE RESPECTIVE TIMES AND AT
THE RATES HEREIN AND THEREIN PRESCRIBED.
2
APPLICABLE LAW: This Note shall be governed by and construed under the
--------------
laws of the State of New York, without regard to principles of conflicts of law,
whose laws the Borrower expressly elects to apply to this Note.
BNC MORTGAGE, INC.
By:_____________________
Name:
Title:
3
Exhibit C
---------
Scheduled Cumulative Prepayments
Exhibit D
---------
Subsidiaries of Borrower
------------------------
Exhibit E
---------
SUBORDINATE CERTIFICATES
------------------------