EXHIBIT 4.4
EXECUTION COPY
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MORTGAGE LOAN PURCHASE AGREEMENT
Between
HEADLANDS MORTGAGE COMPANY,
as Seller
and
HEADLANDS MORTGAGE SECURITIES INC.,
as Purchaser
Dated as of September 1, 1999
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TABLE OF CONTENTS
Page
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ARTICLE I Definitions.................................................................................1
ARTICLE II Procedures for Purchases of Mortgage Loans; Conditions Precedent; Settlements...............1
Section 2.01. Purchase and Sale...........................................................................1
Section 2.02. Delivery of Documents; Purchase of Mortgage Loans...........................................1
Section 2.03. Survival of Representations.................................................................2
Section 2.04. Proceeds of Mortgage Loans..................................................................2
Section 2.05. Defective Mortgage Loans....................................................................3
ARTICLE III Intent of Parties; Security Interest........................................................3
Section 3.01. Intent of Parties; Security Interest........................................................3
ARTICLE IV Representations and Warranties..............................................................3
Section 4.01. Representations and Warranties of Seller....................................................3
Section 4.02. Representations and Warranties Regarding Mortgage Loans.....................................5
Section 4.03. Representations and Warranties of Purchaser................................................10
Section 4.04. Remedies for Breach of Representations and Warranties; Repurchase Obligation...............11
ARTICLE V Covenants and Warranties of Seller.........................................................12
Section 5.01. Affirmative Covenants......................................................................13
Section 5.02. Negative Covenants.........................................................................14
ARTICLE VI Sale of Mortgage Loans from the Purchaser to the Trust.....................................15
Section 6.01. Sale and Servicing Agreement...............................................................15
ARTICLE VII Seller's Servicing Obligations.............................................................16
Section 7.01. Seller's Servicing Obligations.............................................................16
ARTICLE VIII Fees and Expenses..........................................................................16
ARTICLE IX Termination; Additional Remedies...........................................................17
ARTICLE X Payment of Purchase Price..................................................................17
Section 10.01. Purchase Price Payments....................................................................17
Section 10.02. The Purchaser Note.........................................................................17
ARTICLE XI Confidentiality............................................................................18
ARTICLE XII Term.......................................................................................19
ARTICLE XIII Exclusive Benefit of Parties; Assignment...................................................19
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ARTICLE XIV Amendment; Waivers.................................................................................19
ARTICLE XV Execution in Counterparts...........................................................................19
ARTICLE XVI Effect of Invalidity of Provisions.................................................................20
ARTICLE XVII Governing Law.....................................................................................20
ARTICLE XVIII Notices..........................................................................................20
ARTICLE XIX Entire Agreement...................................................................................20
ARTICLE XX Indemnities.........................................................................................20
ARTICLE XXI RESPA Obligations..................................................................................22
ARTICLE XXII Survival..........................................................................................22
ARTICLE XXIII Right of Set-off.................................................................................22
ARTICLE XXIV Consent to Service................................................................................22
ARTICLE XXV Submission to Jurisdiction; Waiver of Trial by Jury................................................23
ARTICLE XXVI Construction......................................................................................23
ARTICLE XXVII Further Agreements...............................................................................23
EXHIBIT A Form of Non-Negotiable Headlands Mortgage Securities Inc.
Promissory Note
SCHEDULE I: Mortgage Loan Schedule
ii
MORTGAGE LOAN PURCHASE AGREEMENT ("Agreement") dated as of
September 1, 1999 between Headlands Mortgage Company, a California corporation
("Seller"), and Headlands Mortgage Securities Inc., a Delaware corporation
("Purchaser").
WHEREAS, Seller desires to sell to Purchaser the Mortgage Loans (as
hereinafter defined), and Purchaser desires to purchase such Mortgage Loans in
accordance with the terms and conditions set forth in this Agreement.
NOW, THEREFORE, the parties, in consideration of good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, and
intending to be legally bound, hereby agree as follows:
ARTICLE I
Definitions
All capitalized terms used in this Agreement and not otherwise defined
herein, shall have the meanings assigned thereto in Annex A to the Indenture
dated as of September 1, 1999, between the Issuer and the Indenture Trustee, as
the same may be amended and supplemented from time to time.
ARTICLE II
Procedures for Purchases of Mortgage Loans; Conditions Precedent; Settlements
Section 2.01. Purchase and Sale. On the Closing Date in consideration
for the Purchase Price the Seller hereby sells, transfers, assigns, sets over
and otherwise conveys to the Purchaser, without recourse, all of its right,
title and interest in and to (i) each Mortgage Loan, including its Principal
Balance (and any Additional Balances) and all collections in respect thereof
received on or after the Cut-Off Date; (ii) property that secured a Mortgage
Loan that is acquired by foreclosure or deed in lieu of foreclosure; (iii) the
Seller's rights under the hazard insurance policies and (iv) all proceeds with
respect to the foregoing.
Section 2.02. Delivery of Documents; Purchase of Mortgage Loans. Prior
to the purchase of the Mortgage Loans:
(a) Seller shall have delivered to the Purchaser or any agent appointed
by the Purchaser the Mortgage File for each of the Mortgage Loans.
(b) Purchaser shall have received a Mortgage Loan Schedule pertaining
to the related Mortgage Loans.
(c) Purchaser shall have received copies of the resolutions of the
Board of Directors of Seller, certified by its respective Secretary, approving
this Agreement.
(d) Purchaser shall have received the Articles of Incorporation of
Seller certified by the Secretary of State of the State of California.
(e) Purchaser shall have received a certificate of the Secretary or
Assistant Secretary of Seller certifying (i) the names and signatures of the
officers authorized on its behalf to execute this Agreement, and any other
documents to be delivered by it hereunder and (ii) a copy of Seller's By-laws.
(f) Purchaser shall have received an opinion of counsel to Seller as to
the due authorization, execution and delivery by the Seller of this Agreement
and as to the validity and enforceability of the transfers contemplated
hereunder and addressing such other matters as the Purchaser may reasonably
request.
(g) Seller shall have instructed the applicable debtor, trustee, paying
agent, authenticating agent, transfer agent, registrar, predecessor in interest,
owner (if the Mortgage Loans are in the form of a security agreement), or
servicer, if any, in respect of the related Mortgage Loans to reflect on their
books and records the transfer of such Mortgage Loans to Purchaser, as owner or
secured party (if the Mortgage Loans are in the form of a security agreement).
(h) Purchaser shall have received the most recent available standard
servicing or lien reports in summary form, if any, with respect to all of the
mortgages in Seller's portfolio similar to the Mortgage Loans.
(i) The Purchaser shall be permitted to perform its standard loan
review of each Mortgage Loan to be purchased.
(j) UCC-1 financing statements duly executed by Seller as debtor shall
have been filed in California naming the Purchaser as secured party and the
Indenture Trustee on behalf of the Trust as assignee.
Section 2.03. Survival of Representations. The terms and conditions of
the purchase of each Mortgage Loan shall be as set forth in this Agreement.
Seller will be deemed on the Closing Date to have made to Purchaser the
representations and warranties set forth in Article IV hereof and such
representations and warranties of Seller shall be true and correct on and as of
the Closing Date. In addition, Seller shall reaffirm the representations and
warranties contained in Article IV on the date of disposition of the Mortgage
Loans by the Purchaser pursuant to the Sale and Servicing Agreement.
Section 2.04. Proceeds of Mortgage Loans. The transfer and sale hereby
of all of the Seller's right, title and interest in and to each Mortgage Loan
shall include all proceeds, products and profits derived therefrom, including,
without limitation, all scheduled payments of principal of and interest on such
Mortgage Loans and other amounts due or payable or to become due or payable in
respect thereof and proceeds thereof, including, without limitation, all moneys,
goods and other tangible or intangible property received upon the liquidation or
sale thereof.
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Section 2.05. Defective Mortgage Loans. If any Mortgage Loan is
re-transferred to the Purchaser pursuant to Section 2.03 of the Sale and
Servicing Agreement, the Seller shall, at the Purchaser's option, either (a)
repurchase such Mortgage Loan at the Repurchase Price, or (b) provide an
Eligible Substitute Mortgage Loan if the Seller has any such loans available for
sale at the time, subject to the terms and conditions of the Sale and Servicing
Agreement.
ARTICLE III
Intent of Parties; Security Interest
Section 3.01. Intent of Parties; Security Interest. Purchaser and
Seller confirm that the transactions contemplated herein are intended as
purchases and sales rather than as loan transactions. In the event, for any
reason, and solely in such event, any transaction hereunder is construed by any
court or regulatory authority as a loan or other purchase and sale of the
related Mortgage Loans, Seller shall be deemed to have hereby pledged to
Purchaser as security for the performance by Seller of all of its obligations
from time to time arising hereunder and under any and all Purchases effected
pursuant thereto, and shall be deemed to have granted to Purchaser a security
interest in, the related Mortgage Loans and all distributions in respect
thereof, and the proceeds of any and all of the foregoing (collectively, the
"Collateral"). In furtherance of the foregoing, (i) this Agreement shall
constitute a security agreement, (ii) Purchaser shall have all of the rights of
a secured party with respect to the Collateral pursuant to applicable law and
(iii) Seller shall execute all documents, including, but not limited to,
financing statements under the Uniform Commercial Code as in effect in any
applicable jurisdictions, as the Purchaser may reasonably require to effectively
perfect and evidence Purchaser's first priority security interest in the
Collateral. Seller also covenants not to pledge, assign or grant any security
interest to any other party in any Mortgage Loan sold to Purchaser.
ARTICLE IV.
Representations and Warranties
Section 4.01. Representations and Warranties of Seller. The Seller
represents, warrants and covenants to the Purchaser as of the Closing Date that:
(i) the Seller is duly organized, validly existing and in good
standing under the laws of the State of California and is duly
authorized and qualified to transact any and all business contemplated
by this Agreement to be conducted by the Seller in any state in which a
Mortgaged Property is located to the extent necessary to ensure the
enforceability of each Mortgage Loan and the servicing of the Mortgage
Loan in accordance with the terms of this Agreement;
(ii) the Seller has the full corporate power and authority to
service each Mortgage Loan, and to execute, deliver and perform, and to
enter into and consummate the transactions contemplated by this
Agreement and the execution, delivery and performance of this Agreement
by the Seller has been duly authorized by all necessary corporate
action on the part of the Seller; and this Agreement, assuming the due
authorization, execution
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and delivery thereof by the Purchaser, constitutes a legal, valid and
binding obligation of the Seller, enforceable against the Seller in
accordance with its respective terms, except to the extent that (a) the
enforceability thereof may be limited by federal or state bankruptcy,
insolvency, moratorium, receivership and other similar laws relating to
creditors' rights generally and (b) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to
the equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought;
(iii) the execution and delivery of this Agreement by the Seller,
the servicing of the Mortgage Loans by the Seller hereunder, the
consummation by the Seller of the transactions herein contemplated, and
the fulfillment by the Seller of or compliance by the Seller with the
terms hereof will not (A) result in a breach of any term or provision
of the charter or by-laws of the Seller or (B) conflict with, result in
a breach, violation or acceleration of, or result in a default under,
the terms of any other material agreement or instrument to which the
Seller is a party or by which it may be bound, or any statute, order or
regulation applicable to the Seller of any court, regulatory body,
administrative agency or governmental body having jurisdiction over the
Seller, which breach, violation, default or non-compliance would have a
material adverse effect on (a) the business, operations, financial
condition, properties or assets of the Seller taken as a whole or (b)
the ability of the Seller to perform its obligations under this
Agreement; and the Seller is not a party to, bound by, or in breach or
violation of any material indenture or other material agreement or
instrument, or subject to or in violation of any statute, order or
regulation of any court, regulatory body, administrative agency or
governmental body having jurisdiction over it, which materially and
adversely affects or, to the Seller's knowledge, would in the future
reasonably be expected to materially and adversely affect, (x) the
ability of the Seller to perform its obligations under this Agreement
or (y) the business, operations, financial condition, properties or
assets of the Seller taken as a whole;
(iv) the Seller is, and currently intends to remain, in good
standing and qualified to do business in each jurisdiction where
failure to be so qualified or licensed would have a material adverse
effect on (a) the business, operations, financial condition, properties
or assets of the Seller taken as a whole or (b) the enforceability of
any Mortgage Loan or the servicing of the Mortgage Loans in accordance
with the terms of this Agreement;
(v) there is no litigation pending or, to the Seller's actual
knowledge, overtly threatened against the Seller that would materially
and adversely affect the execution, delivery or enforceability of this
Agreement or the ability of the Seller to service the Mortgage Loans or
for the Seller to perform any of its other obligations hereunder in
accordance with the terms hereof;
(vi) no consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Seller of, or compliance by the Seller with, this
Agreement or the consummation of the transactions contemplated hereby,
or if any such consent, approval, authorization or order not relating
to a future transaction is required, the Seller has obtained the same;
and
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(vii) the Seller has caused to be performed any and all acts
required to preserve the rights and remedies of the Purchaser in any
insurance policies of the Seller or a mortgagee applicable to the
Mortgage Loans sold by the Seller.
Section 4.02. Representations and Warranties Regarding Mortgage Loans.
(a) Seller represents and warrants to Purchaser as of the Closing Date with
respect to each Mortgage Loan as follows:
(i) As of the Closing Date (and as of the applicable Transfer Date
with respect to any Eligible Substitute Mortgage Loans) and, with
respect to any HELOC Mortgage Loan, as of the date any Additional
Balance is created, the information set forth in the Mortgage Loan
Schedule for such Mortgage Loans is true and correct in all material
respects;
(ii) Each Mortgage Loan is being serviced by the Servicer or a
Person controlling, controlled by or under common control with the
Servicer and qualified to service mortgage loans;
(iii) The Cut-Off Date Principal Balance has not been assigned or
pledged, and the Sponsor is the sole owner and holder of such Cut-Off
Date Principal Balance free and clear of any and all liens, claims,
encumbrances, participation interests, equities, pledges, charges or
security interests of any nature, and has full right and authority,
under all governmental and regulatory bodies having jurisdiction over
the ownership of the applicable Mortgage Loans, to sell, assign or
transfer the same pursuant to this Agreement;
(iv) As of the Closing Date (or as of the applicable Transfer Date
with respect to any Eligible Substitute Mortgage Loans), the Mortgage
Loans have not been assigned or pledged, and the Sponsor is the sole
owner and holder of such Mortgage Loans free and clear of any and all
liens, claims, encumbrances, participation interests, equities,
pledges, charges or security interests of any nature, and has full
right and authority, under all governmental and regulatory bodies
having jurisdiction over the ownership of the applicable Mortgage
Loans, to sell and assign the same pursuant to this Agreement;
(v) As of the Closing Date (or as of the applicable Transfer Date
with respect to any Eligible Substitute Mortgage Loans), the related
Mortgage is a valid and subsisting first or second lien, as set forth
on the Mortgage Loan Schedule with respect to each related Mortgaged
Property, and as of the Cut-Off Date the related Mortgaged Property is
free and clear of all encumbrances and liens having priority over the
first or second lien, as applicable, of such Mortgage except for liens
for (i) real estate taxes and special assessments not yet delinquent;
(ii) any first mortgage loan secured by such Mortgaged Property and
specified on the Mortgage Loan Schedule; (iii) covenants, conditions
and restrictions, rights of way, easements and other matters of public
record as of the date of recording that are acceptable to mortgage
lending institutions generally; and (iv) other matters to which like
properties are commonly subject which do not materially interfere with
the benefits of the security intended to be provided by such Mortgage;
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(vi) As of the Closing Date (or as of the applicable Transfer Date
with respect to any Eligible Substitute Mortgage Loans), there is no
valid offset, defense or counterclaim of any obligor under any Loan
Agreement or Mortgage;
(vii) To the best knowledge of the Sponsor, as of the Closing Date
(or as of the applicable Transfer Date with respect to any Eligible
Substitute Mortgage Loans), there is no delinquent recording or other
tax or fee or assessment lien against any related Mortgaged Property;
(viii) As of the Closing Date (or as of the applicable Transfer
Date with respect to any Eligible Substitute Mortgage Loans), there is
no proceeding pending or, to the best knowledge of the Sponsor,
threatened for the total or partial condemnation of the related
Mortgaged Property, and such property is free of material damage;
(ix) To the best knowledge of the Sponsor, as of the Closing Date
(or as of the applicable Transfer Date with respect to any Eligible
Substitute Mortgage Loans), there are no mechanics' or similar liens or
claims which have been filed for work, labor or material affecting the
related Mortgaged Property which are, or may be, liens prior or equal
to the lien of the related Mortgage, except liens which are fully
insured against by the title insurance policy referred to in clause
(xiv);
(x) No Minimum Monthly Payment is more than 89 days delinquent
(measured on a contractual basis).
(xi) As of the Closing Date (or as of applicable Transfer Date with
respect to any Eligible Substitute Mortgage Loans), for each Mortgage
Loan, the related Mortgage File contains each of the documents and
instruments specified to be included therein;
(xii) The related Loan Agreement and the related Mortgage at
origination complied in all material respects with applicable state and
federal laws, including, without limitation, usury, truth-in-lending,
real estate settlement procedures, consumer credit protection, equal
credit opportunity or disclosure laws applicable to the Mortgage Loans;
(xiii) On the Closing Date, to the extent not already included in
such filing, (or as of the applicable Transfer Date with respect to any
Eligible Substitute Mortgage Loans), the Sponsor has filed UCC-1
financing statements with respect to such Mortgage Loans;
(xiv) Either a lender's title insurance policy or binder was issued
on the date of origination of the Mortgage Loans and each such policy
is valid and remains in full force and effect, or a title search or
guaranty of title customary in the relevant jurisdiction was obtained
with respect to a Mortgage Loans as to which no title insurance policy
or binder was issued;
(xv) As of the Closing Date (or as of the applicable Transfer Date
with respect to any Eligible Substitute Mortgage Loans), none of the
Mortgaged Properties is a mobile home or a manufactured housing unit;
(xvi) As of the Cut-Off Date for the Mortgage Loans no more than
(a) 0.84% of the Pool I Mortgage Loans (by Cut-Off Date Pool I
Balance), or (b) 3.50% of the Initial
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Group II Loans (by Cut-Off Date Pool II Balance) are secured by
Mortgaged Properties located in one United States postal zip code;
(xvii) The Combined Loan-to-Value Ratio for each Pool I Mortgage
Loan was not in excess of 100% and the Combined Loan-to-Value Ratio for
each Pool II Mortgage Loan was not in excess of 100%;
(xviii) Each Pool I Mortgage Loan substantially conforms to certain
loan origination standards with respect to loan balances as of the date
of origination set forth by the Federal National Mortgage Association.
(xix) No selection procedure reasonably believed by the Sponsor to
be adverse to the interests of the Noteholders or the Insurer was
utilized in selecting the Mortgage Loans;
(xx) The Sponsor has not transferred the Mortgage Loans to the
Trust with any intent to hinder, delay or defraud any of its creditors;
(xxi) The Minimum Monthly Payment with respect to any Mortgage Loan
is not less than the interest accrued at the applicable Loan Rate on
the average daily Principal Balance during the interest period relating
to the date on which such Minimum Monthly Payment is due;
(xxii) As of the Closing Date (or as of the applicable Transfer
Date with respect to any Eligible Substitute Mortgage Loans), each Loan
Agreement and each Mortgage Loan is an enforceable obligation of the
related Mortgagor, except as the enforceability thereof may be limited
by the bankruptcy, insolvency or similar laws affecting creditors'
rights generally;
(xxiii) As of the Closing Date (or as of the applicable Transfer
Date with respect to any Eligible Substitute Mortgage Loans), there has
been no default of any senior mortgage loan related to a Mortgaged
Property that has not been cured by a party other than the Servicer;
(xxiv) The terms of each Mortgage Note and each Mortgage have not
been impaired, altered or modified in any respect, except by a written
instrument which (if such instrument is secured by real property) has
been recorded, if necessary, to protect the interest of the Noteholders
and which has been delivered to the Indenture Trustee. The substance of
any such alteration or modification is reflected on the related
Mortgage Loan Schedule and has been approved by the primary mortgage
guaranty insurer, if any;
(xxv) The definition of "prime rate" in each Credit Line Agreement
relating to a HELOC Mortgage Loan does not differ materially from the
definition in the form of Credit Line Agreement in Exhibit D of the
Sale and Servicing Agreement;
(xxvi) The weighted average remaining term to maturity of the Pool
I Mortgage Loans on a contractual basis as of the Cut-Off Date is
approximately 202 months and for the Pool II Mortgage Loans is
approximately 208 months. On each date that the Loan Rates
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relating to Initial HELOC Mortgage Loans have been adjusted, interest
rate adjustments on the Initial HELOC Mortgage Loans were made in
compliance with the related Mortgages and Credit Line Agreement and
applicable law. Over the term of each HELOC Mortgage Loan, the Loan
Rate may not exceed the related Loan Rate Cap, if any. With respect to
the Pool I HELOC Mortgage Loans, the weighted average Loan Rate Cap is
approximately 18.000%. With respect to the Pool II HELOC Mortgage
Loans, the weighted average Loan Rate Cap is approximately 18.000%.
With respect to the Pool I HELOC Mortgage Loans, the margins range
between -1.000% and 7.000% and the weighted average margin is
approximately 3.321% as of the related Cut-Off Date. With respect to
the Pool II HELOC Mortgage Loans, the margins range between 0.000% and
6.250% and the weighted average margin is approximately 2.982% as of
the related Cut-Off Date. The Loan Rates on the Pool I Mortgage Loans
range between 5.875% and 14.250%, the Loan Rates on the Pool II
Mortgage Loans range between 5.875% and 13.750% and the weighted
average Loan Rate is approximately 8.796% for Pool I and 8.245% for
Pool II;
(xxvii) As of the Closing Date (or as of the applicable Transfer
Date with respect to any Eligible Substitute Mortgage Loans), each
Mortgaged Property consists of a single parcel of real property with a
one-to-four unit single family residence erected thereon, or an
individual condominium unit, planned unit development unit or
townhouse;
(xxviii) No more than 29.36% (by Cut-Off Date Pool I Balance) of
the Pool I Mortgage Loans are secured by real property improved by
individual condominium units, planned development units or two-to-four
family residences erected thereon, and approximately 70.64% (by Cut-Off
Date Pool Balance) of the Mortgage Loans are secured by real property
with a one-family residence erected thereon;
No more than 24.49% (by Cut-Off Date Pool II Balance) of the Pool
II Mortgage Loans are secured by real property improved by individual
condominium units, planned development units or two-to-four family
residences erected thereon, and approximately 75.51% (by Cut-Off Date
Pool II Balance) of the Mortgage Loans are secured by real property
with a one-family residence erected thereon;
(xxix) Each Mortgage Note evidencing a Closed End Mortgage Loan is
comprised of one original promissory note, and each such promissory
note constitutes an "instrument" for purposes of Section 9-105(1)(i) of
the UCC;
(xxx) The Credit Limits on the Pool I HELOC Mortgage Loans range
between $8,500 and $495,000 with an average of approximately $50,597.
The Credit Limits on the Pool II HELOC Mortgage Loans range between
$9,000 and $500,000 with an average of approximately $128,377. The
Principal Balances on the Pool I HELOC Mortgage Loans range between $0
and $180,000 with an average of approximately $37,651. The Principal
Balances on the Pool II HELOC Mortgage Loans range between $0 and
$496,355 with an average of approximately $116,937. The Principal
Balances on the Pool I Closed End Mortgage Loans range between $4,989
and $150,000 with an average of approximately $37,655. The Principal
Balances on the Pool II Closed End Mortgage Loans range between $13,000
and $300,000 with an average of approximately $95,962. The average
Credit Limit
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Utilization Rate (weighted by credit line) of the Pool I HELOC Mortgage
Loans is approximately 71.84% and of the Pool II HELOC Mortgage Loans
is approximately 90.37%;
(xxxi) 100% of the Mortgage Loans are second liens, and either (A)
no consent for each Mortgage Loan was required by the holder of the
related senior lien prior to the making of such Mortgage Loan or (B)
such consent has been obtained and is contained in the related Mortgage
File;
(xxxii) This Agreement constitutes a valid transfer and assignment
to the Trust of all right, title and interest of the Sponsor in and to
the Cut-Off Date Principal Balances with respect to the applicable
Mortgage Loans, all monies due or to become due with respect thereto
and all proceeds of such Cut-Off Date Principal Balances with respect
to the Mortgage Loans and such funds as are from time to time deposited
in the Collection Account (excluding any investment earnings thereon)
and all other property specified in the definition of "Trust" as being
part of the corpus of the Trust conveyed to the Trust, and upon payment
for the Additional Balances, will constitute a valid transfer and
assignment to the Indenture Trustee of all right, title and interest of
the Sponsor in and to the Additional Balances, all monies due or to
become due with respect thereto, and all proceeds of such Additional
Balances and all other property specified in the definition of "Trust"
relating to the Additional Balances;
(xxxiii) No Mortgagor is insolvent or bankrupt as of the Closing
Date (or as of the applicable Transfer Date with respect to any
Eligible Substitute Mortgage Loans);
(xxxiv) The proceeds of each Closed End Mortgage Loan have been
fully disbursed, and there is no obligation on the part of the
mortgagee to make future advances thereunder. Any and all requirements
as to completion of any on-site or off-site improvements and as to
disbursements of any escrow funds therefor have been complied with. All
costs, fees and expenses incurred in making or closing or recording
such Closed End Mortgage Loans were paid;
(xxxv) Each Mortgage contains customary and enforceable provisions
which render the rights and remedies of the holder thereof adequate for
the realization against the related Mortgaged Property of the benefits
of the security, including (A) in the case of a Mortgage designated as
a deed of trust, by Indenture Trustee's sale and (B) otherwise by
judicial foreclosure;
(xxxvi) As of the Closing Date (or as of the applicable Transfer
Date with respect to any Eligible Substitute Mortgage Loan), there is
no default, breach, violation or event of acceleration existing under
any Mortgage or the related Mortgage Note and no event which, with the
passage of time or with notice and the expiration of any grace or cure
period, would constitute a default, breach, violation or event of
acceleration; and the Sponsor has not waived any default, breach,
violation or event of acceleration;
(xxxvii) To the best knowledge of the Sponsor, all parties to the
Mortgage Note and the Mortgage had legal capacity to execute the
Mortgage Note and the Mortgage and each Mortgage Note and Mortgage have
been duly and properly executed by such parties;
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(xxxviii) As of the Cut-Off Date, no more than 0.56% of Principal
Balance of the Pool I Mortgage Loans nor more than 0.38% of the
Principal Balance of the Pool II Mortgage Loans represents Mortgage
Loans with respect to which the related Mortgagor had a Credit Score of
600 or less at the time of origination or whose Credit Score was
unavailable;
(xxxix) As of the Closing Date, no Mortgagor has been released, in
whole or in part, except in connection with an assumption agreement
which has been approved by the applicable title insurer (to the extent
required by such title insurer) and which is part of the Mortgage File
delivered to the Indenture Trustee;
(xl) At the time of origination of each Mortgage Loan, the related
prior lien was not more than 30 days delinquent;
(xli) All required inspections, licenses and certificates with
respect to the use and occupancy of all occupied portions of all
property securing the Mortgages have been made, obtained or issued, as
applicable;
(xlii) With respect to each Mortgage Loan, the related prior lien
does not provide for negative amortization;
(xliii) With respect to each Mortgage Loan, the maturity date of
the Mortgage Loan is prior to the maturity date of the related prior
lien if such prior lien provides for a balloon payment;
(xliv) Each Pool I Mortgage Loan is secured by a property having an
appraised value as of origination of $3,500,000.00 or less and each
Pool II Mortgage Loan is secured by a property having an appraised
value as of origination of $5,650,000.00 or less.
(xlv) With respect to each Mortgage Loan, the improvements upon
each Mortgaged Property are covered by a valid and existing hazard
insurance policy with a carrier generally acceptable to the Servicer
that provides for fire and extended coverage representing coverage not
less than (a) the Credit Limit of such HELOC Mortgage Loan or (b) the
Cut-Off Date Principal Balance of such Closed End Mortgage Loan or (c)
the maximum insurable value of the Mortgaged Property.
(b) Seller represents and warrants to Purchaser that each Mortgage Loan
shall have been originated in conformity with and meets, as of the Closing Date,
the underwriting standards for the Seller's home equity loans described in the
Prospectus Supplement dated September 22, 1999 with respect to the Class A-1
Notes and Class A-2 Notes.
(c) Each Mortgage Loan conforms to the representations and warranties
set forth in Section 2.05 of the Sale and Servicing Agreement.
Section 4.03. Representations and Warranties of Purchaser. Purchaser
hereby makes the following representations and warranties, each of which
representations and
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warranties (i) is material and being relied upon by Seller and (ii) is true in
all respects as of the date of this Agreement:
(i) Purchaser has been duly organized and is validly existing as a
corporation under the laws of the State of Delaware.
(ii) Purchaser has the requisite power and authority and legal
right to execute and deliver, engage in the transactions contemplated
by, and perform and observe the terms and conditions of, this Agreement
to be performed by it.
(iii) This Agreement has been duly authorized and executed by
Purchaser, is valid, binding and enforceable against Purchaser in
accordance with its terms, and the execution, delivery and performance
by Purchaser of this Agreement does not conflict with any material term
or provision of any other agreement to which Purchaser is a party or
any term or provision of the Certificate of Incorporation or the
By-laws of the Purchaser, or any law, rule, equation, order, judgment,
writ, injunction or decree applicable to Purchaser of any court,
regulatory body, administrative agency or governmental body having
jurisdiction over Purchaser.
(iv) No consent, approval, authorization or order of, registration
or filing with, or notice to any governmental authority or court is
required under applicable law in connection with the execution and
delivery by Purchaser of this agreement.
(v) To the best knowledge of Purchaser, there is no action,
proceeding or investigation pending or threatened against Purchaser
before any court, administrative agency or other tribunal (i) asserting
the invalidity of this Agreement, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement,
or (iii) which is likely to materially and adversely affect the
performance by Purchaser of its obligations under, or the validity or
enforceability of, this Agreement.
(vi) The purchase of Mortgage Loans hereunder shall constitute a
representation by Purchaser to Seller that Purchaser understands, and
that Purchaser has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks
of, its investment in the relevant Mortgage Loans.
Section 4.04. Remedies for Breach of Representations and Warranties;
Repurchase Obligation. It is understood and agreed that the representations and
warranties set forth in Section 4.01 and 4.02 shall survive each sale of
Mortgage Loans to the Purchaser and shall inure to the benefit of the Purchaser
and subsequent transferees notwithstanding any restrictive or qualified
endorsement on any Mortgage Note or Assignment of Mortgage or the examination or
failure to examine any Mortgage File. With respect to the representations and
warranties contained in Sections 4.01 and 4.02 which are made to the best of the
Seller's knowledge or to the actual knowledge of the Seller, if it is discovered
by either the Seller or the Purchaser that the substance of such representation
and warranty is inaccurate and such inaccuracy materially and adversely affects
the value of the related Mortgage Loan or the Purchaser's interest therein, then
notwithstanding the Seller's lack of knowledge with respect to the inaccuracy at
the time the representation or warranty was made, the Seller shall repurchase
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the related Mortgage Loan in accordance with this Section 4.04 as if the
applicable representation or warranty was breached, subject to the terms and
conditions of the Sale and Servicing Agreement. Upon discovery by either the
Seller or the Purchaser of a breach of any of the foregoing representations and
warranties which materially and adversely affects the value of the Mortgage
Loans or the interest of the Purchaser (or which materially and adversely
affects the interests of the Purchaser in the related Mortgage Loan in the case
of a representation and warranty relating to a particular Mortgage Loan), the
party discovering such breach shall give prompt written notice to the others.
Within 60 days of the earlier of either discovery by or notice to the
Seller of any breach of a representation or warranty which materially and
adversely affects the value of any Mortgage Loan or the Purchaser's interest
therein, the Seller shall use its best efforts promptly to cure such breach in
all material respects and, if such breach cannot be cured or is not cured or is
not being diligently pursued as evidenced by a notice acceptable to the
Purchaser, as evidenced by the Purchaser's agreement thereto, at the end of such
60-day period, the Seller shall, at the Purchaser's option, either (a)
repurchase such Mortgage Loan at the Repurchase Price, or (b) provide an
Eligible Substitute Mortgage Loan, if the Seller has any such loans available
for sale at the time subject to the terms and conditions of the Sale and
Servicing Agreement.
At the time of repurchase or substitution, the Purchaser and the Seller
shall arrange for the assignment of such Mortgage Loan to the Seller and the
delivery by the Purchaser to the Seller of the related Mortgage Files.
In addition to such cure and repurchase obligation, the Seller shall
indemnify the Purchaser and hold it harmless against any losses, damages,
penalties, fines, forfeitures, reasonable and necessary legal fees and related
costs, judgments, and other costs and expenses resulting from any claim, demand,
defense or assertion based on or grounded upon, or resulting from, a breach of
the representations and warranties contained in this Article IV (notwithstanding
any limitation in such representation and warranty as to the Seller's
knowledge). It is understood and agreed that the obligations of the Seller set
forth in this Section 4.04 to cure or repurchase a defective Mortgage Loan and
to indemnify the Purchaser as provided in this Section 4.04 constitute the sole
remedies of the Purchaser respecting a breach of the foregoing representations
and warranties.
Any cause of action against the Seller relating to or arising out of
the breach of any representations and warranties made in Sections 4.01 or 4.02
shall accrue as to any Mortgage Loan upon (i) discovery of such breach by the
Purchaser or notice thereof by the Seller to the Purchaser, (ii) failure by the
Seller to cure such breach or repurchase such Mortgage Loan as specified above,
and (iii) demand upon the Seller by the Purchaser for compliance with the
relevant provisions of this Agreement.
ARTICLE V
Covenants and Warranties of Seller
So long as this Agreement remains in effect or Seller shall have any
obligations hereunder, Seller hereby covenants and agrees with Purchaser as
follows:
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Section 5.01. Affirmative Covenants.
(a) Until the later to occur of (i) the discharge and payment of all of
Seller's obligations under this Agreement and (ii) the Termination Date of this
Agreement, Seller shall, promptly upon preparation, but in no event later than
60 days following the end of each such party's first three fiscal quarters,
deliver to Purchaser its unaudited company-prepared financial statements as of
the end of each such fiscal quarter, prepared in accordance with GAAP. Seller
shall, promptly upon preparation, but in no event later than 90 days following
the end of such party's fourth fiscal quarter, deliver to Purchaser its audited
and certified financial statements, prepared in accordance with GAAP, as of the
end of the most recently ended fiscal year, which audits and certifications
shall each be prepared by a nationally recognized independent accounting firm or
by a regionally recognized independent accounting firm with the prior written
consent of Purchaser, which consent shall not be unreasonably withheld. In all
cases, financial statements shall include, without limitation, a balance sheet,
a profit and loss statement and a statement of cash flows. Notwithstanding
anything in this Agreement to the contrary, if (x) the audited and certified
financial statements described in the immediately preceding sentence are not
delivered within the above-specified 90 days, (y) Seller is diligently using its
best efforts to deliver such financial statements, and (z) Seller provides
Purchaser with a notice specifying the reason for the delay and a date, within a
reasonable time period (as determined by Purchaser), on which such financial
statements will be delivered, and they are so delivered; then failure to deliver
such financial statements within the above-specified 90 days, as the case may
be, shall not be deemed to be an Event of Termination of this Agreement.
(b) Upon request of Purchaser, Seller shall, to the extent lawful,
promptly upon filing, deliver to Purchaser copies of all material public filings
made by Seller with any governmental or quasi-governmental body.
(c) Seller shall (i) with respect to any Mortgage Loans serviced by
Seller or any of its affiliates or otherwise use its best efforts to cause to be
delivered to Purchaser monthly, the report, if any, prepared by the relevant
trustee or servicer setting forth payment activity, defaults and delinquencies
with respect to each Mortgage Loan acquired by Purchaser and (ii) prepare and
deliver reports each month, detailing, with respect to all Purchases, such
information as the Purchaser may from time to time reasonably request.
(d) Seller shall do all things necessary to remain duly incorporated,
validly existing and in good standing as a domestic corporation in its
jurisdiction of incorporation and maintain all requisite authority to conduct
its business in each jurisdiction in which its business is conducted except
where failure to maintain such authority would not have a material adverse
effect on the ability of Seller to conduct its business or to perform its
obligations under this Agreement.
(e) At all times during this Agreement, Seller shall possess sufficient
net capital and liquid assets (or ability to access the same) to satisfy its
obligations as they become due in the normal course of business.
(f) Seller will notify Purchaser in writing of any of the following
promptly upon learning of the occurrence thereof, describing the same and, if
applicable, any remedial steps being taken with respect thereto;
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(i) The occurrence or likelihood of occurrence of an Event of
Termination hereunder;
(ii) The institution of any litigation, arbitration proceeding or
governmental proceeding which, in the opinion of counsel to Seller,
will have a material adverse effect on Seller or the Mortgage Loans;
(iii) The entry of any judgment or decree against Seller if the
aggregate amount of all judgments and decrees then outstanding against
Seller exceeds $10,000,000 after deducting (A) the amount with respect
to which Seller is insured and with respect to which the insurer has
assumed responsibility in writing, and (B) the amount for which Seller
is otherwise indemnified if the terms of such indemnification are
reasonably satisfactory to Purchaser; or
(iv) The occurrence or likelihood of any event which would allow
the obligee under any material loan agreement to which Seller is bound
to declare an event of default or accelerate the obligations of Seller
thereunder.
(g) Seller shall permit the Purchaser or its accountants, attorneys or
other agents access to all of the books and records relating to Mortgage Loans
purchased and retained by Purchaser for inspection and copying during normal
business hours at all places where Seller conducts business.
Section 5.02. Negative Covenants.
(a) Seller shall not assign or attempt to assign this Agreement or any
rights hereunder, without first obtaining the specific written consent of
Purchaser.
(b) Seller shall not amend its Articles of Incorporation or By-laws,
which amendment shall have or is likely to have an adverse effect upon Purchaser
or its interests under this Agreement, without the prior written consent of
Purchaser.
(c) During the term of this Agreement, Seller shall not engage in any
business other than as a consumer and mortgage finance lender and servicer,
except with the prior written consent of Purchaser.
(d) Seller shall not (i) dissolve or terminate its existence or (ii)
transfer any assets to any affiliate except as otherwise expressly permitted or
contemplated hereby.
(e) Except with the written consent of the Purchaser, the Seller shall
not guarantee, endorse or otherwise in any way become or be responsible for any
obligations of any other person, entity or affiliate, including, without
limitation, whether directly or indirectly by agreement to purchase the
indebtedness of any other person or through the purchase of goods, supplies or
services, or maintenance of working capital or other balance sheet covenants or
conditions, or by way of stock purchase, capital contribution, advance or loan
for the purposes of paying or discharging any indebtedness or obligation of such
other person or otherwise; provided, however, that nothing contained herein
shall prevent Seller from indemnifying its officers, directors and agents
pursuant to its By-laws and its Articles of Incorporation.
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(f) Seller will not commit any act in violation of applicable laws, or
regulations promulgated pursuant thereto that relate to the Mortgage Loans or
that materially and adversely affect the operations or financial conditions of
Seller.
ARTICLE VI
Sale of Mortgage Loans from the Purchaser to the Trust
Section 6.01. Sale and Servicing Agreement. It is the intent of the
Seller and the Purchaser that with respect to the Mortgage Loans, the Purchaser
shall concurrently sell all of its right, title and interest to the Mortgage
Loans and all other property conveyed to it hereunder to the Trust pursuant to
the Sale and Servicing Agreement.
With respect to such sale, the Seller agrees:
(i) to cooperate fully with the Purchaser and the Trust with
respect to all reasonable requests and due diligence procedures
including participating in meetings with Rating Agencies, the Insurer
and such other parties as the Purchaser shall designate and
participating in meetings with the Trust and providing information
reasonably requested by the Trust;
(ii) to execute the Sale and Servicing Agreement and all other
necessary documents to effect the transactions contemplated therein;
(iii) the Seller shall make the representations and warranties set
forth herein regarding the Seller and the Mortgage Loans as of the date
of the transfer to the Trust;
(iv) to deliver to the Purchaser for inclusion in any prospectus or
other offering material such publicly available information regarding
the Seller, its financial condition and the mortgage loan delinquency,
foreclosure and loss experience of its portfolio as is customarily set
forth in a prospectus supplement with respect to a comparable mortgage
pool, the underwriting of mortgage loans, the servicer, the servicing
and collection of mortgage loans, lending activities and loan sales of
the servicer, regulatory matters and delinquency and loss experience
and any additional information reasonably requested by the Purchaser,
and to deliver to the Purchaser unaudited consolidated financial
statements of the Seller, in which case the Purchaser shall bear the
cost of having such statements audited by certified public accountants
if the Purchaser desires such an audit, or as is otherwise reasonably
requested by the Purchaser and which the Seller is capable of providing
without unreasonable effort or expense, and to indemnify the Purchaser
and its affiliates for material misstatements or omissions contained in
such information;
(v) to deliver to the Purchaser and to any person designated by the
Purchaser, at the Purchaser's expense, such statements and audit
letters issued by reputable, certified public accountants pertaining to
information provided by the Seller pursuant to clause (iv) above as
shall be reasonably requested by the Purchaser (it being acknowledged
by Purchaser that the delivery of such statements and letters is
subject to the consent of such accountants);
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(vi) to deliver to the Purchaser, and to any Person designated by
the Purchaser, such legal documents and in-house opinions of counsel as
are customarily delivered by originators or servicers, as the case may
be, and reasonably determined by the Purchaser to be necessary in
connection with the transactions contemplated by the Sale and Servicing
Agreement, it being understood that the cost of any opinions of outside
special counsel that may be required shall be the responsibility of the
Seller;
(vii) to cooperate fully with the Purchaser and any prospective
Purchaser with respect to the preparation of Mortgage Loan documents
and other documents and with respect to servicing requirements
reasonably requested by the Rating Agencies and the Insurer; and
(viii) to negotiate and execute one or more custodial and servicing
agreements among the Purchaser, the Seller and a third party
custodian/trustee which is generally considered to be a prudent
custodian/trustee in the secondary mortgage market designated by the
Purchaser in its sole discretion after consultation with the Seller, in
either case for the purpose of securitizing the Mortgage Loans.
ARTICLE VII
Seller's Servicing Obligations
Section 7.01. Seller's Servicing Obligations. The Seller, as an
independent contract servicer, shall service and administer the Mortgage Loans
in accordance with the terms and provisions set forth in Articles III, IV, V,
VII and VIII of the Sale and Servicing Agreement which sections are hereby
incorporated in this Agreement in their entirety (with, however, the changes and
adjustments as provided in this Agreement) as if the same were contained in this
Article VII.
To the extent any provision of any definition set forth in the Sale and
Servicing Agreement shall conflict with any provision set forth in this
Agreement, the provision or definition in this Agreement shall govern.
ARTICLE VIII
Fees and Expenses
The Purchaser shall pay any salaries and other compensation due its
employees and the legal fees and expenses of its attorneys and accountants. All
other costs and expenses incurred in connection with the transfer and delivery
of the Mortgage Loans pursuant to this Agreement or the Sale and Servicing
Agreement, including, without limitation, recording fees, fees for title policy
endorsements and continuations, and fees for recording intervening assignments
of Mortgage, shall be paid by the Seller. To the extent not paid out of the
Trust pursuant to Section 8.6(d)(i) of the Indenture, the Seller shall pay the
on-going fees of any custodian or trustee under the Sale and Servicing
Agreement, the Trust Agreement or the Indenture. The Seller shall pay (i) the
acceptance and file review fees of any custodian or trustee
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under this Agreement, the Indenture, the Trust Agreement or the Sale and
Servicing Agreement and (ii) the costs of legal counsel and legal opinions,
accounting comfort letters and fees, printing of disclosure documents, rating
agency fees, Insurer up-front fees, SEC filing fees and the costs of any and all
related document preparations associated with the Sale and Servicing Agreement,
the Trust Agreement, the Indenture or this Agreement. The Seller also agrees to
pay the fees and other amounts for which the Seller or Servicer is obligated
under the Insurance Agreement.
ARTICLE IX
Termination; Additional Remedies
Upon the occurrence of a Rapid Amortization Event due to an act or
omission of the Seller (an "Event of Termination"), the Purchaser and its
assignees shall have, in addition to all other rights and remedies under this
Agreement or otherwise, all other rights and remedies provided under the UCC of
each applicable jurisdiction and other applicable laws, which rights shall be
cumulative. Without limiting the foregoing, the occurrence of an Event of
Termination shall not deny to the Purchaser or its assignees any remedy in
addition to termination of its obligations to make purchases hereunder to which
the Purchaser or its assignee may be otherwise appropriately entitled, whether
by statute or applicable law, at law or in equity.
ARTICLE X
Payment of Purchase Price
Section 10.01. Purchase Price Payments. On the Closing Date, and on the
Business Day following each other day on which any Mortgage Loans are purchased
from the Seller by the Purchaser pursuant to Article II hereof or Additional
Balances relating to Mortgage Loans are funded by the Seller, on the terms and
subject to the conditions of this Agreement, the Purchaser shall pay to the
Seller the applicable Purchase Price by (i) making or causing to be made a cash
payment to the Seller or its designee in such amount determined by the
Purchaser, (ii) crediting the Seller with an additional capital contribution to
the Purchaser and (iii) automatically increasing the principal amount
outstanding under the Purchaser Note by the amount of the excess of the Purchase
Price to be paid to the Seller for such purchased assets over the amount of any
cash payment made on such day to the Seller and/or any capital contribution made
by the Seller to the Purchaser, subject to a cap on such note at any time equal
to $10 million. Such $10 million cap may be increased upon the occurrence of and
in the amount of any cash capital contributions made by the Seller to the
Purchaser.
Section 10.02. The Purchaser Note.
(a) On the Closing Date, the Purchaser shall deliver to the Seller a
promissory note, substantially in the form of Exhibit A, payable to the order of
the Seller (such promissory note, as the same has been or hereafter may be
amended, supplemented, endorsed or otherwise modified from time to time,
together with any promissory note issued from time to time in substitution
therefor or renewal thereof in accordance with this Agreement, being herein
called
17
the "Purchaser Note"), which Purchaser Note shall, in accordance with its terms,
be subordinated to all interests of the Trust, all claims to the cash flows from
Trust assets and all obligations of the Purchaser, of any nature, now or
hereafter arising under or in connection with the Sale and Servicing Agreement.
The Purchaser Note shall evidence all amounts outstanding thereunder as of the
Closing Date in addition to amounts subsequently incurred thereunder as provided
in this Agreement. Subject to the foregoing, the Purchaser Note shall be payable
in full on the date which is one year and one day after the Termination Date.
The Purchaser Note shall bear interest at the "prime rate" as determined by the
Indenture Trustee from time to time in effect. The Purchaser may prepay all or
part of the outstanding balance of the Purchaser Note and interest accrued
thereon from time to time without any premium or penalty, unless an Event of
Default has occurred and is continuing or would result from such prepayment or
payment.
(b) The Servicer shall hold the Purchaser Note for the benefit of the
Seller, and shall make all appropriate recordkeeping entries with respect to the
Purchaser Note or otherwise to reflect the payments on and adjustments of the
Purchaser Note. The Servicer's books and records shall constitute rebuttable
presumptive evidence of the principal amount of and accrued interest on the
Purchaser Note at any time. The Seller hereby irrevocably authorizes the
Servicer to ▇▇▇▇ the Purchaser Note "CANCELLED" and to return the Purchaser Note
to the Purchaser upon the full and final payment thereof after the Termination
Date.
(c) The Seller hereby agrees not to transfer, assign, exchange or
otherwise convey or pledge, hypothecate or otherwise grant a security interest
in the Purchaser Note or any interest represented thereby, and any attempt to
transfer, assign, exchange, convey, pledge, hypothecate or grant a security
interest in the Purchaser Note or any interest represented thereby shall be void
and of no effect. Notwithstanding anything to the contrary herein, the Seller
may pledge the Purchaser Note to secure its obligations under the Master
Repurchase Facility between Greenwich Capital Financial Products Inc. and
Headlands Mortgage Company.
ARTICLE XI
Confidentiality
Purchaser and Seller each acknowledges that the information heretofore
provided to them pursuant to the operation of this Agreement, is highly
confidential, proprietary information of Seller or Purchaser, as the case may
be. Purchaser and Seller each agrees that it will hold such information in
strict confidence and will not disclose any part of such information to any
person or entity, other than to its accountants and lawyers to the extent
necessary for the performance of their duties and as required by law and other
than to such other persons to the extent necessary, as determined by the
Purchaser in its sole discretion, to complete the transactions contemplated
hereunder and in the Sale and Servicing Agreement including the offering and
issuance of the Class A-1 Notes and Class A-2 Notes; provided, however, that
copies of this Agreement may be included as part of any filing made pursuant to
the Securities Act of 1933 and the Securities Exchange Act of 1934 and any
regulations promulgated thereunder. In furtherance of the foregoing, Purchaser
and Seller each covenants that it will adhere to its established procedures for
the maintenance of confidentiality with respect to such information. Purchaser
and Seller each further agrees that it will not distribute such information
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within its own organization except to persons with a need to know such
information in connection with the transactions contemplated by this Agreement.
ARTICLE XII
Term
This Agreement shall terminate on the Termination Date.
ARTICLE XIII
Exclusive Benefit of Parties; Assignment
This Agreement is for the exclusive benefit of the parties hereto and
their respective successors and assigns and shall not be deemed to give any
legal or equitable right to any other person except the Sponsor, the Trust, the
holders of the Class A-1 Notes and Class A-2 Notes and the Insurer.
Notwithstanding the foregoing, the Seller covenants and agrees that the
representations and warranties contained in this Agreement and the rights of the
Purchaser hereunder are intended to benefit the Trust, the holders of the Class
A-1 Notes and Class A-2 Notes and the Insurer. This Agreement may not be
assigned by any party hereto without the prior written consent of the other
party hereto except to the Trust.
ARTICLE XIV
Amendment; Waivers
This Agreement may be amended from time to time only by written
agreement of Seller and Purchaser with the prior written consent of the Insurer,
which consent shall not be unreasonably withheld. Any forbearance, failure, or
delay by a party in exercising any right, power, or remedy hereunder shall not
be deemed to be a waiver thereof, and any single or partial exercise by a party
of any right, power or remedy hereunder shall not preclude the further exercise
thereof. Every right, power and remedy of a party shall continue in full force
and effect until specifically waived by it in writing. No right, power or remedy
shall be exclusive, and each such right, power or remedy shall be cumulative and
in addition to any other right, power or remedy, whether conferred hereby or
hereafter available at law or in equity or by statute or otherwise.
ARTICLE XV
Execution in Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, and all of which shall constitute one and the
same instrument.
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ARTICLE XVI
Effect of Invalidity of Provisions
In case any one or more of the provisions contained in this Agreement
should be or become invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall in no way be affected, prejudiced or disturbed thereby.
ARTICLE XVII
Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without regard to its rules regarding
conflict of laws.
ARTICLE XVIII
Notices
Any notices, consents, directions, demands and other communications
given under this Agreement (unless otherwise specified herein) shall be in
writing and shall be deemed to have been duly given when personally delivered at
or telecopied to the respective addresses or facsimile numbers, as the case may
be, set forth on the signature page hereof for Seller and Purchaser, or to such
other address or facsimile number as either party shall give notice to the other
party pursuant to this Section. Notices, consents, etc., may also be effected by
first class mail, postage prepaid sent to the foregoing addresses and will be
effective upon receipt by the intended recipient.
ARTICLE XIX
Entire Agreement
This Agreement, including the Exhibits and Schedules hereto, contains
the entire agreement of the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements between them,
whether oral or written, of any nature whatsoever with respect to the subject
matter hereof.
ARTICLE XX
Indemnities
Without limiting any other rights which Purchaser or Seller may have
hereunder or under applicable law, and in addition to any other indemnity
provided hereunder, Seller hereby agrees to indemnify Purchaser and its
respective officers, directors, agents and employees
20
(each, an "Indemnified Party") from and against any and all Losses incurred by
any of them relating to or resulting from:
(1) any representation or warranty made by Seller (or any officers,
employees or agents of Seller) under or in connection with this
Agreement, any periodic report required to be furnished thereunder or
any other information or document delivered by Seller pursuant hereto,
which shall have been false or incorrect in any material respect when
made or deemed made;
(2) the failure by Seller to (a) comply with any applicable law,
rule or regulation with respect to any Purchase or (b) perform or
observe any material obligation or covenant hereunder; or
(3) the failure by Seller (if so requested by Purchaser) to execute
and properly file, or any delay in executing and properly filing,
financing statements or other similar instruments or documents under
the Uniform Commercial Code of any applicable jurisdiction or other
applicable laws with respect to the Mortgage Loans.
Promptly after receipt by an Indemnified Party under this Article
XX of notice of the commencement of any action, such Indemnified Party will, if
a claim in respect thereof is to be made against the indemnifying party under
this Article XX, notify the indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability that it may have to any Indemnified Party otherwise than
under this Article XX. In case any such action is brought against any
Indemnified Party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein, and to
the extent that it may elect by written notice delivered to the Indemnified
Party promptly after receiving the aforesaid notice from such Indemnified Party,
to assume the defense thereof, with counsel satisfactory to such Indemnified
Party; provided, however, that if the defendants in any such action include both
the Indemnified Party and the indemnifying party and the Indemnified Party or
parties shall have reasonably concluded that there may be legal defenses
available to it or them and/or other Indemnified Parties that are different from
or additional to those available to the indemnifying party, the Indemnified
Party or parties shall have the right to elect separate counsel to assert such
legal defenses and to otherwise participate in the defense of such action on
behalf of such Indemnified Party or parties. Upon receipt of notice from the
indemnifying party to such Indemnified Party of its election so to assume the
defense of such action and approval by the Indemnified Party of counsel, the
indemnifying party will not be liable for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof, unless (i) the Indemnified Party shall have employed separate counsel
in connection with the assertion of legal defenses in accordance with the
proviso to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel, approved by you in the case of Article XX, representing the
Indemnified Parties under this Article XX, who are parties to such action), (ii)
the indemnifying party shall not have employed counsel satisfactory to the
Indemnified Party to represent the Indemnified Party within a reasonable time
after notice of commencement of the action or (iii) the indemnifying party has
authorized the employment of counsel for the Indemnified Party at the expense of
the indemnifying party; and except that, if clause (i) or (iii) is applicable,
such liability shall only be in respect of the counsel referred to in such
clause (i) or (iii).
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ARTICLE XXI
RESPA Obligations
Seller agrees to discharge on Purchaser's behalf all obligations,
including, without limitation, all disclosure obligations, which Purchaser may
have under the Real Estate Settlement Procedures Act of 1974, as amended, in
connection with Purchaser's purchases of Mortgage Loans hereunder. Purchaser
agrees to provide Seller with such information as is reasonably necessary for
Seller to discharge such obligations and hereby appoints Seller as its agent in
its name for the purposes of, and only for the purposes of, performing such
obligations. Seller hereby agrees to indemnify Purchaser and its respective
officers, directors, agents and employees from any losses suffered by any such
party in connection with Seller's obligations under this Article XXI.
ARTICLE XXII
Survival
All indemnities and undertakings of Seller and Purchaser hereunder
shall survive the termination of this Agreement.
ARTICLE XXIII
Right of Set-off
Upon the occurrence of any event or circumstance which requires Seller
to make a payment hereunder, Purchaser is hereby authorized then or at any time
or times thereafter, without notice to Seller (any such notice being expressly
waived by Seller), to set-off and apply any and all deposits (general or
special, time or demand, provisional or final), at any time held and other
indebtedness at any time owing by Purchaser to or for the credit or the account
of Seller against any and all of the obligations of Seller now or hereafter
existing hereunder, irrespective of whether or not Purchaser shall have made any
demand hereunder. Purchaser agrees promptly to notify Seller after any such
set-off and application made by Purchaser; provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of Purchaser under this Article XXIII are in addition to other rights and
remedies which Purchaser may have.
ARTICLE XXIV
Consent to Service
Each party irrevocably consents to the service of process by registered
or certified mail, postage prepaid, to it at its address given pursuant to
Article XVIII hereof.
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ARTICLE XXV
Submission to Jurisdiction; Waiver of Trial by Jury
With respect to any claim arising out of this Agreement each party
irrevocably submits to the exclusive jurisdiction of the courts of the State of
New York and the United States District Court located in the Borough of
Manhattan, City of New York, and each party irrevocably waives any objection
which it may have at any time to the laying of venue of any suit, action or
proceeding arising out of or relating hereto brought in any such court,
irrevocably waives any claim that any such suit, action or proceeding brought in
any such court has been brought in any inconvenient forum and further
irrevocably waives the right to object, with respect to such claim, suit, action
or proceeding brought in any such court, that such court does not have
jurisdiction over such party; provided that service of process is made as set
forth in Article XXIV hereof, or by any other lawful means. To the extent
permitted by applicable law, Purchaser and Seller each irrevocably waive all
right of trial by jury in any action, proceeding or counterclaim arising out of
or in connection with this Agreement or any matter arising hereunder.
ARTICLE XXVI
Construction
The headings in this Agreement are for convenience only and are not
intended to influence its construction. References to Articles, Sections,
Schedules and Exhibits in this Agreement are to the Articles, Sections of and
Schedules and Exhibits to this Agreement. The Schedules and Exhibits are hereby
incorporated into and form a part of this Agreement. In this Agreement, the
singular includes the plural, the plural the singular, the words "and" and "or"
are used in the conjunctive or disjunctive as the sense and circumstances may
require and the word "including" means "including, but not limited to." Unless
otherwise stated in this Agreement, in the computation of a period of time from
a specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each means "to but excluding."
ARTICLE XXVII
Further Agreements
The Seller and the Purchaser each agree to execute and deliver to the
other such reasonable and appropriate additional documents, instruments or
agreements as may be necessary or appropriate to effectuate the purposes of this
Agreement.
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IN WITNESS WHEREOF, the Purchaser and the Seller have caused their
names to be signed hereto by their respective officers thereunto duly
authorized, all as of the date first written above.
HEADLANDS MORTGAGE SECURITIES
INC., as Purchaser
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▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Vice President
HEADLANDS MORTGAGE COMPANY,
as Seller
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Executive Vice President
[Mortgage Loan Purchase Agreement]
EXHIBIT A
FORM OF NON-NEGOTIABLE HEADLANDS MORTGAGE
SECURITIES INC. PROMISSORY NOTE
September __, 1999
EXCEPT TO THE EXTENT PROVIDED IN THE PURCHASE AGREEMENT REFERRED TO BELOW, THIS
PROMISSORY NOTE AND ANY INTEREST REPRESENTED HEREBY SHALL NOT BE TRANSFERRED,
ASSIGNED, EXCHANGED, CONVEYED, PLEDGED, HYPOTHECATED OR OTHERWISE THE SUBJECT OF
THE GRANT OF A SECURITY INTEREST AND ANY ATTEMPT TO TRANSFER, ASSIGN, EXCHANGE,
CONVEY, PLEDGE, HYPOTHECATE OR GRANT A SECURITY INTEREST IN THIS PROMISSORY NOTE
OR ANY INTEREST REPRESENTED HEREBY SHALL BE VOID AND OF NO EFFECT.
For VALUE RECEIVED, the undersigned, HEADLANDS MORTGAGE SECURITIES INC., a
Delaware corporation (the "Purchaser"), promises to pay to HEADLANDS MORTGAGE
COMPANY, a California corporation (the "Seller"), on the terms and subject to
the conditions set forth herein and in the Purchase Agreement referred to below,
the aggregate unpaid Purchase Price of all assets purchased and to be purchased
by the Purchaser pursuant to the Purchase Agreement, provided that such amount
shall in no event exceed [$__________]. Such amount as shown in the records of
the Seller will be rebuttable presumptive evidence of the principal amount owing
under this Note.
1. Purchase and Sale Agreement. This Note is the Purchaser Note
described in, and is subject to the terms and conditions set forth in, that
certain Mortgage Loan Purchase Agreement dated as of September 1, 1999 (as the
same may be amended, supplemented, restated or otherwise modified in accordance
with its terms, the "Purchase Agreement"), between the Seller and the Purchaser.
Reference is hereby made to the Purchase Agreement for a statement of certain
other rights and obligations of the Purchaser and the Seller.
2. Definitions. Capitalized terms used (but not defined) herein have
the meanings ascribed thereto in the Purchase Agreement. In addition, as used
herein, the following terms have the following meanings:
"Bankruptcy Proceedings" has the meaning set forth in clause (a) of
paragraph 7 hereof."
"Final Maturity Date" means the date that falls one year and one day
after the Termination Date.
"Junior Liabilities" means all obligations of the Purchaser to the
Seller under this Note and under all similar Notes issued by the Purchaser to
the Seller in connection with any previous or future securitization
transactions.
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"Senior Liabilities" means all obligations of the Purchaser to the
Trust and any other obligations of the Purchaser arising under or in connection
with the Sale and Servicing Agreement, howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent, now or thereafter existing,
or due or to become due on or before the Final Maturity Date.
"Subordination Provisions" means, collectively, clauses (a) through
(i) of paragraph 7 hereof.
3. Interest. Subject to the Subordination Provisions and paragraph 10
hereof, the Purchaser promises to pay interest on the aggregate unpaid principal
amount of this Note outstanding on each day, at a variable rate equal to the
rate publicly announced by the Indenture Trustee from time to time as its "prime
lending rate."
4. Interest Payment Dates. Subject to the Subordination Provisions,
paragraph 10 hereof and Section 10.02 of the Purchase Agreement, the Purchaser
shall pay accrued interest on this Note on each Payment Date and on the Final
Maturity Date. The Purchaser also shall pay accrued interest on the principal
amount of each prepayment hereof on the date of each such prepayment.
5. Basis of Computation. Interest accrued hereunder shall be computed
for the actual number of days elapsed on the basis of a 360-day year.
6. Principal Payment Dates. Subject to the Subordination Provisions,
any unpaid principal of this Note shall be paid on the Final Maturity Date (or,
if such date is not a Business Day, the next succeeding Business Day). Subject
to the Subordination Provisions, paragraph 10 hereof and Section 10.02 of the
Purchase Agreement, the principal amount of and accrued interest on this Note
may be prepaid on any Business Day without premium or penalty.
7. Subordination Provisions. The Purchaser covenants and agrees, and
the Seller, by its acceptance of this Note, likewise covenants and agrees, that
the payment of all Junior Liabilities is hereby expressly subordinated in right
of payment to the payment and performance of the Senior Liabilities to the
extent and in the manner set forth in the following clauses of this paragraph 7:
(a) (i) In the event of any dissolution, winding up, liquidation,
readjustment, reorganization or other similar event relating to the Purchaser,
whether voluntary or involuntary, partial or complete, and whether in
bankruptcy, insolvency, receivership or other similar proceedings, or upon an
assignment for the benefit of creditors, or any other marshalling of the assets
and liabilities of the Purchaser or any sale of all or substantially all of the
assets of the Purchaser except pursuant to the Sale and Servicing Agreement
(such proceedings being herein collectively called "Bankruptcy Proceedings"),
and (ii) on and after the occurrence of an Event of Default, the Senior
Liabilities shall first be paid and performed in full and in cash before the
Seller shall be entitled to receive and to retain any payment or distribution in
respect of the Junior Liabilities. In order to implement the foregoing: (x) all
payments and distributions of any kind or character in respect of the Junior
Liabilities to which the Seller would be entitled except for this clause (a)
shall be made directly to the Indenture Trustee (for the benefit of the
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Noteholders); and (y) the Seller hereby irrevocably agrees that the Indenture
Trustee (on behalf of the Noteholders), in the name of the Seller or otherwise,
may demand, ▇▇▇ for, collect, receive and receipt for any and all such payments
or distributions, and file, prove and vote or consent in any such Bankruptcy
Proceedings with respect to any and all claims of the Seller relating to the
Junior Liabilities, in each case until the Senior Liabilities shall have been
paid and performed in full and in cash.
(b) following the occurrence of any of the events described in
clause (a)(i) or (ii), in the event that the Seller receives any payment or
other distribution of any kind or character from the Purchaser or from any other
source whatsoever, in respect of the Junior Liabilities, such payment or other
distribution shall be received in trust for the Indenture Trustee and shall be
turned over by the Seller to the Indenture Trustee (for the benefit of the
Noteholders) forthwith. All payments and distributions received by the Indenture
Trustee in respect of this Note, to the extent received in or converted into
cash, may be applied by the Indenture Trustee (for the benefit of the
Noteholders) first to the payment of any and all reasonable expenses (including
reasonable attorneys' fees and legal expenses) paid or incurred by the Indenture
Trustee or the Noteholders in enforcing these Subordination Provisions, or in
endeavoring to collect or realize upon the Junior Liabilities, and any balance
thereof shall, solely as between the Seller and the Noteholders, be applied by
the Indenture Trustee toward the payment of the Senior Liabilities in a manner
determined by the Indenture Trustee to be in accordance with the Indenture; but
as between the Purchaser and its creditors, no such payments or distributions of
any kind or character shall be deemed to be payments or distributions in respect
of the Senior Liabilities.
(c) Upon the final payment in full and in cash of all Senior
Liabilities, the Seller shall be subrogated to the rights of the Indenture
Trustee to receive payments or distributions from the Purchaser that are
applicable to the Senior Liabilities until the Junior Liabilities are paid in
full.
(d) These Subordination Provisions are intended solely for the
purpose of defining the relative rights of the Seller, on the one hand, and the
Indenture Trustee (on behalf of Noteholders), on the other hand. Nothing
contained in these Subordination Provisions or elsewhere in this Note (subject
to paragraph 10 hereof) is intended to or shall impair, as between the
Purchaser, its creditors (other than the Noteholders) and the Seller, the
Purchaser's obligation, which is unconditional and absolute, to pay the Junior
Liabilities as and when the same shall become due and payable in accordance with
the terms hereof (subject to paragraph 10 hereof) and of the Purchase Agreement
or to affect the relative rights of the Seller and creditors of the Purchaser
(other than the Noteholders).
(e) The Seller shall not, until the Senior Liabilities have been
finally paid and performed in full and in cash, (i) cancel, waive, forgive,
transfer or assign, or commence legal proceedings to enforce or collect, or
subordinate to any obligation of the Purchaser, howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, or now or
thereafter existing, or due or to become due (other than the Senior
Liabilities), the Junior Liabilities or any rights in respect hereof or (ii)
convert the Junior Liabilities into an equity interest in the Purchaser, unless,
in the case of each of clauses (i) and (ii) above, the Seller shall have
received the prior written consent of the Indenture Trustee and the Insurer in
each case.
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(f) The Seller shall not, except without the advance written consent
of the Indenture Trustee and the Insurer, commence, or join with any other
Person in commencing, any Bankruptcy Proceedings with respect to the Purchaser
until at least one year and one day have passed since the Termination Date.
(g) If, at any time, any of the payment (in whole or in part) made
with respect to any Senior Liabilities is rescinded or must be restored or
returned by the Indenture Trustee or Noteholders (whether in connection with any
Bankruptcy Proceedings or otherwise), these Subordination Provisions shall
continue to be effective or shall be reinstated, as the case may be, as though
such payment had not been made.
(h) The Indenture Trustee (on behalf of Noteholders) may, from time
to time, with the consent of the Insurer without notice to the Seller, and
without waiving any of its rights under these Subordination Provisions, take any
or all of the following actions: retain or obtain an interest in any property to
secure any of the Senior Liabilities; (ii) retain or obtain the primary or
secondary obligations of any other obligor or obligors with respect to any of
the Senior Liabilities; (iii) extend or renew for one or more periods (whether
or not longer than the original period), alter or exchange any of the Senior
Liabilities, or release or compromise any obligation of any nature with respect
to any of the Senior Liabilities; (iv) amend, supplement, amend and restate, or
otherwise modify the Sale and Servicing Agreement or any related document; and
(v) release its security interest in or surrender, release or permit any
substitution or exchange for all or any part of any rights or property securing
any of the Senior Liabilities, or extend or renew for one or more periods
(whether or not longer than the original period) or release, compromise, alter
or exchange any obligations of any nature of any obligor with respect to any
such rights or property.
(i) The Seller hereby waives: (i) notice of acceptance of these
Subordination Provisions by any of the Noteholders, (ii) notice of the
existence, creation, non-payment or non-performance of all or any of the Senior
Liabilities; and (iii) all diligence in enforcement, collection or protection
of, or realization upon, the Senior Liabilities, or any thereof, or any security
therefor.
(j) These Subordination Provisions constitute a continuing offer
from the Purchaser to all Persons who become the holders of, or who continue to
hold, Senior Liabilities; and these Subordination Provisions are made for the
benefit of the Noteholders, and the Indenture Trustee may proceed to enforce
such provisions on behalf of each of such Persons.
8. General. No failure or delay on the part of the Seller in exercising
any power or right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power or right preclude any other or
further exercise thereof or the exercise of any other power or right. No
amendment, modification or waiver of, or consent with respect to, any provision
of this Note shall in any event be effective unless (a) the same shall be in
writing and signed and delivered by the Purchaser and the Seller, and (b) all
consents required for such actions under the Purchase Agreement and the Sale and
Servicing Agreement shall have been received by the appropriate Persons. The
rights and remedies granted hereunder to the Indenture Trustee and the
Noteholders are subject to exercise as provided in the Purchase Agreement and
the Sale and Servicing Agreement.
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9. Limitation on Interest. Notwithstanding anything in this Note to the
contrary, the Purchaser shall never be required to pay unearned interest on any
amount outstanding hereunder, and shall never be required to pay interest on the
principal amount outstanding hereunder at a rate in excess of the maximum
interest rate that may be contracted for, charged or received without violation
of applicable federal or state law.
10. Acknowledgment. The Seller acknowledges and agrees that it has no
rights to payment under this Note, and will not make any claim for payment
hereunder, unless funds are available for payment by the Purchaser in excess of
amounts due and payable by it at the time under the Sale and Servicing Agreement
and under all similar notes issued by the Purchaser to the Seller in connection
with any previous or future securitizations.
11. No Negotiation. This Note is not negotiable.
12. Governing Law. THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE
UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES.
13. Captions. Paragraph captions used in this Note are provided solely
for convenience of reference only and shall not affect the meaning or
interpretation of any provision of this Note
HEADLANDS MORTGAGE SECURITIES
INC.
By:_________________________________
Name:_______________________________
Title:______________________________
SCHEDULE I
MORTGAGE LOAN SCHEDULE
[On file with ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP]