FLOW
WAREHOUSING CREDIT AND SECURITY AGREEMENT
between
FRANKLIN
CREDIT MANAGEMENT CORPORATION
Borrower
and
SKY
BANK
Lender
Dated
as of August 11, 2006
FLOW
WAREHOUSING
CREDIT
AND
SECURITY
AGREEMENT
THIS
FLOW
WAREHOUSING
CREDIT
AND
SECURITY
AGREEMENT
(the
“Agreement” )
is entered into as of August 10, 2006, between Franklin Credit
Management Corporation, a New York corporation (the “
Company ”
or the “
Borrower ”),
having its principal office at 101 Hudson Street, Jersey City, NJ
07302, and Sky Bank, an Ohio banking corporation (the
“
Bank ”),
having an office at 110 East Main Street, Salineville, Ohio
43945.
WHEREAS
,
the Company has requested the Bank, and the Bank is willing,
to extend a revolving warehousing line of credit to the
Company to finance the purchasing of residential mortgage
loans in mortgage loan portfolio pools of less than
$1,500,000, in the aggregate, at the time of purchase, and the
parties desire to set forth herein the terms and conditions
under which Advances under the revolving warehousing line of
credit shall be made and security provided for the repayment
thereof;
NOW
,
THEREFORE
,
the parties hereto hereby agree as follows:
ARTICLE
I
DEFINITIONS
Section 1.1.
Defined Terms .
Capitalized terms defined below or elsewhere in this Agreement
(including the Exhibits hereto) shall have the following
meanings:
“Advance” means
a disbursement by the Bank under the Commitment, including
readvances of funds previously advanced to the Company and repaid
to the Bank.
“Advance Request” has
the meaning set forth in Section 2.2 hereof.
“Affiliate” has
the meaning set forth in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act.
“Agreement” means
this FLOW Warehousing Credit and Security Agreement, either as
originally executed or as it may from time to time be supplemented,
modified or amended.
“Bank” has
the meaning set forth in the first paragraph of this
Agreement.
“Business Day” means
any day excluding Saturday, Sunday and any day which is a legal
holiday for banks under the laws of the State of Ohio.
“Collateral” has
the meaning set forth in Section 3 hereof.
“Collateral Documents” means
all Mortgage Loan Documents evidencing or securing or pertaining to
any Pledged Mortgage Loan, whether now existing or hereafter
arising, and being generally described on
Exhibit C attached
hereto. The term Collateral Documents shall also include any
endorsements or assignments of such Mortgage Loan Documents to the
Company. The Bank shall have the right, on not less than thirty
(30) Business Days’ prior written notice to the Company to
modify
Exhibit C to
conform to current legal requirements or Bank practices, and, as so
modified, said Exhibits shall be deemed a part hereof.
“Commitment” has
the meaning set forth in Section 2.1 hereof.
“Company” has
the meaning set forth in the first paragraph of this
Agreement.
“Conventional Mortgage Loan” means
a Mortgage Loan other than a FHA-insured or VA-guaranteed Mortgage
Loan.
“Custodian” means
the organization, if any, which holds Mortgage Loan Documents under
any custodial agreement relating to pooled Mortgage Loans on the
Company and Bank’s behalf.
Custodial Agreement” means
any custodial agreement entered into by Bank, Company and the
Custodian, if any .
“Debt” means,
with respect to any Person, at any date (a) all indebtedness
or other obligations of such Person which, in accordance with GAAP,
would be included in determining total liabilities as shown on the
liabilities side of a balance sheet of such Person at such date;
(b) all indebtedness or other obligations of such Person for
borrowed money or for the deferred purchase price of property or
services; (c) all indebtedness or other obligations of any
other Person for borrowed money or for the deferred purchase price
of property or services in respect of which such Person is liable,
contingently or otherwise, to pay or advance money or property as
guarantor, endorser, or otherwise (except as endorser of negotiable
instruments for collection in the ordinary course of business), or
which such Person has agreed to purchase or otherwise acquire; and
(d) all indebtedness for borrowed money or for the deferred
purchase price of property or services secured by a Lien on any
property owned or being purchased by such Person (even though such
Person has not assumed or otherwise become liable for the payment
of such indebtedness).
“Default” means
the occurrence of any event or existence of any condition which,
but for the giving of notice, the lapse of time, or both, would
constitute an Event of Default.
“Event of Default” means
any of the conditions or events set forth in Section 8.1
hereof.
“Exchange Act” means
the Securities Exchange Act of 1934, as amended from time to time,
and any successor statute.
“FHA” means
The Federal Housing Administration of the United States Department
of Housing and Urban Development and any successor
thereto.
“FHLMC” means
The Federal Home Loan Mortgage Corporation and any successor
thereto.
“Floating Rate” has
the meaning set forth in Section 2.4 hereof.
“FNMA” means
The Federal National Mortgage Association and any successor
thereto.
“GAAP” means
generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or
in such other statements by such other entity as may be approved by
a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of
determination.
“GNMA” means
Government National Mortgage Association or any successor
thereto.
“HUD” means
the United States Department of Housing and Urban Development or
any successor thereto.
“Indemnified Liabilities” has
the meaning set forth in Section 9.3 hereof.
“Index” has
the meaning set forth in Section 2.4 hereof.
“Insurer” means
FHA, VA or a private mortgage insurer, as applicable.
“Internal Revenue Code” means
the Internal Revenue Code of 1986, or any subsequent federal income
tax law or laws, as any of the foregoing have been or may from time
to time be amended.
“Investor” means
a third party financially responsible institution purchasing
Mortgage Loans from the Company pursuant to a Purchase
Commitment.
“Lien” means
any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale
or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security
interest).
“Lock-box Terms” has
the meaning set forth in
Section 3.5 hereof.
“Margin Stock” has
the meaning assigned to that term in Regulation U of the Board
of Governors of the Federal Reserve System as in effect from time
to time.
“Mortgage” means
either (1) a first-lien mortgage, deed of trust, security deed
or similar instrument on improved real property; or (2) a
second-lien mortgage, deed of trust, security deed or similar
instrument on improved real property.
“Mortgage Loan” means
any loan evidenced by a Mortgage Note, including any modifications
thereof. A Mortgage Loan, unless otherwise expressly stated herein,
means a Residential Mortgage Loan.
“Mortgage Loan Documents” means
the Mortgage, Mortgage Note, credit and closing packages,
disclosures, and all other files, records and documents evidencing,
securing, guaranteeing or otherwise arising in connection with or
relating to any Pledged Mortgage Loan, and including, without
limitation, (to the extent applicable) those documents listed
on
Exhibit C .
“Mortgage Note” means
a note secured by a Mortgage and evidencing a Mortgage
Loan.
“
Net Worth” means,
at any date of determination, (a) Consolidated total assets of the
Company and its Subsidiaries at such date less (b) the sum of (i)
Consolidated total liabilities of the Company and its Subsidiaries
at such date and (ii) the liquidation value of any redeemable
preferred stock of the Company and its Subsidiaries at such date,
in each case as determined in accordance with GAAP.
“Note” has
the meaning set forth in Section 2.3 hereof.
“Notices” has
the meaning set forth in Section 11.3.
“Officers’ Certificate” means
a certificate executed on behalf of the Company by its vice
president, cashier or other appropriate officer.
“Person” means
and includes natural persons, corporations, limited liability
companies, partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust land trusts, business
trusts or other organizations, whether or not legal entities, and
companies, governmental agencies and political subdivisions
thereof.
“Pledged Mortgage Loans” has
the meaning set forth in Section 3.1 hereof.
“
Post-Default Rate ”
means in respect of any day (a “
Post-Default Day ”)
an Event of Default has occurred and is continuing hereunder, a
rate per annum on a 360 day per year basis equal to 2% per annum
plus the applicable Floating Rate on such Post-Default
Day.
“Covered Loan” means (a) a
“high
cost mortgage” as defined in Section 152(a) of the Home
Ownership and Equity Protection Act of 1994; (b) a “high cost
home loan” or a “predatory loan” within the
meaning of any corresponding state or local laws, including but not
limited to, the Georgia Fair Lending Act, the New York State
Anti-Predatory Lending Law, and the New Jersey Homeownership
Security Act; (c) any loan which under any other state or local law
or ordinance could result in such loan being deemed to be
unenforceable or could result in the refund or recession of all
principal and/or interest paid or to be paid under such loan; and
(d) any loan which under a state or local law may otherwise subject
the originator and/or holder of such loan to civil or criminal
sanctions related to the origination, holding, servicing, and/or
transfer of such loan.
“Purchase Commitment” means
a written commitment, in form and substance reasonably satisfactory
to the Bank, issued in favor of the Company by an Investor pursuant
to which that Investor commits to purchase one or more Mortgage
Loans, along with the related correspondent or whole loan purchase
agreement by and between the Company and the Investor, in form and
substance reasonably satisfactory to the Bank, governing the terms
and conditions of any such purchases.
“Redemption Amount” has
the meaning set forth in Section 3.3 hereof.
“Residential Mortgage Loan” means
a Mortgage Loan secured by a Mortgage covering improved real
property containing one- to four-family residences, including,
condominiums, and cooperative housing units.
“Subsidiary” means
any corporation, association or other business entity in which more
than fifty percent (50%) of the total voting power or shares of
stock entitled to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or
indirectly, by any Person or one or more of the other Subsidiaries
of that Person or a combination thereof.
“VA” means
the Department of Veterans Affairs and any successor
thereto.
Section 1.2.
Other Definitional Provisions .
(a) Accounting terms not otherwise defined herein shall have
the meanings given them under GAAP.
(b)
Defined
terms may be used in the singular or the plural, as the
context requires.
ARTICLE
II
THE
CREDIT
Section 2.1.
The Commitment .
(a) Subject to the terms and conditions of this Agreement,
including the conditions precedent set forth in Section 4.1 below,
and provided no Default has occurred and is continuing, the Bank
agrees, from time to time during the period from the date hereof to
the expiration date as provided in Section 2.6 hereof, to make
Advances to, or on behalf of, the Company solely for the purchase
of Mortgage Loans in mortgage loan portfolio pools of less than
$1,500,000, in the aggregate, at the time of purchase (and known
between the parties individually as a “Flow
Transaction” and collectively, as the “Flow
Transactions”),
provided the
total aggregate principal amount which is outstanding at any one
time of all such Advances shall not exceed Forty Million Dollars
($40,000,000.00) unless there is a written request by the Company
and subsequent approval by an officer of the Bank to modify this
amount. The obligation of the Bank to make Advances hereunder up to
such limits or the amount to which such limit may be reduced
pursuant to Section 2.7(b) hereof, is hereinafter referred to
as the
“Commitment.” Within
the Commitment, the Company may borrow, repay and
re-borrow.
(b)
Advances
shall be used by the Company solely for the purpose of funding
or financing the purchase of Flow Transaction Mortgage Loans
and shall be made at the request of the Company, in the manner
hereinafter provided in Section 2.2., secured by the
assignment and pledge of such Mortgage Loans to
Bank.
(c)
Unless
otherwise agreed to by Bank at its sole discretion, no Advance
for the purchase of a Mortgage Loan shall exceed (100%) of the
purchase price, inclusive of the transaction fee payable to
Bank and all out of pocket costs incurred by the Company for
the acquisition of such Mortgage Loan.
(d)
Notwithstanding anything to the contrary herein, Advances may
be obtained by the Company for the purpose of repurchasing
Mortgage Loans that were sold by the Company to an Investor,
provided, however, an Advance for such purpose shall be
limited to 98% of the then unpaid principal balance of the to
be repurchased Mortgage Loan, and such Advances shall be
repaid not later than the later of (i) sixty (60) days from
the date of such Advance, or (ii) at the time of and included
with the next refinancing of Advances through a term loan
issued under and pursuant to the Senior Debt Facility provided
such repurchased Mortgage Loan qualifies for refinancing into
the Senior Debt Facility.
Section 2.2.
Procedures for Obtaining Advances .
(a) The Company may obtain an Advance hereunder, subject to
the satisfaction of the conditions set forth in Sections 4.1
hereof, upon compliance with the procedures set forth in this
Section 2.2. Requests for Advances shall be initiated by the
Company by delivering to the Bank a completed and signed request
for an Advance (an
“Advance Request” )
on the then current form therefor approved by the Bank and provided
to the Company. The current form in use by the Bank is set forth
in
Exhibit B hereto.
The Bank shall have the right to revise or supplement approved
forms of Advance Request by giving prior written-notice thereof to
the Company. Bank, in all events, reserves the right to reject any
Loan Request to finance the acquisition of a Covered
Loan.
(b)
The
procedures to be followed by the Company in making an Advance
Request for the purchase of Mortgage Loans, and the documents
relating to the Collateral described in the Advance Request
required to be delivered to the Bank, shall consist of those
set forth in the following described
Exhibit C attached
hereto and hereby made part hereof entitled: Procedures and
Documentation for Warehousing Residential Mortgage
Loans.
The
Bank shall have the right, on not less than thirty (30)
days’ prior written notice to the Company, to modify
said Exhibit(s) to conform to current legal requirements or
requirements set forth by the regulators and independent
certified auditors of the Bank, and, as so modified, said
Exhibit shall be deemed part hereof for any Advance Requests
thereafter delivered.
(c)
Before
funding any Advance, the Bank shall have three (3) Business
Days to examine each Advance Request to be delivered prior to
the Advance, as set forth in
Exhibit C hereto,
and may reject such of them as do not meet the requirements of this
Agreement. Bank, in all events, reserves the right to reject any
Advance Request to finance the purchase of (i) any Mortgage Loan
which in the Bank’s judgment does not comply or did not
comply at the time of origination with any federal or state statute
or regulation applicable to such Mortgage Loan, and/or (ii) any
Covered Loan.
(d)
To
make an Advance, the Bank shall debit this warehousing credit
line account for the amount of the Advance and, unless
otherwise agreed to by the Bank, the Bank shall wire the
proceeds of such Advance to the Company’s operating
account no
. _____________
with the Bank.
(e)
All
Advances under this Agreement shall constitute a single
indebtedness and all of the Collateral shall be security for
the Note and for the performance of all obligations of the
Company to the Bank.
(f)
This Agreement shall be separate from and shall not be subject
to the Senior Credit Facility except as specifically otherwise
provided in this Agreement.
Section 2.3.
Note .
The Company’s obligation to pay the principal of, and
interest on, all Advances made by the Bank shall be evidenced by
the promissory note (the
“Note” )
of the Company dated as of the date hereof substantially in the
form of
Exhibit A attached
hereto. The term
“Note” shall
include all extensions, renewals and modifications of the Note and
all substitutions therefor. All terms and provisions of the Note
are incorporated herein.
Section 2.4.
Interest & Transaction Fees .
(a) The unpaid principal balance of Advances shall bear
interest, payable monthly, on the fifth (5
th )
day of each month, from the date of such Advance until paid in
full, at a floating per annum rate of interest (the “
Floating Rate ”)
from time to time which is fifty (50) basis points less that the
Index. The interest rate charged herein shall be adjusted monthly,
effective on the first (1
st )
day of each month, based upon the Index in effect on the last
Business Day of the then prior month. As used herein, the term
“Index” shall mean the independent index, which is the
Prime Rate as published from time to time in the Money Rates Column
of
The Wall Street Journal .
If more than one such prime rate or a range of prime rates is
published, the highest prime rate will be used when calculating the
Index, and if
The Wall Street Journal ceases
to publish the Prime Rate, Lender and Company will mutually and
reasonably agree upon an independent, replacement source for
determining the Prime Rate when calculating the Index.
Interest
will be calculated on the basis of actual days elapsed over a 360
day year ( 365/360
basis) .
Interest
will be billed monthly and will be due within ten (10) days of the
issuance of the relevant monthly billing statement.
(b)
If an Event of Default has occurred and is continuing
hereunder, the Company shall be obligated to pay to Bank
interest on the outstanding principal balance of outstanding
Advances at a rate per annum equal to the Post-Default Rate
until paid in full or such Event of Default is cured or waived
by the Bank.
(c)
The
record of the dates and amounts of each Advance, the payments
of principal and interest, and applicable interest rates and
other information with respect thereto shall be maintained on
the books and records of the holder of the Note and such
records shall constitute prima facie evidence of the accuracy
of the information so recorded.
Section 2.5.
Principal Payments .
(a) The outstanding principal amount of each Advance shall be
payable in full upon the earliest to occur of (i) the
occurrence of any event described in Section 2.5(c) hereof
with respect to such Advance, (ii) the due date required for
such principal amount upon the expiration or termination of the
Commitment in accordance with and subject to the terms of Section
2.6 below; or (iii) the occurrence of an Event of
Default.
(b)
The
Company shall have the right to prepay the outstanding
Advances in whole or in part, from time to time, without
premium or penalty or advance notice, and in accordance with
and subject to the terms of Section 3.4 herein-below, the
corresponding Pledged Mortgage Loans shall be released from
Bank’s security interest.
(c)
The
Mortgage Loans will be reviewed on a monthly basis and
t he
Company shall be obligated to pay to the Bank, without the
necessity of prior demand or notice from the Bank, and the
Company authorizes the Bank to charge its account for, the
amount of any outstanding Advance against a specific Mortgage
Loan upon the occurrence of any of the following
events:
| |
1.
|
One
hundred twenty (120) calendar days elapse from the date of the
Advance;
|
| |
2.
|
Ten
(10) Business Days elapse from the date the Collateral Documents
relating to a Mortgage Loan against which the Advance was made,
were required to be received by the Bank or the custodian without
the actual receipt thereof; or
|
| |
3.
|
Thirty
(30) calendar days elapse from the date a Collateral Document
relating to a Mortgage Loan against which the Advance was made was
delivered to the Company for correction or completion, without
being returned to the Bank, or such Collateral Documents, upon
examination by the Bank, are found not to be in compliance with the
requirements of this Agreement or the related Purchase Commitment;
or
|
| |
4.
|
Upon
sale of the Mortgage Loan; or
|
| |
5.
|
Upon
a determination by Bank within thirty (30) days of the date of the
Advance that the Mortgage Loan with respect to which such Advance
was made is (a) a fraudulent loan, or (b) does not comply, in a
material manner, with the requirements of this Agreement, provided,
however, in such event, Company shall have sixty (60) days from the
date of notification to Company of such determination to either
re-pay such Advance to Bank, or in the event of subpart (b), to
cure such defect; or
|
| |
6.
|
Upon
a determination by the regulators or auditors of either the Bank or
the Company, that the Mortgage Loan is a predatory loan, as defined
in any applicable federal, state or local statute or
regulation
|
(d)
Notwithstanding
the foregoing, any such Advance related to a Mortgage Loan
meeting criteria 1 above may, at the option of Company, be
refinanced through a term loan issued under and pursuant to
the related
Master Credit and Security Agreement dated
October 13, 2004, between the Bank, certain now existing and
hereafter arising subsidiaries of the Company (individually, a
“
Company Subsidiary ”
and collectively and severally, the “
Company Subsidiaries ”),
and the Company (the “
Senior Credit Facility ”)
(subject to the terms, conditions, covenants and any amendments
thereof and provided that term loan advances are then available
under such Senior Credit Facility), provided, further however, in
the event that such Advance relates to a Mortgage Loan that has
been originated with the specific intent to sell such Mortgage Loan
to a 3
rd party,
not more than ninety-eight percent (98%) of such advance may be
refinanced with funds from said Senior Credit
Facility.
(e)
Upon
making such payment to the Bank as outlined in 2.5(c) above,
the Company shall be deemed to have redeemed such Mortgage
Loan from pledge (other than in the event of a re-finance
under the Senior Credit Facility), and the Collateral
Documents relating thereto shall be promptly released by the
Bank to the Company or to the applicable Investor. The Bank
agrees to take such other steps reasonably requested by the
Company in connection with such release.
Section 2.6.
Expiration and/or Termination of Commitment
. (a) Unless terminated earlier as permitted hereunder, the
Commitment shall expire of its own term, and without the necessity
of action by the Bank,
on August 11, 2007 .
Notwithstanding anything to the foregoing, for any Advance made by
the Bank prior to the termination date, the Company shall still
have one hundred twenty (120) days from the date of the Advance to
pay the Bank the amount of any outstanding Advance or the Company
may, at its option, re-finance any such Outstanding Advance through
a term loan issued under the Senior Credit Facility.
(b)
The
Bank shall have the right, without cause, at any time to
terminate the Agreement on not less than sixty (60)
days’ prior written notice to the Company. During such
sixty (60) day notice period, Company may continue to obtain
Advances in accordance with the terms of this Agreement, and
upon expiration of such sixty (60) day notice period, as set
forth above, Company shall continue to have one hundred twenty
(120) days from the date of each Advance to pay the Bank the
amount of any then outstanding Advances or the Company may, at
its option, re-finance any such Outstanding Advances through a
term loan issued under the Senior Credit
Facility.
(c)
The
Bank shall also have the right to terminate this Agreement and
the line of credit extended to the Company pursuant to the
terms of this Agreement, upon any adverse material change in
the Company’s financial condition as defined by the Bank
in its reasonable discretion during the term of this Agreement
upon written notice to the Company. For purposes of
this
Section 2.6(c) ,
the term “adverse material change” means
Company’s failure to comply with and maintain during the term
of this Agreement any of the Financial Requirements set forth
under
Section 6.15 .
Notwithstanding the foregoing, the Company shall continue to have
one hundred twenty (120) days from the date of each Advance to pay
the Bank the amount of any then outstanding Advances or, at the
discretion of the Bank, may re-finance any such Outstanding
Advances through a term loan issued under the Senior Credit
Facility.
(d)
The
Bank shall have the right from time to time and in its sole
discretion, to extend the term of this Agreement with prior
written notice to the Company. The length of any such
extension shall also be determined in the Bank’s sole
discretion. Such extension may be made subject to the
renegotiation of the terms hereunder and to any other such
conditions as the Bank may deem necessary. Under no
circumstances shall such an extension by the Bank be
interpreted or construed as the Bank’s forfeiture of any
of its rights, entitlements or interest created hereunder. The
Company acknowledges and understands that the Bank is under no
obligation whatsoever to extend the term of this Agreement
beyond its expiration date as originally stated in this
Agreement, or if extended, to further extend the expiration
date beyond any such extension thereof.
Section 2.7.
Method of Making Payments; Reductions in Commitment
.
(a) Except as otherwise specifically provided herein, all
payments hereunder shall be received by the Bank on the date when
due and shall be made in lawful money of the United States of
America in immediately available funds at the office of the Bank,
at
East Liverpool, Ohio, P.O. Box 5399
,
zip code 43920 ,
or at such other place as the Bank from time to time shall
designate. Whenever any payment to be made hereunder or under the
Note shall be stated to be due on a day which is not a Business
Day, the due date thereof shall be extended to the next succeeding
Business Day, and, with respect to payments of principal, the
interest thereon shall be payable at the applicable rate during
such extension. Funds received by the Bank after 4:00 p.m. (East
Liverpool, Ohio, time) on a Business Day shall be deemed to have
been paid by the Company on the next succeeding Business
Day.
(b)
The
Company shall have the right, at any time and from time to
time, effective as of the first day of any calendar month, to
terminate in whole or permanently reduce in part, without
premium or penalty, the amount of the Commitment in excess of
the then outstanding principal amount of all Advances
hereunder. The Company shall give written notice to the Bank
designating the date of such termination or reduction not less
than five (5) Business Days’ prior to the date such
termination or reduction is to take effect, and the amount of
any partial reduction of the Commitment shall be in an
aggregate minimum amount of One Hundred Thousand Dollars
($100,000.00) or integral multiples of One Hundred Thousand
Dollars ($100,000.00) in excess of that amount.
Section 2.8.
Late Payment Fees .
In the event the Company fails to make any payment (whether of
principal or interest) on the date such payment is due and payable
hereunder or under the Note, and such failure continues for more
than fifteen (15) days after notice from the Bank, the Company
shall pay to the Bank, upon demand therefor, a late payment fee
equal to
five percent (5%) of
the amount of such payment or
One Thousand Dollars ($1,000.00)
, whichever is greater.
Section 2.9.
Net Payments .
All payments with respect to any Advance shall be made without
offset or counterclaim and free from any present or future taxes,
levies, imports, duties or other similar charges of whatsoever
nature imposed by any government or any political subdivision or
taxing authority hereof, other than any taxes on or measured by the
net income of the Bank.
Section 2.10.
Commitment & Transaction Fees. The
Company shall pay the Bank the transaction fee equal to
Fifty Dollars ($50.00) for
each Advance obtained
under
the terms of this Agreement which fee shall be billed monthly and
will be due within ten (10) days of the issuance of the relevant
monthly billing statement. In addition, so long as this Agreement
is in effect, the Company shall annually pay the Bank a commitment
fee computed as follows:
Ten Thousand Dollars ($10,000.00)
multiplied
by a fraction, the numerator of which is equal to the average
monthly un-borrowed amount of the Commitment during the previous
year, and the denominator of which is equal to the Commitment. The
commitment fee shall be payable by the Company to the Bank within
thirty (30) days of the anniversary date of this Agreement. The
Bank shall provide the Company with an annual statement showing its
computation of the average daily un-borrowed amount of the
Commitment for the previous year. Unless the Company contests the
accuracy of the Bank’s statement within ten (10) days of
receipt, the Bank may debit this credit line account for the amount
of the commitment fee.
ARTICLE
III
COLLATERAL
Section 3.1.
Assignments and Grant of Security Interest .
In consideration of the Commitment, and as security for (i) the
payment of the Note and (ii) payment and performance of all of the
Company’s obligations hereunder, the Company hereby grants to
the Bank a security interest in all rights and interest of the
Company in and to the following described property (collectively,
the
“Collateral” ):
(a)
All
Mortgage Loans, including all Mortgage Notes and Mortgages
evidencing or securing such Mortgage Loans and all other
related Mortgage Loan Documents which from time to time are
delivered, or caused to be delivered, or which heretofore have
been delivered to the Bank (including delivery to a third
party on behalf of the Bank) pursuant hereto or in respect of
which an Advance has been made by the Bank or which is
hereafter made by the Bank hereunder (the
“Pledged Mortgage Loans” );
the Company shall deliver a schedule, in form and detail acceptable
to Bank, of the Mortgage Loan(s) being purchased from the proceeds
of such Advance.
(b)
All
mortgage insurance and all commitments issued by Insurers to
insure or guarantee any Pledged Mortgage Loan; all Purchase
Commitments held by the Company covering the Pledged Mortgage
Loans and all proceeds resulting from the sale thereof to
Investors pursuant thereto; and all personal property,
contract rights, collection and servicing rights and servicing
fees and income, accounts and general intangibles of
whatsoever kind relating to the Pledged Mortgage Loans; said
Insurer commitments and the Purchase Commitments, and all
other documents or instruments delivered to the Bank in
respect of the Pledged Mortgage Loans, and including, without
limitation, the right to receive all insurance proceeds and
condemnation awards which may be payable in respect of the
premises encumbered by any Pledged Mortgage Loan;
(c)
All
right, title and interest of the Company in and to all files,
surveys, certificates, correspondence, appraisals, computer
programs, tapes, discs, cards, accounting records, information
and data of the Company relating to the Pledged Mortgage
Loans;
(d)
All
rights, but not any obligations or liabilities under all
purchase agreements relating to the Company’s
acquisition of Pledged Mortgage Loans.
(e)
All
property of the Company, in any form or capacity now or at any
time hereafter in the possession or direct or indirect control
of the Bank relating to the Pledged Mortgage Loans (including
possession by a parent company, affiliate or subsidiary of the
Bank);
(f)
All
rights (but not any obligations or liabilities) of the Company
under the Custodial Agreements; and
(g)
All
replacements, products and proceeds of any and all of the
foregoing.
In
addition to the foregoing grant of a security interest to the
Bank in the Collateral, the Company hereby assigns and
delivers to the Bank and grants to Bank a security interest in
all of the following: (i) the Company’s right (but
not any liabilities of the Company) under all Purchase
Commitments now held or hereafter acquired by the Company
covering Pledged Mortgage Loans and all proceeds resulting
from the sale of Pledged Mortgage Loans pursuant thereto; and
(ii) all rights of the Company (but not any liabilities
of the Company) with respect to Investors to the extent
related to the Pledged Mortgage Loans. Upon the request of the
Bank, the Company shall execute any further document or
instrument reasonably requested by the Bank to further
evidence or effectuate the assignments set forth in this
subparagraph.
Without
limiting the foregoing, it is the express intention of the
Company, that the security interest granted above is and shall
be a continuing security interest covering all now present (or
then present), and all future obligations of the Company to
Bank hereunder or arising hereunder; and that the security
interests granted herein by the Company shall remain in effect
until all indebtedness secured hereby has been paid in full
and the Commitment has expired or has been otherwise
terminated.
Upon
the request of the Bank, the Company shall execute any further
document or instrument reasonably requested by the Bank to
further evidence or effectuate the assignments and security
interests set forth in this Section. Furthermore, the Company
(a) hereby authorizes Bank to sign (if required) and file
financing statements at any time with respect to any of the
Collateral, without such financing statements being executed
by, or on behalf of, the Company, (b) shall, at any time on
request of Bank, execute or cause to be executed financing
statements in respect of any Collateral, and (c) shall
reasonably cooperate to provide any information reasonably
required by the Bank in connection with the filing of
financing statements with respect to the Collateral. The
Company agrees to pay all filing fees, including fees for
filing continuation statements in connection with such
financing statements, and to reimburse Bank for all costs
incurred in connection therewith.
Section 3.2.
Reserved.
Section 3.3.
Right of Redemption from Pledge .
Provided no Default or Event of Default has occurred and is
continuing, the Company may redeem a Mortgage Loan from pledge, by
either paying, or causing an Investor to pay, to the Bank, for
application to prepayment of the principal balance of the Note, an
amount (the
“Redemption Amount” )
equal to amount of the Advance made with respect to such Mortgage
Loan, which is still outstanding. To determine the exact amount of
an Advance for an individual Mortgage Loan under this Section 3.3,
the Bank will be provided, prior to making an Advance, with loan
level pricing detailing the percentage price to be paid, (rounded
to the nearest tenth of one percent) and the proposed funding cost
to the Bank (rounded to the nearest one dollar) for each Mortgage
Loan proposed for purchase by the Company.
Section 3.4.
Collection and Servicing Rights .
(a) The Company agrees that the “Lock Box Terms” set
forth on
Exhibit F shall
be utilized by Company for the receiving, collecting, and
processing of all sums payable to the Company in respect of the
Collateral (the “
Lock-box Terms ”).
Under that Lock-box Terms the Bank shall be entitled to receive all
sums payable to the Company in respect of the Collateral. All
amounts payable to the Company for the purchase by any Investor of
any Pledged Mortgage Loans shall also be paid directly to the Bank.
The Company shall instruct each Pledged Mortgage Loan obligor to
direct all payments due under the Pledged Mortgage Loans, and shall
direct each Investor to pay the amounts payable for the purchase of
such Pledged Mortgage Loans, directly to the Lockbox address at the
Bank. Without limiting the foregoing, Following the occurrence of
any Event of Default, the Bank may, at any time thereafter, upon
written notice to the Company, be entitled to service, receive and
collect all sums payable to the Company in respect of the
Collateral, and in such case: (i) the Bank in its discretion
may, in its own name or in the name of the Company or otherwise,
demand, sue for, collect or receive any money or property at any
time payable or receivable on account of or in exchange for any of
the Collateral, but shall be under no obligation to do so; and
(ii) all amounts so received and collected by the Bank shall
be held by it as part of the Collateral.
(b)
The
Bank shall have the right on not less than thirty (30) days
prior notice to the Company to reasonably modify the Lock-box
Terms to conform to then current Bank practices upon mutual
agreement of Company, not to be unreasonably withheld, and/or
banking regulations.
Section 3.5.
Return of Collateral at End of Commitment .
If (i) the Commitment shall have expired or been terminated,
and (ii) no Advances, interest or other amounts evidenced by
the Note or due under this Agreement shall be outstanding and
unpaid, the Bank shall promptly deliver or release all Collateral
in its possession to the Company. The Bank shall also execute and
deliver such assignments and other instruments and documents
reasonably requested by the Company to vest title in the Collateral
into the Company. The receipt of the Company for any Collateral
released or delivered to the Company pursuant to any provision of
this Agreement shall be a complete and full acquittance for the
Collateral so returned.
ARTICLE
IV
CONDITIONS
PRECEDENT
Section 4.1.
Advances .
The obligation of the Bank to make Advances under this Agreement
are subject to the following conditions precedent:
(a)
The Bank shall have received the following, all of which must
be satisfactory in form and content to the Bank, in its
reasonable discretion:
(1)
On or before the date hereof, the Note duly executed by the
Company;
(2)
On or before the date hereof of Certified copies of the
Company’s articles of organization and by-laws, and
certificate of good standing dated no less recently than one
(1) month prior to the date of the initial
Advance;
(3)
On or before the date hereof of an original resolution of the
board of directors of the Company, certified as of the date of
this Agreement by its secretary, authorizing the execution,
delivery and performance of this Agreement and the Note, and
all other instruments or documents to be delivered by the
Company pursuant to this Agreement;
(4)
On or before the date hereof of a true and complete copy of
the
audited financial
statements of the Company for the most recent fiscal year-end
containing a balance sheet and related statements of income and
retained earnings (the
“Statement Date” )
and changes in financial position for the period ended on the
Statement Date, all prepared in accordance with GAAP;
(5)
On or before the date hereof of copies of the certificates,
documents or other written instruments which evidence the
Company’s eligibility described in
Section 5.13 hereof,
all in form and substance satisfactory to the Bank;
(6)
On or before the date hereof of Copies of the Company’s
errors and omissions insurance policy or mortgage impairment
insurance policy and blanket bond coverage policy, or
certificates in lieu of policies, all in form and content
satisfactory to the Bank, showing compliance by the Company;
and
(7)
On or before the date hereof of a Power of Attorney to indorse
negotiable instruments in the form of
Exhibit E .
(8)
On or before the date hereof of The Bank shall have received
evidence satisfactory to it as to the due filing and recording
in all appropriate offices of all financing statements and
other instruments as may be necessary to perfect the security
interest of the Bank in the Collateral under the Uniform
Commercial Code of the State of New York or other applicable
law.
(9)
Prior to each Advance, (a) the Bank shall
have received a true and complete copy of each of the
following: (i) the purchase agreement relating to the
acquisition of the Mortgage Loan(s) being acquired with the
Advance, and the assignment documents assigning such Mortgage
Loan(s) to the Company or, where applicable, the Mortgage
Identification Number (“MIN”) for each Mortgage
Loan registered on the MERS® System to track the transfer
of ownership and/or servicing rights to the Company; and
evidence that such assignment to Borrower has been
appropriately registered on the MERS® System; and (ii) a
schedule, in form and detail acceptable to Bank of the
Mortgage Loan(s) being purchased; and (b) the
Company shall have delivered to the Bank an Advance Request,
and shall have delivered to the Bank or the Custodian the
Collateral Documents called for under this Agreement, and
shall have satisfied the procedures set forth in, Sections 2
and the applicable Exhibits related thereto. All items
delivered to the Bank must be reasonably satisfactory to the
Bank in form and content, and the Bank may reject such of them
as do not meet the requirements of this
Agreement.
(10)
The representations and warranties of the Company contained in
Article V hereof shall be true and correct in all material
respects as if made on and as of the date of each Advance
unless the same by its terms relates to an earlier
date.
(11)
The Company shall have performed all agreements to be
performed by it hereunder and under the Note, and after giving
effect to the requested Advance, there shall exist no Default
or Event of Default hereunder or under the Note.
(12)
As of the date of such Advance, the Company shall not have
(i) incurred any material liabilities, direct or
contingent, other than in the ordinary course of its business
that would render it to be noncompliant with the financial
requirements set forth in Article 6 herein, since the dates of
the Company’s most recent financial statements
theretofore delivered to the Bank, or (ii) experienced
any other material adverse change in its business or
operations.
Acceptance
of the proceeds of the requested Advance by the Company shall
be deemed a representation by the Company that all conditions
set forth in this Section 4 shall have been satisfied as
of the date of such Advance.
ARTICLE
V
REPRESENTATIONS
AND
WARRANTIES
In
order to induce the Bank to enter into this Agreement and make
each Advance, the Company hereby represents and warrants to
the Bank, as of the date of this Agreement and as of the date
of each Advance Request and of each Advance,
that:
Section 5.1.
Organization; Good Standing .
The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, has the
full legal power and authority to own its property and to carry on
its business as currently conducted and is duly qualified as a
foreign corporation to do business and is in good standing in each
jurisdiction in which the transaction of its business makes such
qualification necessary, except in jurisdictions, if any, where a
failure to be in good standing has no material adverse effect on
the business, operations, assets or financial condition of the
Company.
Section 5.2.
Authorization and Enforceability .
The Company has the power and authority to execute, deliver and
perform this Agreement, the Note and all other documents
contemplated hereby or thereby. The execution, delivery and
performance by the Company of this Agreement, the Note and all
other documents contemplated hereby or thereby and the making of
the borrowing hereunder and thereunder, have been duly and validly
authorized by all necessary corporate action on the part of the
Company (none of which actions have been modified or rescinded, and
all of which actions are in full force and effect) and do not and
will not conflict with or violate any provision of law or of the
articles of organization or bylaws of the Company, conflict with or
result in a breach of or constitute a default or require any
consent under, or result in the creation of any Lien upon any
property or assets of the Company (other than pursuant to this
Agreement), or result in or require the acceleration of any
indebtedness of the Company pursuant to any agreement, instrument
or indenture to which the Company is a party or by which the
Company or its property may be bound or affected. This Agreement,
the Note and all other documents contemplated hereby or thereby
constitute legal, valid, and binding obligations of the Company
enforceable in accordance with their respective terms, except as
limited by bankruptcy, insolvency or other similar laws affecting
the enforcement of creditors’ rights and by general
principles of equity.
Section 5.3.
Approvals .
The execution and delivery of this Agreement, the Note and all
other documents contemplated hereby or thereby and the performance
of the Company’s obligations hereunder and thereunder do not
require any license, consent, approval or other action of any state
or federal agency or governmental or regulatory
authority.
Section 5.4.
Financial Condition .
The balance sheet of the Company as at the Statement Date, and the
related statements of income and cash flows for the fiscal year
ended on the Statement Date, heretofore furnished to the Bank,
fairly present the financial condition of the Company as at the
Statement Date and the results of its operations for the fiscal
period ended on the Statement Date. The Company had, on the
Statement Date, no known liabilities, direct or indirect, fixed or
contingent, matured or unmatured, or liabilities for taxes,
long-term leases or unusual forward or long-term commitments not
disclosed by, or reserved against in, said balance sheet and
related statements, except as heretofore disclosed to the Bank in
writing or otherwise reflected on the Company’s balance
sheet, and except for the Bank’s extension(s) of credit to
the Company Except for financial statements prepared for interim
periods between the fiscal year-end, all financial statements were
prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved. Since the Statement Date, there
has been no material adverse change in the business, operations,
assets or financial condition of the Company, nor is the Company
aware of any state of facts which (with or without notice or lapse
of time or both) would or could result in any such material adverse
change.
Section 5.5.
Litigation .
There are no actions, claims, suits or proceedings pending, or to
the knowledge of the Company, threatened against or affecting the
Company in any court or before any arbitrator or before any
government commission, board, bureau or other administrative agency
which, if adversely determined, may reasonably be expected to
result in any material and adverse change in the business,
operations, assets, licenses, qualifications or financial condition
of the Company.
Section 5.6.
Licenses; Compliance with Laws .
The Company has all material permits, licenses, authorizations and
approvals with all governmental authorities or agencies that are
required in order to permit it to conduct its business as presently
conducted, and all such material permits, licenses, authorizations
and approvals that are required to conduct its business as
presently conducted are in full force and effect. The Company, to
the best of its knowledge, is not in violation of any provision of
any law, or of any judgment, award, rule, regulation, order,
decree, writ or injunction of any court or public regulatory body
or authority which might have a material adverse effect on the
business, operations, assets or financial condition of the
Company.
Section 5.7.
Regulation U .
No part of the proceeds of any Advances made hereunder will be used
to purchase or carry any Margin Stock or to extend credit to others
for the purpose of purchasing or carrying any Margin
Stock.
Section 5.8.
Investment Company Act .
The Company is not an “investment company,” or a
company controlled by an “investment company,” within
the meaning of the Investment Company Act of 1940, as
amended.
Section 5.9.
Payment of Taxes .
The Company has filed or caused to be filed all federal, state, and
local income, excise, property and other tax returns with respect
to the operations of the Company, which to the knowledge of the
Company are required to be filed, all such returns are true and
correct in all material respects, and the Company has paid or
caused to be paid all taxes as shown on such returns or on any
assessment to the extent that such taxes have become due, except in
cases where the Company has disputed in good faith the amount of
said taxes.
Section 5.10.
Agreements .
The Company is not a party to any agreement, instrument or
indenture or subject to any restriction materially and adversely
affecting its business, operations, assets or financial condition,
except as disclosed in the financial statements described in this
Agreement. The Company is not in default in the performance,
observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement, instrument, or indenture
which default could have a material adverse effect on the business,
operations, properties or financial condition of the Company. No
holder of any indebtedness of the Company has given notice of any
asserted default thereunder, and no liquidation or dissolution of
the Company and no receivership, insolvency, bankruptcy,
reorganization or other similar proceedings relative to the Company
or any of its properties is pending, or to the knowledge of the
Company, threatened.
Section 5.11.
Title to Properties .
The Company has good, valid, insurable (in the case of real
property) and marketable title to all material portions of its
properties and assets (whether real or personal, tangible or
intangible) reflected on the financial statements described in this
Agreement, except for such properties and assets as have been
disposed of since the date of such financial statements as no
longer used or useful in the conduct of its business or as have
been disposed of in the ordinary course of business, and all such
properties and assets are free and clear of all Liens except as
disclosed in such financial statements, and liens created in favor
of Bank (the “Bank Liens”)
Section 5.12.
Reserved.
Section 5.13.
Eligibility .
The Company has and shall maintain in good standing all state and
local permits, licenses, approvals, registrations and
qualifications which are required in order to permit the Company to
conduct its business, in all material manners, as presently
conducted, and which if not maintained in good standing could
materially and adversely affect the Companies business, operations,
assets, or financial condition or which could materially and
adversely impair the ability of Company to perform its obligation
hereunder.
Section 5.14.
Special Representations Concerning Collateral
.
The Company hereby represents and warrants to the Bank, as of the
date of this Agreement and as of the date of each Advance Request
and of each Advance, that:
(a)
The Company owns the Collateral free and clear of any Lien,
except for the security interest created by this Agreement,
and any rights of Investors and Insurers of the Pledged
Mortgage Loans. No financing statement or other instrument
similar in effect covering all or any part of the Collateral
is on file in any recording office, except such as may have
been filed in fa
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