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Exhibit 10.1
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MASTER CREDIT AND SECURITY AGREEMENT
among
SKY BANK
and
FRANKLIN CREDIT MANAGEMENT CORPORATION
and
THOSE SUBSIDIARIES WHICH RECEIVE ADVANCES HEREUNDER
Dated as of October 13, 2004
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Master Credit and Security Agreement
This Master Credit and Security Agreement (the "Agreement") is
entered
into as of October 13, 2004, between Franklin Credit
Management
Corporation, a Delaware corporation (the "Company" ), having its
principal
office at Six Harrison Street, New York, New York 10013, and Sky
Bank, an
Ohio banking corporation (the "Bank"), having an office at 110
East Main
Street, Salineville, Ohio 43945. The Subsidiaries of the Company
which
receive Company Subsidiary Loans under this Agreement or which
have
heretofore received Company Subsidiary Loans will also become
parties
hereto.
Whereas, the Bank, the Company and certain Company Subsidiaries
have
previously entered into loan arrangements, whereby Bank and the
Company and
each respective Company Subsidiary entered into a separate term
loan and
security agreement and a promissory note;
Whereas the Bank, the Company and each Company Subsidiary which
have
previously entered into a loan and security agreement, other
than Tribeca
Lending Corporation, desire to amend and restate each such loan
and
security agreement;
Whereas, at the request of the Company, the Bank has from time
to time
extended credit to Company subsidiaries and to additional
Subsidiaries of
the Company (i) to finance the purchase of residential mortgage
loans, or
(ii) to consolidate and refinance such extensions of credit made
earlier by
the Bank, with such extensions of credit having been secured by
the loans
purchased by those Subsidiaries with the Bank's financing, and a
list of
all such outstanding extensions of credit from the Bank is set
forth on
Schedule I attached hereto; and
Whereas, the Company has requested the Bank, and the Bank is
willing,
to amend and restate each such loan and security agreement and
to continue
to extend credit to Subsidiaries of the Company from time to
time to
finance the purchasing of residential mortgage loans, such
extensions of
credit to be secured by the loans to be purchased with the
Bank's
financing; and the parties now desire to set forth herein the
terms and
conditions to which all such prior extensions of credit shall
now be
subject, and under which all such future extensions of credit
for those
purposes shall be made, and the security provided for the
repayment
thereof;
Now, Therefore, the parties hereby agree to amended and restate
each
previously existing loan and security agreement, other than any
warehouse
arrangement or loan and security agreement with Tribeca
Lending
Corporation, 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:
"Administrative Services Agreement" has the meaning set forth in
Section
10.1 hereof.
"Administrative Servicing Fee" means an amount to be agreed to
in writing
from time to time between the Bank and the Company in
consideration of the
services provided under its Administrative Servicing Agreement
with its
Company Subsidiary.
"Advance" means a disbursement by the Bank under a Company
Subsidiary Loan.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
General Rules
and Regulations under the Exchange Act.
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"Agreement" means this Master 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
the principal offices of the Bank in Salineville, Ohio, or the
Company in
New York, New York are closed for business.
"Collateral" has the meaning set forth in Section 3 hereof.
"Collateral Documents" has the meaning set forth in Exhibit D.
The Bank
shall have the right, on not less than thirty (30) Business
Days' prior
written notice to the Company to modify Exhibit D 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(a)
hereof.
"Company" has the meaning set forth in the first paragraph of
this
Agreement.
"Company Subsidiary" means any Subsidiary of the Company,
whether now
existing or hereafter organized and created, which becomes a
party to this
Agreement and which has heretofore received or which hereafter
receives a
Company Subsidiary Loan, provided, however, it is recognized
that the
Company has as of the date of this Agreement at least one other
Subsidiary
which has a "warehouse line of credit" facility from the Bank
not covered
by this Agreement, and may in the future have one or more
Subsidiaries
which do not have extensions of credit from the Bank.
"Company Subsidiary Loan" means a now existing or hereafter
arising loan to
a Company Subsidiary pursuant to this Agreement and the related
Note, to
finance the purchase of residential mortgage loans or to
consolidate and
refinance loans which were granted by Bank to one or more
Company
Subsidiaries to finance the purchase of residential mortgage
loans.
"Company Subsidiary Loan Request" means the current form in use
by the Bank
as set forth in Exhibit B hereto. The Bank shall have the right,
on not
less than thirty (30) Business Days' prior written notice to the
Company,
to modify Exhibit B to conform to current legal requirements or
Bank
practices, and, as so modified, said Exhibits shall be deemed a
part
hereof.
"Consolidated" refers to the consolidation of accounts in
accordance with
GAAP.
"Conventional Mortgage Loan" means a Mortgage Loan other than a
FHA-insured
or VA-guaranteed Mortgage Loan.
"Corporate Advances" means all customary, reasonable and
necessary "out of
pocket" costs and expenses incurred in the performance by the
Company or
any subservicer of its servicing obligations with respect to
the
preservation, restoration and protection of the mortgaged
property.
"Custodial Agreement" means that certain Custodial Agreement
dated as of
October 22, 2003, among the Company, U.S. Bank National
Association as
Custodian, the Bank, and those Subsidiaries of the Company who
have become
parties to that Agreement and who may become parties to it in
the future.
Furthermore, each Company Subsidiary that becomes a party to
this Agreement
by executing a counterpart signature page shall also thereby
become and be
deemed to be a party to the Custodial Agreement to the same
extent as if
such Company Subsidiary had executed a counterpart signature
page to the
Custodial Agreement, and such Company Subsidiary shall be bound
by the
terms and provisions of the Custodial Agreement.
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"Custodian" means the organization which holds documents under
the
Custodial Agreement relating to Mortgage Loans on the Company's
behalf or
on behalf of a Company Subsidiary.
"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.
"ERISA" means the Employee Retirement Income Security Act of
1974, as
amended from time to time and any successor statute.
"Escrow Payment" With respect to any Mortgage Loan, the
amounts
constituting ground rents, taxes, assessments, water rates,
sewer rents,
municipal charges, mortgage insurance premiums, fire and hazard
insurance
premiums, condominium charges, and any other payments required
to be
escrowed by the mortgagor with the mortgagee pursuant to the
Mortgage or
any other document.
"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(a)
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.
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"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(a) 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 financially responsible institution
purchasing Mortgage
Loans from the Company or from a Company Subsidiary pursuant to
a Purchase
Commitment.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest,
charge or encumbrance of any kind, including without limitation
any
conditional sale or other title retention agreement, any lease
in the
nature thereof, and any agreement to give any security
interest.
"Lock-box Agreement" has the meaning set forth in Section 3.4
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. 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.
"Mortgage Loan Principal Balance" means, as of any date of
determination,"
the outstanding principal balance of such Mortgage Loan as
calculated
pursuant to the Mortgage Loan Documents.
"Mortgage Note" means a note secured by a Mortgage and
evidencing a
Mortgage Loan.
"Multiemployer Plan" means a "multiemployer plan" as defined
in
Section 4001(a)(3) of ERISA which is maintained for employees of
the
Company or a Subsidiary of the Company.
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"Net Worth" mean, with respect to the Company and its
Subsidiaries 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 hereof.
"Officers' Certificate" means a certificate executed on behalf
of the
Company or of a Company Subsidiary 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.
"Plans" has the meaning set forth in Section 5.1(l) hereof.
"Pledged Mortgage Loans" has the meaning set forth in Section
3.1(a)
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.
"Purchase Commitment" means a written commitment, issued in
favor of the
Company or of a Company Subsidiary by an Investor pursuant to
which that
Investor commits to purchase one or more Mortgage Loans, or
whole loan
purchase agreement by and between the Company or a Company
Subsidiary and
the Investor, 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 a one- to four-family
residence.
"Statement Date" has the meaning set forth in Sections 4.1(h)
and
6.1(b)(ii) hereof.
"Subsidiary" means any corporation, association or other
business entity in
which more than fifty percent (50%) of the total voting power or
shares of
stock entitled to vote in the election of directors, managers or
trustees
thereof is at the time owned or controlled, directly or
indirectly, by any
Person or one or more of the other Subsidiaries of that Person
or a
combination thereof.
"Success Fees" has the meaning set forth in Section 2.10.
"Taxes" means an amount to be agreed to in writing from time to
time
between the Bank and the Company to be used to pay income taxes
for the
Company and/or Company Subsidiary.
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"Underwriting Standards" has the meaning set forth in Exhibits
C. The Bank
shall have the right, on not less than thirty (30) Business
Days' prior
written notice to the Company to modify Exhibits C to conform to
current
legal requirements or Bank practices, and, as so modified, said
Exhibits
shall be deemed a part hereof
"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 and the Conditions Precedent described 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
Company
Subsidiary Loans to, or on behalf of, Company Subsidiaries,
provided,
however, that the total aggregate principal amount which is
outstanding at
any one time of all such Company Subsidiary Loans shall not
exceed the
lesser of (i) the aggregate approved principal amount of all
Company
Subsidiary Loans which have been approved by Bank under this
Agreement from
time to time, or (ii) the amount permitted by the lesser of (a)
the loan
policy guidelines adopted by the Bank from time to time or (b)
any
regulatory limitations applicable to the Bank which are now or
hereafter in
effect (the "Commitment").
(b) Company Subsidiary Loans approved by Bank from time to time
as
provided herein shall be used by Company Subsidiaries solely for
the
purpose of funding or financing the purchase of Mortgage Loans,
or for the
consolidation and refinancing of then existing Company
Subsidiary Loans
against the pledge of such Mortgage Loans.
(c) All Company Subsidiary Loans outstanding prior to the date
of this
Agreement for the purpose of funding or financing the purchase
of Pledged
Mortgage Loans shall be treated as having been issued under, and
shall be
subject to the covenants of, this Agreement. The Company shall
cause all of
its Subsidiaries which have such Company Subsidiary Loans
outstanding to
become parties to this Agreement by executing counterpart
signature pages
in the form of Exhibit E. In the event that the terms of this
Agreement
shall conflict with the terms of the loan documentation for such
a Company
Subsidiary Loan, the terms of this Agreement shall prevail,
except for
interest rate terms, which shall not be affected by the terms of
this
Agreement, and except that any Default under any such loan,
which has not
been cured or waived, shall remain in effect.
(d) The warehousing credit line extended by the Bank to
Tribeca
Lending Corporation, a New York corporation and a Subsidiary of
the Company
shall be separate from and shall not be subject to this
Agreement except as
specifically otherwise provided in this Agreement.
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Section 2.2. Procedures for Obtaining Advances. Each Company
Subsidiary Loan Request is subject to Bank's approval. Such Bank
approval
is subject to the Conditions Precedent set forth in Section 4.1.
Bank shall
reasonably endeavor to provide a conditional approval or denial
within four
(4) Business Days for requests of less than $1,000,000.00 and
within five
(5) Business Days for requests of $1,000,000.00 or more. Before
providing
final approval and funding any Company Subsidiary Loan, the Bank
shall have
a reasonable amount of time (not less than five (5) Business
Days) to
examine the Collateral Documents required to be delivered to
Bank or to
Custodian, as set forth in Section 4.1, and may reject such of
them as do
not meet the requirements of this Agreement, and/or may reduce
the amount
of such Company Subsidiary Loan. Bank, in all events, reserves
the right to
reject any Company Subsidiary Loan Request to finance the
purchase of, or
which includes Advances for the purchase of a "high cost
mortgage" as
defined in Section 152(a) of the Home Ownership and Equity
Protection Act
of 1994, or if it is in violation of any corresponding state or
local law.
Section 2.3. Note. Each Company Subsidiary Loan, and the
corresponding
Company Subsidiary's obligation to pay the principal of, and
interest on
the Company Subsidiary Loan to it made by the Bank, shall
hereafter be
evidenced by a promissory note of the Company Subsidiary payable
to the
Bank, and being substantially in the form of Exhibit A attached
hereto. All
existing promissory notes evidencing Company Subsidiary Loans
heretofore
granted by Bank to a Company Subsidiary shall remain in full
force and
effect. The term "Note" or "Notes" shall mean each and all such
existing
promissory notes evidencing a Company Subsidiary Loan, and all
promissory
notes hereafter executed and delivered by a Company Subsidiary
to evidence
Company Subsidiary Loans granted hereunder, and shall include
all
extensions, renewals and modifications, and all substitutions
therefor.
Section 2.4. Interest and Transaction Fees. (a) The unpaid
principal
balance of each Company Subsidiary Loan shall bear interest,
payable
monthly, on the fifth (5th) 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") based upon an index which will be the Federal
Home Loan
Bank of Cincinnati 30 day advance rate (the "Index"), plus the
applicable
margin in accordance with the following matrix:
Base Rate Index Bank Margin
<201 350
201 - 475 325
Greater than 475 300
The interest rate charged herein shall be adjusted monthly,
effective
on the first (1st) day of each month, based upon the Index in
effect on the
last Business Day of the then prior month. The Federal Home Loan
Bank of
Cincinnati 30 day advance rate shall mean the highest rate of
interest as
published daily by Bloomberg under the symbol FHL5LBR1. If the
Index
becomes unavailable during the term of this Agreement, the Bank
may
designate a substitute Index which is reasonably comparable
after notice to
the Company and each Company Subsidiary. Interest will be
calculated on the
basis of actual days elapsed over a 360 day year (365/360
basis), and
principal and interest payments will be billed monthly and will
be due on
the fifth day of each month.
If an Event of Defaults has occurred and is continuing
hereunder, the
Company and Company Subsidiary shall be obligated to pay to Bank
interest
on the outstanding principal balance of each Company Subsidiary
Loan at a
rate per annum equal to the Post-Default Rate until such Company
Subsidiary
Loan is paid in full or such Event of Default is cured or waived
by the
Bank.
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(b) At the time of closing of each Company Subsidiary Loan,
such
Company Subsidiary or the Company shall pay the Bank a
transaction fee
equal to one percent (1.0%) of the amount of such Company
Subsidiary Loan
(unless otherwise mutually agreed to by Bank and such Company
Subsidiary).
(c) The books and records of Bank, absent manifest error,
shall
constitute prima facie evidence of the principal balance of each
Company
Subsidiary Loan and the date and amount of each payment of
principal and
interest and applicable interest rates and other information
with respect
thereto.
Section 2.5. Payments. (a) The Company and each Company
Subsidiary
which becomes a party to this Agreement shall ensure that any
and all
payments on the Pledged Mortgage Loans shall be made as
specified in
Section 3.4. The Bank shall receive, record and forward to the
Company or
the Company Subsidiary the record of all payments made by
Pledged Mortgage
Loan obligors in accordance with the Lock Box Agreement. So long
as no
Event of Default shall have occurred and be continuing, Pledged
Mortgage
Loan payments with the exception of any Escrow Payments
deposited in the
lockbox or otherwise received by the Company or the Company
Subsidiary
shall be delivered to the Bank and shall be applied, on or about
the 5th,
12th, 19th and 26th day of each month as follows:
First, (i) all amounts received in respect of a particular
Mortgage Pool
shall be distributed to the related Mortgage Pool in the
following order up
to an amount equal to:
(A) the related Pool Percentage Interest of any accrued and
unpaid Taxes, Administrative Servicing Fees and any Corporate
Advances
for such month;
(B) any accrued and unpaid interest and Success Fees due on
all
Company Subsidiary Loans related to such Mortgage Pool; and
(C) the required Principal Payment for such Mortgage Pool;
(ii) all remaining amounts after the allocations set forth
in
clauses 2.5(a)(i)(A) through (C) above from all Mortgage Pools
in the
aggregate shall be distributed to all Mortgage Pools in the
following order
, in each case to the extent not distributed to such Mortgage
Pool pursuant
to clause 2.5(a)(i) above, up to an amount equal to:
(A) any accrued and unpaid Taxes, Administrative Servicing
Fees
and any Corporate Advances for such month for each Mortgage
Pool, pro
rata based on their remaining entitlement pursuant to clause
2.5(a)(i)(A) above after all allocations pursuant to clause
2.5(a)(i)(A) above;
(B) any accrued and unpaid interest and Success Fees due on
all
Company Subsidiary Loans for each Mortgage Pool, pro rata based
on
their remaining entitlement pursuant to clause 2.5(a)(i)(B)
above
after all allocations pursuant to clause 2.5(a)(i)(B) above;
and
(C) the required Principal Payment for such Mortgage Pool,
pro
rata based on their remaining entitlement pursuant to clause
2.5(a)(i)(C) above after all allocations pursuant to clause
2.5(a)(i)(C) above;
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(iii) all remaining amounts after the allocations set forth
in
clauses 2.5(a)(i) through 2.5(a)(ii) above from all Mortgage
Pools in the
aggregate shall be applied to pay all other accrued and unpaid
sums due to
the Bank hereunder, and
(iv) all remaining amounts after the allocations set forth
in
clauses 2.5(a)(i) through 2.5(a)(iii) above from all Mortgage
Pools in
the aggregate shall be paid as determined by the Bank in its
reasonable discretion exercised in good faith and then,
Second, all amounts distributed to each Mortgage Pool pursuant
to clauses
2.5(a)(i) through 2.5(a)(ii) above shall then be applied to the
Company
Subsidiary Loans related to such Mortgage Pool in the following
order to
pay:
(i) any accrued and unpaid interest and Success Fees due on
each
Company Subsidiary Loan related to such Mortgage Pool pro rata
based
on their entitlement thereto; and
(ii) to each Company Subsidiary Loan, the greater of the
related
Required Amortization Payment and the Subsidiary
Undercollateralization Amount, pro rata, based on their
respective
entitlement thereto.
"Pool Percentage Interest" means the related Mortgage Pool Value
over the
aggregate Mortgage Pool Value of all Mortgage Pools.
"Principal Payment" for the related month and any Mortgage Pool
means
an amount equal to the greater of (i) the Required
Amortization
Payment on all Company Subsidiary Loans related to such Mortgage
Pool
and (ii) the Pool Undercollateralization Amount.
"Company Subsidiary Loan Value" means, as of any date of
determination, the aggregate Mortgage Loan Principal Balance of
all
Pledged Mortgage Loans owned by the related Company Subsidiary
less an
amount equal to all Reserves in respect of such Company
Subsidiary.
"Mortgage Pool" means the pool of Mortgage Loans comprised of
the
Pledged Mortgage Loans owned by the Company Subsidiaries set
forth on
Exhibit G.
"Mortgage Pool Value" means, as of any date of determination,
the
aggregate Mortgage Loan Principal Balance of all Pledged
Mortgage
Loans in the related Mortgage Pool less an amount equal to
all
Reserves in respect of the Pledged Mortgage Loans comprising
such
Mortgage Pool.
"Mortgage Pool Loan Amount" means the outstanding principal
balance of
all Company Subsidiary Loans made by Company Subsidiaries that
own
Pledged Mortgaged Loans in such Mortgage Pool.
"Pool LTV" means, as of any date of determination, the ratio of
the
applicable Mortgage Pool Value to the outstanding principal
balance of
all Notes that were funded in respect of Advances for such
Mortgage
Pool.
"Pool Undercollateralization Amount" for each Mortgage Pool
shall mean
the amount, if any, by which the (i) Mortgage Pool Loan
Amount
immediately prior to making distributions on any payment date
as
described above, exceeds (ii) the product of the applicable
Required
Pool LTV multiplied by the Mortgage Pool Value, taking into
account
all payments made and applied on the underlying Pledged Mortgage
Loans
on or prior to such payment date.
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"Required Amortization Payment" means a payment of principal on
the
related Company Subsidiary Loan as specified in the Note.
"Required Pool LTV" for each Mortgage Pool shall be as specified
on
Exhibit G. On the 5th day of each calendar quarter (i.e., April
5,
July 5, October 5 and January 5) or if such day is not a
Business Day,
the next succeeding Business Day, the Required Pool LTV for
each
Mortgage Pool shall be reset (and Exhibit G automatically
amended in
accordance herewith) as the weighted average of the Required
Pool LTV
as of the last day of the preceding calendar month and the
Required
Subsidiary LTV for each Company Subsidiary that was joined to
Exhibit
G since the last reset of the Required Pool LTV's, weighted
based on
the Mortgage Pool Value of the related Mortgage Pool as of the
last
day of the preceding calendar month and the Company Subsidiary
Loan
Value as of the date the related Advance was made, in each
case
subject to the approval of the Bank with respect to such
calculations.
"Required Subsidiary LTV" for each Company Subsidiary Loan shall
be as
specified on Exhibit G. In the event any Company Subsidiary not
a
party hereto on the date hereof becomes a party hereto, the
Company
Subsidiary Loan Request in the form attached hereto as Exhibit
B,
shall set forth the Required Subsidiary LTV as a percentage
equal to
(A) (1) the amount of the Advance less (2) all accrued and
unpaid
interest on such Mortgage Loans included in the purchase price
of such
Mortgage Loan upon acquisition by the Company Subsidiary (or, in
the
case of Mortgage Loans assigned to the Company Subsidiary by
the
Company, by the Company) divided by (B) (1) the outstanding
principal
balance of the Mortgage Loans in respect of which an Advance
will be
made less (2) all Reserves for such Mortgage Loans in the
aggregate
minus (C) if the Company Subsidiary Loan is to become part of
the
Mortgage Pool designated as "A" or "B", 2%, (2) if the
Company
Subsidiary Loan is to become part of the Mortgage Pool
designated as
"C", 3% and (3) if the Company Subsidiary Loan is to become part
of
any other Mortgage Pool, a percentage to be determined by the
Bank and
the Company. Upon the making of the Advance with respect to any
such
new Company Subsidiary, Exhibit G shall be automatically amended
to
include such Company Subsidiary, the designation of the Mortgage
Pool
(as set forth on the Company Subsidiary Loan Request) and the
Required
Subsidiary LTV, as set forth on the Company Subsidiary Loan
Request
and as calculated above, in each case subject to the approval of
the
Bank with respect to such calculations.
"Reserves" means all reserve amounts in respect of a Pledged
Mortgage
Loan as determined monthly.
"Subsidiary Undercollateralization Amount" for each Company
Subsidiary
shall mean the amount, if any, by which the (i) outstanding
principal
balance of the applicable Company Subsidiary Loan immediately
prior to
making distributions on any payment date as described above,
exceeds
(ii) the product of the applicable Required Subsidiary LTV
multiplied
by the outstanding principal balance of the applicable
Company
Subsidiary Loan Value, taking into account all payments made
and
applied on the underlying Pledged Mortgage Loans on or prior to
such
payment date.
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<PAGE>
Notwithstanding the foregoing, the outstanding principal amount
of
each Company Subsidiary Loan shall be payable: (i) in part, upon
the
occurrence of any event described in Section 2.5(c) hereof
with
respect to such Company Subsidiary Loan; or (ii) in full, upon
an
uncured Event of Default. Furthermore, if an Event of Default
has
occurred and is then continuing, the provisions of Section 8.3
shall
apply.
Notwithstanding the foregoing, for purposes of determining
Defaults in
the payment of amounts due under this Agreement, (i) it shall
not be a
Default in payment of principal so long as the amount of
principal
paid to the Company Subsidiary Loans in the aggregate in any
calendar
month is at least equal to the Required Amortization Payments
due in
the aggregate on the Company Subsidiary Loans for such month and
(ii)
it shall not be a payment Default under this Agreement unless
all
amounts paid pursuant to the foregoing waterfalls in the
aggregate for
all payment dates for such month are not at least equal to
the
Administrative Servicing Fees due for such month, interest due
on the
Company Subsidiary Loans for such month and the Required
Amortization
Payments due for such month.
(b) Notwithstanding the general order of payments set forth in
Section
2.5 above, and so long as the provisions of Sections 2.5(c) or
8.3 do
not apply, the Company or a Company Subsidiary may prepay a
Company
Subsidiary Loan, in whole or in part at any time and from time
to
time, without premium or penalty (but subject to the Success
Fee),
provided, however, the Bank may, at its reasonable
discretion,
determine in which order of priority that the then outstanding
Company
Subsidiary Loans are prepaid so as not to have a detrimental
impact on
any remaining Company Subsidiary Loans.
(c) The Company and the Company Subsidiary shall be obligated to
pay
to the Bank, and the Company and the Company Subsidiary
hereby
authorize the Bank to charge its account for, the amount of
the
Advance for the purchase of such Mortgage Loan if the Company or
the
Company Subsidiary (i) fails, to deliver the Collateral
Documents
relating to the Mortgage Loan against which such Advance was
made
within sixty (60) days after written notice by the Bank, or
(ii)
fails, within sixty (60) days after the delivery of any
Collateral
Documents to the Company Subsidiary for correction or
completion,
without being returned to the Bank corrected or completed as
instructed by the Bank, or from the date a Collateral
Document,
following examination by the Bank, is found not to be in
compliance
with the requirements of this Agreement.
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, two
(2) years following the date of execution of this Agreement. No
such
expiration, however, shall in and of itself operate to
accelerate the
due date of any outstanding Company Subsidiary Loan, or
otherwise
terminate the obligations, terms and covenants herein with
respect to
any then outstanding Company Subsidiary Loans.
(b) Either party shall have the right, without cause, at any
time to
terminate this Commitment on not less than six (6) months'
prior
written notice to the other party. No such termination, however,
shall
in and of itself operate to accelerate the due date of any
outstanding
Company Subsidiary Loan, or otherwise terminate the obligations,
terms
and covenants herein with respect to any then outstanding
Company
Subsidiary Loans.
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<PAGE>
(c) The Bank shall, furthermore, have the right to terminate
the
Commitment upon or following the occurrence of a Event of
Default as
specified in Section 8. No such termination, however, shall in
and of
itself operate to accelerate the due date of any outstanding
Company
Subsidiary Loan, or otherwise terminate the obligations, terms
and
covenants herein with respect to any then outstanding
Company
Subsidiary Loans.
(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
agreement with the Company and each Company Subsidiary. 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 waiver, release
or
forfeiture of any of its rights, entitlements or interests
created
hereunder. The Company and each Company Subsidiary 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.
Section 2.7. Method of Making Payments. Except as otherwise
specifically provided herein, all payments under a Note 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, or such other place as the Bank from
time
to time shall designate; provided that in any event such
payments are
received no later than 12:00 p.m. New York City time. Whenever
any
payment to be made under a 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.
New York City time on a Business Day shall be deemed to have
been paid
on the next succeeding Business Day.
Section 2.8. Net Payments. All payments with respect to any
Company
Subsidiary Loan 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 2.9. Direct Payments. Any and all payments received by
the
Company or a Company Subsidiary on Pledged Mortgage Loans with
respect
to which a Company Subsidiary Loan is made shall be deemed to
have
been delivered in trust for the benefit of Bank and shall be
promptly
delivered to the Bank for application to the Company Subsidiary
Loans
and such other specified purposes in accordance with and as set
forth
in Section 2.5.
Section 2.10. Success Fees. The Company or the Company
Subsidiary
shall pay to Bank a "Success Fee" amounting to the lesser of (i)
one
half of one percent (0.50%) of the original principal balance of
the
Company Subsidiary Loan (provided further, however, that
Company
Subsidiary acknowledges and agrees that the Success Fee for a
Company
Subsidiary Loan listed on Schedule I attached hereto, shall be
one
percent (1.0%) of the original principal balance of such
Company
Subsidiary Loan), or (ii) fifty percent (50%) of the
remaining
cashflows of the Pledged Mortgage Loans related to such
Company
Subsidiary Loan received after the payoff of such Company
Subsidiary
Loan.
12
<PAGE>
Article III
Collateral
Section 3.1. Assignments and Grants of Security Interest by
Company
and Company Subsidiary. In consideration of the Commitment and
as
security for (i) the payment of the Note made by it and the
performance of all of such Company Subsidiary's obligations
under this
Agreement, (ii) the obligations of such Company Subsidiary under
this
Agreement, (iii) the obligations of any other Company
Subsidiary,
under that other Company Subsidiary's Note and under this
Agreement,
whether such other Company Subsidiary is now existing or is
hereafter
created, and whether such other Company Subsidiary's Loan was
made
prior to or after the Company Subsidiary Loan to the Company
Subsidiary granting this security interest, the Company does
hereby,
each Company Subsidiary which contemporaneously herewith becomes
a
party to this Agreement does hereby, and each Company Subsidiary
which
hereafter becomes a party to this Agreement shall, by executing
a
counterpart signature page to this Agreement thereby, grant and
convey
to the Bank a security interest in all rights, titles and
interest of
the Company and the Company Subsidiary, respectively, in and to
the
following described property (collectively, the "Collateral"),
and
each Company Subsidiary which becomes a party hereto
contemporaneously
herewith does hereby confirm and reaffirm its prior grant
and
conveyance to the Bank of a security interest in all of its
right,
title, and interest in the following described 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 under a
Company
Subsidiary Loan has been made by the Bank or which is hereafter
made
by the Bank hereunder (the "Pledged Mortgage Loans"); each
Company
Subsidiary hereafter obtaining a Company Subsidiary Loan shall
deliver
a schedule, in form and detail acceptable to Bank, of the
Mortgage
Loans being purchased from the proceeds of such Company
Subsidiary
Loan and pledged hereunder, which schedule shall attached to
the
Company Subsidiary's counterpart signature page to this
Agreement and
shall be deemed to be a part of this Agreement.
(b) All rights, but not any obligations or liabilities under
all
purchase agreements relating to the acquisition of Pledged
Mortgage
Loans under which the Company or the Company Subsidiary is
the
purchaser, and all rights, but not any obligations or
liabilities
under all assignments to the Company Subsidiary by the Company
of the
Company's rights under such agreements where the Company is
the
purchaser.
13
<PAGE>
(c) All mortgage insurance and all commitments issued by
Insurers to
insure or guarantee any Pledged Mortgage Loans; and all
personal
property, contract rights, servicing 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, 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;
(d) All right, title and interest of the Company and/or the
Company
Subsidiary in and to all files, surveys, certificates,
correspondence,
appraisals, computer programs, tapes, discs, cards,
accounting
records, information and data of the Company and/or the
Company
Subsidiary relating to the Pledged Mortgage Loans;
(e) All property of the Company and/or the Company Subsidiary,
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) The Company and the Company Subsidiary's rights (but not
any
obligations or liabilities of the Company or the Company
Subsidiary)
under all Purchase Commitments now held or hereafter acquired by
the
Company and/or the Company Subsidiary covering Pledged Mortgage
Loans
and all proceeds resulting from the sale of Pledged Mortgage
Loans to
Investors pursuant thereto;
(g) All rights (but not any obligations or liabilities) of the
Company
and of the Company Subsidiary under the Administrative
Services
Agreements and under the Custodial Agreements; and
(h) All replacements, products and proceeds of any and all of
the
foregoing.
Without limiting the foregoing, it is the express intention
of
the Company, and of each Company Subsidiary that now or
hereafter
becomes a party to this Agreement, 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 all now present (or
then
present), and all future obligations of each and every
Company
Subsidiary to Bank hereunder or arising hereunder, and that
the
security interests granted herein by the Company and each
Company
Subsidiary 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 and the Company
Subsidiaries 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 and the Company Subsidiaries (a)
hereby
authorize 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 or
the
Company Subsidiaries, (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 and the Company Subsidiaries agree 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.
14
<PAGE>
Section 3.2 Mandatory Prepayment. In the event that the Bank
shall in good faith determine at any time that any Pledged
Mortgage
Loan materially and adversely breaches the representations
and
warranties contained in this Agreement, and the Company or the
Company
Subsidiary fails to cure such breach of compliance upon thirty
(30)
Business Days prior written notice from the Bank, the Company or
the
Company Subsidiary shall partially prepay the Company Subsidiary
Loan
Advance by paying the Bank the Redemption Amount with respect to
such
Pledged Mortgage Loan and the Bank shall release such Pledged
Mortgage
Loan from the Pledge of this Agreement.
Section 3.3. Right of Redemption from Pledge. Provided no
Default
or Event of Default has occurred and is continuing, a Company
and/or
Company Subsidiary may redeem a Pledged Mortgage Loan from
pledge, by
either (i) 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 the price at which
such
Mortgage Loan could readily be sold as determined by the Bank,
or
(ii)delivering substitute Collateral which, in addition to
being
acceptable to the Bank in its sole discretion, will when
included with
the Collateral, result in an LTV for the applicable Mortgage
Pool
which is equal to or less than the LTV of such Mortgage Pool at
the
time of the redemption request.
Section 3.4. Collection and Servicing Rights. (a) The
Company
Subsidiary and the Bank agree that the "Lock Box Terms" set
forth on
Exhibit F shall be utilized by Company Subsidiary for the
receiving,
collecting, and processing of all sums payable to the
Company
Subsidiary in respect of the Collateral (the "Lock-box
Agreement").
Under that Lock-box Agreement, the Bank shall be entitled to
receive
all sums payable to the Company Subsidiary in respect of the
Collateral. All amounts payable to the Company Subsidiary for
the
purchase by any Investor under a Purchase Commitment of any
Pledged
Mortgage Loans shall also be paid directly to the Bank. The
Company
Subsidiary 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.
(b) In the event of any conflict between the terms of the
Lock-box Agreement and the terms of the Administrative
Services
Agreement, the Lock-box Agreement terms shall prevail. The Bank
shall
have the right on not less than thirty (30) days prior notice to
the
Company and each Company Subsidiary to reasonably modify the
Lock-box
Agreement to conform to then current Bank practices and/or
banking
regulations.
Section 3.5. Return of Collateral. If no Company Subsidiary
Loans, interest or other amounts evidenced by a Note or due
under a
Company Subsidiary Loan or under this Agreement shall be
outstanding
and unpaid, the Bank shall promptly deliver or release all
Collateral
in its possession to the Company or to the Company Subsidiaries,
as
appropriate. The Bank shall also execute and deliver such
assignments
and other instruments and documents reasonably requested by
the
Company or by the Company Subsidiaries to vest title in the
Collateral
to the Company or the Company Subsidiaries, as appropriate.
The
receipt of the Company or of Company Subsidiaries, as
appropriate, for
any Collateral released or delivered pursuant to any provision
of this
Agreement shall be a complete and full acquittance for the
Collateral
so returned, and the Bank shall hereafter be discharged from
any
liability or responsibility therefor.
15
<PAGE>
Article IV
Conditions Precedent
Section 4.1. Relating to a Company Subsidiary Advance. The
obligation of the Bank to fund an approved Company Subsidiary
Loan is
subject to (i) the receipt by the Bank by the date of an
Advance
thereunder of the following documents, all of which must be
satisfactory in form and content to the Bank in its
reasonable
discretion, and (ii) the satisfaction of the following
conditions
precedent:
a) Requests for a Company Subsidiary Loan shall be initiated
by
the Company or by a Company Subsidiary by delivering to the Bank
a
completed and signed a Company Subsidiary Loan Request. The Bank
shall
review such Company Subsidiary Loan Request and if the Bank does
not
approve such designation of a Mortgage Pool, the Company or
Company
Subsidiary shall revise such request and deliver a new completed
and
signed Company Subsidiary Loan Request with a revised
designation of a
Mortgage Pool for the Bank's approval.
b) The Company and/or the Company Subsidiary shall have
delivered
the Collateral Documents to the Custodian within three (3)
Business
Days after the date of the closing of the Company Subsidiary
Loan;
c) The Bank shall have received the Tax Identification number
of
each Company Subsidiary, as the case may be, and, when
specifically
requested for a particular Company Subsidiary Loan,
file-stamped
copies of the Company Subsidiary's articles of incorporation
(dated no
less recently than one (1) month prior to the date of the
Advance),
and operating agreement or by-laws;
d) When specifically requested for a particular Company
Subsidiary Loan, the Bank shall have received an original
resolution
of the members/manager, or directors, of the Company and each
Company
Subsidiary, as the case may be, certified by its manager or
chief
executive officer authorizing the execution, delivery and
performance
of this Agreement, the Note, and all other instruments or
documents to
be delivered by the Company Subsidiary pursuant to this
Agreement;
e) When specifically requested for a particular Company
Subsidiary Loan, the Bank shall have received a certificate of
the
Company's and each Company Subsidiary's manager or chief
executive
officer as to the incumbency and authenticity of the signatures
of the
officers of the Company and the Company Subsidiary executing
this
Agreement, the Note, the Company Subsidiary Loan Request, and
all
other instruments or documents to be delivered pursuant hereto
(the
Bank being entitled to rely thereon until a new such certificate
has
been furnished to the Bank);
f) The Bank shall have received an original independently
audited
financial statements of the Company for the most recent
fiscal
year-end for which reports on Form 10-K have been filed with
the
Securities and Exchange Commission (the "Statement Date")
containing a
balance sheet and related statements of income and retained
earnings
and changes in financial position for the period ended on
the
Statement Date, all prepared in accordance with GAAP applied on
a
basis consistent with prior periods and reasonably acceptable to
the
Bank;
16
<PAGE>
g) [Reserved];
h) [Reserved];
i) The Bank shall have satisfied itself, in its discretion
and
following due diligence, that the Underwriting Standards have
been
satisfied. The Bank shall have received each of the following,
which
must be satisfactory in form and content to the Bank in its
reasonable
discretion: (i) The purchase agreement relating to the
acquisition of
the Mortgage Loans, and the assignment to the Company Subsidiary
by
the Company of the Company's rights under such purchase
agreement when
the Company is the purchaser; (ii) a schedule, in form and
detail
acceptable to Bank of the Mortgage Loans being purchased, (iii)
the
Note, substantially in the form of Exhibit A hereto, duly
executed by
the Company Subsidiary; (iv) counterpart signature page for
this
Agreement, substantially in the form of Exhibit E hereto,
duly
executed by the Company Subsidiary; and (v) if the Company, not
the
Company Subsidiary, is the party to the purchase agreement
covering
the Mortgage Loans and Mortgage Loan Documents to be acquired by
the
Company Subsidiary and pledged to the Bank to secure the
Advance, a
duly executed assignment by the Company to the Company
Subsidiary of
all of the Company's rights in the purchase agreement and in
the
Mortgage Loans and Mortgage Loan Documents covered by that
agreement;
j) [Reserved];
k) 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
relates
to an earlier date;
l) The representations and warranties of the Company
Subsidiary
contained in Article V hereof shall be true and correct in
all
material respects as if made on and as of the date of the
Advance
unless the same relates to an earlier date;
m) The Company Subsidiary shall have performed all obligations
to
be performed by it hereunder, and after giving effect to the
requested
Advance, there shall exist no Default or Event of Default
hereunder;
n) The Company Subsidiary shall have become a party to this
Agreement, shall have performed all obligations to be performed
by it
under this Agreement, and under the Note, and, after giving
effect to
the requested Advance, there shall exist no Default or Event
of
Default under this Agreement or under any Note;
o) The Company shall not have experienced any other material
adverse change in its business or operations as reasonably
determined
by the Bank in its reasonable discretion exercised in good
faith; and
p) The Company Subsidiary, as reasonably determined by the
Bank
in its reasonable discretion exercised in good faith, shall not
have
(i) incurred any material liabilities, direct or contingent,
other
than in the ordinary course of its business and other than under
this
Agreement, or (ii) experienced any other material adverse change
in
its business or operations as reasonably determined by the Bank
in its
reasonable discretion exercised in good faith.
17
<PAGE>
Section 4.2. Acceptance of Proceeds. Acceptance of the
proceeds
of the requested Advance by the Company Subsidiary shall be
deemed a
representation by the Company and the Company Subsidiary that
all
conditions set forth in this Article IV shall have been
satisfied as
of the date of such Advance.
Article V
Representations and Warranties
Section 5.1. By the Company. In order to induce the Bank to
enter
into this Agreement and make each Company Subsidiary Loan, the
Company
hereby represents and warrants to the Bank, as of the date of
this
Agreement and as of the date of each Company Subsidiary Loan
Request
and of each Company Subsidiary Loan, that:
(a) Organization; Good Standing. The Company is a
corporation
duly organized, validly existing, and in good standing under the
laws
of the State of Delaware and is duly registered to do business
and is
in good standing under the laws of the State of New York, 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 in 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.
(b) Authorization and Enforceability. The Company has the
power
and authority to execute, deliver and perform this Agreement and
all
other documents contemplated hereby or thereby. The
execution,
delivery and performance by the Company of this Agreement and
all
other documents contemplated hereby or thereby, 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 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.
(c)Approvals. The execution and delivery of this Agreement
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.
18
<PAGE>
(d)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, and
except for
the Bank's extension(s) of credit to the Company and its
Subsidiaries.
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)
could
reasonably be expected to result in any such material adverse
change.
(e) 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.
(f) Compliance with Laws. The Company 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 could reasonably be expected to have
a
material adverse effect on the business, operations, assets
or
financial condition, assets, licenses, qualifications or
financial
condition of the Company.
(g) 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.
(h) 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.
(i) 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
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.
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<PAGE>
(j) 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 Section 5.1(d) hereof. 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 reasonably be expected to 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.
(k) Title to Properties. The Company or the applicable
Company
Subsidiary 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 Section 5.1(d) hereof,
except
for such properties and assets as have been disposed of since
the date
of such financial statements as no longer used or useful in
the
conduct of its business or as have been disposed of in the
ordinary
course of business, and all such properties and assets are free
and
clear of all Liens except as disclosed in such financial
statements.
(l) ERISA. All plans ("Plans") of a type described in
Section 3(3) of ERISA in respect of which the Company is an
"Employer," as defined in Section 3(8) of ERISA, are in
substantial
compliance with ERISA, and none of such Plans is insolvent or
in
reorganization, has an accumulated or waived funding deficiency
within
the meaning of Section 412 of the Internal Revenue Code, and
the
Company has not incurred any material liability (including
any
material contingent liability) to or on account of any such
Plan
pursuant to Sections 4062, 4063, 4064, 4201 or 4204 of ERISA;
and no
proceedings have been instituted to terminate any such plan, and
no
condition exists which presents a material risk to the Company
of
incurring a material liability to or on account of any such
Plan
pursuant to any of the foregoing Sections of ERISA. No Plan or
trust
forming a part thereof has been terminated since September 1,
1974.
(m) Eligibility. The Company has all state and local
permits,
licenses, approvals, registrations and qualifications which it
is
required to have, in order to purchase, sell or service the
Pledged
Mortgage Loans.
Section 5.2. By the Company Subsidiary. In order to induce
the
Bank to make a Company Subsidiary Loan, each Company Subsidiary
does
represent and warrant to the Bank, as of the date of each
Company
Subsidiary Loan Request and each Company Subsidiary Loan,
that:
(a) Organization; Good Standing; Subsidiaries. Such Company
Subsidiary is a duly organized, validly existing and in good
standing
under the laws of the state of its jurisdiction of
incorporation, and
is duly registered to do business in and is in good standing
under the
laws of the state of its jurisdiction of incorporation, and 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 Company Subsidiary to do business in 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 Subsidiary. Such Company Subsidiary has no
Subsidiaries.
20
<PAGE>
(b)Authorization and Enforceability. Such Company Subsidiary
has
the power and authority to execute, deliver and perform this
Agreement, and all other documents contemplated thereby. The
execution, delivery and performance by such Company Subsidiary
of the
Note, this Agreement and all other documents contemplated
thereby and
the making of the borrowing thereunder, have been duly and
validly
authorized by all necessary corporate action on the part of
such
Company Subsidiary (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, bylaws or operating agreement
of such
Company Subsidiary, 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 such
Company
Subsidiary (other than pursuant to this Agreement), or result in
or
require the acceleration of any indebtedness of such Company
Subsidiary pursuant to any agreement, instrument or indenture to
which
such Company Subsidiary is a party or by which such Company
Subsidiary
or its property may be bound or affected. This Agreement, and
all
other documents contemplated hereby constitute legal, valid,
and
binding obligations of such Company Subsidiary 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.
(c) Approvals. The execution and delivery of the Note, this
Agreement, and all other documents contemplated thereby and
the
performance of such Company Subsidiary's obligations thereunder
do not
require any license, consent, approval or other action of any
state or
federal agency or governmental or regulatory authority.
(d) Financial Condition. Any balance sheet of such Company
Subsidiary as at the Statement Date, and the related statements
of
income and cash flows for the fiscal year ended on the Statement
Date,
theretofore furnished to the Bank, fairly present the
financial
condition of such Company Subsidiary as at the Statement Date
and the
results of its operations for the fiscal period ended on the
Statement
Date. Such Company Subsidiary 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
theretofore
disclosed to the Bank in writing, and except for the Bank's
extension(s) of credit to such Company Subsidiary. 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
such
Company Subsidiary, nor is such Company Subsidiary 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.
21
<PAGE>
(e) Litigation. There are no actions, claims, suits or
proceedings pending, or to the knowledge of such Company
Subsidiary,
threatened against or affecting such Company Subsidiary 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 such Company Subsidiary.
(f) Compliance with Laws. Such Company Subsidiary 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, assets, licenses, qualifications or financial
condition of
such Company Subsidiary.
(g) Regulation U. No part of the proceeds of any Advance 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.
(h) Investment Company Act. Such Company Subsidiary 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.
(i) Payment of Taxes. Such Company Subsidiary 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 such
Company
Subsidiary, which are required to be filed, all such returns are
true
and correct in all material respects, and such Company
Subsidiary has
paid or caused to be paid all taxes as shown on such returns
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