UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) of the SECURITIES
EXCHANGE ACT OF 1934 For the transition period from _______to_________
1-14074
------------------------
(Commission File Number)
ContiFinancial Corporation
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3852588
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
277 Park Avenue
New York, New York 10172
- ------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 207-2800
--------------
no change
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No|_|
The Company had 46,661,592 shares of common stock outstanding as of November 10,
1999.
<PAGE>
ContiFinancial Corporation
Table of Contents
PART I
Page
----
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Unaudited Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Recent Developments, Financial Results and Liquidity 17
Selected Financial Data 20
Results of Operations 23
Liquidity and Capital Resources 28
Year 2000 30
Forward-looking Statements 30
Item 3. Quantitative and Qualitative Disclosures About Market Risk 32
PART II
Item 1. Legal Proceedings 34
Item 4. Submission of Matters to a Vote of Security Holders 34
Item 6. Exhibits and Reports on Form 8-K 36
Signatures 37
2
<PAGE>
CONTIFINANCIAL CORPORATION
Consolidated Balance Sheets as of September 30, 1999 and March 31,
1999 (in thousands, except share data)
<TABLE>
<CAPTION>
September 30, March 31,
1999 1999
----------- -----------
Assets (unaudited)
<S> <C> <C>
Cash and cash equivalents $ 64,278 $ 112,839
Restricted cash 1,531 4,072
Receivables held for sale:
Receivables held for sale 252,643 1,089,410
Allowance for loan losses (5,312) (7,364)
----------- -----------
Receivables held for sale, net 247,331 1,082,046
Other receivables 122,836 95,984
Due from affiliates 2,317 53,680
Interest-only and residual certificates 400,989 722,012
Capitalized servicing rights 70,579 105,273
Premises and equipment, net of accumulated depreciation of $13,441 and $13,454
as of September 30, 1999 and March 31, 1999, respectively 20,291 23,792
Cost in excess of equity acquired 12,627 85,388
Equity investments in unconsolidated subsidiaries 1,258 4,978
Taxes receivable -- 13,024
Other assets 34,130 52,076
----------- -----------
Total assets $ 978,167 $ 2,355,164
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable $ 53,689 $ 90,412
Receivables sold under agreements to repurchase 138,244 804,524
Due to affiliates 139 8,918
Short-term debt 422,262 512,797
Taxes payable 4,327 --
Long-term debt 699,191 699,225
Other liabilities 18,835 31,316
----------- -----------
Total liabilities 1,336,687 2,147,192
----------- -----------
Commitments and contingencies
Minority interest in subsidiaries 4,157 4,721
Stockholders' equity (deficit):
Preferred stock (par value $0.01 per share; 25,000,000 shares authorized; none
issued at September 30, 1999 and March 31, 1999) -- --
Common stock (par value $0.01 per share; 250,000,000 shares authorized;
47,657,539 shares issued at September 30, 1999 and March 31, 1999) 477 477
Paid-in capital 396,771 398,209
Accumulated deficit (734,725) (163,301)
Treasury stock (978,511 and 910,169 shares of common stock, at cost, at September 30,
1999 and March 31, 1999, respectively) (25,200) (25,106)
Deferred compensation -- (7,028)
----------- -----------
Total stockholders' equity (deficit) (362,677) 203,251
----------- -----------
Total liabilities and stockholders' equity (deficit) $ 978,167 $ 2,355,164
=========== ===========
</TABLE>
The accompanying notes to the unaudited condensed consolidated financial
statements are an integral part of these statements.
3
<PAGE>
CONTIFINANCIAL CORPORATION
Consolidated Statements of Operations
for the three and six months ended September 30, 1999 and 1998
(in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Gross income (loss):
Gain (loss) on sale of receivables $ (187,876) $ 16,316 $ (296,827) $ 53,888
Commercial real estate valuation adjustments -- (129,034) -- (129,034)
Interest 32,443 90,899 84,632 162,879
Net servicing income 1,430 28,966 14,337 55,686
Gain on sale of subsidiary (Note 5) -- -- 22,121 --
Other income 1,084 3,708 4,097 9,552
------------ ------------ ------------ ------------
Total gross income (loss) (152,919) 10,855 (171,640) 152,971
------------ ------------ ------------ ------------
Expenses:
Compensation and benefits 44,735 51,842 95,791 95,166
Interest 38,103 66,140 80,769 121,522
Provision for loan losses 2,605 2,329 4,558 3,051
General and administrative 41,827 40,071 84,965 72,582
Other charges (Note 3) 53,465 36,090 123,394 36,090
------------ ------------ ------------ ------------
Total expenses 180,735 196,472 389,477 328,411
------------ ------------ ------------ ------------
Loss before income taxes and minority interest (333,654) (185,617) (561,117) (175,440)
Provision (benefit) for income taxes (Note 6) 74 (71,362) 10,342 (67,261)
------------ ------------ ------------ ------------
Loss before minority interest (333,728) (114,255) (571,459) (108,179)
Minority interest in earnings (losses) of subsidiaries (21) (4) (35) 52
------------ ------------ ------------ ------------
Net loss $ (333,707) $ (114,251) $ (571,424) $ (108,231)
============ ============ ============ ============
Basic loss per common share $ (7.18) $ (2.48) $ (12.30) $ (2.33)
============ ============ ============ ============
Diluted loss per common share $ (7.18) $ (2.48) $ (12.30) $ (2.33)
============ ============ ============ ============
Basic weighted average number of shares outstanding 46,467,695 46,153,506 46,458,192 46,419,684
============ ============ ============ ============
Diluted weighted average number of shares outstanding
46,467,695 46,153,506 46,458,192 46,419,684
============ ============ ============ ============
</TABLE>
The accompanying notes to the unaudited condensed consolidated financial
statements are an integral part of these statements.
4
<PAGE>
CONTIFINANCIAL CORPORATION
Condensed Consolidated Statements of Cash Flows
for the six months ended September 30, 1999 and 1998
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
September 30,
1999 1998
--------- ---------
<S> <C> <C>
Net cash provided by (used in) operating activities $ 7,817 $(290,309)
--------- ---------
Cash flows from investing activities:
Proceeds from sale of majority-owned subsidiary, net (Note 5) 34,196 --
Acquisitions of majority-owned subsidiaries (net of cash acquired) (804) (22,086)
Acquisitions of minority-owned subsidiaries -- (1,140)
Purchase of premises and equipment, net (2,534) (8,375)
Proceeds from sale of unconsolidated subsidiaries 3,000 --
Other, net
473 --
--------- ---------
Net cash provided by (used in) investing activities 34,331 (31,601)
--------- ---------
Cash flows from financing activities:
Increase (decrease) in short-term debt (90,709) 158,340
Increase in long-term debt -- 199,778
Debt issuance costs -- (11,692)
Repurchase of common stock -- (22,052)
Other, net -- (12)
--------- ---------
Net cash provided by (used in) financing activities (90,709) 324,362
--------- ---------
Net increase (decrease) in cash and cash equivalents (48,561) 2,452
Cash and cash equivalents at beginning of period 112,839 173,588
--------- ---------
Cash and cash equivalents at end of period $ 64,278 $ 176,040
========= =========
</TABLE>
The accompanying notes to the unaudited condensed consolidated financial
statements are an integral part of these statements.
5
<PAGE>
CONTIFINANCIAL CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1999
(in thousands, except share data and where noted)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
ContiFinancial Corporation and its majority-owned subsidiaries (collectively,
"ContiFinancial" or the "Company") have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission and, in the opinion of
management, reflect all normal recurring adjustments which are necessary for a
fair presentation of the financial position, results of operations, and cash
flows for each period shown. The preparation of financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the results of operations. Actual results could
differ from these estimates. In addition, results for interim periods are not
necessarily indicative of results for the full year. These unaudited condensed
consolidated financial statements should be read in conjunction with the audited
Consolidated Financial Statements and notes thereto included in the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1999 (the "Annual
Report"). All significant intercompany accounts and transactions have been
eliminated in consolidation.
2. RECENT DEVELOPMENTS, FINANCIAL RESULTS AND LIQUIDITY
In fiscal 1999 and continuing in the first two quarters of fiscal 2000 the
Company has incurred significant losses of $426.3 million and $571.4 million,
respectively. Over this period the Company has experienced a significant decline
in liquidity. As a result of these factors there is substantial doubt as to the
Company's ability to continue as a going concern. At September 30, 1999
stockholders' equity has been reduced to a deficit balance of $362.7 million.
During fiscal 1999 and fiscal 2000, the Company recorded fair value adjustments
to interest-only and residual certificates totaling approximately $329 million
and $325 million, respectively, resulting from higher-than-estimated credit
losses and prepayment speeds, and an increase in the discount rate used in the
valuation from 10% to 12% to reflect the capital market's deteriorating view of
the "sub-prime" industry in which the Company operates. The Company believes its
interest-only and residual certificates are fairly valued at September 30, 1999
but can provide no assurances that future prepayment and loss experience or
changes in the required market discount rate will not necessitate additional
write-downs. If there are such additional write-downs in future periods, the
Company's income would be reduced, likely resulting in a net loss for such
period.
The Company's operations were also significantly and adversely affected by
difficult capital market conditions that commenced in the second quarter of
fiscal 1999, with the effects of these events, and their repercussions,
continuing to affect the Company's results through the first two quarters of
fiscal 2000. During the second quarter of fiscal 1999, the economic instability
in Asia and Russia precipitated a global debt crisis (the "Debt Crisis") which
caused a "flight to quality" by investors. During this period, fixed income
investors purchased large amounts of U.S. Treasury securities, causing U.S.
Treasury yields to decrease significantly. As investor demand for U.S. Treasury
securities increased, the demand for other fixed income securities declined
dramatically, causing yields on such other securities to rise relative to U.S.
Treasury securities. Since almost all of the Company's loan originations were
ultimately funded by the issuance of securities backed by the loans it
originates (securitization), these unusual interest rate movements affected the
market value of all of the Company's originations, causing significant losses
and leading to a critical loss of liquidity.
6
<PAGE>
CONTIFINANCIAL CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1999
(in thousands, except share data and where noted)
While the Debt Crisis abated for other sectors of the economy in fiscal 1999,
its impact and subsequent repercussions continued to affect the "sub-prime"
industry in which the Company operates. The sudden and significant loss of
liquidity experienced throughout the industry, occurring within the context of
increasing market skepticism about the quality of earnings reported under
"gain-on-sale accounting", intensified capital market concerns about the
industry and severely curtailed access to the capital markets as a source of new
liquidity.
In order to attempt to strengthen the Company's ability to operate in this
difficult environment, in the third quarter of fiscal 1999, the Company began to
search for an investor who could contribute additional equity capital to the
Company or a buyer who would be interested in purchasing the Company's business.
On May 14, 1999, the Company signed an indication of interest letter with
Residential Funding Corporation ("RFC") under which RFC indicated its interest
in acquiring all of the outstanding common stock of the Company. On July 2,
1999, a second indication of interest letter was signed with RFC, again for the
acquisition of all of the outstanding common stock of the Company, but on
revised business terms. Definitive documentation for the acquisition was then
negotiated with RFC. On July 14, 1999, just prior to the expected signing of the
definitive documentation, RFC informed the Company that it had determined not to
proceed with the acquisition.
In light of the failure to consummate the transaction with RFC, and the
impending expiration of certain of the Company's credit facilities, the
Company's Board of Directors hired Mr. Alan Fishman as the new Chief Executive
Officer of the Company on July 20, 1999.
Following a review of the Company's situation, Mr. Fishman and other members of
the Company's senior management pursued a plan (the "Restructuring Plan") of
focusing the Company's operations on the most promising of its origination
channels, reducing the size of the Company, negotiating for the restructuring or
extension of the Company's credit facilities and then recommencing the search
for an equity investor in the Company, a buyer of the Company's business or of
certain of the Company's assets.
Pursuant to the Restructuring Plan, in August 1999, the Company entered into a
definitive agreement with Greenwich Capital Financial Products, Inc.
("Greenwich"), an affiliate of Greenwich Capital Markets, Inc., to provide
ContiFinancial with a $500 million revolving servicing-released whole loan
purchase facility with a maximum aggregate purchase commitment of up to $1.5
billion, at ContiFinancial's option, through March 31, 2000. Greenwich also
agreed to provide a warehouse facility of up to $250 million on a revolving
basis. This facility also expires on March 31, 2000. In addition to the two
facilities, Greenwich purchased on a whole loan basis, through an affiliate,
approximately $772 million of home equity loans which were funded under
ContiFinancial's prior warehouse facilities. The Company expects these
arrangements with Greenwich will provide the Company with the necessary
warehouse financing to support the reduced amount of originations contemplated
as the Restructuring Plan is being implemented.
Also in August 1999, the Company began the implementation of a workforce
reduction plan which will result in the reduction of approximately 30% of the
Company's employees by the end of the Company's fiscal year in order to achieve
the strategic goals of focusing the Company's origination in the channels with
the greatest potential and reducing the overall size of the Company. See Note 3.
7
<PAGE>
CONTIFINANCIAL CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1999
(in thousands, except share data and where noted)
On August 19, 1999, the Company agreed with the lenders under its Revolving
Credit Facility and Commercial Paper Program (collectively, the "Bank
Facilities") to extend the maturity date of the Bank Facilities from August 20,
1999 to March 31, 2000 and to convert both facilities into term arrangements.
The Company also agreed to certain modifications of the Bank Facilities
including a $20 million minimum liquidity covenant. The agreement also included
providing collateral to the lenders in the form of a lien on certain Excess
Spread Receivables with a June 30, 1999 book value of approximately $147
million. The book value of these Excess Spread Receivables as of September 30,
1999 was approximately $103 million. The interest rate on each facility remains
at LIBOR plus 300 basis points. The Company was in compliance with the amended
covenants of the Bank Facilities as of September 30, 1999.
With the objectives of the Restructuring Plan of refocusing the Company's
operations, reducing the size of the Company and restructuring and extending the
Company's credit facilities being substantially accomplished, the Company has
re-launched its efforts to explore strategic alternatives. The Company has
retained financial advisors Lehman Brothers, Inc. and The Blackstone Group L.P.
(the "Advisors") as advisors in the process. With the assistance of the
Advisors, the Company is pursuing various strategic alternatives including but
not limited to a sale of the Company, sales of one or more of the business
operations and/or assets of the Company or a recapitalization of the Company
with additional equity capital.
During the restructuring process, the Company expects that it will be cash flow
negative and will operate at a loss. The Company's continued operations during
the restructuring process are dependent on the continued availability of the
Bank Facilities and the warehouse financing and the supplemental servicer
agreement under the Greenwich arrangements (see Note 9). During this period, the
Company's cash reserves may not be sufficient to meet the Company's cash needs.
There can be no assurance that an equity investor or buyer of the Company's
business or its assets can be found on a timely basis.
As a result of the developments described above, the Company determined, during
the first quarter of fiscal 2000, that the carrying value of Cost in excess of
equity acquired on the Company's balance sheet has been impaired and should be
written-down (see Note 3 and Management's Discussion and Analysis of Financial
Condition and Results of Operations). During the first and second quarters, the
Company has also determined that it may not be able to achieve the results
assumed in its prior loan loss projections; therefore, assumptions as to future
loss frequencies and severities were increased, resulting in fair value
adjustments to interest-only and residual certificates (see Note 4 and
Management's Discussion and Analysis of Financial Condition and Results of
Operations).
For the six months ended September 30, 1999, the Company incurred a net loss of
$571.4 million, primarily due to the fair value adjustment to interest-only and
residual certificates, the write-down of Cost in excess of equity acquired, and
restructuring and severance costs as discussed above. As a result of this net
loss, stockholders' equity has been reduced to a deficit balance of $362.7
million.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. Accordingly, the financial
statements do not include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and classification of
liabilities that might result should the Company be unable to continue as a
going concern.
8
<PAGE>
CONTIFINANCIAL CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1999
(in thousands, except share data and where noted)
3. OTHER CHARGES
Other charges included in the Company's Consolidated Statements of Operations
for the three and six months ended September 30, 1999 and 1998 consisted of the
following:
<TABLE>
<CAPTION>
-------------------------------------------
Three Months Ended Six Months Ended
September 30, September 30,
------------------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Other Charges:
Write-down of cost in excess of equity acquired $ 2,569 $ 2,782 $ 62,522 $ 2,782
Restructuring charges (excluding compensation related) 12,056 5,340 18,715 5,340
Severance for approximately 760 employees 8,653 -- 8,653 --
Staff retention costs 17,143 -- 17,143 --
Write-offs and reserves of receivables from affiliates
and others 13,044 27,968 14,227 27,968
Other -- -- 2,134 --
-------- -------- -------- --------
Total Other Charges $ 53,465 $ 36,090 $123,394 $ 36,090
======== ======== ======== ========
</TABLE>
Based on the recent developments discussed in Note 2, management made a
determination that the carrying value of cost in excess of equity acquired
related to most of the Company's operations had been significantly impaired and
appropriate write-downs of $2.6 million and $62.5 million for the three and six
months ended September 30, 1999, respectively, had to be recorded. For the three
months ended September 30, 1999, the writedown of $2.6 million primarily relates
to a majority owned subsidiary of the Company based on the Company's expectation
of the net proceeds to be realized from the sale of this entity.
The restructuring charges of $12.1 and $18.7 million, for the three and six
months ended September 30, 1999, respectively, primarily represent legal and
consulting fees related to restructuring.
In August 1999, the Company began the implementation of a workforce reduction
plan which has resulted in a reduction of the workforce of approximately 11% as
of September 30, 1999, and is expected to result in the reduction of
approximately 30% of the Company's employees by the end of the Company's fiscal
year in order to achieve the strategic goals of the Company's restructuring plan
as discussed in Note 2. A charge of $8.7 million for severance costs was
recorded for approximately 760 employees representing a cross section of
individuals from all operations of the Company. At September 30, 1999, $4.3
million of this charge remains in Other liabilities.
In July 1999 and August 1999, the Company established the CFN and CMC 1999
Retention Bonus Plans (the "Plans") for the purpose of retaining the valuable
services of the Company's key employees through certain dates. In order to
guarantee payment to employees of amounts that will become due to them under the
Plans, the Company established and funded irrevocable trusts with the amount
necessary to satisfy the Company's maximum liability under the Plans.
9
<PAGE>
CONTIFINANCIAL CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1999
(in thousands, except share data and where noted)
4. INTEREST-ONLY AND RESIDUAL CERTIFICATES
Interest only and residual certificates (also referred to as excess spread
receivables or ESR) represents the present value of the estimated stream of
future cash flows that the Company expects to receive over the life of a
securitization, taking into consideration estimated prepayment speeds and credit
losses. At September 30, 1999 and March 31, 1999, the Company's ESR portfolio
consisted of the following:
September 30, March 31,
1999 1999
---- ----
Home equity:
ContiMortgage/ContiWest $344,581 $611,320
Other servicers 17,760 24,800
-------- --------
Total home equity 362,341 636,120
Home improvement 20,488 4,046
Commercial real estate 6,935 6,263
Auto 6,142 69,804
Other 5,083 5,779
-------- --------
Total ESR portfolio $400,989 $722,012
======== ========
10
<PAGE>
CONTIFINANCIAL CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1999
(in thousands, except share data and where noted)
The changes in ESR from March 31, 1999 to September 30, 1999 are presented in
the table below:
Interest-only and residual certificates:
Balance as of March 31, 1999 $ 722,012
New securitizations 43,543
ESR received in strategic alliance asset swap 17,964
Net cash distributions from REMICs and trusts (42,604)
Sale of subsidiary (62,446)
Accruals of interest income 25,112
Clean-up call on previously sold ESR 22,076
Fair value adjustments (324,668)
--------
Balance as of September 30, 1999 $ 400,989
=========
In accordance with SFAS No. 134, "Accounting for Mortgage-Backed Securities
Retained after the Securitization of Mortgage Loans Held for Sale by a Mortgage
Banking Enterprise", the Company continues to classify ESR as "trading
securities". As such, they are carried at fair value in the Consolidated Balance
Sheets. Unrealized changes in ESR fair value are included in Gain (loss) on sale
of receivables on the accompanying Consolidated Statements of Operations in the
period of the change.
The Company has, from time to time, completed sales of ESR as either sales with
limited recourse or Net Interest Margin Securities ("NIMS") sales. Nevertheless,
there is only a limited market for the sale of ESR. Consequently, the Company
estimates the fair value of ESR through the application of a discounted cash
flow analysis, which requires the use of various assumptions, specifically
regarding prepayments, losses and discount data.
A significant factor affecting the level of estimated future ESR cash flows is
the rate at which the underlying principal of the securitized loans is reduced.
Prepayments represent principal reductions in excess of contractually scheduled
reductions, and prepayment speeds are generally expressed as an annualized
Conditional (or Constant) Prepayment Rate ("CPR"). In determining the fair value
of the ContiMortgage/ContiWest ESR portfolio as of September 30, 1999, the
Company's weighted average estimated future CPR was approximately 29% as
compared to approximately 28% at March 31, 1999.
Another significant factor that is considered in estimating the fair value of
ESR is the estimate of future credit losses. As credit enhancement, the ESR is
subordinate to the rights of the holders of the senior pass-through securities.
Aggregate lifetime credit losses (historical plus future) as a percentage of the
original pool balances for the ContiMortgage/ContiWest ESR portfolio was
estimated to be 4.50% at September 30, 1999 as compared to 2.91% at March 31,
1999. Based on the developments during the first quarter of fiscal 2000, as
discussed in Note 2, management made a determination that the Company most
likely would not be able to achieve the results in its prior loan loss
projections; therefore, assumptions as to future loss severities were increased,
resulting in a fair value adjustment to interest-only and residual certificates
of $151.2 million for the three months ended June 30, 1999. During the second
quarter of fiscal 2000, management made a further determination that assumptions
as to future loss frequencies should be increased, resulting in a fair value
adjustment to interest-only and residual certificates of $173.5 million. The
basis for this increased expectation in loss frequency was driven by the
following factors: (i) the recent performance of the Company's more seasoned
REMICs resulted in management increasing its assumptions of loss frequencies
across the entire portfolio, and (ii) new data from third parties regarding loss
frequency expecta-
11
<PAGE>
CONTIFINANCIAL CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1999
(in thousands, except share data and where noted)
tions on subprime collateral in general. The cumulative impact
of the fair value adjustments to interest-only and residual certificates for the
six months ended September 30, 1999 is $324.7 million.
The Company determines the discount rate used in estimating fair value by
selecting a rate that it believes is commensurate with the risks involved. The
Company recognizes that the ESR discount rate when interacting with the other
two assumptions, losses and prepayment, is a "risk-adjusted" rate. In
determining this rate the Company considers many factors including a comparison
to the yields on other financial instruments with prepayment or credit risk. The
future cash flows estimated as of September 30, 1999 and March 31, 1999, taking
into consideration estimated prepayment rates and credit losses, were discounted
at 12% to arrive at the fair value amounts presented in the accompanying
Consolidated Balance Sheets.
Assumptions regarding future CPR and credit losses are subject to volatility
that could materially affect operating results. Both the amount and timing of
estimated ESR cash flows are dependent on the performance of the underlying
loans, and actual cash flows may vary significantly from expectations. If actual
prepayment speeds or credit losses in future periods were to be higher than the
assumptions used in the Company's fair value estimate, or if the estimated
market discount rate were to increase, the ESR carrying value would have to be
written down through a charge to earnings, which could cause the Company to
report losses in future periods. Given the size of ContiMortgage/ContiWest's
servicing portfolio, even a modest change in ESR fair value assumptions can have
a relatively large impact on the ESR fair value. The table below illustrates the
impact of a positive or negative change in a single assumption used to determine
fair value for the ContiMortgage/ContiWest related ESR while keeping the
absolute value of the other two assumptions constant. The impact of changes in
these assumptions are not linear. As of September 30, 1999, changes in the
assumptions would have approximately the following impact on fair value:
Factor Change Fair
------ ------ ----
value
-----
impact
------
Annual CPR +100 basis points $(21.3
million)
Annual CPR - 100 basis points $ 25.0
million
Lifetime credit losses + 10 basis points $(15.4
million)
Lifetime credit losses - 10 basis points $ 16.6
million
Discount rate +100 basis points $(24.5
million)
Discount rate - 100 basis points $ 27.1
million
12
<PAGE>
CONTIFINANCIAL CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1999
(in thousands, except share data and where noted)
5. GAIN ON SALE OF SUBSIDIARY
On June 11, 1999, the Company sold its interest in its wholly-owned subsidiary,
Triad Financial Corporation ("Triad") to Fairlane Credit LLC, a wholly-owned
subsidiary of Ford Motor Credit Company. The sale of Triad resulted in a gain of
approximately $22 million and provided gross proceeds of approximately $134
million through sale proceeds, repayment of intercompany debt and net return of
intercompany warehouse financing. Of this amount, approximately $95 million was
used to pay down the Company's Bank Facilities.
6. TAXES
SFAS No. 109 requires that deferred tax assets be reduced by a valuation
allowance if it is more likely than not that some portion of the deferred tax
assets will not be realized. The Company has provided a valuation allowance for
the entire amount of the net deferred tax asset since it is more likely than not
that the net deferred tax asset will not be realized.
Due to the Company's ownership of REMIC residual certificates, the Federal tax
provision for the three and six months ended September 30, 1999 is based on
excess inclusion generated by the ownership of these certificates.
7. EARNINGS PER SHARE
For the three and six months ended September 30, 1999 and 1998, diluted loss per
share equals basic loss per share, as the dilutive calculation would have an
antidilutive impact as a result of the net loss incurred in those periods.
13
<PAGE>
CONTIFINANCIAL CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1999
(in thousands, except share data and where noted)
8. DEBT
Short-term and long-term debt at September 30, 1999 and March 31, 1999 consisted
of the following:
<TABLE>
<CAPTION>
September 30, March 31,
1999 1999
<S> <C> <C>
Short-term debt:
Commercial paper $258,925 $312,477
Revolving Credit Facility 163,000 200,000
Current portion of long-term debt 337 320
-------- --------
Total short-term debt $422,262 $512,797
======== ========
Long-term debt:
8 3/8% Senior Notes, $300 million face amount, due 2003 $299,463 $299,405
7 1/2% Senior Notes, $200 million face amount, due 2002 199,618 199,547
8 1/8% Senior Notes, $200 million face amount, due 2008 199,800 199,792
Capitalized lease 310 481
-------- --------
Total long-term debt $699,191 $699,225
======== ========
</TABLE>
The Company is required to comply with various financial covenants under its
outstanding Senior Notes and Bank Facilities. As of December 31, 1998 and
continuing through September 30, 1999, the Company's leverage ratio exceeded the
leverage ratio test under the covenants of its outstanding Senior Notes. As a
result, the Company is prevented from issuing additional unsecured debt until
its leverage ratio is below such test.
As of December 31, 1998, amended financial covenants were received changing the
leverage and fixed charge ratios and the minimum net worth test in the Bank
Facilities, and lenders agreed to exclude certain charges from the covenant
ratio calculations. As of March 31, 1999, the Bank Facilities were amended to
eliminate the financial covenants and borrowing base provisions, among other
things. As part of the bank amendment, the Company agreed to reduce commitments
under the Bank Facilities by 75% of the total proceeds received by the Company
for the sale of Triad Financial Corporation ("Triad"). On June 11, 1999, the
sale of Triad was closed, and the Bank Facilities commitments were reduced by
approximately $95 million. If the above mentioned amendments had not been
obtained, the Company would not have been in compliance with the covenants.
As part of the December amendments to the Revolving Credit Facility, the Company
had agreed to prepay the Revolving Credit Facility on August 20, 1999, which
made the Revolving Credit Facility coterminous with the Commercial Paper
Program. As part of the March amendments, the interest rate of the Revolving
Credit Facility and the Commercial Paper Program were increased to LIBOR plus
300 basis points.
On August 19, 1999, the Company agreed with the lenders under its Bank
Facilities to extend the maturity date of the Bank Facilities from August 20,
1999 to March 31, 2000 and to convert both facilities into term arrangements
("Term Facility"). The Company also agreed to certain modifications of the Bank
Facilities including a $20 million minimum liquidity covenant. The agreement
also includes providing collateral to the lenders in the form of a lien on
certain Excess Spread Receivables with a June 30, 1999 book value of
approximately $147 million. The book value of these Excess Spread Receivables as
of September 30, 1999
14
<PAGE>
CONTIFINANCIAL CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1999
(in thousands, except share data and where noted)
was approximately $103 million. The interest rate on each facility remains at
LIBOR plus 300 basis points. The Company was in compliance with the amended
covenants of the Bank Facilities as of September 30, 1999.
9. SUBSEQUENT EVENTS
Servicing Advance Financing
On November 10, 1999, the Company entered into a new arrangement with Greenwich
to provide monthly servicer advances, up to an aggregate outstanding amount of
$125 million, to certain REMICs for which ContiMortgage is the servicer. This
arrangement replaced the ContiGroup arrangement which expired on October 15,
1999. Greenwich has agreed to make these advances, for a fee, through November
9, 2000.
Litigation
On or about October 21, 1999, a purported class action entitled O'Hopp v.
ContiFinancial Corporation, et al., No. 99cv06794, was filed in the United
States District Court for the Eastern District of New York on behalf of Dea
O'Hopp, a stockholder of the Company, and similarly situated individuals,
against the Company, Continental Grain Corporation (sued in its capacity as a
"controlling person") and former Company officers and/or directors James E.
Moore and Daniel J. Willett. On or about October 29, 1999, a virtually identical
complaint was filed against the same defendants in the United States District
Court for the Southern District of New York in an action entitled I&M Associates
v. ContiFinancial Corporation, et al., No. 99 Civ. 10941. Both actions allege,
among other things, violations of Section 10(b) of the Exchange Act and Rule
10b-5 promulgated thereunder, based on allegedly false or misleading statements
and failures to disclose allegedly material information in Company press
releases, SEC filings and statements made to analysts during the period from
January 19, 1998 through July 21, 1999. These misstatements and omissions,
plaintiffs allege, artificially inflated the Company's stock price during the
relevant time period. The plaintiffs seek damages in an unspecified amount. The
Company intends to defend these actions vigorously. Given the preliminary stage
of the litigation, the Company is unable to evaluate the potential materiality
of such suits, if any.
New York Stock Exchange Listing
The Company recently received notification from the New York Stock Exchange that
the Company currently does not meet listing standards of the Exchange requiring
a minimum average share price of $1.00 over a consecutive 30 trading day period,
and total market capitalization of not less than $50 million in conjunction with
stockholders' equity of not less than $50 million. The Company is required to
bring its average share price to the minimum specified by the Exchange within
six months and, in accordance with the rules of the Exchange, the Company is
working with the Exchange on a business plan to address the market
capitalization and stockholders' equity issue within the applicable time frame.
However, it is unlikely that the Company will be successful in meeting these
requirements. The Company will examine alternatives to the Exchange for the
continued trading of the Company's common stock.
15
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
This discussion should be read in conjunction with the accompanying unaudited
Condensed Consolidated Financial Statements and notes thereto included herein,
and the Company's audited Consolidated Financial Statements and notes thereto
included in the Company's Annual Report. Certain statements under this caption
constitute "forward-looking statements" under federal securities laws. See
"Forward-looking Statements."
Recent Developments, Financial Results and Liquidity
In fiscal 1999 and continuing in the first two quarters of fiscal 2000 the
Company has incurred significant losses of $426.3 million and $571.4 million,
respectively. Over this period the Company has experienced a significant decline
in liquidity. As a result of these factors there is substantial doubt as to the
Company's ability to continue as a going concern (see Note 2 to the Consolidated
Financial Statements). At September 30, 1999 stockholders' equity has been
reduced to a deficit balance of $362.7 million.
During fiscal 1999 and fiscal 2000, the Company recorded fair value adjustments
to interest-only and residual certificates totaling approximately $329 million
and $325 million, respectively, resulting from higher-than-estimated credit
losses and prepayment speeds, and an increase in the discount rate used in the
valuation from 10% to 12% to reflect the capital market's deteriorating view of
the "sub-prime" industry in which the Company operates. The Company believes its
interest-only and residual certificates are fairly valued at September 30, 1999
but can provide no assurances that future prepayment and loss experience or
changes in the required market discount rate will not necessitate additional
write-downs. If there are such additional write-downs in future periods, the
Company's income would be reduced, likely resulting in a net loss for such
period.
The Company's operations were also significantly and adversely affected by
difficult capital market conditions that commenced in the second quarter of
fiscal 1999, with the effects of these events, and their repercussions,
continuing to affect the Company's results through the first two quarters of
fiscal 2000. During the second quarter of fiscal 1999, the economic instability
in Asia and Russia precipitated a global debt crisis (the "Debt Crisis") which
caused a "flight to quality" by investors. During this period, fixed income
investors purchased large amounts of U.S. Treasury securities, causing U.S.
Treasury yields to decrease significantly. As investor demand for U.S. Treasury
securities increased, the demand for other fixed income securities declined
dramatically, causing yields on such other securities to rise relative to U.S.
Treasury securities. Since almost all of the Company's loan originations were
ultimately funded by the issuance of securities backed by the loans it
originates (securitization), these unusual interest rate movements affected the
market value of all of the Company's originations, causing significant losses
and leading to a critical loss of liquidity.
While the Debt Crisis abated for other sectors of the economy in fiscal 1999,
its impact and subsequent repercussions continued to affect the "sub-prime"
industry in which the Company operates. The sudden and significant loss of
liquidity experienced throughout the industry, occurring within the context of
increasing market skepticism about the quality of earnings reported under
"gain-on-sale accounting", intensified capital market concerns about the
industry and severely curtailed access to the capital markets as a source of new
liquidity.
16
<PAGE>
In order to attempt to strengthen the Company's ability to operate in this
difficult environment, in the third quarter of fiscal 1999, the Company began to
search for an investor who could contribute additional equity capital to the
Company or a buyer who would be interested in purchasing the Company's business.
On May 14, 1999, the Company signed an indication of interest letter with
Residential Funding Corporation ("RFC") under which RFC indicated its interest
in acquiring all of the outstanding common stock of the Company. On July 2,
1999, a second indication of interest letter was signed with RFC, again for the
acquisition of all of the outstanding common stock of the Company, but on
revised business terms. Definitive documentation for the acquisition was then
negotiated with RFC. On July 14, 1999, just prior to the expected signing of the
definitive documentation, RFC informed the Company that it had determined not to
proceed with the acquisition.
In light of the failure to consummate the transaction with RFC, and the
impending expiration of certain of the Company's credit facilities, the
Company's Board of Directors hired Mr. Alan Fishman as the new Chief Executive
Officer of the Company on July 20, 1999.
Following a review of the Company's situation, Mr. Fishman and other members of
the Company's senior management pursued a plan (the "Restructuring Plan") of
focusing the Company's operations on the most promising of its origination
channels, reducing the size of the Company, negotiating for the restructuring or
extension of the Company's credit facilities and then recommencing the search
for an equity investor in the Company, a buyer of the Company's business or of
certain of the Company's assets.
Pursuant to the Restructuring Plan, in August 1999, the Company entered into a
definitive agreement with Greenwich Capital Financial Products, Inc.
("Greenwich"), an affiliate of Greenwich Capital Markets, Inc., to provide
ContiFinancial with a $500 million revolving servicing-released whole loan
purchase facility with a maximum aggregate purchase commitment of up to $1.5
billion, at ContiFinancial's option, through March 31, 2000. Greenwich also
agreed to provide a warehouse facility of up to $250 million on a revolving
basis. This facility also expires on March 31, 2000. In addition to the two
facilities, Greenwich purchased on a whole loan basis, through an affiliate,
approximately $772 million of home equity loans which were funded under
ContiFinancial's prior warehouse facilities. The Company expects these
arrangements with Greenwich will provide the Company with the necessary
warehouse financing to support the reduced amount of originations contemplated
as the Restructuring Plan is being implemented.
Also in August 1999, the Company began the implementation of a workforce
reduction plan which will result in the reduction of approximately 30% of the
Company's employees by the end of the Company's fiscal year in order to achieve
the strategic goals of focusing the Company's origination in the channels with
the greatest potential and reducing the overall size of the Company. See Note 3
to the Consolidated Financial Statements.
On August 19, 1999, the Company agreed with the lenders under its Revolving
Credit Facility and Commercial Paper Program (collectively, the "Bank
Facilities") to extend the maturity date of the Bank Facilities from August 20,
1999 to March 31, 2000 and to convert both facilities into term arrangements.
The Company also agreed to certain modifications of the Bank Facilities
including a $20 million minimum liquidity covenant. The agreement also included
providing collateral to the lenders in the form of a lien on certain Excess
Spread Receivables with a June 30, 1999 book value of approximately $147
million. The book value of these Excess Spread Receivables as of September 30,
1999 was approximately $103 million. The interest rate on each facility remains
at LIBOR plus 300 basis points. The Company was in compliance with the amended
covenants of the Bank Facilities as of September 30, 1999.
17
<PAGE>
With the objectives of the Restructuring Plan of refocusing the Company's
operations, reducing the size of the Company and restructuring and extending the
Company's credit facilities being substantially accomplished, the Company has
re-launched its efforts to explore strategic alternatives. The Company has
retained financial advisors Lehman Brothers, Inc. and The Blackstone Group L.P.
(the "Advisors") as advisors in the process. With the assistance of the
Advisors, the Company is pursuing various strategic alternatives including but
not limited to a sale of the Company, sales of one or more of the business
operations and/or assets of the Company or a recapitalization of the Company
with additional equity capital.
During the restructuring process, the Company expects that it will be cash flow
negative and will operate at a loss. The Company's continued operations during
the restructuring process are dependent on the continued availability of the
Bank Facilities and the warehouse financing and supplemental servicer agreement
under the Greenwich arrangements (see Note 9 to the Consolidated Financial
Statements). During this period, the Company's cash reserves may not be
sufficient to meet the Company's cash needs. There can be no assurance that an
equity investor or buyer of the Company's business or its assets can be found on
a timely basis.
As a result of the developments described above, the Company determined, during
the first quarter of fiscal 2000, that the carrying value of Cost in excess of
equity acquired on the Company's balance sheet has been impaired and should be
written-down (see Note 3 to the Consolidated Financial Statements). During the
first and second quarters, the Company has also determined that it may not be
able to achieve the results assumed in its prior loan loss projections;
therefore, assumptions as to future loss frequencies and severities were
increased, resulting in fair value adjustments to interest-only and residual
certificates (see Note 4 to the Consolidated Financial Statements).
For the six months ended September 30, 1999, the Company incurred a net loss of
$571.4 million, primarily due to the fair value adjustment to interest-only and
residual certificates, the write-down of Cost in excess of equity acquired, and
restructuring and severance costs as discussed above. As a result of this net
loss, stockholders' equity has been reduced to a deficit balance of $362.7
million.
18
<PAGE>
Selected Financial Data
ContiFinancial Corporation
Loan Originations, Securitizations and Sales
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
For the three months For the six months
ended % ended %
September 30, Incr. September 30, Incr.
------------------- ---------------
1999 1998 (Decr.) 1999 1998 (Decr.)
---- ---- ------- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Loan Originations
Home equity, home improvement
and other residential mortgage loans:
Brokers ............................. $ 208,425 $ 401,301 (48.1%) $ 609,540 $ 777,196 (21.6%)
Correspondents ...................... 142,095 1,585,875 (91.0%) 700,307 2,935,304 (76.1%)
Direct retail ....................... 425,490 498,906 (14.7%) 942,574 964,831 (2.3%)
---------- ---------- ----- ---------- ---------- -----
Total home equity, home improvement
and other residential mortgage loans ... 776,010 2,486,082 (68.8%) 2,252,421 4,677,331 (51.8%)
---------- ---------- ---------- ---------- -----
Commercial real estate mortgage loans:
Conduit (ContiMAP(R)and affiliates) . -- 656,524 (100.0%) -- 1,375,307 (100.0%)
Keystone ............................ 248,716 269,543 (7.7%) 568,041 487,495 16.5%
---------- ---------- ---------- ---------- -----
Total commercial real estate loans ..... 248,716 926,067 (73.1%) 568,041 1,862,802 (69.5%)
---------- ---------- ---------- ---------- -----
Triad auto loans ....................... -- 102,407 (100.0%) 88,675 172,953 (48.7%)
---------- ---------- ---------- ---------- -----
Total loan originations .......... $1,024,726 $3,514,556 (70.8%) $2,909,137 $6,713,086 (56.7%)
========== ========== ========== ========== =====
Securitizations and Sales
Whole loan sales to Greenwich affiliate $ 771,801 $ -- n/a $ 771,801 $ -- n/a
ContiMortgage/ContiWest securitizations -- 2,100,000 (100.0%) 800,000 3,850,000 (79.2%)
Other home equity, home improvement and
other residential mortgage sales .... 539,123 193,360 178.8% 1,123,488 389,543 188.4%
---------- ---------- ---------- ---------- -----
Total home equity, home improvement and
other residential mortgage sales .... 1,310,924 2,293,360 (42.8%) 2,695,289 4,239,543 (36.4%)
---------- ---------- ---------- ---------- -----
Commercial real estate mortgage loans:
Whole loan sales .................... 81,248 -- n/a 461,900 -- n/a
Conduit (ContiMAP(R)and affiliates) . -- 581,343 (100.0%) -- 581,343 (100.0%)
Keystone ............................ 248,716 269,543 (7.7%) 568,041 487,495 16.5%
---------- ---------- ---------- ---------- -----
Total commercial real estate mortgage
loans ................................. 329,964 850,886 (61.2%) 1,029,941 1,068,838 (3.6%)
---------- ---------- ---------- ---------- -----
Triad auto loans ....................... -- 80,007 (100.0%) -- 137,674 (100.0%)
Strategic alliances .................... -- 56,939 (100.0%) 12,783 157,188 (91.9%)
---------- ---------- ---------- ---------- -----
Total securitizations and sales .. $1,640,888 $3,281,192 (50.0%) $3,738,013 $5,603,243 (33.3%)
========== ========== ========== ========== =====
</TABLE>
n/a - not applicable
19
<PAGE>
ContiMortgage Corporation
Delinquencies, Defaults and Losses
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
ContiMortgage September 30, March 31, September 30,
Servicing Portfolio 1999 1999 1998
---- ---- ----
<S> <C> <C> <C>
Number of loans serviced (at period end) 179,692 194,032 188,625
Serviced loan portfolio (at period end) $ 11,981,339 $ 12,966,131 $ 12,535,874
============== ============== ==============
Weighted Average Seasoning (age in months) (1) 21 17 15
Delinquencies:
30 - 59 days 2.11% 1.39% 2.02%
60 - 89 days 0.65% 0.51% 0.74%
90 days and over 0.05% 0.44% 0.57%
-------------- -------------- --------------
Total delinquencies (%) 2.81% 2.34% 3.33%
============== ============== ==============
Total delinquencies ($) $ 336,138 $ 303,802 $ 417,862
============== ============== ==============
Defaults:
Foreclosure 2.79% 2.29% 1.95%
Bankruptcy 2.03% 1.65% 1.53%
Real estate owned 1.31% 1.04% 0.93%
Loss mitigation and legal (2) 1.38% 1.24% 0.91%
-------------- -------------- --------------
Total defaults (%) 7.51% 6.22% 5.32%
============== ============== ==============
Total defaults ($) $ 899,973 $ 806,656 $ 666,687
============== ============== ==============
</TABLE>
(1) This caption has been added to illustrate the significant change in the age
of the portfolio and provide a frame of reference for the location of the
portfolio within the default cycle.
(2) This category includes non-performing accounts specifically identified for
accelerated resolution under the Company's loss mitigation program. Resolution
strategies include refinances, reinstatements, and full payoffs; forbearance
plans; pre-foreclosure sales for less than full payoff; third party foreclosure
sales; deed-in-lieu (or "cash for keys"); and charge-offs.
20
<PAGE>
ContiMortgage Corporation
Delinquencies, Defaults and Losses Continued
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
For the three For the twelve
ContiMortgage months ended months ended
Loan Loss Experience September 30, September 30,
1999 1999
---- ----
<S> <C> <C>
Average serviced loan portfolio $12,327,641 $12,687,135
=========== ===========
Net losses:
REMICs and loans held pending securitization 49,116 180,019
Loans and properties purchased out of REMICs 3,002 5,951
----------- -----------
Total net losses $ 52,118 $ 185,970
=========== ===========
Realized net losses as a percentage of average amount outstanding (2):
REMICs and loans held pending securitization 1.59% 1.42%
Loans and properties purchased out of REMICs 0.10% .05%
----------- -----------
Total realized net losses as a percentage of average amount
outstanding 1.69% 1.47%
=========== ===========
</TABLE>
(2) Amounts for the three months ended September 30, 1999 are annualized.
21
<PAGE>
Results of Operations
Three and Six Months Ended September 30, 1999 Compared with the Three and Six
Months Ended September 30, 1998
The Company incurred a net loss of $333.7 million and $571.4 million for the
three and six months ended September 30, 1999 compared to a net loss of $114.3
million and $108.2 million for the three and six months ended September 30,
1998, a decrease of $219.5 million and $463.2 million, respectively. The
Company's total gross income (loss) decreased to a loss of $152.9 million and
$171.6 million for the three and six months ended September 30, 1999,
respectively, from income of $10.9 million and $153.0 million for the comparable
periods last year. Total expenses decreased to $180.7 million for the three
months ended September 30, 1999 from $196.5 million for the comparable period
last year, and increased to $389.5 million for the six months ended September
30, 1999 from $328.4 million for the comparable period last year.
Explanation of the significant revenue and expense captions and the drivers of
those changes are described below.
Gain (Loss) on Sale of Receivables:
The following table sets forth the components of gain (loss) on sale of
receivables for the three and six months ended September 30, 1999 and 1998:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
------------- -------------
(dollars in thousands) 1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Home equity/home improvement $ (15,928) $ 83,591 $ 24,479 $ 171,112
Commercial real estate 1,538 1,490 3,362 2,752
Auto and Other -- 9,542 -- 17,879
--------- --------- --------- ---------
Gain (loss) before fair value adjustments (14,390) 94,623 27,841 191,743
Fair value adjustments (173,486) (78,307) (324,668) (137,855)
--------- --------- --------- ---------
Gain (loss) after fair value adjustments $(187,876) $ 16,316 $(296,827) $ 53,888
========= ========= ========= =========
</TABLE>
Gain (loss) before fair value adjustments was unfavorable by $109.0 million for
the three months ended September 30, 1999 as compared to the same three months
of fiscal 1999, whereas total securitizations and sales decreased 50%, from $3.3
billion to $1.6 billion for the same respective periods. Gain (loss) before fair
value adjustments was unfavorable by $163.9 million for the six months ended
September 30, 1999 as compared to the same six months of fiscal 1999, whereas
total securitizations and sales decreased 33%, from $5.6 billion to $3.7 billion
for the same respective periods. In the three months ended September 30, 1999
Greenwich purchased on a whole loan basis, through an affiliate, approximately
$772 million of home equity loans which were funded under ContiFinancial's prior
warehouse facilities. The consideration for the sale was the net cash proceeds
and the residual from the securitization Greenwich's affiliate subsequently
executed with the purchased collateral. The loss on this transaction was $20.3
million. The loss was primarily the result of both the prefunding and higher
level of overcollateralization levels required by the monoline insurer
supporting the transaction due to the Company's impaired financial condition and
the perceived quality of the collateral securitized, and the higher level of
transaction costs to execute the securiti-
22
<PAGE>
zation. For ContiMortgage/ContiWest transactions, gain (loss) before fair value
adjustments expressed as a percentage of total securitizations and sales
resulted in a loss of 1.22% compared to a gain of 3.6% for the respective three
months ended September 30, 1999 and 1998. For the six months ended September 30,
1999 and 1998, ContiMortgage/ContiWest transactions gain (loss) before fair
value adjustments expressed as a percentage of total securitizations and sales
resulted in a gain of 0.9% compared to a gain of 4.0%, respectively. This
decrease in profitability between the two periods reflects higher loss
assumptions (see below) and higher investor spread requirements.
For the three months ended June 30, 1999, the Company recorded fair value
write-downs of $151.2 million on Interest-only and residual certificates,
primarily reflecting increased estimates of credit losses in the
ContiMortgage/ContiWest portfolio. In response to events occurring in the first
fiscal quarter, as more fully described in Note 2 to the Consolidated Financial
Statements, management made a determination that the Company most likely would
not be able to achieve the results assumed in its prior loan loss projections;
therefore, assumptions as to future loss severities were increased. For the
three months ended June 30, 1998, the fair value adjustments of $59.5 million
resulted primarily due to increased estimates of future prepayment speeds and
losses in the ContiMortgage/ContiWest portfolio.
During the second quarter of fiscal 2000, management made a further
determination that assumptions as to future loss frequencies should be
increased, resulting in a fair value adjustment to interest-only and residual
certificates of $173.5 million for the three months ended September 30, 1999.
The basis for this increased expectation in loss frequency was driven by the
following factors: (i) the recent performance of the Company's more seasoned
REMICs resulted in management increasing its assumptions of loss frequencies
across the entire portfolio, and (ii) new data from third parties regarding loss
frequency expectations on subprime collateral in general.
The cumulative impact of the fair value adjustments to interest-only and
residual certificates for the six months ended September 30, 1999 is $324.7
million.
Interest Income and Expense:
In the normal course of its activities, the Company carries inventories of loans
pending sale or securitization and earns a positive spread between the interest
income earned on those loans and the cost of financing such loans. Interest
income also includes accrued imputed interest on Excess Spread Receivables
("ESR"). In addition to the cost of financing loans pending sale or
securitization, interest expense includes the cost of financing the Company's
longer term capital requirements, including the cost of strategic acquisitions.
Interest income during the three and six months ended September 30, 1999
declined $58.5 million or 64.3%, and $78.2 million or 48.0%, respectively,
compared to the three and six months ended September 30, 1998. Interest expense
fell $28.0 million or 42.4%, and $40.8 million or 33.5%, respectively, for the
three and six months ended September 30, 1999 compared to the comparable period
in the prior year. These decreases reflect the decline in loan originations that
began in the second half of fiscal 1999 and continued during the first quarter
of fiscal 2000, the elimination of substantially all financing commitments to
strategic alliance clients, and the reduction in the balance of ESR.
23
<PAGE>
Net servicing Income:
Net servicing income consists of servicing fees and prepayment penalties
collected from borrowers, and capitalized servicing activity. Net servicing
income declined $27.5 million and $41.3 million or 95.1% and 74.3% in the three
and six months ended September 30, 1999 compared to the three and six months
ended September 30, 1998. The following table presents the components of
servicing income for the two periods:
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30, September 30,
------------- -------------
(in thousands) 1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Capitalized servicing created $ -- $ 31,651 7,052 $ 52,653
Premiums paid for capitalized prepayment penalties
-- (13,954) (1,736) (18,621)
Amortization of capitalized servicing (15,344) (9,787) (31,361) (17,872)
Fees and prepayment penalty collections 24,774 21,056 53,882 39,526
Impairment of capitalized servicing (8,000) -- (13,500) --
------------ ------------ ------------ ------------
Net servicing income $ 1,430 $ 28,966 $ 14,337 $ 55,686
============ ============ ============ ============
Total ContiMortgage/ContiWest securitization volume $ -- $ 2,100,000 $ 800,000 $ 3,850,000
Average ContiMortgage servicing portfolio (excluding
warehouse) $ 11,302,293 $ 10,220,169 $ 11,539,326 $ 9,687,734
</TABLE>
The absence of capitalized servicing created during the quarter ended September
30, 1999 was attributable to the appointment of a servicer other than the
Company on a loan sale to Greenwich during that quarter. The appointment of
another servicer, because of the Company's impaired financial condition, was
necessary to obtain the monoline insurance guaranty on the transaction. The
increase in amortization of capitalized servicing of $5.6 million in the quarter
ended September 30, 1999 versus the comparable fiscal 1999 quarter was due
predominantly to the 20% increase in the amount of capitalized servicing created
during fiscal 1999, which affects the level of subsequent amortization, as
compared to the amount of capitalized servicing created in fiscal 1998 (such
capitalized amounts being $76.6 million and $63.6 million, respectively).
Further, the prepayment penalty component of capitalized servicing created was
higher in fiscal 1999 than fiscal 1998, and since prepayment penalties have set
expiration dates that may be as short as six months, capitalized prepayment
penalties are, on average, amortized over a much shorter period than normal
servicing fees.
The Company recorded an estimated impairment reserve of $5.5 million during the
first quarter of fiscal 1999 because certain securitized portfolios have reached
delinquency levels that may trigger the loss of the servicing rights related to
those pools. The Company also recorded an estimated impairment reserve of $8.0
million in the second quarter of fiscal 2000 due to the expectation that
servicing costs on a per loan basis will increase in the future. Given its
current financial condition, the Company is unable to increase its servicing
portfolio and as a result the portfolio will increase in age. As the portfolio
ages, the portion of the portfolio that is delinquent, which is more costly to
service, will increase.
Fees and prepayment penalties collected in the three and six months ended
September 30, 1999 increased by $3.7 million and $14.4 million, respectively,
compared to the three and six months ended September 30, 1998
24
<PAGE>
primarily due to an increase in the average balance of the
ContiMortgage/ContiWest portfolio of loans serviced for others and a higher
level of ancillary income such as prepayment penalties and late fees.
The following table presents an analysis of capitalized servicing rights
activity during the six months ended September 30, 1999:
(in thousands)
Balance as of March 31, 1999 $ 105,273
New securitization 7,052
Capitalized servicing received in strategic alliance asset swap 3,115
Amortization of capitalized servicing rights (31,361)
Impairment of capitalized servicing (13,500)
----------
Balance as of September 30, 1999 $ 70,579
=========
Compensation and Benefits and General and Administrative Expenses:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
(dollars in thousands) 1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Compensation and benefits $ 44,735 $ 51,842 $ 95,791 $ 95,166
========= ======== ======== ========
General and administrative expenses $ 41,827 $ 40,071 $ 84,965 $ 72,582
========= ======== ======== ========
Quarter-end head count 2,766 3,583
Average head count for the quarter 2,898 3,394
</TABLE>
In the three months ended September 30, 1999 compensation and benefits decreased
by $7.1 million or 13.7% due to a workforce reduction of approximately 11%.
General and administrative expenses increased in the three and six months ended
September 30, 1999 by $1.8 million and $12.4 million, respectively, or 4.4% and
17.1%, respectively. The increase for the six months ended September 30, 1999
compared to the prior comparable period primarily reflects the expansion of the
Company's direct-to-consumer retail operations during fiscal 1999 and the
expansion of the Company's servicing operations due to the increase in the size
of the servicing portfolio. Direct-to-consumer retail operations require a
higher level of G&A Expense than non-retail operations that are conducted
through correspondents and brokers.
25
<PAGE>
Other Charges:
Other charges for the three and six months ended September 30, 1999 and 1998
consisted of the following:
<TABLE>
<CAPTION>
------------------- --------------------
Three Months Ended Six Months Ended
September 30, September 30,
-------------------- --------------------
(dollars in thousands) 1999 1998 1999 1998
----- ----- ------ --------
<S> <C> <C> <C> <C>
Other Charges:
Write-down of cost in excess of equity acquired
$ 2,569 $ 2,782 $ 62,522 $ 2,782
Restructuring charges (excluding compensation related)
12,056 5,340 18,715 5,340
Severance for approximately 760 employees 8,653 -- 8,653 --
Staff retention costs 17,143 -- 17,143 --
Write-offs and reserves of receivables from affiliates
and others 13,044 27,968 14,227 27,968
Other -- -- 2,134 --
Total Other Charges $ 53,465 $ 36,090 $123,394 $ 36,090
</TABLE>
Based on the recent developments discussed in Note 2, management made a
determination that the carrying value of cost in excess of equity acquired
related to most of the Company's operations had been significantly impaired and
appropriate write-downs of $2.6 million and $62.5 million for the three and six
months ended September 30, 1999, respectively, had to be recorded. For the three
months ended September 30, 1999, the writedown of $2.6 million primarily relates
to a majority owned subsidiary of the Company based on the Company's expectation
of the net proceeds to be realized from the sale of this entity.
The restructuring charges of $12.1 and $18.7 million, for the three and six
months ended September 30, 1999, respectively, primarily represent legal and
consulting fees related to restructuring.
In August 1999, the Company began the implementation of a workforce reduction
plan which has resulted in a reduction of the workforce of approximately 11% as
of September 30, 1999, and is expected to result in the reduction of
approximately 30% of the Company's employees by the end of the Company's fiscal
year in order to achieve the strategic goals of the Company's restructuring plan
as discussed in Note 2 to the Consolidated Financial Statements. A charge of
$8.7 million for severance costs was recorded for approximately 760 employees
representing a cross section of individuals from all operations of the Company.
At September 30, 1999, $4.3 million of this charge remains in Other liabilities.
In July 1999 and August 1999, the Company established the CFN and CMC 1999
Retention Bonus Plans (the "Plans") for the purpose of retaining the valuable
services of the Company's key employees through certain dates. In order to
guarantee payment to employees of amounts that will become due to them under the
Plans, the Company established and funded irrevocable trusts with the amount
necessary to satisfy the Company's maximum liability under the Plans.
26
<PAGE>
Liquidity and Capital Resources
The following discussion of Liquidity and Capital Resources should be read in
conjunction with "Recent Developments, Financial Results and Liquidity" at the
beginning of this Item 2. "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
Funding Requirements
The Company requires continued access to short- and long-term sources of funding
for its operations. The Company's primary cash requirements include the funding
of (i) mortgage loan originations and purchases pending their pooling and sale,
(ii) on going administrative and other operating expenses which will include
payments relating to the Restructuring Plan, (iii) payments related to tax
obligations, (iv) interest and principal payments relating to the Company's
long-term debt and short-term borrowed funds, (v) the costs of sales under the
Company's Purchase and Sale Facilities and Repurchase Agreements (collectively,
the "Warehouse Facilities"), and (vi) the cost of any subsequent contingent
purchase price payments on prior acquisitions.
The Company has taken steps to improve the cash flow characteristics of its
business activities by shedding businesses that required significant capital
outlays and focusing its financial resources on its core home equity business.
Within the home equity business, the Company took further steps to reduce the
capital requirements by implementing a whole loan sale strategy to accelerate
recapture of origination costs. Furthermore, development of the Company's retail
home equity origination platform provides a source of cash income through
origination points and fees. The reduction in correspondent origination volume
has significantly reduced the total amount of premiums paid to originate a loan.
As competition has decreased, the cost of originating correspondent loans has
also dropped significantly, benefiting the Company through lower purchase
premiums.
Sources of Liquidity and Capital
During the quarter ended September 30, 1999, the Company's primary sources of
liquidity were whole loan sales to the Greenwich purchase facilities and to
other third party loan purchasers.
On August 12, 1999, the Company entered into a definitive agreement with
Greenwich to provide the Company with a $500 million revolving
servicing-released whole loan purchase facility of up to $1.5 billion, at
ContiFinancial's option, through March 31, 2000. Greenwich provides a warehouse
facility of up to $250 million on a revolving basis. Both facilities ("Greenwich
Facilities") expire on March 31, 2000. In addition to the two facilities,
Greenwich purchased on a whole loan basis, through an affiliate, approximately
$772 million of home equity loans which were funded under ContiFinancial's prior
warehouse facilities.
As of September 30, 1999 the Company had $250 million of committed and $60
million of uncommitted capacity under the warehouse facilities. As of September
30, 1999, the Company had utilized $200 million of the capacity under the
Warehouse Facilities.
As discussed in the "Recent Developments, Financial Results and Liquidity", the
Company is operating on a negative cash flow basis and is dependent on the
Greenwich Facilities for its continued operations. In order to fund new loans
and asset originations and purchases, the Company is dependent on its ability to
27
<PAGE>
fund loans under the Greenwich Facilities. The Company is also dependent on
continued access to the Bank Facilities or obtaining new bank facilities in
order to meet its cash needs.
The Company is required to comply with various financial covenants under its
outstanding Senior Notes and Bank Facilities. As of December 31, 1998 and
continuing through September 30, 1999, the Company's leverage ratio exceeded the
leverage ratio test under the covenants of its outstanding Senior Notes. As a
result, the Company is prevented from issuing additional unsecured debt until
its leverage ratio is below such test.
As of December 31, 1998, amended financial covenants were received changing the
leverage and fixed charge ratios and the minimum net worth test in the Bank
Facilities, and lenders agreed to exclude certain charges from the covenant
ratio calculations. As of March 31, 1999, the Bank Facilities were amended to
eliminate the financial covenants and borrowing base provisions, among other
things. As part of the bank amendment, the Company agreed to reduce commitments
under the Bank Facilities by 75% of the total proceeds received by the Company
for the sale of Triad Financial Corporation ("Triad"). On June 11, 1999, the
sale of Triad was closed, and the Bank Facilities commitments were reduced by
approximately $95 million. If the above mentioned amendments had not been
obtained, the Company would not have been in compliance with the covenants.
As part of the December amendments to the Revolving Credit Facility, the Company
had agreed to prepay the Revolving Credit Facility on August 20, 1999, which
made the Revolving Credit Facility coterminous with the Commercial Paper
Program. As part of the March amendments, the interest rate of the Revolving
Credit Facility and the Commercial Paper Program were increased to LIBOR plus
300 basis points.
On August 19, 1999, the Company agreed with the lenders under its Bank
Facilities to extend the maturity date of the Bank Facilities from August 20,
1999 to March 31, 2000 and to convert both facilities into term arrangements.
The Company also agreed to certain modifications of the Bank Facilities
including a $20 million minimum liquidity covenant. The agreement also includes
providing collateral to the lenders in the form of a lien on certain Excess
Spread Receivables with a June 30, 1999 book value of approximately $147
million. The book value of these Excess Spread Receivables as of September 30,
1999 was approximately $87 million. The interest rate on each facility remains
at LIBOR plus 300 basis points. The Company was in compliance with the amended
covenants of the Bank Facilities as of September 30, 1999.
At September 30, 1999, the Company had outstanding $422.0 million on its Bank
Facilities.
On November 10, 1999, the Company entered into a new arrangement with Greenwich
to provide monthly servicer advances, up to an aggregate outstanding amount of
$125 million, to certain REMICs for which ContiMortgage is the servicer. This
arrangement replaced the ContiGroup arrangement which expired on October 15,
1999. Greenwich has agreed to make these advances, for a fee, through November
9, 2000.
On June 11, 1999, the Company sold its interest in Triad to Fairlane Credit LLC,
a wholly-owned subsidiary of Ford Motor Credit Company. The sale of Triad
resulted in a gain to the Company of approximately $22 million and provided
gross proceeds of approximately $134 million through sale proceeds, repayment of
intercompany debt and net return of intercompany warehouse financing. Of this
amount, approximately $95 million was used to pay down the Company's Bank
Facilities, thereby reducing the commitments under the Bank Facilities by the
pay down amount.
28
<PAGE>
On July 15, 1999, Standard & Poor's lowered its senior unsecured debt and
long-term debt credit ratings to CC, Moody's Investors Service downgraded the
Company's long-term debt ratings to Caa2 and Fitch IBCA reduced the Company's
long-term debt rating to C.
The Company recently received notification from the New York Stock Exchange that
the Company currently does not meet listing standards of the Exchange requiring
a minimum average share price of $1.00 over a consecutive 30 trading day period,
and total market capitalization of not less than $50 million in conjunction with
stockholders' equity of not less than $50 million. The Company is required to
bring its average share price to the minimum specified by the Exchange within
six months and, in accordance with the rules of the Exchange, the Company is
working with the Exchange on a business plan to address the market
capitalization and stockholders' equity issue within the applicable time frame.
However, it is unlikely that the Company will be successful in meeting these
requirements. The Company will examine alternatives to the Exchange for the
continued trading of the Company's common stock.
Year 2000
The "Year 2000" issue, the ability of systems to identify dates in the 21st
century, is a critical business and operational issue being addressed by the
Company's ongoing entities. During the three months ended September 30, 1999 the
Company's Year 2000 Project Team continued to monitor and implement changes to
upgrade the Company's facilities, computer systems and applications for Year
2000 compliance. As of September 30, 1999, the Company believes that all
material hardware, software and computerized systems are Year 2000 compliant.
The Company will continue to monitor and test critical applications through
1999. Modifications will be implemented, as required, to ensure Year 2000
compliance.
The Company estimates that the direct cost of its Year 2000 remediation,
including contingency planning, will be approximately $2.0 million. To date, the
Company has spent approximately $1.7 million on the Year 2000 issue.
The Company's contingency plan documentation covers a broad range of problems
that could occur relative to the turn of the century. In addition, ContiMortgage
has a disaster recovery plan in place to support a computer related outage.
The Company presently believes, based on the information obtained during the
systems inventory and assessment phase, that the Year 2000 issue will not have a
material adverse impact on its computer systems or operations. However, the
interdependent nature of the Company's operations, in particular its substantial
reliance on third party vendors, makes it impossible to say with certainty that
the Year 2000 issue will not have a material adverse impact on those computer
systems and operations.
Forward-looking Statements
Certain statements contained in this Quarterly Report on Form 10-Q, including,
but not limited to, statements relating to the Company's strategic objectives,
raising additional equity and future performance, which are not historical fact,
may be deemed to be forward-looking statements under the federal securities
laws. There are many important factors that could cause the Company's actual
results to differ materially from those indicated in the forward-looking
statements, including the ability of the Company to successfully complete a
transaction with a buyer or equity investor. Such factors also include, but are
not limited to, general economic conditions; interest rate risk; prepayment
speeds; delinquency and default rates; credit
29
<PAGE>
losses; changes (legislative and otherwise) in the asset securitization
industry; demand for the Company's services; residential and commercial real
estate values; the ability of the Company to negotiate agreements to sell whole
loans; the impact of certain covenants in debt agreements of the Company; the
degree to which the Company is leveraged; its needs for financing; the continued
availability of the Company's credit facilities; the risk of margin calls on the
Company's credit facilities and hedge positions; capital markets conditions,
including the markets for asset-backed securities and commercial mortgage loans;
the performance of the Company's subsidiaries and affiliates; the Company's Year
2000 issues; and other risks identified in the Company's Securities and Exchange
Commission filings. In addition, it should be noted that past financial and
operational performance of the Company is not necessarily indicative of future
financial and operational performance.
30
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The primary market risk exposure that the Company faces is interest rate risk.
The Company is most vulnerable to changes in U.S. Treasury yields, LIBOR yields,
and the yield spread requirements of the investors who buy the Company's
securities and loans. The Company's material exposures of interest rate
sensitive financial instruments, which are entered into for other than trading
purposes, are its committed pipeline of loans, its loan inventories (including
off-balance-sheet exposures), its interest-only and residual certificates, its
capitalized servicing rights, and the various derivative financial instruments
that the Company uses to manage the interest rate risk related to the
aforementioned other financial instruments. The overall objective of the
Company's interest rate risk management policies is to mitigate the effect of
changing interest rates on the fair value of its other financial instruments.
The Company does not have an ongoing hedging program to manage interest rate
risk associated with its interest-only and residual certificates and its
capitalized servicing rights. The primary risk involved is that a decline in
interest rates could result in an acceleration of prepayment speeds that would
adversely impact the fair value of these assets. However, because of the
relatively short average lives of the Company's home equity loans, prepayment
speeds related to the Company's portfolios are not as interest rate sensitive as
those of traditional mortgage products; therefore, the Company believes it would
require a substantial and sustained decline in interest rates, beyond what the
Company would consider to be a "reasonably possible near-term change," to impact
prepayment speeds to a material extent. The Company is also exposed to basis
risk in its portfolio of interest-only and residual certificates in that a
portion of the Company's securities have interest rates that adjust on a monthly
basis, whereas the interest rates on the loans that collateralize the securities
may be fixed or have adjustment intervals and indices that are different than
those of the underlying securities.
As part of its interest rate risk management process, the Company performs
various sensitivity analyses that attempt to quantify the net change in fair
value of its interest rate sensitive financial instruments. These analyses
assume hypothetical scenarios of instantaneous and permanent shifts in the U.S.
Treasury and/or LIBOR yield curves. The Company employs various discounted cash
flow models to determine the fair value of its interest rate sensitive financial
instruments under these scenarios. The primary assumptions used in the
discounted cash flow models are prepayment rates, credit losses, discount rates
and investor yield spread requirements. See Note 4 to the Consolidated Financial
Statements.
Using the sensitivity analysis described above, as of September 30, 1999, the
Company estimates that a parallel, instantaneous and permanent increase in the
U.S. Treasury yield curve of 50 basis points (.50%), all else being constant,
would result in an aggregate decrease in the fair value of its interest rate
sensitive financial instruments (derivative and other) of approximately $2
million; an instantaneous and permanent increase in the LIBOR yield curve of 50
basis points (.50%), all else being constant, would result in an aggregate
decrease in the fair value of its interest rate sensitive financial instruments
(derivative and other) of approximately $13 million; an instantaneous and
permanent increase in the discount rate of 120 basis points (1.20%), all else
being constant, would result in an aggregate decrease in the fair value of its
interest rate sensitive financial instruments (derivative and other) of
approximately $34 million; and an instantaneous and permanent increase in the
investor yield spread requirement of 50 basis points (.50%), all else being
constant, would result in an aggregate decrease in the fair value of its
interest rate sensitive financial instruments (derivative and other) of
approximately $3 million.
The Company assumed there would be no material change in prepayment speeds under
the interest rate change scenarios presented above. The Company estimates that a
100 basis points (1.0%) increase in pre-
31
<PAGE>
payment speeds would decrease the fair value of the interest-only and residual
certificates by approximately $26 million and would decrease the fair value of
the capitalized servicing rights by $1.0 million (net of the estimated benefit
from increased prepayment penalty income). See Note 4 to the Consolidated
Financial Statements for the effect of changes in prepayment speeds and other
assumptions on the interest-only and residual certificates.
These sensitivity analyses are limited by the fact that that they are performed
at a particular point in time and do not incorporate other factors that may
impact the fair value of the Company's interest rate sensitive financial
instruments in each scenario. The above scenarios do not reflect the Company's
expectations regarding future movements in interest rates or prepayment speeds.
Consequently, the preceding estimates should not be viewed as a forecast.
32
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
On or about October 21, 1999, a purported class action entitled O'Hopp
v. ContiFinancial Corporation, et al., No. 99cv06794, was filed in the
United States District Court for the Eastern District of New York on
behalf of Dea O'Hopp, a stockholder of the Company, and similarly
situated individuals, against the Company, Continental Grain
Corporation (sued in its capacity as a "controlling person") and
former Company officers and/or directors James E. Moore and Daniel J.
Willett. On or about October 29, 1999, a virtually identical complaint
was filed against the same defendants in the United States District
Court for the Southern District of New York in an action entitled I&M
Associates v. ContiFinancial Corporation, et al., No. 99 Civ. 10941.
Both actions allege, among other things, violations of Section 10(b)
of the Exchange Act and Rule 10b-5 promulgated thereunder, based on
allegedly false or misleading statements and failures to disclose
allegedly material information in Company press releases, SEC filings
and statements made to analysts during the period from January 19,
1998 through July 21, 1999. These misstatements and omissions,
plaintiffs allege, artificially inflated the Company's stock price
during the relevant time period. The plaintiffs seek damages in an
unspecified amount. The Company intends to defend these actions
vigorously. Given the preliminary stage of the litigation, the Company
is unable to evaluate the potential materiality of such suits, if any.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The annual meeting of shareholders of the Company was held
September 14, 1999.
(b) Directors whose term of office as a director continued after the
meeting including the Class I Directors elected (see (c)(i) below):
Class I Directors Class II Directors Class III Directors
- ----------------- ------------------ -------------------
Mark R. Baker Paul J. Fribourg John P. Tierney
Alan H. Fishman John W. Spiegel Michael J. Zimmerman
Donald L. Staheli Lawrence G. Weppler
(c) Holders of common shares voted at this meeting on the following
matters, which were set forth in full in the registrant's proxy
statement dated August 25, 1999:
(i) Election of Class I Directors
Nominee For Withheld
------- --- --------
Mark R. Baker 37,611,976 42,420
Alan H. Fishman 37,612,376 42,020
33
<PAGE>
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
(ii) Amend the 1995 Long-Term Stock Incentive
Plan (Re: Limits): 37,544,226 96,670 13,500
(iii) Amend the 1995 Long-Term Stock Incentive
Plan (Re: Increase): 37,018,185 623,526 12,685
(iv) Amend the 1995 Long-Term Stock Incentive Plan
(Re: Goals): 37,420,625 221,686 12,085
(v) Amend the Section 162(m) Bonus Plan: 37,574,144 69,052 11,200
(vi) Appointment of Auditors: 37,626,613 25,583 2,200
</TABLE>
Appointment of the firm of Arthur Andersen LLP as the independent
accountants for the Company for the fiscal year ending March 31, 2000.
(d) Subsequent to the vote, on October 13, 1999, the following directors
resigned from the board:
Donald Staheli
John P. Tierney
Lawrence Weppler
(e) Subsequent to the vote, on October 13, 1999, the following persons have
been elected as directors by the board of directors to fill vacancies on
the board of directors:
James Larocca
Thomas Robards
34
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit
No. Description
10.33 Fourth Amendment to the Credit Agreement
10.34 Fourth Amendment to the Amended and Restated Letter of
Credit and Reimbursement Agreement
10.35 Pledge and Security Agreement between the Company and
Credit Suisse First Boston
10.36 Master Repurchase Agreement between Greenwich Capital
Financial Products, Inc. and the Company
10.37 Master Mortgage Loan Purchase Facility between Greenwich
Capital Financial Products, Inc. and the Company
10.38 Amended and Restated Pledge and Security Agreement
between the Company and Greenwich Capital Financial
Products, Inc., et al
11.1 Computation of the Company's Earnings Per Common Share
12.1 Ratio of Earnings to Fixed Charges
27.1 Financial Data Schedule
(b)Reports on Form 8-K.
None.
35
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ContiFinancial Corporation
Signature Title Date
/s/ William P. Higgins Senior Vice President and November 15, 1999
- ------------------------ Controller (Principal Accounting -----------------
William P. Higgins Officer)
/s/ Frank W. Baier Senior Vice President and Chief November 15, 1999
- ------------------------ Financial Officer (Principal -----------------
Frank W. Baier Financial Officer)
FOURTH AMENDMENT dated as of August 19, 1999
(this "Amendment") to the Credit Agreement (as
previously amended, the "Credit Agreement") dated as
of January 7, 1997, among ContiFinancial Corporation,
a Delaware corporation (the "Borrower"), the Lenders
party thereto and Credit Suisse First Boston, New
York Branch, as Administrative Agent.
A. Pursuant to the Credit Agreement, the Lenders have extended
credit to the Borrower on the terms and subject to the conditions set forth
therein.
B. The Borrower has requested that the Lenders extend the
Maturity Date and amend certain other provisions of the Credit Agreement as set
forth herein. The undersigned Lenders are willing to amend such provisions on
the terms and subject to the conditions set forth herein.
Accordingly, in consideration of the mutual agreements
contained herein and other good and valuable consideration, the sufficiency and
receipt of which are hereby acknowledged, the parties hereto hereby agree as
follows:
SECTION 1. Definitions. Each capitalized term used but not
defined herein shall have the meaning assigned to it in the Credit Agreement as
amended hereby. The principles of construction set forth in Section 1.03 of the
Credit Agreement shall apply equally to this Amendment.
SECTION 2. Amendments to Article I.
(a) Amendment of Section 1.01. Section 1.01 of the Credit
Agreement is hereby amended by:
(i) inserting in the appropriate alphabetical order the
following definitions:
"Act of Insolvency" means, with respect to the Borrower and
its Restricted Subsidiaries, (i) the filing of a petition,
commencing, or authorizing the commencement of any case or
proceeding under any bankruptcy, insolvency, reorganization,
liquidation, dissolution or similar law relating to the
protection of creditors of the Borrower or any of its Restricted
Subsidiaries, or suffering any such petition or proceeding to be
commenced by another; provided, however, that any involuntary
proceeding filed against the Borrower or a Restricted Subsidiary
shall not constitute an Act of Insolvency unless such petition or
proceeding is not dismissed within 30 days of its commencement,
(ii) seeking the appointment of a receiver, trustee, custodian or
similar official for the Borrower or a Restricted Subsidiary or
any substantial part of its property, (iii) the appointment of a
receiver, conservator, or manager for the Borrower or a
Restricted Subsidiary or any substantial part of the property of
either by any governmental agency or authority having the
jurisdiction
<PAGE>
to do so, (iv) the making or offering by the Borrower or a
Restricted Subsidiary of a composition with its respective
creditors or a general assignment for the benefit of creditors,
(v) the admission in writing by the Borrower or a Restricted
Subsidiary of such party's inability to pay its ordinary course
trade debts as they become due or mature, or (vi) any
Governmental Authority or agency or any person, agency or entity
acting or purporting to act under Governmental Authority shall
have taken any action to condemn, seize or appropriate, or to
assume custody or control of, all or any substantial part of the
property of the Borrower or a Restricted Subsidiary, or shall
have taken any action to displace the management of such party or
to curtail its authority in the conduct of the business of such
party.
"Affiliate Transaction" shall have the meaning assigned
thereto in Section 6.06 hereof.
"Average Liquidity Test" means for any month (A) the sum of
(i) the Borrower's consolidated cash plus unencumbered mortgage
loans on the last Business Day of such month and (ii) the
Borrower's consolidated cash plus unencumbered mortgage loans on
the first Business Day of the following month, (B) divided by
two.
"Collateral" has the meaning specified in the Security
Agreement.
"Consolidated Restricted Subsidiary" means a Restricted
Subsidiary (i) 80% of the Capital Stock and 80% of the Voting
Stock of which is owned by the Borrower or one or more
Consolidated Restricted Subsidiaries and (ii) which is treated as
a consolidated subsidiary for the purpose of the Borrower's U.S.
Federal income tax reporting.
"Contractual Obligation" means as to any Person, any
provision of any agreement, instrument or other undertaking to
which such Person is a party or by which it or any of its
property is bound or any provision of any security issued by such
Person.
"Excluded Subsidiary" means each of Royal Mortgage Partners,
L.P., Resource One Consumer Discount Company, Inc., Resource One
Mortgage of Oxford Valley, Inc., Resource One of Delaware Valley,
Inc., Resource Corporation Financial Inc., Crystal Mortgage
Company, Inc., Lenders M.D., Inc., Keystone Mortgage Partners
LLC, Keystone Mortgage Partners, Inc., Keystone Mortgage Funding,
Inc., Keystone Mortgage Investments, Inc., Keystone Capital
Group, Inc. and California Lending Group.
"Fourth Amendment Date" means August 19, 1999.
2
<PAGE>
"Greenwich" means Greenwich Capital Financial Products, Inc.
"Indentures" means the Indenture, dated as of August 15,
1996, between the Borrower and The Chase Manhattan Bank, as
Trustee, the Indenture, dated as of March 1, 1997, between the
Borrower and The Chase Manhattan Bank, as Trustee, and the
Indenture, dated as of March 4, 1998, between the Borrower and
The Bank of New York, as Trustee, pursuant to the terms of each
of which the Borrower has issued Senior Notes.
"Material Adverse Effect" means a material adverse effect
upon (i) the business operations, properties or assets of the
Borrower and its Subsidiaries, taken as a whole, (ii) the ability
of the Borrower to perform its obligations, or of the
Administrative Agent or the Lenders to enforce any of their
respective rights or remedies, under this Agreement or any of
documents to be executed and/or delivered hereunder, (iii) the
validity or enforceability of any of the Security Documents or
(iv) the Collateral taken as a whole (provided that any fair
value adjustments to Excess Spread Receivables as required by
GAAP shall not be deemed a "Material Adverse Effect"), in the
case of clauses (i), (ii), (iii) and (iv) above (A) taking into
consideration the financial condition of the Borrower and its
Subsidiaries as of the date of this Agreement and (B) without
taking into consideration any further deterioration of the
financial condition of the Borrower and its Subsidiaries after
the date of this Agreement.
"Permitted Holders" means lineal descendants of Jules
Fribourg, including any individual legally adopted; spouses of
such descendants; trusts, the beneficiaries of which are any of
the foregoing; partnerships, corporations, or other entities in
which any of the foregoing (individually or collectively) has a
controlling interest; and charitable organizations established by
any of the foregoing.
"Requirement of Law" means as to any Person, the certificate
of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation
or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding
upon such Person or any of its Property or to which such Person
or any of its property is subject.
"Responsible Officer" means, as to any Person, the chief
executive officer, vice president and treasurer, or with respect
to financial matters, the chief financial officer or treasurer of
such Person; provided, however, that in the event any such
officer is unavailable at any time he or she is required to take
any action hereunder, Responsible Officer shall mean any officer
authorized to act on such officer's behalf as demonstrated to the
Buyer to its reasonable satisfaction.
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"Restricted Payment" means (i) the declaration or payment of
any dividends or any other distributions of any sort in respect
of its Capital Stock or similar payment to the direct or indirect
holders of its Capital Stock (other than (A) dividends or
distributions payable solely in its Capital Stock (other than
Disqualified Stock), (B) dividends or distributions payable
solely to the Borrower or a Subsidiary and (C) pro rata dividends
or other distributions made by an Unrestricted Subsidiary to
minority shareholders (or owners of an equivalent interest in the
case of a Subsidiary that is an entity other than a
corporation)), (ii) the purchase, redemption or other acquisition
or retirement for value of any Capital Stock of the Borrower held
by any Person or of any Capital Stock of a Subsidiary held by any
Affiliate of the Borrower (other than a Subsidiary), including
the exercise of any option to exchange any Capital Stock (other
than into Capital Stock of the Borrower that is not Disqualified
Stock), (iii) the purchase, repurchase, redemption, defeasance or
other acquisition or retirement for value, prior to scheduled
maturity, scheduled repayment or scheduled sinking fund payment
of any Subordinated Obligations (other than the purchase,
repurchase or other acquisition of such Subordinated Obligations
purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case
due within one year of the date of acquisition).
"Secured Parties" has the meaning given to such term in the
Security Agreement.
"Security Agreement" means the Pledge and Security
Agreement, dated as of the Fourth Amendment Date, by the Borrower
in favor of Credit Suisse First Boston, New York Branch, as
Collateral Agent.
"Security Documents" means the Security Agreement and all
other documents executed and delivered in connection therewith.
"Senior Indebtedness" means (i) Indebtedness of any Person
and (ii) accrued and unpaid interest (including interest accruing
on or after the filing of any petition in bankruptcy or for
reorganization relating to the Borrower to the extent post-filing
interest is allowed in such proceeding) in respect of (A)
indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Person is
responsible or liable unless, in the case of either clause (i) or
(ii), in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is provided that
such obligations are subordinate in right of payment to the
Borrower's obligations hereunder; provided, however, that Senior
Indebtedness shall not include (1) any obligation of such Person
to any Subsidiary of such Person, (2) any liability for Federal,
state, local or other taxes owed or owing by such Persons, (3)
any accounts payable or other
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liability to trade creditors arising in the ordinary course of
business (including guarantees thereof or instruments evidencing
such liabilities), (4) any obligation in respect of Capital Stock
of such Person or (5) that portion of any Indebtedness which at
the time of Incurrence is Incurred in violation of this
Agreement.
"Senior Notes" means any and all notes issued by the
Borrower under the terms of the Indentures.
"Subordinated Obligation" means any Indebtedness of the
Borrower (whether outstanding on the date hereof or thereafter
incurred) which is subordinate or junior in right of payment to
the obligations of the Borrower under this Agreement pursuant to
a written agreement to that effect.
"Temporary Cash Investments" means any of the following: (i)
any investment in direct obligations of the United States of
America or any agency thereof or obligations guaranteed by the
United States of America or any agency thereof, (ii) investments
in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of
acquisition thereof issued by a bank or trust company that is not
an Affiliate of the Borrower and which is organized under the
laws of the United States of America, any state thereof or any
foreign country recognized by the United States, and which bank
or trust company has capital, surplus and undivided profits
aggregating in excess of $50,000,000 (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A"
(or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined
in Rule 436 under the Securities Act) or any money-market fund
sponsored by a registered broker dealer or mutual fund
distributor, (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in
clause (i) above entered into with a bank meeting the
qualifications described in clause (ii) above, (iv) investments
in commercial paper, maturing not more than 90 days after the
date of acquisition, issued by a corporation (other than an
Affiliate of the Borrower) organized and in existence under the
laws of the United States of America or any foreign country
recognized by the United States of America with a rating at the
time as of which any investment therein is made of "P-1" (or
higher) according to Moody's Investors Service, Inc. or "A-1" (or
higher) according to Standard and Poor's Ratings Group, and (v)
investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States of America,
or by any political subdivision or taxing authority thereof, and
rated at least "A" by Standard & Poor's Ratings Group or "A" by
Moody's Investors Service, Inc.
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<PAGE>
(ii) Deleting the definition of "Asset Disposition" in its
entirety and replacing it with the following:
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or
dispositions) by the Borrower or any Restricted Subsidiary,
including any disposition by means of a merger, consolidation or
similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (i) any shares of Capital
Stock of a Restricted Subsidiary (other than directors'
qualifying shares or shares required by applicable law to be held
by a Person other than the Borrower or a Restricted Subsidiary),
(ii) all or substantially all the assets of any division or line
of business of the Borrower or any Restricted Subsidiary, (iii)
any other assets of the Borrower or any Restricted Subsidiary
outside of the ordinary course of business of the Borrower or
such Restricted Subsidiary, (iv) any Investment in a Strategic
Alliance Client or (v) any Excess Spread Receivables (other than,
in the case of (i), (ii), (iii), (iv) and (v) above, (x) a
disposition by a Restricted Subsidiary to the Borrower or by the
Borrower or a Restricted Subsidiary to a Consolidated Restricted
Subsidiary, (y) a disposition that constitutes a permitted
Restricted Payment or (z) a disposition of assets (including
related assets) for an aggregate consideration of $1.0 million or
less).
(iii) Deleting the definition of "Change of Control" in its
entirety and replacing it with the following:
"Change in Control" means the occurrence of any of the
following events:
(i) Any "person" (as such term is used in Section 13(d) and
14(d) of the Exchange Act), other than any Permitted Holder, is
or becomes the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that such person shall be
deemed to have "beneficial ownership" of all shares that any such
person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time),
directly or indirectly, of more than 35% of the total voting
power of the Voting Stock of such Person; provided, however, that
the Permitted Holders beneficially own (as defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act), directly or indirectly,
in the aggregate a lesser percentage of the total voting power of
the Voting Stock of the Borrower or any Restricted Subsidiary
than such other person and do not have the right or ability by
voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors (for the purposes
of this clause (i), such other person shall be deemed to
beneficially own any Voting Stock of a corporation held by
another corporation (a "parent corporation"), if such other
person is the beneficial owner (as defined above for such
person), directly or indirectly, of more
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<PAGE>
than 35% of the voting power of the Voting Stock of such parent
corporation and the Permitted Holders beneficially own (as
defined above for the Permitted Holders), directly or indirectly,
in the aggregate a lesser percentage of the voting power of the
Voting Stock of such parent corporation and do not have the right
or ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors of
such parent corporation);
(ii) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board of Directors
(together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the
Borrower or any Restricted Subsidiary was approved by a vote of
66-2/3% of the directors of the Borrower or any Restricted Subsidiary
then still in office who were either directors at the beginning of
such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority
of the Board of Directors then in office; or
(iii) the merger or consolidation of the Borrower or any
Restricted Subsidiary with or into another Person or the merger of
another Person with or into the Borrower or any Restricted Subsidiary,
as the case may be, or the liquidation, wind-up or dissolution of the
Borrower or any Restricted Subsidiary, as the case may be, or the sale
of all or substantially all the assets of the Borrower or any
Restricted Subsidiary, as the case may be, to another Person (other
than a Person that is controlled by the Permitted Holders), and, in
the case of any such merger or consolidation, the securities of the
Borrower or any Restricted Subsidiary, as the case may be, that are
outstanding immediately prior to such transaction and which represent
100% of the aggregate voting power of the Voting Stock of the Borrower
or any Restricted Subsidiary, as the case may be, are changed into or
exchanged for cash, securities or property, unless pursuant to such
transaction such securities are changed into or exchanged for, in
addition to any other consideration, securities of the surviving
corporation that represent immediately after such transaction, at
least a majority of the aggregate voting power of the Voting Stock of
the surviving corporation; provided, however, that the sale by the
Borrower or its Subsidiaries from time to time solely of receivables
to a trust for the purpose solely of effecting one or more
securitizations shall not be treated hereunder as a sale of all or
substantially all the assets of the Borrower.
Notwithstanding anything contained in this Agreement to the contrary,
a Change of Control accompanied by an equity infusion in the Borrower of
not less than $100,000,000 shall not constitute an Event of Default under
this Agreement for 60 days after the date of such equity infusion, unless
an additional Change of Control shall occur during such 60-day period.
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<PAGE>
(iv) Deleting the definition of "Interest Payment Date" in its
entirety and replacing it with the following:
"Interest Payment Date" means with respect to any Loan, the
third Business Day of each month.
(v) Deleting the words "one, two or three months" in the
definition of "Interest Period" and replacing them with the words "one
month."
(vi) Deleting the definition of "Maturity Date" in its entirety
and replacing it with the following:
"Maturity Date" means March 31, 2000, as such date may be
extended from time to time pursuant to Section 2.11.
(vii) Deleting the definition of "Net Available Cash" in its
entirety and replacing it with the following:
"Net Available Cash" from an Asset Disposition means cash
payments received therefrom (including any cash payments received
by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the
form of assumption by the acquiring Person of Indebtedness or
other obligations relating to such properties or assets or
received in any other noncash form) in each case net of (i) all
legal, title and recording tax expenses, commissions and other
fees and expenses incurred, and all Federal, state, provincial,
foreign and local taxes required to be accrued as a liability
under GAAP, as a consequence of such Asset Disposition, (ii) all
payments made on any Indebtedness which is secured by any assets
subject to such Asset Disposition, in accordance with the terms
of any Lien upon or other security agreement of any kind with
respect to such assets, or which must by its terms, or in order
to obtain a necessary consent to such Asset Disposition, or by
applicable law be, repaid out of the proceeds from such Asset
Disposition, (iii) all distributions and other payments required
to be made to minority interest holders in Subsidiaries or joint
ventures as a result of such Asset Disposition and (iv) the
deduction of appropriate amounts provided by the Borrower as a
reserve, in accordance with GAAP, against any liabilities
associated with the property or other assets disposed in such
Asset Disposition and retained by the Borrower or any Restricted
Subsidiary after such Asset Disposition.
SECTION 3. Amendments to Article II. Article II of the Credit
Agreement is hereby amended by:
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<PAGE>
(a) Deleting the first sentence of Section 2.02(b) in its
entirety and replacing it with the following words: "Each Revolving Borrowing
shall be comprised of Eurodollar Loans only."
(b) Deleting Section 2.02(c) and (d) in their entirety and
replacing it with the following words "(c) [Reserved]." and "(d) [Reserved].",
respectively.
(c) Deleting the following words in Section 2.03: "or (b) in the
case of an ABR Borrowing, not later than 12:00 noon, New York City time, one
Business Day before the date of the proposed Borrowing," deleting clause (iii)
of section 2.03 in its entirety and replacing it with the words "(iii) stating
that the Borrowing is a Eurodollar Borrowing;" and deleting the first sentence
in the paragraph following Section 2.03(v).
(d) Deleting Section 2.04 in its entirety and replacing it with
the following:
SECTION 2.04. Swingline Loans. The Swingline Lender shall
not make any Swingline Loans to the Borrower after the Fourth
Amendment Date.
(e) Deleting clause (ii) in Section 2.05 in its entirety and
replacing it with the following words: "(ii) in the case of the Borrower, the
interest rate then applicable to Eurodollar Loans with a one-month Interest
Period."
(f) Deleting Section 2.06(a) in its entirety and replacing it
with the following words: "After the Fourth Amendment Date, each Revolving
Borrowing shall be a Eurodollar Borrowing with a one-month Interest Period."
(g) Deleting Section 2.06(b), (c), (d) and (e) in their entirety.
(h) Deleting the number "(i)" in Section 2.08(a) and deleting
clause (ii) thereof in its entirety.
(i) Deleting the parenthetical in the first sentence of Section
2.09(b) in its entirety, deleting the number "(i)" in Section 2.09(b), deleting
clauses (ii) and (iii) of Section 2.09(b) in their entirety and deleting the
last sentence of Section 2.09(b) in its entirety.
(j) Deleting Section 2.11(a) in its entirety and replacing it
with the words "(a) [Reserved]."
(k) Adding the following proviso immediately before the proviso
in Section 2.11(e): "provided, however, that the Borrower shall not be required
to pay any such accrued interest on any Interest Payment Date when the Average
Liquidity Test for the prior month is less than $40,000,000; any such unpaid
interest shall be due and payable on the Termination Date (provided further that
no interest shall accrue on and
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<PAGE>
such deferred interest)" and adding the word "further" after the word "provided"
in such provision.
(l) Deleting Section 2.11(c) in its entirety and replacing it
with the words "(c) [Reserved]."
(m) Deleting clause (ii) of Section 2.11(d) in its entirety and
replacing it with the following words: "(ii) in the case of any other amount, 2%
plus the Alternate Base Rate."
(n) Deleting clause (iii) of Section 2.11(e) in its entirety and
renumbering clause (iv) so that it is clause (iii).
(o) Deleting the following words in Section 2.11(f): "and (solely
with respect to the determination of interest payable on any Swingline Loan) the
applicable Federal Funds Effective Rate shall be determined by the Swingline
Lender."
(p) Deleting Section 2.12 in its entirety and replacing it with
the words "SECTION 2.12. [Reserved]."
(q) Deleting clause (b) of Section 2.14 in its entirety and
renumbering clauses (c) and (d) so that they are clauses (b) and (c),
respectively.
SECTION 4. Amendments to Article III. Article III of the Credit
Agreement is hereby amended to delete the words "September 30, 1996" in clause
(ii) of Section 3.04(a) and replacing it with the words "March 31, 1999" and to
add the words "and subject to any qualifications contained therein" at the end
of Section 3.04(a). Section 3.04(b) is hereby in its entirety and replaced with
the words: "(b) Since March 31, 1999, there has been no Material Adverse Effect,
except as otherwise disclosed to the Lenders."
SECTION 5. Amendments to Article V. Article V of the Credit
Agreement is hereby amended by:
(a) Deleting the following words in the parenthetical in Section
5.01(a)(i): "without a "going concern" or like qualification or exception and";
and adding the following at the end of the Section 5.01:
"(i) the following additional financial information (A) the
Borrower's consolidated cash flow information for each month
within 15 Business Days after the end of such month; (B)
rolling three month financial projections for the Borrower
at the beginning of each month starting on December 1, 1999
through the Termination Date; (C) the Borrower's actual cash
position as of the preceding Business Day on the first
Business Day of each week; (D) quarterly Excess Spread
Receivables valuations when
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quarterly financial statements are provided pursuant to
Section 5.01(a) or (b), as applicable; (E) monthly static
pool performance summaries on a pool-by-pool basis with
respect to each Excess Spread Receivables comprising the
Collateral within five Business Days of receipt thereof by
the Borrower and (F) monthly deal trigger report (including,
without limitation, loss and delinquency triggers) on or
before the 25th day of the month or the next Business Day
thereafter.
(j) on the second Business Day of each month, a certificate
of a Financial Officer setting forth reasonably detailed
calculations of the Average Liquidity Test for the prior
month."
(b) Deleting the number "(i)" in Section 5.01(a) and also
deleting the following words in such Section: ", and (ii) a letter from such
independent public accountants certifying that during the course of their audit
nothing came to their attention that would indicate that the Borrowing Base
Certificate, if any, relating to the last day of such fiscal year is inaccurate
in any material respect."
(c) Deleting Section 5.01(g) in its entirety and replacing it
with the words "(g) [Reserved]."
SECTION 6. Amendments to Article VI. Article VI of the Credit
Agreement is hereby amended by deleting Section 6.01 and Sections 6.03 through
6.10 thereof in their entirety and substituting therefor the following:
SECTION 6.01. Restricted Payments. Neither the Borrower nor any
Restricted Subsidiary shall make any Restricted Payment.
SECTION 6.03. Collateral. Neither the Borrower nor any Restricted
Subsidiary shall take any action which would directly or indirectly
impair or adversely affect (i) the Administrative Agent's lien on any
Collateral or (ii) the value of such Collateral except, in the case of
this clause (ii), (x) any action solely relating to, resulting solely
from, or arising solely out of the financial condition of the Borrower
or (y) any action taken in the ordinary course of business.
SECTION 6.04. Material Adverse Effect. Neither the Borrower nor
any Restricted Subsidiary shall take any action which could reasonably
be expected to have a Material Adverse Effect.
SECTION 6.05. Business Activities. Neither the Borrower nor any
Restricted Subsidiary shall engage, to any substantial extent, in any
line or lines of business activity other than the businesses now
generally carried out by it, or cease or take any action to cease (or
permit any Subsidiary which is not an Excluded Subsidiary of the
Borrower to cease) to be in the business of originating mortgage
loans.
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SECTION 6.06. Affiliate Transactions. (A) The Borrower shall not
permit any of its Subsidiaries to sell, lease or otherwise transfer
any property or assets to, or purchase, lease or otherwise acquire any
property or assets from, or otherwise engage in any other transactions
with, any of its Affiliates (an "Affiliate Transaction") unless the
terms thereof (i) are no less favorable to the Borrower or such
Subsidiary than those that could be obtained at the time of such
transaction in arm's-length dealings with a Person who is not such an
Affiliate, (ii) if such Affiliate Transaction involves an amount in
excess of $2,000,000 (or the equivalent amount in any foreign
currency), (x) are set forth in writing and (y) have been approved by
a majority of the members of the Board of Directors having no personal
stake in such Affiliate Transaction and (iii) if such Affiliate
Transaction involves an amount in excess of $10,000,000 (or the
equivalent amount in any foreign currency), have been determined by a
nationally recognized investment banking firm to be fair from a
financial standpoint, to the Borrower and its Subsidiaries.
(B) Without limiting the generality of any other provisions set
forth in this Agreement, the provisions of Section 6.06(A)(i) shall
not prohibit (i) any Permitted Investment, (ii) any issuance of
securities, or other payments, awards or grants in cash, securities or
otherwise pursuant to, or the funding of, employment arrangements,
stock options and stock ownership plans approved by the Board of
Directors, (iii) the grant of stock options or similar rights to
employees and directors of the Borrower pursuant to plans approved by
the Board of Directors, (iv) loans or advances to employees in the
ordinary course of business in accordance with the past practices of
the Borrower or its Subsidiaries, but in any event not to exceed
$1,000,000 (or the equivalent amount in any foreign currency) in
aggregate principal amount outstanding at any one time; provided that
the $2,882,488 of employee loans -------- existing as of June 30, 1999
shall not be included in calculating such $1,000,000 limit, (v) the
payment of reasonable fees to directors of the Borrower and its
Subsidiaries who are not employees of the Borrower or its
Subsidiaries, (vi) any Affiliate Transactions between the Borrower and
a Subsidiary or between consolidated Subsidiaries (in each case other
than any Subsidiary that is an "affiliate" (as such term is defined in
the Exchange Act)) of any Affiliate (other than any Subsidiary) of the
Borrower and (vii) transactions pursuant to any agreement as in
existence as of the date hereof between the Borrower or its
Subsidiaries and Continental Grain Company, a Delaware corporation, or
one of its Subsidiaries or any extensions or renewals thereof.
SECTION 6.07. Investment Company. Neither the Borrower nor any
Restricted Subsidiary shall become an "investment company" or a
company "controlled" by an "investment company" within the meaning of
the Investment Company Act, as amended.
SECTION 6.08. Average Liquidity Test. The Borrower shall not
permit the Average Liquidity Test for any month to be less than
$20,000,000.
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<PAGE>
SECTION 6.09. Asset Dispositions. The Borrower shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly,
consummate any Asset Disposition unless (i) the Borrower or such
Restricted Subsidiary receives consideration at the time of such Asset
Disposition at least equal to the fair market value (including as to
the value of all non-cash consideration), as determined in good faith
by the Board of Directors of the Borrower, of the shares and assets
subject to such Asset Disposition and at least 85% of the
consideration thereof received by the Borrower or such Restricted
Subsidiary is in the form of cash or cash equivalents and (ii) an
amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by the Borrower (or such Restricted Subsidiary,
as the case may be) either (x) for working capital purposes or (y) to
prepay, repay, redeem or purchase, on a ratable basis, Senior
Indebtedness of the Borrower or any Indebtedness of a Restricted
Subsidiary, as the case may be (other than in either case Indebtedness
owed to the Borrower or an Affiliate of the Borrower), provided that
the Borrower may prepay, repay, redeem or purchase any Senior
Indebtedness owed to the Borrower's warehouse lenders without such
ratable payments to the holders of any other Senior Indebtedness, in
either case within 180 days from the later of the date of such Asset
Disposition or the receipt of such Net Available Cash; provided,
however, that in connection with any prepayment, repayment or purchase
of Indebtedness pursuant to this Section, the Borrower or such
Restricted Subsidiary shall retire such Indebtedness and shall cause
the related loan commitment (if any) to be permanently reduced in an
amount equal to the principal amount so prepaid, repaid or purchased,
and (iii) at the time of such Asset Disposition no Default shall have
occurred and be continuing (or would result therefrom).
Notwithstanding the foregoing provisions of this Section 6.09, the
Borrower and the Restricted Subsidiaries shall not be required to
apply any Net Available Cash in accordance with this Section except to
the extent that the aggregate Net Available Cash from all Asset
Dispositions which are not applied in accordance with this paragraph
exceeds $10 million; provided, however, pending application of Net
Available Cash pursuant to this Section 6.09, such Net Available Cash
shall be invested in Temporary Cash Investments.
For the purposes of this Section 6.09, the following are deemed
to be cash or cash equivalents: (x) the assumption of Indebtedness of
the Borrower or any Restricted Subsidiary, and the release of the
Borrower and its continuing Restricted Subsidiaries from all liability
on such Indebtedness, in connection with such Asset Disposition and
(y) securities received by the Borrower or any Restricted Subsidiary
from the transferee that are promptly converted by the Borrower or
such Restricted Subsidiary into cash.
SECTION 6.10. Senior Note Payments. The Borrower shall timely
make all required payments to holders of its Senior Notes that are due
in each of September and October 1999.
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SECTION 7. Amendments to Article VII. (a) Article VII of the
Credit Agreement is hereby amended by deleting clauses (f) through (m) thereof
in their entirety and substituting therefor the following:
(f) an Act of Insolvency occurs with respect to the Borrower;
(g) any governmental, regulatory, or self-regulatory authority
takes any action to remove, limit, restrict, suspend or terminate the
rights, privileges, or operations of the Borrower or any of its Restricted
Subsidiaries which in any case has a Material Adverse Effect;
(h) any Change of Control of the Borrower shall have occurred
without the prior consent of the Required Banks which consent shall not be
unreasonably withheld;
(i) the Required Lenders, in their good faith judgment, believe
that there has been a Material Adverse Effect;
(j) the occurrence and continuance of a material "event of
default" or of an "event of termination" on the part of the Borrower (x)
under any agreement between the Borrower (or an Affiliate thereof) on the
one hand, and Greenwich (or an Affiliate thereof) on the other hand, which
has not been waived by Greenwich (or its Affiliate), or (y) under any of
the Indentures;
(k) there ceases to be a valid, first priority perfected security
interest in the Collateral (as defined in the Security Agreement)."
(b) Article VII of the Credit Agreement is hereby amended by
deleting the words "and in the case of any event with respect to the Borrower
described in clause (h) or (i)" in the provision following paragraph (m) and
inserting the words "and in the case of any event with respect to the Borrower
in clause (f)."
SECTION 8. Amendments to Article VIII. The first paragraph of
Article VIII of the Credit Agreement is hereby amended so that the words "and as
Collateral Agent (as defined in the Security Agreement)" are inserted after the
word "agent" in the third sentence of such paragraph and so that the words "and
of the Security Agreement" are added after the word "hereof" in the fifth
sentence of such paragraph.
14
<PAGE>
SECTION 9. Amendments to Article IX. Article IX of the Credit
Agreement is hereby amended by (a) deleting the words "each of the Borrower and"
from clauses (i) and (ii) of the proviso to Section 9.04(b) and adding the
following proviso at the end of clause (i) in such Section 9.04(b): "; provided
that the Borrower receives prior written notice of any such assignment"; and (b)
Article IX of the Credit Agreement is hereby amended by adding the following
Section 9.13 to the end thereof:
"SECTION 9.13. Collateral Proceeds. Each Lender agrees that if it
receives greater than its pro rata share of the proceeds of Collateral
(as defined in the Security Agreement), such Lender shall return such
excess proceeds to the Collateral Agent (as defined in the Security
Agreement) for redistribution among the Secured Parties so that each
Secured Party receives proceeds of Collateral equal to the same
percentage of the total Obligations (as defined in the Security
Agreement) owed to it. This Section 9.13 may not be amended without
the written consent of all of the Secured Parties."
SECTION 10. Representations and Warranties. The Borrower
represents and warrants to the Administrative Agent and each Lender that:
(a) The representations and warranties set forth in the Credit
Agreement and the Security Documents are true and correct in all
material respects as of and with the same effect as if made on the
date hereof (except to the extent such representations and warranties
expressly relate to an earlier date) after giving effect to this
Amendment, and with all references in such representations to (i) the
"Transactions" being deemed to include the execution, delivery and
performance by the Borrower of this Amendment and (ii) "this
Agreement" being deemed to include this Amendment.
(b) (i) The Borrower's identification and description is a
complete listing of all Eligible Excess Spread Receivable pools as of
June 30, 1999 and (ii) subject to retention by the Borrower of
reasonable reserves, the Borrower cannot grant a security interest in
favor of the Administrative Agent and the Lenders in more than
$147,004,342 in book value of the Borrower's Eligible Excess Spread
Receivables pursuant to the terms of the Indentures without also
granting a ratable Lien to the holders of Senior Notes.
(c) The Borrower has made a full and complete assessment of all
issues which may be related to the occurrence of the year 2000,
including all issues related to its computer program and software (the
"Year 2000 Issues"), and has a realistic and achievable program for
remediating the Year 2000 Issues on a timely basis (the "Year 2000
Program"). Based on such assessment and on the Year 2000 Program, the
Borrower does not reasonably anticipate that Year 2000 Issues will
have a Material Adverse Effect.
15
<PAGE>
(d) After giving effect to this Amendment, the Borrower is in
compliance in all material respects with all the terms and provisions
contained in the Credit Agreement required to be observed or performed
by it.
(e) After giving effect to this Amendment, no Default has
occurred and is continuing to the best of the Borrower's knowledge.
The foregoing representations and warranties shall survive the execution and
delivery of this Amendment.
SECTION 11. Effectiveness. This Amendment shall become effective
on the date (the "Amendment Effective Date") on which each of the following
conditions is met:
(a) the Administrative Agent shall have received counterparts of
this Amendment that, when taken together, bear the signatures of the
Borrower and the Lenders;
(b) the Administrative Agent shall have received an opinion of
Borrower's in-house counsel and Dewey Ballantine LLP, in form and
substance satisfactory to the Administrative Agent and covering such
matters relating to this Amendment and the Security Documents, as the
Administrative Agent shall reasonably request;
(c) the Administrative Agent shall have received such documents
and certificates as the Administrative Agent or its counsel may
reasonably request relating to the organization, existence and good
standing of the Borrower or the authorization of this Amendment and
the Security Documents, and any other legal matters relating to the
Borrower or this Amendment or the Security Documents, all in form and
substance reasonably satisfactory to the Administrative Agent and its
counsel; and
(d) an amendment to the Reimbursement Agreement, substantially in
the form of this Amendment, shall have been executed and delivered by
the Borrower and of all the "Participating Banks" (as defined in the
Reimbursement Agreement), and the amendments set forth therein shall
have become effective (or shall become effective concurrently with the
effectiveness of the amendments set forth herein).
(e) the Collateral Agent shall have received the Security
Agreement, dated as of the date hereof, duly executed by an authorized
officer of the Borrower, together with certificates evidencing all of
the Collateral, which certificates shall be accompanied by undated
certificate powers duly executed in blank.
16
<PAGE>
The Administrative Agent shall promptly notify the Borrower and
the Lenders of the Amendment Effective Date, and such notice shall be conclusive
and binding on all parties hereto.
SECTION 12. Fees and Expenses. Without limiting the Borrower's
obligations under Section 9.03 of the Credit Agreement, the Borrower agrees to
pay all reasonable out-of-pocket expenses incurred by the Administrative Agent,
the Co-Arrangers identified on the cover page of the Credit Agreement and their
respective Affiliates, including the reasonable fees and disbursements of all
counsel and advisors for such parties, in connection with the preparation,
negotiation, execution and delivery of this Amendment and the Security Documents
and the evaluation by such parties of their rights and the rights of the Lenders
under the Credit Agreement, the Security Documents or any related documentation.
SECTION 13. Miscellaneous.
(a) Except as expressly set forth herein, this Amendment shall
not by implication or otherwise limit, impair, constitute a waiver of
or otherwise affect the rights and remedies of the Lenders or the
Administrative Agent under the Credit Agreement, and shall not alter,
modify, amend or in any way affect any of the terms, conditions,
obligations, covenants or agreements contained in the Credit
Agreement, all of which are ratified and affirmed in all respects and
shall continue in full force and effect. Nothing herein shall be
deemed to entitle the Borrower or any Subsidiary to a consent to, or a
waiver, amendment, modification or other change of, any of the terms,
conditions, obligations, covenants or agreements contained in the
Credit Agreement in similar or different circumstances. This Amendment
shall apply and be effective only with respect to the provisions of
the Credit Agreement specifically referred to herein. The Borrower
hereby ratifies, affirms, acknowledges and agrees that the Credit
Agreement and the Loans and reimbursement obligations thereunder
represent the valid, enforceable and collectible obligations of the
Borrower, and acknowledges that there are no existing claims,
defenses, personal or otherwise, or rights of setoff whatsoever with
respect to the Credit Agreement or the Loans or reimbursement
obligations thereunder.
(b) As used in the Credit Agreement, the terms "Agreement",
"herein", "hereinafter", "hereunder", "hereto", and words of similar
import shall mean, from and after the date hereof, the Credit
Agreement as amended by this Amendment.
(c) Section headings used herein are for convenience of reference
only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Amendment.
17
<PAGE>
(d) THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
(e) This Amendment may be executed in any number of counterparts,
each of which shall be an original but all of which, when taken
together, shall constitute but one instrument.
(f) The Lenders hereby waive any Default resulting from (i) the
failure by the Borrower to timely provide to the Administrative Agent
the Borrower's March 31, 1999 financial statements as required in
Section 5.01(a) of the Credit Agreement and (ii) the "going concern"
qualification contained in the report of the Borrower's independent
public accountants given in connection with such financial statements.
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective duly authorized
officers as of the date first above written.
CONTIFINANCIAL CORPORATION
by
-----------------------------------
Name:/s/ Alan Fishman
Title: Authorized Signatory
by
-----------------------------------
Name:/s/ Frank Baier
Title: Authorized Signatory
CREDIT SUISSE FIRST BOSTON, NEW
YORK BRANCH Individually and as
Administrative Agent,
by
-----------------------------------
Name:/s/ Robert N. Finney
Title: Managing Director
by
-----------------------------------
Name:/s/ Jay Chall
Title: Director
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES,
by
-----------------------------------
Name:/s/ J. Curtin Beaudouin
Title: First Vice President
by
-----------------------------------
Name:/s/ Anthony C. Valencourt
Title: Senior Vice President
<PAGE>
CORESTATES BANK, N.A.,
by
-----------------------------------
Name:
Title:
THE BANK OF NEW YORK,
by
-----------------------------------
Name:/s/ Richard P. Hebner
Title: Vice President
DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLAND BRANCHES,
by
-----------------------------------
Name:/s/ Gayma Z. Shivnarain
Title: Director
by
-----------------------------------
Name:/s/ John S. McGill
Title: Director
DG BANK,
by
-----------------------------------
Name:/s/ Wolfgang Bollmann
Title: Senior Vice President
by
-----------------------------------
Name:/s/ Norah McCann
Title: Senior Vice President
THE BANK OF NOVA SCOTIA,
by
-----------------------------------
Name:/s/ A.T.D. Clarke
Title: Senior Manager
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH,
by
-----------------------------------
Name:/s/ David Bonington
Title: Vice President
SOCIETE GENERALE, NEW YORK BRANCH
by
-----------------------------------
Name:/s/ Charles D. Fischer, Jr.
Title: Vice President
COMERICA BANK,
by
-----------------------------------
Name:/s/ Von L. Ringger
Title: First Vice President
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
by
-----------------------------------
Name:/s/ Helen F. Wessling
Title: Vice President
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
by
-----------------------------------
Name:/s/ Anna Marie Fallon
Title: Vice President
PNC BANK NATIONAL ASSOCIATION,
by
-----------------------------------
Name:/s/ Robert E. Bjoahul
Title: Vice President
<PAGE>
THE SUMITOMO BANK, LIMITED, NEW
YORK BRANCH,
by
-----------------------------------
Name:/s/ Suresh S. Tata
Title: Senior Vice President
FOURTH AMENDMENT dated as of August 19, 1999
(this "Amendment") to the Amended and Restated Letter
of Credit and Reimbursement Agreement, dated as of
August 21, 1998 (as heretofore amended, the
"Reimbursement Agreement"), among ContiFinancial
Corporation, a Delaware corporation (the "Company"),
the Participating Banks party thereto, Credit Suisse
First Boston, New York Branch, as Agent, and Dresdner
Bank AG, New York Branch, as Issuing Bank.
A. Pursuant to the Reimbursement Agreement, the Participating
Banks have extended credit to the Company on the terms and subject to the
conditions set forth therein.
B. The Company has requested that the Participating Banks extend
the Termination Date and amend certain other provisions of the Reimbursement
Agreement as set forth herein. The undersigned Participating Banks are willing
to amend such provisions on the terms and subject to the conditions set forth
herein.
Accordingly, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the sufficiency and receipt of
which are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Definitions. Each capitalized term used but not
defined herein shall have the meaning assigned to it in the Reimbursement
Agreement as amended hereby. The principles of construction set forth in Section
1.03 of the Reimbursement Agreement shall apply equally to this Amendment.
SECTION 2. Amendments to Article I.
(a) Amendment of Section 1.01. Section 1.01 of the Reimbursement
Agreement is hereby amended by:
(i) inserting in the appropriate alphabetical order the following
definitions:
"Act of Insolvency" means, with respect to the Company and
its Restricted Subsidiaries, (i) the filing of a petition,
commencing, or authorizing the commencement of any case or
proceeding under any bankruptcy, insolvency, reorganization,
liquidation, dissolution or similar law relating to the
protection of creditors of the Company or any of its Restricted
Subsidiaries, or suffering any such petition or proceeding to be
commenced by another; provided, however, that any involuntary
proceeding filed against the Company or a Restricted Subsidiary
shall not constitute an Act of Insolvency unless such petition or
proceeding is not dismissed within 30 days of its commencement,
(ii) seeking the appointment of a receiver, trustee, custodian or
similar official for the
<PAGE>
Company or a Restricted Subsidiary or any substantial part of its
property, (iii) the appointment of a receiver, conservator, or
manager for the Company or a Restricted Subsidiary or any
substantial part of the property of either by any governmental
agency or authority having the jurisdiction to do so, (iv) the
making or offering by the Company or a Restricted Subsidiary of a
composition with its respective creditors or a general assignment
for the benefit of creditors, (v) the admission in writing by the
Company or a Restricted Subsidiary of such party's inability to
pay its ordinary course trade debts as they become due or mature,
or (vi) any Governmental Authority or agency or any person,
agency or entity acting or purporting to act under Governmental
Authority shall have taken any action to condemn, seize or
appropriate, or to assume custody or control of, all or any
substantial part of the property of the Company or a Restricted
Subsidiary, or shall have taken any action to displace the
management of such party or to curtail its authority in the
conduct of the business of such party.
"Affiliate Transaction" shall have the meaning assigned
thereto in Section 6.06 hereof.
"Average Liquidity Test" means for any month (A) the sum of
(i) the Company's consolidated cash plus unencumbered mortgage
loans on the last Business Day of such month and (ii) the
Company's consolidated cash plus unencumbered mortgage loans on
the first Business Day of the following month, (B) divided by
two.
"Collateral" has the meaning specified in the Security
Agreement.
"Consolidated Restricted Subsidiary" means a Restricted
Subsidiary (i) 80% of the Capital Stock and 80% of the Voting
Stock of which is owned by the Company or one or more
Consolidated Restricted Subsidiaries and (ii) which is treated as
a consolidated subsidiary for the purpose of the Company's U.S.
Federal income tax reporting.
"Contractual Obligation" means as to any Person, any
provision of any agreement, instrument or other undertaking to
which such Person is a party or by which it or any of its
property is bound or any provision of any security issued by such
Person.
"Excluded Subsidiary" means each of Royal Mortgage Partners,
L.P., Resource One Consumer Discount Company, Inc., Resource One
Mortgage of Oxford Valley, Inc., Resource One of Delaware Valley,
Inc., Resource Corporation Financial Inc., Crystal Mortgage
Company, Inc., Lenders M.D., Inc., Keystone Mortgage Partners
LLC, Keystone Mortgage Partners, Inc., Keystone Mortgage Funding,
Inc., Keystone
2
<PAGE>
Mortgage Investments, Inc., Keystone Capital Group, Inc. and
California Lending Group.
"Fourth Amendment Date" means August 19, 1999.
"Greenwich" means Greenwich Capital Financial Products, Inc.
"Indentures" means the Indenture, dated as of August 15,
1996, between the Company and The Chase Manhattan Bank, as
Trustee, the Indenture, dated as of March 1, 1997, between the
Company and The Chase Manhattan Bank, as Trustee, and the
Indenture, dated as of March 4, 1998, between the Company and The
Bank of New York, as Trustee, pursuant to the terms of each of
which the Company has issued Senior Notes.
"Material Adverse Effect" means a material adverse effect
upon (i) the business operations, properties or assets of the
Company and its Subsidiaries, taken as a whole, (ii) the ability
of the Company to perform its obligations, or of the Agent, the
Issuing Bank or the Participating Banks to enforce any of their
respective rights or remedies, under this Agreement or any of
documents to be executed and/or delivered hereunder, (iii) the
validity or enforceability of any of the Security Documents or
(iv) the Collateral taken as a whole (provided that any fair
value adjustments to Excess Spread Receivables as required by
GAAP shall not be deemed a "Material Adverse Effect"), in the
case of clauses (i), (ii), (iii) and (iv) above (A) taking into
consideration the financial condition of the Company and its
Subsidiaries as of the date of this Agreement and (B) without
taking into consideration any further deterioration of the
financial condition of the Company and its Subsidiaries after the
date of this Agreement.
"Permitted Holders" means lineal descendants of Jules
Fribourg, including any individual legally adopted; spouses of
such descendants; trusts, the beneficiaries of which are any of
the foregoing; partnerships, corporations, or other entities in
which any of the foregoing (individually or collectively) has a
controlling interest; and charitable organizations established by
any of the foregoing.
"Requirement of Law" means as to any Person, the certificate
of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation
or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding
upon such Person or any of its Property or to which such Person
or any of its property is subject.
3
<PAGE>
"Responsible Officer" means, as to any Person, the chief
executive officer, vice president and treasurer, or with respect
to financial matters, the chief financial officer or treasurer of
such Person; provided, however, that in the event any such
officer is unavailable at any time he or she is required to take
any action hereunder, Responsible Officer shall mean any officer
authorized to act on such officer's behalf as demonstrated to the
Buyer to its reasonable satisfaction.
"Restricted Payment" means (i) the declaration or payment of
any dividends or any other distributions of any sort in respect
of its Capital Stock or similar payment to the direct or indirect
holders of its Capital Stock (other than (A) dividends or
distributions payable solely in its Capital Stock (other than
Disqualified Stock), (B) dividends or distributions payable
solely to the Company or a Subsidiary and (C) pro rata dividends
or other distributions made by an Unrestricted Subsidiary to
minority shareholders (or owners of an equivalent interest in the
case of a Subsidiary that is an entity other than a
corporation)), (ii) the purchase, redemption or other acquisition
or retirement for value of any Capital Stock of the Company held
by any Person or of any Capital Stock of a Subsidiary held by any
Affiliate of the Company (other than a Subsidiary), including the
exercise of any option to exchange any Capital Stock (other than
into Capital Stock of the Company that is not Disqualified
Stock), (iii) the purchase, repurchase, redemption, defeasance or
other acquisition or retirement for value, prior to scheduled
maturity, scheduled repayment or scheduled sinking fund payment
of any Subordinated Obligations (other than the purchase,
repurchase or other acquisition of such Subordinated Obligations
purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case
due within one year of the date of acquisition).
"Secured Parties" has the meaning given to such term in the
Security Agreement.
"Security Agreement" means the Pledge and Security
Agreement, dated as of the Fourth Amendment Date, by the Company
in favor of Credit Suisse First Boston, New York Branch, as
Collateral Agent.
"Security Documents" means the Security Agreement and all
other documents executed and delivered in connection therewith.
"Senior Indebtedness" means (i) Indebtedness of any Person
and (ii) accrued and unpaid interest (including interest accruing
on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company to the extent post-filing
interest is allowed in such proceeding) in respect of (A)
indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other
similar
4
<PAGE>
instruments for the payment of which such Person is responsible
or liable unless, in the case of either clause (i) or (ii), in
the instrument creating or evidencing the same or pursuant to
which the same is outstanding, it is provided that such
obligations are subordinate in right of payment to the Company's
obligations hereunder; provided, however, that Senior
Indebtedness shall not include (1) any obligation of such Person
to any Subsidiary of such Person, (2) any liability for Federal,
state, local or other taxes owed or owing by such Persons, (3)
any accounts payable or other liability to trade creditors
arising in the ordinary course of business (including guarantees
thereof or instruments evidencing such liabilities), (4) any
obligation in respect of Capital Stock of such Person or (5) that
portion of any Indebtedness which at the time of Incurrence is
Incurred in violation of this Agreement.
"Senior Notes" means any and all notes issued by the Company
under the terms of the Indentures.
"Subordinated Obligation" means any Indebtedness of the
Company (whether outstanding on the date hereof or thereafter
incurred) which is subordinate or junior in right of payment to
the obligations of the Company under this Agreement pursuant to a
written agreement to that effect.
"Temporary Cash Investments" means any of the following: (i)
any investment in direct obligations of the United States of
America or any agency thereof or obligations guaranteed by the
United States of America or any agency thereof, (ii) investments
in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of
acquisition thereof issued by a bank or trust company that is not
an Affiliate of the Company and which is organized under the laws
of the United States of America, any state thereof or any foreign
country recognized by the United States, and which bank or trust
company has capital, surplus and undivided profits aggregating in
excess of $50,000,000 (or the foreign currency equivalent
thereof) and has outstanding debt which is rated "A" (or such
similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule
436 under the Securities Act) or any money-market fund sponsored
by a registered broker dealer or mutual fund distributor, (iii)
repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above
entered into with a bank meeting the qualifications described in
clause (ii) above, (iv) investments in commercial paper, maturing
not more than 90 days after the date of acquisition, issued by a
corporation (other than an Affiliate of the Company) organized
and in existence under the laws of the United States of America
or any foreign country recognized by the United States of America
with a rating at the time as of which any investment therein is
5
<PAGE>
made of "P-1" (or higher) according to Moody's Investors Service,
Inc. or "A-1" (or higher) according to Standard and Poor's
Ratings Group, and (v) investments in securities with maturities
of six months or less from the date of acquisition issued or
fully guaranteed by any state, commonwealth or territory of the
United States of America, or by any political subdivision or
taxing authority thereof, and rated at least "A" by Standard &
Poor's Ratings Group or "A" by Moody's Investors Service, Inc.
(ii) Deleting the definition of "Asset Disposition" in its
entirety and replacing it with the following:
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or
dispositions) by the Company or any Restricted Subsidiary,
including any disposition by means of a merger, consolidation or
similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (i) any shares of Capital
Stock of a Restricted Subsidiary (other than directors'
qualifying shares or shares required by applicable law to be held
by a Person other than the Company or a Restricted Subsidiary),
(ii) all or substantially all the assets of any division or line
of business of the Company or any Restricted Subsidiary, (iii)
any other assets of the Company or any Restricted Subsidiary
outside of the ordinary course of business of the Company or such
Restricted Subsidiary, (iv) any Investment in a Strategic
Alliance Client or (v) any Excess Spread Receivables (other than,
in the case of (i), (ii), (iii), (iv) and (v) above, (x) a
disposition by a Restricted Subsidiary to the Company or by the
Company or a Restricted Subsidiary to a Consolidated Restricted
Subsidiary, (y) a disposition that constitutes a permitted
Restricted Payment or (z) a disposition of assets (including
related assets) for an aggregate consideration of $1.0 million or
less).
(iii) Deleting the definition of "Change of Control" in its
entirety and replacing it with the following:
"Change in Control" means the occurrence of any of the
following events:
(i) Any "person" (as such term is used in Section 13(d) and
14(d) of the Exchange Act), other than any Permitted Holder, is
or becomes the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that such person shall be
deemed to have "beneficial ownership" of all shares that any such
person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time),
directly or indirectly, of more than 35% of the total voting
power of the Voting Stock of such Person; provided, however, that
the Permitted Holders beneficially own (as defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act), directly or indirectly,
in the aggregate a
6
<PAGE>
lesser percentage of the total voting power of the Voting Stock
of the Company or any Restricted Subsidiary than such other
person and do not have the right or ability by voting power,
contract or otherwise to elect or designate for election a
majority of the Board of Directors (for the purposes of this
clause (i), such other person shall be deemed to beneficially own
any Voting Stock of a corporation held by another corporation (a
"parent corporation"), if such other person is the beneficial
owner (as defined above for such person), directly or indirectly,
of more than 35% of the voting power of the Voting Stock of such
parent corporation and the Permitted Holders beneficially own (as
defined above for the Permitted Holders), directly or indirectly,
in the aggregate a lesser percentage of the voting power of the
Voting Stock of such parent corporation and do not have the right
or ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors of
such parent corporation);
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of
Directors (together with any new directors whose election by such
Board of Directors or whose nomination for election by the
shareholders of the Company or any Restricted Subsidiary was
approved by a vote of 66-2/3% of the directors of the Company or
any Restricted Subsidiary then still in office who were either
directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors then in
office; or
(iii) the merger or consolidation of the Company or any
Restricted Subsidiary with or into another Person or the merger
of another Person with or into the Company or any Restricted
Subsidiary, as the case may be, or the liquidation, wind-up or
dissolution of the Company or any Restricted Subsidiary, as the
case may be, or the sale of all or substantially all the assets
of the Company or any Restricted Subsidiary, as the case may be,
to another Person (other than a Person that is controlled by the
Permitted Holders), and, in the case of any such merger or
consolidation, the securities of the Company or any Restricted
Subsidiary, as the case may be, that are outstanding immediately
prior to such transaction and which represent 100% of the
aggregate voting power of the Voting Stock of the Company or any
Restricted Subsidiary, as the case may be, are changed into or
exchanged for cash, securities or property, unless pursuant to
such transaction such securities are changed into or exchanged
for, in addition to any other consideration, securities of the
surviving corporation that represent immediately after such
transaction, at least a majority of the aggregate voting power of
the Voting Stock of the surviving corporation; provided, however,
that the sale by the Company or its Subsidiaries from
7
<PAGE>
time to time solely of receivables to a trust for the purpose
solely of effecting one or more securitizations shall not be
treated hereunder as a sale of all or substantially all the
assets of the Company.
Notwithstanding anything contained in this Agreement to the
contrary, a Change of Control accompanied by an equity infusion in the
Company of not less than $100,000,000 shall not constitute an Event of
Default under this Agreement for 60 days after the date of such equity
infusion, unless an additional Change of Control shall occur during
such 60-day period.
(iv) Deleting the definition of "Interest Payment Date" in its
entirety and replacing it with the following:
"Interest Payment Date" means with respect to any Loan, the
third Business Day of each month.
(v) Deleting the words "one, two or three months" in the
definition of "Interest Period" and replacing them with the words "one
month."
(vi) Deleting the definition of "Net Available Cash" in its
entirety and replacing it with the following:
"Net Available Cash" from an Asset Disposition means cash
payments received therefrom (including any cash payments received
by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the
form of assumption by the acquiring Person of Indebtedness or
other obligations relating to such properties or assets or
received in any other noncash form) in each case net of (i) all
legal, title and recording tax expenses, commissions and other
fees and expenses incurred, and all Federal, state, provincial,
foreign and local taxes required to be accrued as a liability
under GAAP, as a consequence of such Asset Disposition, (ii) all
payments made on any Indebtedness which is secured by any assets
subject to such Asset Disposition, in accordance with the terms
of any Lien upon or other security agreement of any kind with
respect to such assets, or which must by its terms, or in order
to obtain a necessary consent to such Asset Disposition, or by
applicable law be, repaid out of the proceeds from such Asset
Disposition, (iii) all distributions and other payments required
to be made to minority interest holders in Subsidiaries or joint
ventures as a result of such Asset Disposition and (iv) the
deduction of appropriate amounts provided by the Company as a
reserve, in accordance with GAAP, against any liabilities
associated with the property or other assets disposed in such
Asset Disposition and retained by the Company or any Restricted
Subsidiary after such Asset Disposition.
8
<PAGE>
(vii) deleting the definition of "Termination Date" in its
entirety and replacing it with the following:
"Termination Date" means March 31, 2000, as such date may be
extended from time to time pursuant to Section 2.11.
SECTION 3. Amendments to Article II.
(a) Section 2.04(a) is hereby amended by deleting the words "(a
"Loan")" at the end of the first sentence and adding the words ", and on the
Fourth Amendment Date, amounts outstanding under Section 2.03 of this Agreement
shall be deemed converted by the Company into a term loan (each such loan
pursuant to this Section 2.04(a), a "Loan")" at the end of the first sentence.
(b) The second and third sentences of Section 2.04(b) are hereby
deleted in their entirety.
(c) Section 2.04(c) is hereby amended by (i) deleting the words
from "The Company shall pay interest on the unpaid principal amounts" through
"(ii) Eurodollar Loans;" and (ii) deleting clause (B) in the proviso thereto and
lettering clause (C) so that it is clause (B).
(d) Section 2.04(c)(ii) is hereby amended by adding the following
proviso at the end of such clause: "; provided, however, that the Company shall
not be required to pay any such accrued interest on any Interest Payment Date
when the Average Liquidity Test for the prior month is less than $40,000,000;
any such unpaid interest shall be due and payable on the Termination Date
(provided further that no interest shall accrue on any such deferred interest).
(e) Section 2.04(d) and (e) are hereby deleted in their entirety.
SECTION 4. Amendments to Article III. Article III of the
Reimbursement Agreement is hereby amended to delete the words "September 30,
1996" in clause (ii) of Section 3.04(a) and replacing it with the words "March
31, 1999" and to add the words "and subject to any qualifications contained
therein" at the end of Section 3.04(a). Section 3.04(b) is amended by deleting
it in its entirety and replacing it with the following clause: "(b) Since March
31, 1999, there has been no Material Adverse Effect, except as otherwise
disclosed to the Participating Banks."
SECTION 5. Amendments to Article V. Article V of the
Reimbursement Agreement is hereby amended by:
(a) Deleting the following words in the parenthetical in Section
5.01(a)(i): "without a "going concern" or like qualification or exception and";
and adding the following at the end of the Section 5.01:
9
<PAGE>
"(i) the following additional financial information (A) the
Company's consolidated cash flow information for each month
within 15 Business Days after the end of such month; (B)
rolling three month financial projections for the Company at
the beginning of each month starting on December 1, 1999
through the Termination Date; (C) the Company's actual cash
position as of the preceding Business Day on the first
Business Day of each week; (D) quarterly Excess Spread
Receivables valuations when quarterly financial statements
are provided pursuant to Section 5.01(a) or (b), as
applicable; (E) monthly static pool performance summaries on
a pool-by-pool basis with respect to each Excess Spread
Receivable comprising the Collateral within five Business
Days of receipt thereof by the Company and (F) monthly deal
trigger report (including, without limitation, loss and
delinquency triggers) on or before the 25th day of the month
or the next Business Day thereafter.
(j) on the second Business Day of each month, a certificate
of a Financial Officer setting forth reasonably detailed
calculations of the Average Liquidity Test for the prior
month."
(b) Deleting the number "(i)" in Section 5.01(a) and also
deleting the following words in such Section: ", and (ii) a letter from such
independent public accountants certifying that during the course of their audit
nothing came to their attention that would indicate that the Borrowing Base
Certificate, if any, relating to the last day of such fiscal year is inaccurate
in any material respect."
(c) Deleting Section 5.01(g) in its entirety and replacing it
with the words "(g) [Reserved]."
SECTION 6. Amendments to Article VI. Article VI of the
Reimbursement Agreement is hereby amended by deleting Section 6.01 and Sections
6.03 through 6.13 thereof in their entirety and substituting therefor the
following:
SECTION 6.01. Restricted Payments. Neither the Company nor any
Restricted Subsidiary shall make any Restricted Payment.
SECTION 6.03. Collateral. Neither the Company nor any Restricted
Subsidiary shall take any action which would directly or indirectly
impair or adversely affect (i) the Agent's lien on any Collateral or
(ii) the value of such Collateral except, in the case of this clause
(ii), (x) any action solely relating to, resulting solely from, or
arising solely out of the financial condition of the Company or (y)
any action taken in the ordinary course of business.
10
<PAGE>
SECTION 6.04. Material Adverse Effect. Neither the Company nor
any Restricted Subsidiary shall take any action which could reasonably
be expected to have a Material Adverse Effect.
SECTION 6.05. Business Activities. Neither the Company nor any
Restricted Subsidiary shall engage, to any substantial extent, in any
line or lines of business activity other than the businesses now
generally carried out by it, or cease or take any action to cease (or
permit any Subsidiary which is not an Excluded Subsidiary of the
Company to cease) to be in the business of originating mortgage loans.
SECTION 6.06. Affiliate Transactions. (A) The Company shall not
permit any of its Subsidiaries to sell, lease or otherwise transfer
any property or assets to, or purchase, lease or otherwise acquire any
property or assets from, or otherwise engage in any other transactions
with, any of its Affiliates (an "Affiliate Transaction") unless the
terms thereof (i) are no less favorable to the Company or such
Subsidiary than those that could be obtained at the time of such
transaction in arm's-length dealings with a Person who is not such an
Affiliate, (ii) if such Affiliate Transaction involves an amount in
excess of $2,000,000 (or the equivalent amount in any foreign
currency), (x) are set forth in writing and (y) have been approved by
a majority of the members of the Board of Directors having no personal
stake in such Affiliate Transaction and (iii) if such Affiliate
Transaction involves an amount in excess of $10,000,000 (or the
equivalent amount in any foreign currency), have been determined by a
nationally recognized investment banking firm to be fair from a
financial standpoint, to the Company and its Subsidiaries.
(B) Without limiting the generality of any other provisions set
forth in this Agreement, the provisions of Section 6.06(A)(i) shall
not prohibit (i) any Permitted Investment, (ii) any issuance of
securities, or other payments, awards or grants in cash, securities or
otherwise pursuant to, or the funding of, employment arrangements,
stock options and stock ownership plans approved by the Board of
Directors, (iii) the grant of stock options or similar rights to
employees and directors of the Company pursuant to plans approved by
the Board of Directors, (iv) loans or advances to employees in the
ordinary course of business in accordance with the past practices of
the Company or its Subsidiaries, but in any event not to exceed
$1,000,000 (or the equivalent amount in any foreign currency) in
aggregate principal amount outstanding at any one time; provided that
the $2,882,488 of employee loans existing as of June 30, 1999 shall
not be included in calculating such $1,000,000 limit, (v) the payment
of reasonable fees to directors of the Company and its Subsidiaries
who are not employees of the Company or its Subsidiaries, (vi) any
Affiliate Transactions between the Company and a Subsidiary or between
consolidated Subsidiaries (in each case other than any Subsidiary that
is an "affiliate" (as such term is defined in the Exchange Act)) of
any Affiliate (other than any Subsidiary) of the Company and (vii)
transactions pursuant to any agreement as in existence as of the date
hereof
11
<PAGE>
between the Company or its Subsidiaries and Continental Grain Company,
a Delaware corporation, or one of its Subsidiaries or any extensions
or renewals thereof.
SECTION 6.07. Investment Company. Neither the Company nor any
Restricted Subsidiary shall become an "investment company" or a
company "controlled" by an "investment company" within the meaning of
the Investment Company Act, as amended.
SECTION 6.08. Average Liquidity Test. The Company shall not
permit the Average Liquidity Test for any month to be less than
$20,000,000.
SECTION 6.09. Asset Dispositions. The Company shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly,
consummate any Asset Disposition unless (i) the Company or such
Restricted Subsidiary receives consideration at the time of such Asset
Disposition at least equal to the fair market value (including as to
the value of all non-cash consideration), as determined in good faith
by the Board of Directors of the Company, of the shares and assets
subject to such Asset Disposition and at least 85% of the
consideration thereof received by the Company or such Restricted
Subsidiary is in the form of cash or cash equivalents and (ii) an
amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by the Company (or such Restricted Subsidiary,
as the case may be) either (x) for working capital purposes or (y) to
prepay, repay, redeem or purchase, on a ratable basis, Senior
Indebtedness of the Company or any Indebtedness of a Restricted
Subsidiary, as the case may be (other than in either case Indebtedness
owed to the Company or an Affiliate of the Company), provided that the
Company may prepay, repay, redeem or purchase any Senior Indebtedness
owed to the Company's warehouse lenders without such ratable payments
to the holders of any other Senior Indebtedness, in either case within
180 days from the later of the date of such Asset Disposition or the
receipt of such Net Available Cash; provided, however, that in
connection with any prepayment, repayment or purchase of Indebtedness
pursuant to this Section, the Company or such Restricted Subsidiary
shall retire such Indebtedness and shall cause the related loan
commitment (if any) to be permanently reduced in an amount equal to
the principal amount so prepaid, repaid or purchased, and (iii) at the
time of such Asset Disposition no Default shall have occurred and be
continuing (or would result therefrom). Notwithstanding the foregoing
provisions of this Section 6.09, the Company and the Restricted
Subsidiaries shall not be required to apply any Net Available Cash in
accordance with this Section except to the extent that the aggregate
Net Available Cash from all Asset Dispositions which are not applied
in accordance with this paragraph exceeds $10 million; provided,
however, pending application of Net Available Cash pursuant to this
Section 6.09, such Net Available Cash shall be invested in Temporary
Cash Investments.
12
<PAGE>
For the purposes of this Section 6.09, the following are deemed
to be cash or cash equivalents: (x) the assumption of Indebtedness of
the Company or any Restricted Subsidiary, and the release of the
Company and its continuing Restricted Subsidiaries from all liability
on such Indebtedness, in connection with such Asset Disposition and
(y) securities received by the Company or any Restricted Subsidiary
from the transferee that are promptly converted by the Company or such
Restricted Subsidiary into cash.
SECTION 6.10. Senior Note Payments. The Company shall timely make
all required payments to holders of its Senior Notes that are due in
each of September and October 1999.
SECTION 7. Amendments to Article VII. (a) Article VII of the
Reimbursement Agreement is hereby amended by deleting clauses (f) through (n)
thereof in their entirety and substituting therefor the following:
"(f) an Act of Insolvency occurs with respect to the Company;
(g) any governmental, regulatory, or self-regulatory authority
takes any action to remove, limit, restrict, suspend or terminate the
rights, privileges, or operations of the Company or any of its Restricted
Subsidiaries which in any case has a Material Adverse Effect;
(h) any Change of Control of the Company shall have occurred
without the prior consent of the Required Banks which consent shall not be
unreasonably withheld;
(i) the Required Banks, in their good faith judgment, believe
that there has been a Material Adverse Effect;
(j) the occurrence and continuance of a material "event of
default" or of an "event of termination" on the part of the Company (x)
under any agreement between the Company (or an Affiliate thereof) on the
one hand, and Greenwich (or an Affiliate thereof) on the other hand, which
has not been waived by Greenwich (or its Affiliate) or (y) under any of the
Indentures;
(k) there ceases to be a valid, first priority perfected security
interest in the Collateral (as defined in the Security Agreement)."
(b) Article VII of the Reimbursement Agreement is hereby amended
by deleting the words "and in the case of any event with respect to the Company
described in clause (h) or (i)" in the provision following paragraph (n) and
inserting the words "and in the case of any event with respect to the Company in
clause (f)."
SECTION 8. Amendments to Article VIII. The first paragraph of
Article VIII of the Reimbursement Agreement is hereby amended so that the words
"and as
13
<PAGE>
Collateral Agent (as defined in the Security Agreement)" are inserted after the
word "agent" in the third sentence of such paragraph and so that the words "and
of the Security Agreement" are added after the word "hereof" in the fifth
sentence of such paragraph.
SECTION 9. Amendments to Article IX. Article IX of the
Reimbursement Agreement is hereby amended by (a) deleting the words "each of the
Borrower and" from clauses (i) and (ii) of the proviso to Section 9.04(b) and
adding the following proviso at the end of clause (i) in such Section 9.04(b):
"; provided that the Borrower receives prior written notice of such
assignment."; and (b) adding the following Section 9.13 to the end thereof:
"SECTION 9.13. Collateral Proceeds. Each Participating Bank
agrees that if it receives greater than its pro rata share of the
proceeds of Collateral (as defined in the Security Agreement), such
Participating Bank shall return such excess proceeds to the Collateral
Agent (as defined in the Security Agreement) for redistribution among
the Secured Parties so that each Secured Party receives proceeds of
Collateral equal to the same percentage of the total Obligations (as
defined in the Security Agreement) owed to it. This Section 9.13 may
not be amended without the written consent of all of the Secured
Parties."
SECTION 10. Representations and Warranties. The Company
represents and warrants to the Agent and each Participating Bank that:
(a) The representations and warranties set forth in the
Reimbursement Agreement and the Security Documents are true and
correct in all material respects as of and with the same effect as if
made on the date hereof (except to the extent such representations and
warranties expressly relate to an earlier date) after giving effect to
this Amendment, and with all references in such representations to (i)
the "Transactions" being deemed to include the execution, delivery and
performance by the Company of this Amendment and (ii) "this Agreement"
being deemed to include this Amendment.
(b) (i) The Company's identification and description is a
complete listing of all Eligible Excess Spread Receivable pools as of
June 30, 1999 and (ii) subject to retention by the Company of
reasonable reserves, the Company cannot grant a security interest in
favor of the Agent and the Participating Banks in more than
$147,004,342 in book value of the Company's Eligible Excess Spread
Receivables pursuant to the terms of the Indentures without also
granting a ratable Lien to the holders of Senior Notes.
(c) The Company has made a full and complete assessment of all
issues which may be related to the occurrence of the year 2000,
including all issues related to its computer program and software (the
"Year 2000 Issues"), and has a realistic and achievable program for
remediating the Year 2000 Issues on a timely basis (the "Year 2000
Program"). Based on such assessment and on the
14
<PAGE>
Year 2000 Program, the Company does not reasonably anticipate that
Year 2000 Issues will have a Material Adverse Effect.
(d) After giving effect to this Amendment, the Company is in
compliance in all material respects with all the terms and provisions
contained in the Reimbursement Agreement required to be observed or
performed by it.
(e) After giving effect to this Amendment, no Default has
occurred and is continuing to the best of the Company's knowledge.
The foregoing representations and warranties shall survive the execution and
delivery of this Amendment.
SECTION 11. Effectiveness. This Amendment shall become effective
on the date (the "Amendment Effective Date") on which each of the following
conditions is met:
(a) the Agent shall have received counterparts of this Amendment
that, when taken together, bear the signatures of the Company and the
Participating Banks;
(b) the Agent shall have received an opinion of the Company's
in-house counsel and Dewey Ballantine LLP, in form and substance
satisfactory to the Agent and the Issuing Bank and covering such
matters relating to this Amendment and the Security Documents, as the
Agent shall reasonably request;
(c) the Agent shall have received such documents and certificates
as the Agent or its counsel may reasonably request relating to the
organization, existence and good standing of the Company or the
authorization of this Amendment and Security Documents and any other
legal matters relating to the Company or this Amendment or the
Security Documents, all in form and substance reasonably satisfactory
to the Agent and its counsel; and
(d) an amendment to the Credit Agreement, substantially in the
form of this Amendment, shall have been executed and delivered by the
Company and of all the "Lenders" (as defined in the Credit Agreement),
and the amendments set forth therein shall have become effective (or
shall become effective concurrently with the effectiveness of the
amendments set forth herein).
(e) the Collateral Agent shall have received the Security
Agreement, dated as of the date hereof, duly executed by an authorized
officer of the Company, together with certificates evidencing all of
the Collateral, which certificates shall be accompanied by undated
certificate powers duly executed in blank.
15
<PAGE>
The Agent shall promptly notify the Company and the Participating
Banks of the Amendment Effective Date, and such notice shall be conclusive and
binding on all parties hereto.
SECTION 12. Fees and Expenses. Without limiting the Company's
obligations under Section 9.03 of the Reimbursement Agreement, the Company
agrees to pay all reasonable out-of-pocket expenses incurred by the Agent, the
Issuing Bank, the Co-Arrangers identified on the cover page of the Reimbursement
Agreement and their respective Affiliates, including the reasonable fees and
disbursements of all counsel and advisors for such parties, in connection with
the preparation, negotiation, execution and delivery of this Amendment and the
Security Documents and the evaluation by such parties of their rights and the
rights of the Participating Banks under the Reimbursement Agreement, the
Security Documents or any related documentation.
SECTION 13. Miscellaneous.
(a) Except as expressly set forth herein, this Amendment shall
not by implication or otherwise limit, impair, constitute a waiver of
or otherwise affect the rights and remedies of the Participating
Banks, the Agent or the Issuing Bank under the Reimbursement
Agreement, and shall not alter, modify, amend or in any way affect any
of the terms, conditions, obligations, covenants or agreements
contained in the Reimbursement Agreement, all of which are ratified
and affirmed in all respects and shall continue in full force and
effect. Nothing herein shall be deemed to entitle the Company or any
Subsidiary to a consent to, or a waiver, amendment, modification or
other change of, any of the terms, conditions, obligations, covenants
or agreements contained in the Reimbursement Agreement in similar or
different circumstances. This Amendment shall apply and be effective
only with respect to the provisions of the Reimbursement Agreement
specifically referred to herein. The Company hereby ratifies, affirms,
acknowledges and agrees that the Reimbursement Agreement and the Loans
and reimbursement obligations thereunder represent the valid,
enforceable and collectible obligations of the Company, and
acknowledges that there are no existing claims, defenses, personal or
otherwise, or rights of setoff whatsoever with respect to the
Reimbursement Agreement or the Loans or reimbursement obligations
thereunder.
(b) As used in the Reimbursement Agreement, the terms
"Agreement", "herein", "hereinafter", "hereunder", "hereto", and words
of similar import shall mean, from and after the date hereof, the
Reimbursement Agreement as amended by this Amendment.
(c) Section headings used herein are for convenience of reference
only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Amendment.
16
<PAGE>
(d) THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
(e) This Amendment may be executed in any number of counterparts,
each of which shall be an original but all of which, when taken
together, shall constitute but one instrument.
(f) The Participating Banks hereby waive any Default resulting
from (i) the failure by the Company to timely provide to the Agent the
Company's March 31, 1999 financial statements as required in Section
5.01(a) of the Reimbursement Agreement and (ii) the "going concern"
qualification contained in the report of the Company's independent
public accountants given in connection with such financial statements.
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed and delivered by their respective duly authorized officers
as of the date first above written.
CONTIFINANCIAL CORPORATION
by
-----------------------------------
Name:/s/ Alan Fishman
Title: Authorized Signatory
by
-----------------------------------
Name:/s/ Frank Baier
Title: Authorized Signatory
CREDIT SUISSE FIRST BOSTON, NEW
YORK BRANCH Individually and as
Administrative Agent,
by
-----------------------------------
Name:/s/ Robert N. Finney
Title: Managing Director
by
-----------------------------------
Name:/s/ Jay Chall
Title: Director
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES,
by
-----------------------------------
Name:/s/ J. Curtin Beaudouin
Title: First Vice President
by
-----------------------------------
Name:/s/ Anthony C. Valencourt
Title: Senior Vice President
<PAGE>
THE BANK OF NOVA SCOTIA,
by
-----------------------------------
Name:/s/ A.T.D. Clarke
Title: Senior Manager
THE CHASE MANHATTAN BANK,
by
-----------------------------------
Name:/s/ Elizabeth A. Kelley
Title: Managing Director
BANK OF AMERICA, N.A. (formerly
NATIONSBANK, N.A.)
by
-----------------------------------
Name:/s/ Garrett Dolt
Title: Vice President
CREDIT LYONNAIS NEW YORK BRANCH,
by
-----------------------------------
Name:/s/ David Bonington
Title: Vice President
SOCIETE GENERALE,
by
-----------------------------------
Name:/s/ Charles D. Fischer, Jr.
Title: Vice President
COMERICA BANK,
by
-----------------------------------
Name:/s/ Von L. Ringger
Title: First Vice President
<PAGE>
UBS AG, NEW YORK BRANCH,
by
-----------------------------------
Name:/s/ W. Scott James
Title: Managing Director
by
-----------------------------------
Name:/s/ Phil Cartularo
Title: Associate Director
THE SUMITOMO BANK, LIMITED,
NEW YORK BRANCH,
by
-----------------------------------
Name:/s/Suresh S. Tata
Title: Senior Vice President
BADEN-WUERTTEMBERGISCHE BANK AG,
by
-----------------------------------
Name:/s/ Robert B. Herber
Title: Authorized Signatory
by
-----------------------------------
Name:/s/ Thomas A. Lowe
Title: Authorized Signatory
SOUTHTRUST BANK, NATIONAL
ASSOCIATION,
by
-----------------------------------
Name:/s/ Andy Raine
Title: Assistant Vice President
<PAGE>
MANUFACTURERS AND TRADERS
TRUST COMPANY,
by
-----------------------------------
Name:/s/ Kevin B. Quinn
Title: Assistant Vice President
CREDIT AGRIEOLE INDOSUEZ,
by
-----------------------------------
Name:/s/ Richard Manix
Title: First Vice President
-----------------------------------
Name:/s/ Wha Kyung Lee
Title: Vice President
================================================================================
PLEDGE AND SECURITY AGREEMENT
made by
CONTIFINANCIAL CORPORATION
in favor of
CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH,
as Collateral Agent
Dated as of August 19, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1.DEFINED TERMS ................................................... 1
1.1 Definitions ......................................................... 1
1.2 Other Definitional Provisions ....................................... 3
SECTION 2 GRANT OF SECURITY INTEREST ....................................... 4
2.1 Collateral ........................................................... 4
2.2 Grant of Security Interest in Collateral ............................. 4
SECTION 3 REPRESENTATIONS AND WARRANTIES ................................... 5
3.1 Representations in Credit Agreement .................................. 5
3.2 Title; No Other Liens ................................................ 5
3.3 Perfection; Priority ................................................. 5
3.4 Chief Executive Office; Books and Records ............................ 5
SECTION 4 COVENANTS ........................................................ 6
4.1 Generally ............................................................ 6
4.2 Covenants in Credit Agreement ........................................ 6
4.3 Payment of Obligations ............................................... 6
4.4 Maintenance of Perfected Security Interest; Further Documentation .... 6
4.5 Changes in Locations, Name, Etc ...................................... 7
4.6 Notices ............................................................. 8
4.7 Certificates, Instruments and Investment Property ................... 8
SECTION 5 REMEDIAL PROVISIONS .............................................. 9
5.1 Sale of Collateral .................................................. 9
5.2 Voting Rights ....................................................... 10
5.3 Proceeds to be Turned Over To Collateral Agent ...................... 11
5.4 Code and Other Remedies ............................................. 11
5.5 Waiver; Deficiency .................................................. 12
SECTION 6 THE COLLATERAL AGENT ............................................ 12
6.1 Collateral Agent's Appointment as Attorney-in-Fact, Etc ............. 12
6.2 Duty of Collateral Agent ............................................ 14
6.3 Execution of Financing Statements ................................... 14
6.4 Authority of Collateral Agent ....................................... 15
SECTION 7 MISCELLANEOUS ................................................... 15
i
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
7.1 Amendments in Writing ............................................... 15
7.2 Notices ............................................................. 15
7.3 No Waiver by Course of Conduct; Cumulative Remedies ................. 15
7.4 Enforcement Expenses; Indemnification ............................... 15
7.5 Successors and Assigns .............................................. 16
7.6 Set-Off ............................................................. 16
7.7 Counterparts ........................................................ 17
7.8 Severability ........................................................ 17
7.9 Section Headings .................................................... 17
7.10 Integration ........................................................ 17
7.11 GOVERNING LAW ...................................................... 17
7.12 Submission To Jurisdiction; Waivers ................................ 17
7.13 Acknowledgements ................................................... 18
7.14 Releases ........................................................... 18
7.15 WAIVERS OF JURY TRIAL .............................................. 19
Annex 1 to Pledge and Security Agreement ................................... 1
Pledge and Security Agreement .............................................. 1
Annex 3 to Pledge and Security Agreement ................................... 2
Annex 4 to Pledge and Security Agreement ................................... 1
Annex 5 to Pledge and Security Agreement ................................... 1
ii
<PAGE>
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT, dated as of August 19, 1999,
made by ContiFinancial Corporation, a Delaware corporation (the "Grantor"), in
favor of Credit Suisse First Boston, New York Branch ("CSFB"), as agent for the
banks, financial institutions and other entities from time to time party to
either or both of the Credit Agreement and the Reimbursement Agreement referred
to below (the "Secured Parties" and CSFB, in such capacity, the "Collateral
Agent").
W I T N E S S E T H:
WHEREAS, the Secured Parties have made extensions of credit to
the Grantor pursuant to (i) the Credit Agreement dated as of January 7, 1997 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Grantor, the lenders party thereto and CSFB, as
Administrative Agent, and (ii) the Amended and Restated Letter of Credit and
Reimbursement Agreement dated as of September 9, 1997, as amended and restated
as of August 21, 1998 (as further amended, amended and restated, supplemented or
otherwise modified from time to time, the "Reimbursement Agreement" and together
with the Credit Agreement, the "Agreements"), among the Grantor, the
participating banks party thereto, CSFB, as Agent, and Dresdner Bank AG, New
York Branch, as Issuing Bank; and
WHEREAS, the proceeds of the extensions of credit under the
Agreements have been used in part to enable the Grantor to make valuable
transfers to one or more of its Subsidiaries in connection with the operation of
their respective businesses; and
WHEREAS, the Grantor has derived substantial direct and
indirect benefit from the making of the extensions of credit under the
Agreements; and
WHEREAS, it is a condition precedent to the obligation of the
Secured Parties to amend the Agreements that the Grantor shall have executed and
delivered this Agreement to the Collateral Agent;
NOW, THEREFORE, in consideration of the premises and to induce
the Secured Parties to amend the Agreements, the Grantor hereby agrees with the
Collateral Agent, for the ratable benefit of the Secured Parties, as follows:
SECTION 1. DEFINED TERMS
1.1 Definitions.
(a) Unless otherwise defined herein, terms defined in the
Credit Agreement and used herein shall have the meanings given to them in the
Credit Agreement.
(b) The following terms shall have the following meanings:
<PAGE>
"Agreement" means this Pledge and Security Agreement.
"Collateral" has the meaning specified in Section 2.
"Control" has the meaning specified in the Uniform Commercial
Code in effect in the State of New York on the date hereof and, to the extent
the category of property or rights is expanded by any subsequent amendment of
such statute, as so expanded from and after the date such amendment becomes
effective.
"General Intangibles" means all "general intangibles" as such
term is defined in Section 9-106 of the Uniform Commercial Code in effect in the
State of New York on the date hereof and, to the extent the category of property
or rights is expanded by any subsequent amendment of such statute, as so
expanded from and after the date such amendment becomes effective and, General
Intangibles in any event, includes with respect to the Grantor, all contracts,
agreements, instruments and indentures in any form, and portions thereof, to
which the Grantor is a party or under which the Grantor has any right, title or
interest or to which the Grantor or any property of the Grantor is subject, as
the same may from time to time be amended, supplemented or otherwise modified,
including (i) all rights of the Grantor to receive moneys due and to become due
to it thereunder or in connection therewith, (ii) all rights of the Grantor to
damages arising thereunder and (iii) all rights of the Grantor to perform and to
exercise all remedies thereunder, in each case to the extent the grant by the
Grantor of a security interest pursuant to this Agreement in its right, title
and interest in such contract, agreement, instrument or indenture is not
prohibited by such contract, agreement, instrument or indenture without the
consent of any other party thereto, would not give any other party to such
contract, agreement, instrument or indenture the right to terminate its
obligations thereunder, or is permitted with consent if all necessary consents
to such grant of a security interest have been obtained from the other parties
hereto (it being understood that the foregoing shall not be deemed to obligate
the Grantor to obtain such consents); provided, however, that the foregoing
limitation shall not affect, limit, restrict or impair the grant by the Grantor
of a security interest pursuant to this Agreement in any receivable or any money
or other amounts due or to become due under any such contract, agreement,
instrument or indenture.
"Instruments" has the meaning specified in the Uniform
Commercial Code in effect in the State of New York on the date hereof and, to
the extent the category of property or rights is expanded by any subsequent
amendment of such statute, as so expanded from and after the date such amendment
becomes effective.
"Investment Property" means all "investment property" as such
term is specified in the Uniform Commercial Code in effect in the State of New
York on the date hereof and, to the extent the category of property or rights is
expanded by any subsequent amendment of such statute, as so expanded from and
after the date such amendment becomes effective.
"New York UCC" means the Uniform Commercial Code as from time
to time in effect in the State of New York; provided, however, in the event
that, by reason of
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mandatory provisions of law, any or all of the attachment, perfection or
priority of the Collateral Agent's and the Secured Parties' security interest in
any Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of New York, the term "New York UCC" shall
mean the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such attachment, perfection or
priority and for purposes of definitions related to such provisions.
"Obligations" means the Loans (as defined in the Credit
Agreement or the Reimbursement Agreement), obligations under any Letter of
Credit and all other advances, debts, liabilities, obligations, covenants and
duties owing by the Grantor to the Agent under the Reimbursement Agreement, the
Administrative Agent under the Credit Agreement, the Collateral Agent, any other
Secured Party, the Issuing Bank (as defined in the Reimbursement Agreement), the
Swingline Lender, any Affiliate of any of them or any indemnitee, of every type
and description, present or future, whether or not evidenced by any note,
guaranty or other instrument, arising under this Agreement or under the
Agreements, whether or not for the payment of money, whether arising by reason
of an extension of credit, opening or amendment of a Letter of Credit or payment
of any draft drawn thereunder, loan, guaranty, indemnification, foreign exchange
transaction or in any other manner, whether direct or indirect (including,
without limitation, those acquired by assignment), absolute or contingent, due
or to become due, now existing or hereafter arising and however acquired. The
term "Obligations" includes, without limitation, all interest, charges,
expenses, fees, attorneys' fees and disbursements and any other sum chargeable
to the Grantor under this Agreement or the Agreements and all obligations of the
Grantor to cash collateralize obligations under a Letter of Credit, if any.
"Proceeds" means all "proceeds" as such term is defined in
Section 9-306(1) of the Uniform Commercial Code in effect in the State of New
York on the date hereof and, in any event, shall include, without limitation,
(a) all dividends or other income from the Collateral, collections thereon or
distributions or payments with respect thereto, including any Instruments,
General Intangibles and Investment Property received in connection therewith,
and any amounts deposited in any overcollateralization account or reserve
account which is payable with respect to any Collateral (b) any and all proceeds
of any insurance, indemnity, warranty or guaranty payable to the Grantor from
time to time with respect to any of the Collateral, (c) any and all payments (in
any form whatsoever) made or due and payable to the Grantor from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(or any Person acting under color of Governmental Authority) and (d) any and all
other amounts from time to time paid or payable under or in connection with any
of the Collateral.
"Securities Act" means the Securities Act of 1933, as amended.
1.2 Other Definitional Provisions. (a) The words "hereof,"
"herein," "hereto" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
section, subsection or clause
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in this Agreement, and Section and Schedule references are to this Agreement
unless otherwise specified.
(b) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the
Collateral or any part thereof, when used in relation to the Grantor, shall
refer to the Grantor's Collateral or the relevant part thereof.
(d) References herein to an Exhibit, Schedule, Article,
Section, subsection or clause refer to the appropriate Exhibit or Schedule to,
or Article, Section, subsection or clause in this Agreement.
(e) Any reference in this Agreement to the Agreements shall
include all appendices, exhibits and schedules thereto, and, unless specifically
stated otherwise all amendments, restatements, supplements or other
modifications thereto, and as the same may be in effect at any and all times
such reference becomes operative.
(f) The term "including" when used herein means "including
without limitation" unless the context otherwise requires.
(g) The terms "Secured Parties" and "Collateral Agent" include
their respective successors.
SECTION 2. GRANT OF SECURITY INTEREST
2.1 Collateral. For the purposes of this Agreement, all of the
following property now owned or at any time hereafter acquired by the Grantor or
in which the Grantor now has or at any time in the future may acquire any right,
title or interests is collectively referred to as the "Collateral":
(a) those certain Excess Spread Receivables listed on Annex 2
hereto and all certificates and documents, if any, representing any such
Collateral or relating thereto;
(b) all books and records pertaining to the Collateral; and
(c) to the extent not otherwise included, all Proceeds and
products of each of the foregoing and all accessions to, substitutions and
replacements for, and rents, profits and products of, each of the foregoing, all
dividends, cash, interest, all instruments and other property and Proceeds and
products from time to time received, receivable or otherwise distributed in
respect of the Collateral or in exchange therefore.
2.2 Grant of Security Interest in Collateral. As collateral
security for the full, prompt and complete payment and performance when due
(whether at stated maturity, by acceleration or otherwise) of the Obligations,
the Grantor hereby collaterally assigns, conveys, mortgages, pledges,
hypothecates and transfers to the Collateral Agent,
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and grants to the Collateral Agent, for the ratable benefit of the Secured
Parties, a security interest in all of its right, title and interest in, to and
under the Collateral.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Secured Parties to amend the Agreements, the
Grantor hereby represents and warrants to the Secured Parties that:
3.1 Representations in Credit Agreement. The representations
and warranties set forth in Article III of the Credit Agreement and Article III
of the Reimbursement Agreement are hereby incorporated herein by reference, are
true and correct, and the Collateral Agent and each Secured Party shall be
entitled to rely on each of them as if they were fully set forth herein.
3.2 Title; No Other Liens. (a) Except for the security
interests granted to the Collateral Agent for the ratable benefit of the Secured
Parties pursuant to this Agreement, the Grantor is the legal and beneficial
owner of and has good and marketable title to the Collateral on Annex 2 and owns
each item of such Collateral free and clear of any and all Liens, or options in
favor of, or claims of any other Person. No financing statement or other public
notice with respect to all or any part of the Collateral is on file or of record
in any public office, except such as have been filed in favor of the Collateral
Agent, for the benefit of the Secured Parties, pursuant to this Agreement or as
are permitted by the Agreements.
(b) All Collateral in certificated form has been delivered to
the Collateral Agent.
3.3 Perfection; Priority.
(a) Upon (i) the completion of the filings and other actions
specified on Annex 1 (which, in the case of all filings and other documents
referred to on said Schedule, have been delivered to the Collateral Agent in
completed and duly executed form), (ii) the delivery to the Collateral Agent of
all certificates representing Collateral that consist of certificated securities
and (iii) the Collateral Agent having obtained Control over such Investment
Property, the security interests granted pursuant to this Agreement will
constitute valid and continuing perfected security interests in the Collateral
in favor of the Collateral Agent, for the benefit of the Secured Parties, having
the priority ascribed to such security interests in Section 3.3(b).
(b) Upon the completion of the filings and other actions
specified in Section 3.3(a) and on Annex 1 (which, in the case of all filings
and other documents referred to on said Schedule, have been delivered to the
Collateral Agent in completed and duly executed form), the security interests
granted pursuant to this Agreement are prior to all other Liens on the
Collateral in existence on the date hereof.
3.4 Chief Executive Office; Books and Records. On the date
hereof, the Grantor's jurisdiction of organization, the location of the
Grantor's chief executive office
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or sole place of business and the place where its records concerning the
Collateral are kept are specified on Annex 4.
SECTION 4. COVENANTS
The Grantor covenants and agrees with the Secured Parties
that, from and after the date of this Agreement until the obligations under the
Credit Agreement and the Reimbursement Agreement shall have been paid in full,
no Letter of Credit (as defined in the Reimbursement Agreement) shall be
outstanding and the Commitments shall have terminated:
4.1 Generally. The Grantor shall (i) except for the security
interest created by this Agreement, not create or suffer to exist any Lien upon
or with respect to any of the Collateral; (ii) not use or permit any Collateral
to be used unlawfully or in violation of any provision of this Agreement or any
applicable statute, regulation or ordinance or any policy of insurance covering
the Collateral; and (iii) pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all claims
(including claims for labor, materials and supplies) against, the Collateral,
except to the extent the validity thereof is being contested in good faith;
provided, however, that the Grantor shall in any event pay such taxes,
assessments, charges, levies or claims not later than five days prior to the
date of any proposed sale under any judgment, writ or warrant of attachment
entered or filed against the Grantor or any of the Collateral as a result of the
failure to make such payment. The Grantor shall not sell, transfer or assign (by
operation of law or otherwise) any Collateral except as contemplated in this
Agreement.
4.2 Covenants in Credit Agreement. The Grantor shall take, or
shall refrain from taking, as the case may be, each action that is necessary to
be taken or not taken, as the case may be, so that no Default or Event of
Default under the Agreements is caused by the failure to take such action or to
refrain from taking such action by the Grantor.
4.3 Payment of Obligations. The Grantor will pay and discharge
or otherwise satisfy at or before maturity or before they become delinquent, as
the case may be, all taxes, assessments and governmental charges or levies
imposed upon the Collateral or in respect of income or profits therefrom, as
well as all claims of any kind (including claims for labor, materials and
supplies) against or with respect to the Collateral, except that no such charge
need be paid if the amount or validity thereof is currently being contested in
good faith by appropriate proceedings, reserves in conformity with GAAP with
respect thereto have been provided on the books of the Grantor and such
proceedings could not reasonably be expected to result in the sale, forfeiture
or loss of any material portion of the Collateral or any interest therein.
4.4 Maintenance of Perfected Security Interest; Further
Documentation.
(a) The Grantor shall maintain the security interests created
by this Agreement as perfected security interests having at least the priorities
described in
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Section 3.3 and shall defend such security interests against the claims and
demands of all Persons.
(b) The Grantor will furnish to the Collateral Agent from time
to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as the
Collateral Agent may reasonably request, all in reasonable detail.
(c) At any time and from time to time, upon the written
request of the Collateral Agent, and at the sole expense of the Grantor, the
Grantor will promptly and duly execute and deliver, and have recorded, such
further instruments and documents and take such further actions as the
Collateral Agent may reasonably request for the purpose of obtaining or
preserving the full benefits of this Agreement and of the rights and powers
herein granted, including the filing of any financing or continuation statements
under the Uniform Commercial Code (or other similar laws) in effect in any
jurisdiction with respect to the security interests created hereby.
(d) The Grantor hereby authorizes the Collateral Agent to file
one or more financing or continuation statements, and amendments thereto,
relative to all or any part of the Collateral without the signature of the
Grantor. The Grantor agrees that a carbon, photographic or other reproduction of
this Agreement or of a financing statement signed by Grantor shall be sufficient
as a financing statement and may be filed as a financing statement in any and
all jurisdictions.
4.5 Changes in Locations, Name, Etc.
(a) The Grantor will not, except upon 30 days' prior written
notice to the Collateral Agent and delivery to the Collateral Agent of all
additional executed financing statements and other documents reasonably
requested by the Collateral Agent to maintain the validity, perfection and
priority of the security interests provided for herein:
(i) change the location of its chief executive office or sole
place of business from that referred to in Section 3.4; or
(ii) change its name, identity or corporate structure to such
an extent that any financing statement filed by the Collateral Agent in
connection with this Agreement would become misleading.
(b) The Grantor will keep and maintain at its own cost and
expense satisfactory and complete records of the Collateral, including a record
of all payments received and all credits granted with respect to the Collateral
and all other dealings with the Collateral. The Grantor will, if so requested by
the Collateral Agent, furnish to the Collateral Agent, as often as the
Collateral Agent reasonably requests, statements and schedules further
identifying and describing the Collateral and the transaction generating the
Collateral related thereto, such other reports in connection with the Collateral
as the Collateral Agent may reasonably request and any information that the
Collateral Agent may reasonably request in order to perform an evaluation of the
Collateral, all in
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reasonable detail. The Grantor will mark its books and records pertaining to the
Collateral to evidence this Agreement and the Lien and security interests
granted hereby. For the Secured Parties' further security, the Grantor agrees
that the Secured Parties shall have a special property interest in all of the
Grantor's books and records pertaining to the Collateral. At any time, upon
reasonable notice from the Collateral Agent, the Grantor shall permit any
representative of the Collateral Agent to inspect such books and records and
will provide photocopies thereof to the Collateral Agent.
4.6 Notices. The Grantor will advise the Collateral Agent,
promptly and in reasonable detail, of any Lien (other than security interests
created hereby or Liens permitted under the Agreements) on any of the
Collateral.
4.7 Certificates, Instruments and Investment Property.
(a) The Grantor will deliver all certificates or Instruments
representing or evidencing the Collateral or, subject to Section 5, any amounts
payable under or in connection therewith, whether now arising or hereafter
acquired or arising to the Collateral Agent, and held by or on behalf of the
Collateral Agent pursuant hereto, in suitable form for transfer by delivery or,
as applicable, accompanied by the Grantor's endorsement, where necessary, or
duly executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Collateral Agent. The Collateral Agent shall have
the right, at any time in its discretion and without notice to the Grantor, to
transfer to or to register in its name or in the name of its nominees any or all
certificates, Instruments or Investment Property constituting Collateral. The
Collateral Agent shall have the right at any time to exchange certificates or
instruments representing or evidencing any Collateral for certificates or
instruments of smaller or larger denominations.
(b) Subject to Section 5, the Grantor shall be entitled to
exercise all voting, consent and corporate rights with respect to the
Collateral; provided, however, that no vote shall be cast, no consent shall be
given, no corporate right shall be exercised and no other action shall be taken
by the Grantor which, in the Collateral Agent's reasonable judgment, would
impair the Collateral or which would be inconsistent with or result in any
violation of any provision of the Credit Agreement, the Reimbursement Agreement
or this Agreement.
(c) The Grantor hereby agrees that it shall not grant Control
over any Collateral to any Person other than the Collateral Agent.
(d) Subject to Section 5, the Grantor shall be entitled to
receive all payments, including any and all dividends, made in respect of the
Collateral paid in the normal course of business of the relevant issuer thereof
and consistent with past practice, to the extent permitted in the Agreements.
Any sums paid or other property distributed upon or in respect of the Collateral
upon the liquidation or dissolution of any issuer thereof shall be paid over to
the Collateral Agent to be held by it hereunder as additional collateral
security for the Obligations, and in case any distribution of capital shall be
made on or in respect of the Collateral or any property shall be distributed
upon or with
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respect to such Collateral pursuant to the recapitalization or reclassification
of the capital of any issuer thereof or pursuant to the reorganization thereof,
the property so distributed shall be delivered to the Collateral Agent to be
held by it hereunder as additional collateral security for the Obligations. If
any sums of money or property so paid or distributed in respect of the
Collateral shall be received by the Grantor, the Grantor shall, until such money
or property is paid or delivered to the Collateral Agent, hold such money or
property in trust for the Secured Parties, segregated from other funds of the
Grantor, as additional collateral security for the Obligations.
(e) Without the prior written consent of the Collateral Agent,
the Grantor will not (i) vote to enable, or take any other action to permit, any
issuer of Investment Property or other Collateral to issue any stock or other
equity securities of any nature or to issue any other securities convertible
into or granting the right to purchase or exchange for any stock or other equity
securities of any nature of any issuer thereof, (ii) sell, assign, transfer,
exchange, or otherwise dispose of, or grant any option with respect to, any
Collateral or the Proceeds thereof (except pursuant to a transaction expressly
permitted by the Agreements), (iii) create, incur or permit to exist any Lien or
option in favor of, or any claim of any Person with respect to, any of the
Collateral or the Proceeds thereof, or any interest therein, except for the
security interests created by this Agreement or (iv) enter into any agreement or
undertaking restricting the right or ability of the Grantor or the Collateral
Agent to sell, assign or transfer any of the Collateral or Proceeds thereof.
(f) Upon request of the Collateral Agent, the Grantor shall
cause each Person which is an issuer of an uncertificated security included in
the Collateral to execute and deliver all instruments and documents, and take
all further action that the Collateral Agent may reasonably request, in order to
perfect and protect any security interest granted or purported to be granted in
such uncertificated securities, to establish Control by the Collateral Agent
over such Collateral or to enable the Collateral Agent to exercise and enforce
its rights and remedies hereunder with respect to such Collateral, including and
as applicable, (i) register the security interest granted hereby upon the books
of such Person in accordance with Article 8 of the New York UCC and (ii) deliver
to the Collateral Agent an Acknowledgment of Pledge, duly executed by such the
issuer of the applicable uncertificated security, in substantially the form of
Annex 3.
SECTION 5. REMEDIAL PROVISIONS
5.1 Sale of Collateral. The Grantor recognizes that the
Collateral Agent may be unable to effect a public sale of any or all the
Collateral, by reason of certain prohibitions contained in the Securities Act
and applicable state securities laws or otherwise, and may be compelled to
resort to one or more private sales thereof to a restricted group of purchasers
which will be obliged to agree, among other things, to acquire such securities
for their own account for investment and not with a view to the distribution or
resale thereof. The Grantor acknowledges and agrees that any such private sale
may result in prices and other terms less favorable than if such sale were a
public sale. The Collateral Agent shall be under no obligation to delay a sale
of any of the Collateral for the period of time necessary to permit the issuer
thereof to register such
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securities for public sale under the Securities Act, or under applicable state
securities laws, even if such issuer would agree to do so.
5.2 Voting Rights.
(a) If an Event of Default under the Credit Agreement or the
Reimbursement Agreement shall occur and be continuing (other than an Event of
Default arising under clause (f) of Article VII of the Agreements) and the
Collateral Agent shall have provided notice to the Grantor of the acceleration
of the obligations outstanding under the Agreements and shall have commenced
enforcement action in respect thereof, (i) the Collateral Agent shall have the
right to receive any and all cash dividends, payments or other Proceeds paid in
respect of the Collateral and make application thereof to the Obligations in the
order set forth in the Agreements, and (ii) the Collateral Agent or its nominee
may exercise (x) all voting, consent, corporate and other rights pertaining to
such Collateral at any meeting of shareholders of the relevant issuer or issuers
thereof or otherwise and (y) any and all rights of conversion, exchange and
subscription and any other rights, privileges or options pertaining to such
Collateral as if it were the absolute owner thereof (including the right to
exchange at its discretion any and all of the Collateral upon the merger,
consolidation, reorganization, recapitalization or other fundamental change in
the corporate structure of any issuer thereof, or upon the exercise by the
Grantor or the Collateral Agent of any right, privilege or option pertaining to
such Collateral, and in connection therewith, the right to deposit and deliver
any and all of the Collateral with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions as the
Collateral Agent may determine), all without liability except to account for
property actually received by it, but the Collateral Agent shall have no duty to
the Grantor to exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing. IN ORDER TO PERMIT
THE COLLATERAL AGENT TO EXERCISE THE VOTING AND OTHER CONSENSUAL RIGHTS WHICH IT
MAY BE ENTITLED TO EXERCISE PURSUANT HERETO AND TO RECEIVE ALL DIVIDENDS AND
OTHER DISTRIBUTIONS WHICH IT MAY BE ENTITLED TO RECEIVE HEREUNDER, (I) THE
GRANTOR SHALL PROMPTLY EXECUTE AND DELIVER (OR CAUSE TO BE EXECUTED AND
DELIVERED) TO THE COLLATERAL AGENT ALL SUCH PROXIES, DIVIDEND PAYMENT ORDERS AND
OTHER INSTRUMENTS AS THE COLLATERAL AGENT MAY FROM TIME TO TIME REASONABLY
REQUEST AND (II) WITHOUT LIMITING THE EFFECT OF CLAUSE (I) ABOVE, THE GRANTOR
HEREBY GRANTS TO THE COLLATERAL AGENT AN IRREVOCABLE PROXY TO VOTE THE
INVESTMENT PROPERTY OR OTHER COLLATERAL AND TO EXERCISE ALL OTHER RIGHTS,
POWERS, PRIVILEGES AND REMEDIES TO WHICH A HOLDER OF SUCH COLLATERAL WOULD BE
ENTITLED (INCLUDING GIVING OR WITHHOLDING WRITTEN CONSENTS OF SHAREHOLDERS,
CALLING SPECIAL MEETINGS OF SHAREHOLDERS AND VOTING AT SUCH MEETINGS), WHICH
PROXY SHALL BE EFFECTIVE, AUTOMATICALLY AND WITHOUT THE NECESSITY OF ANY ACTION
(INCLUDING ANY TRANSFER OF ANY INVESTMENT PROPERTY
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OR OTHER COLLATERAL ON THE RECORD BOOKS OF THE ISSUER THEREOF) BY ANY OTHER
PERSON (INCLUDING THE ISSUER OF SUCH INVESTMENT PROPERTY OR OTHER COLLATERAL OR
ANY OFFICER OR AGENT THEREOF), UPON THE OCCURRENCE AND DURING THE CONTINUATION
OF AN EVENT OF DEFAULT UNDER THE CREDIT AGREEMENT OR THE REIMBURSEMENT
AGREEMENT, AND WHICH PROXY SHALL ONLY TERMINATE UPON THE PAYMENT IN FULL OF THE
OBLIGATIONS.
(b) The Grantor hereby authorizes and instructs each issuer of
any Collateral pledged by the Grantor hereunder to (i) comply with any
instruction received by it from the Collateral Agent in writing that (x) states
that an Event of Default under the Credit Agreement or the Reimbursement
Agreement has occurred and is continuing and (y) is otherwise in accordance with
the terms of this Agreement, without any other or further instructions from the
Grantor, and the Grantor agrees that each such issuer shall be fully protected
in so complying and (ii) unless otherwise expressly permitted hereby, pay any
dividends or other payments with respect to such Investment Property directly to
the Collateral Agent.
5.3 Proceeds to be Turned Over To Collateral Agent. If an
Event of Default under the Credit Agreement or the Reimbursement Agreement shall
occur and be continuing (other than an Event of Default arising under clause (f)
of Article VII of the Agreements) and the Collateral Agent shall have provided
notice to the Grantor of the acceleration of the obligations outstanding under
the Agreements and shall have commenced enforcement action in respect thereof,
all Proceeds received by the Grantor consisting of cash, checks and other
near-cash items shall be held by the Grantor in trust for the Collateral Agent
and the other Secured Parties, segregated from other funds of the Grantor, and
shall, forthwith upon receipt by the Grantor, be turned over to the Collateral
Agent in the exact form received by the Grantor (duly indorsed by the Grantor to
the Collateral Agent, if required). All Proceeds received by the Collateral
Agent hereunder shall be held by the Collateral Agent in a deposit account
maintained under its sole dominion and control. All Proceeds, while held by the
Collateral Agent in such deposit account (or by the Grantor in trust for the
Collateral Agent and the other Secured Parties), shall continue to be held as
collateral security for all the Obligations and shall not constitute payment
thereof until applied as provided in the Credit Agreement or the Reimbursement
Agreement, as applicable.
5.4 Code and Other Remedies. If an Event of Default under the
Credit Agreement or the Reimbursement Agreement shall occur and be continuing,
the Collateral Agent, on behalf of the Secured Parties, may exercise, in
addition to all other rights and remedies granted to them in this Agreement and
in any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the New York UCC
or any other applicable law. Without limiting the generality of the foregoing,
the Collateral Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon the Grantor or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof
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(or contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, at any exchange, broker's board or office of the
Collateral Agent or any other Secured Party or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
The Collateral Agent or any other Secured Party shall have the right upon any
such public sale or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of the Collateral so
sold, free of any right or equity of redemption in the Grantor, which right or
equity is hereby waived and released. The Grantor further agrees, at the
Collateral Agent's request, to assemble the Collateral and make it available to
the Collateral Agent at places which the Collateral Agent shall reasonably
select, whether at the Grantor's premises or elsewhere. The Collateral Agent
shall apply the net proceeds of any action taken by it pursuant to this Section
5.4, after deducting all reasonable costs and expenses of every kind incurred in
connection therewith or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the
Collateral Agent and any other Secured Party hereunder, including reasonable
attorneys' fees and disbursements, to the payment in whole or in part of the
Obligations, in such order as the Credit Agreement or the Reimbursement
Agreement, as applicable, shall proscribe, and only after such application and
after the payment by the Collateral Agent of any other amount required by any
provision of law, including Section 9-504(1)(c) of the New York UCC, need the
Collateral Agent account for the surplus, if any, to the Grantor. To the extent
permitted by applicable law, the Grantor waives all claims, damages and demands
it may acquire against the Collateral Agent or any other Secured Party arising
out of the exercise by them of any rights hereunder. If any notice of a proposed
sale or other disposition of Collateral shall be required by law, such notice
shall be deemed reasonable and proper if given at least 10 days before such sale
or other disposition.
5.5 Waiver; Deficiency. The Grantor waives and agrees not to
assert any rights or privileges which it may acquire under Section 9-112 of the
New York UCC. The Grantor shall remain liable for any deficiency if the proceeds
of any sale or other disposition of the Collateral are insufficient to pay its
Obligations and the fees and disbursements of any attorneys employed by the
Collateral Agent or any other Secured Party to collect such deficiency.
SECTION 6. THE COLLATERAL AGENT
6.1 Collateral Agent's Appointment as Attorney-in-Fact, Etc.
(a) The Grantor hereby irrevocably constitutes and appoints
the Collateral Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Grantor and in the name of the
Grantor or in its own name, for the purpose of carrying out the terms of this
Agreement, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the
purposes of this Agreement, and, without limiting the generality of the
foregoing, the Grantor hereby gives the Collateral Agent the power and right, on
behalf
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<PAGE>
of the Grantor, without notice to or assent by the Grantor, to do any or all of
the following:
(i) in the name of the Grantor or in its own name, or otherwise,
take possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due with
respect to any Collateral and file any claim or take any other action or
proceeding in any court of law or equity or otherwise deemed appropriate
by the Collateral Agent for the purpose of collecting any and all such
moneys due with respect to any Collateral whenever payable;
(ii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of the
premiums therefor and the costs thereof;
(iii) execute, in connection with any sale provided for in Section
5.4, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral; and
(iv) (1) direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Collateral Agent or as the Collateral Agent
shall direct; (2) ask or demand for, collect, and receive payment of and
receipt for, any and all moneys, claims and other amounts due or to become
due at any time in respect of or arising out of any Collateral; (3) sign
and indorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of the
Collateral; (4) commence and prosecute any suits, actions or proceedings
at law or in equity in any court of competent jurisdiction to collect the
Collateral or any portion thereof and to enforce any other right in
respect of any Collateral; (5) defend any suit, action or proceeding
brought against the Grantor with respect to any Collateral; (6) settle,
compromise or adjust any such suit, action or proceeding and, in
connection therewith, give such discharges or releases as the Collateral
Agent may deem appropriate; and (7) generally, sell, transfer, pledge and
make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the Collateral Agent were the
absolute owner thereof for all purposes, and do, at the Collateral Agent's
option and the Grantor's expense, at any time, or from time to time, all
acts and things which the Collateral Agent deems necessary to protect,
preserve or realize upon the Collateral and the Collateral Agent's and the
other Secured Parties' security interests therein and to effect the intent
of this Agreement, all as fully and effectively as the Grantor might do.
Anything in this Section 6.1(a) to the contrary notwithstanding, the Collateral
Agent agrees that it will not exercise any rights under the power of attorney
provided for in this
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<PAGE>
Section 6.1(a) unless an Event of Default under the Credit Agreement or the
Reimbursement Agreement shall be continuing.
(b) If the Grantor fails to perform or comply with any of its
agreements contained herein, the Collateral Agent, at its option, but without
any obligation so to do, may perform or comply, or otherwise cause performance
or compliance, with such agreement.
(c) The expenses of the Collateral Agent incurred in
connection with actions undertaken as provided in this Section 6.1, together
with interest thereon at a rate per annum equal to the rate per annum at which
interest would then be payable on past due Loans that are ABR Loans under the
Credit Agreement, from the date of payment by the Collateral Agent to the date
reimbursed by the relevant Grantor, shall be payable by the Grantor to the
Collateral Agent on demand.
(d) The Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. All powers, authorizations and
agencies contained in this Agreement are coupled with an interest and are
irrevocable until this Agreement is terminated and the security interests
created hereby are released.
6.2 Duty of Collateral Agent. The Collateral Agent's sole duty
with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the New York UCC or
otherwise, shall be to deal with it in the same manner as the Collateral Agent
deals with similar property for its own account. Neither the Collateral Agent or
any other Secured Party nor any of their respective officers, directors,
employees or agents shall be liable for failure to demand, collect or realize
upon any of the Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
the Grantor or any other Person or to take any other action whatsoever with
regard to the Collateral or any part thereof. The powers conferred on the
Collateral Agent and the other Secured Parties hereunder are solely to protect
the Collateral Agent's and the other Secured Parties' interests in the
Collateral and shall not impose any duty upon the Collateral Agent or other
Secured Party to exercise any such powers. The Collateral Agent and the other
Secured Parties shall be accountable only for amounts that they actually receive
as a result of the exercise of such powers, and neither they nor any of their
officers, directors, employees or agents shall be responsible to the Grantor for
any act or failure to act hereunder, except for their own gross negligence or
willful misconduct.
6.3 Execution of Financing Statements. Pursuant to Section
9-402 of the New York UCC and any other applicable law, the Grantor authorizes
the Collateral Agent to file or record financing statements and other filing or
recording documents or instruments with respect to the Collateral without the
signature of the Grantor in such form and in such offices as the Collateral
Agent reasonably determines appropriate to perfect the security interests of the
Collateral Agent under this Agreement. A photographic or other reproduction of
this Agreement shall be sufficient as a financing
14
<PAGE>
statement or other filing or recording document or instrument for filing or
recording in any jurisdiction.
6.4 Authority of Collateral Agent. The Grantor acknowledges
that the rights and responsibilities of the Collateral Agent under this
Agreement with respect to any action taken by the Collateral Agent or the
exercise or non-exercise by the Collateral Agent of any option, voting right,
request, judgment or other right or remedy provided for herein or resulting or
arising out of this Agreement shall, as between the Collateral Agent and the
other Secured Parties, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Collateral Agent and the Grantor, the Collateral Agent shall be
conclusively presumed to be acting as agent for the Collateral Agent and the
other Secured Parties with full and valid authority so to act or refrain from
acting, and the Grantor shall not be under any obligation, or entitlement, to
make any inquiry respecting such authority.
SECTION 7. MISCELLANEOUS
7.1 Amendments in Writing. None of the terms or provisions of
this Agreement may be waived, amended, supplemented or otherwise modified except
in accordance with 9.02 of the Credit Agreement.
7.2 Notices. All notices, requests and demands to or upon the
Collateral Agent or the Grantor hereunder shall be effected in the manner
provided for in Section 9.01 of the Credit Agreement or Section 9.01 of the
Reimbursement Agreement; provided, however, that any such notice, request or
demand to or upon the Grantor shall be addressed to the Grantor at its notice
address set forth on Annex 5.
7.3 No Waiver by Course of Conduct; Cumulative Remedies.
Neither the Collateral Agent nor any other Secured Party shall by any act
(except by a written instrument pursuant to Section 7.1), delay, indulgence,
omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any Default or Event of Default under the Credit Agreement
or the Reimbursement Agreement, as applicable. No failure to exercise, nor any
delay in exercising, on the part of the Collateral Agent or any other Secured
Party, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Collateral Agent or any
other Secured Party of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy which the Collateral Agent or
such other Secured Party would otherwise have on any future occasion. The rights
and remedies herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any other rights or remedies provided by
law.
7.4 Enforcement Expenses; Indemnification.
(a) The Grantor agrees to pay or reimburse the Collateral
Agent and each other Secured Party for all its costs and expenses incurred in
enforcing or preserving any
15
<PAGE>
rights under this Agreement and the Agreements, including the reasonable fees
and disbursements of counsel (including the allocated reasonable fees and
expenses of in-house counsel) to each Secured Party.
(b) The Grantor agrees to pay, and to save the Collateral
Agent and each other Secured Party harmless from, any and all liabilities with
respect to, or resulting from any delay in paying, any and all stamp, excise,
sales or other taxes which may be payable or determined to be payable with
respect to any of the Collateral or in connection with any of the transactions
contemplated by this Agreement.
(c) The Grantor agrees to pay, and to save the Collateral
Agent and each other Secured Party and each Affiliate of the Collateral Agent
and any other Secured Party harmless from, any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Agreement to the
extent the Grantor would be required to do so pursuant to the Credit Agreement
or the Reimbursement Agreement, as applicable.
(d) The agreements in this Section 7.4 shall survive repayment
of the Obligations and all other amounts payable under the Agreements.
7.5 Successors and Assigns. This Agreement shall be binding
upon the successors and assigns of the Grantor and shall inure to the benefit of
the Collateral Agent and each other Secured Party and their successors and
assigns; provided, however, that the Grantor may not assign, transfer or
delegate any of its rights or obligations under this Agreement without the prior
written consent of the Collateral Agent.
7.6 Set-Off. The Grantor hereby irrevocably authorizes the
Collateral Agent, each other Secured Party and each of their respective
Affiliates at any time and from time to time, without notice to the Grantor ,
any such notice being expressly waived by the Grantor, to set-off and
appropriate and apply any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by the Collateral
Agent, such other Secured Party or any of their respective Affiliates to or for
the credit or the account of the Grantor, or any part thereof in such amounts as
the Collateral Agent, such other Secured Party or any of their respective
Affiliates, as the case may be, may elect, against and on account of the
obligations and liabilities of the Grantor to the Collateral such Agent such
other Secured Party or any such Affiliate hereunder and claims of every nature
and description of the Collateral Agent, such other Secured Party or any of
their
16
<PAGE>
respective Affiliates, as the case may be, against the Grantor, in any currency,
whether arising hereunder, under the Credit Agreement, the Reimbursement
Agreement or otherwise, as the Collateral Agent, such other Secured Party or any
of their respective Affiliates, as the case may be, may elect, whether or not
the Collateral Agent, such other Secured Party or any of their respective
Affiliates, as the case may be, has made any demand for payment and although
such obligations, liabilities and claims may be contingent or unmatured. The
Collateral Agent, such other Secured Party or any of their respective
Affiliates, as the case may be, shall notify the Grantor promptly of any such
set-off and the application made by the Collateral Agent, such other Secured
Party or any of their respective Affiliates, as the case may be, of the proceeds
thereof, provided, however, that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of the
Collateral Agent, such other Secured Party or any of their respective
Affiliates, as the case may be, under this Section 7.6 are in addition to other
rights and remedies (including other rights of set-off) which the Collateral
Agent, such other Secured Party or any of their respective Affiliates, as the
case may be, may have.
7.7 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
7.8 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
7.9 Section Headings. The Section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
7.10 Integration. This Agreement and the Agreements represent
the agreement of the Grantor, the Collateral Agent and each other Secured Party
with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Collateral Agent or
other Secured Party relative to subject matter hereof and thereof not expressly
set forth or referred to herein or in the Agreements.
7.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
7.12 Submission To Jurisdiction; Waivers. The Grantor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the Credit Agreement and the
Reimbursement Agreement to which it is a party, or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive general
jurisdiction of the Courts of the State of New York, the courts of the United
States of America for the Southern District of New York, and appellate courts
from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter have to the
venue of any
17
<PAGE>
such action or proceeding in any such court or that such action or proceeding
was brought in an inconvenient court and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid; to the
Grantor at its address referred to in Section 7.2 or at such other address of
which the Collateral Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding referred
to in this Section any special, exemplary, punitive or consequential damage.
7.13 Acknowledgements. The Grantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the Credit Agreement and the
Reimbursement Agreement;
(b) neither the Collateral Agent nor any Secured Party has any
fiduciary relationship with or duty to the Grantor arising out of or in
connection with this Agreement or any of the Credit Agreement and the
Reimbursement Agreement, and the relationship between the Grantor, on the one
hand, and the Collateral Agent and Secured Parties, on the other hand, in
connection herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the Credit
Agreement or the Reimbursement Agreement or otherwise exists by virtue of the
transactions contemplated hereby among the Secured Parties or among the Grantor
and the Secured Parties.
7.14 Releases.
(a) At such time as the Loans and the Obligations shall have
been paid in full, the Commitments have been terminated and no Letters of Credit
(as defined in the Reimbursement Agreement) shall be outstanding which are not
cash collateralized or backstopped to the satisfaction of the Secured Parties,
the Collateral shall be released from the Liens created hereby, and this
Agreement and all obligations (other than those expressly stated to survive such
termination) of the Collateral Agent and the Grantor hereunder shall terminate,
all without delivery of any instrument or performance of any act by any party,
and all rights to the Collateral shall revert to the Grantor. At the request and
sole expense of the Grantor following any such termination, the Collateral Agent
shall deliver to the Grantor any Collateral held by the Collateral Agent
hereunder, and execute and deliver to the Grantor such documents as the Grantor
shall reasonably request to evidence such termination.
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<PAGE>
(b) If any of the Collateral shall be sold, transferred or
otherwise disposed of by the Grantor in a transaction permitted by the
Agreements, then the Collateral Agent, at the request and sole expense of the
Grantor, shall execute and deliver to the Grantor all releases or other
documents reasonably necessary or desirable for the release of the Liens created
hereby on such Collateral.
7.15 WAIVERS OF JURY TRIAL. THE SECURED PARTIES AND THE
GRANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR THE CREDIT AGREEMENT OR THE
REIMBURSEMENT AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
19
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has caused this
Pledge and Security Agreement to be duly executed and delivered as of the date
first above written.
CONTIFINANCIAL CORPORATION
By: ________________________________
Name:/s/Alan Fishman
Title: Authorized Signatory
By: ________________________________
Name:/s/Frank Baier
Title: Authorized Signatory
20
<PAGE>
Annex 1 to
Pledge and Security Agreement
UCC FILINGS AND OTHER NECESSARY ACTION
UCC-1 Financing Statements to be filed in the following jurisdictions:
New York State
New York County
A1-1
<PAGE>
Annex 2 to
Pledge and Security Agreement
EXCESS SPREAD RECEIVABLES
- --------------------------------------------------------------------------------
CERTIFICATE PERCENTAGE
INTEREST
- --------------------------------------------------------------------------------
ContiMortgage Home Equity Loan Trust 1997-4, Home Equity Loan 48.18%
Pass-Through Certificate, Interest Only Class C Certificate,
issued pursuant to that certain Pooling and Servicing Agreement dated
as of September 1, 1997 among ContiSecurities Asset Funding Corp., as
Depositor, ContiMortgage Corporation, as Seller and Servicer,
ContiWest Corporation, as Seller, and Manufacturers and Traders Trust
Company, as Trustee, as the same may be amended from time to time.
- --------------------------------------------------------------------------------
ContiMortgage Home Equity Loan Trust 1997-4, Home Equity Loan 14.6771%
Pass-Through Certificate, Interest Only Class C Certificate,
issued pursuant to that certain Pooling and Servicing Agreement dated
as of September 1, 1997 among ContiSecurities Asset Funding Corp., as
Depositor, ContiMortgage Corporation, as Seller and Servicer,
ContiWest Corporation, as Seller, and Manufacturers and Traders Trust
Company, as Trustee, as the same may be amended from time to time.
- --------------------------------------------------------------------------------
ContiMortgage Home Equity Loan Trust 1998-1, Home Equity Loan 48.18%*
Pass-Through Certificate, Interest Only Class C Certificate,
issued pursuant to that certain Pooling and Servicing Agreement dated
as of March 1, 1998 among ContiSecurities Asset Funding Corp., as
Depositor, ContiMortgage Corporation, as Seller and Servicer,
ContiWest Corporation, as Seller, and Manufacturers and Traders Trust
Company, as Trustee, as the same may be amended from time to time.
- --------------------------------------------------------------------------------
ContiMortgage Home Equity Loan Trust 1998-1, Home Equity Loan 51.82%*
Pass-Through Certificate, Interest Only Class C Certificate,
issued pursuant to that certain Pooling and Servicing Agreement dated
as of March 1, 1998 among ContiSecurities Asset Funding Corp., as
Depositor, ContiMortgage Corporation, as Seller and Servicer,
ContiWest Corporation, as Seller, and Manufacturers and Traders Trust
Company, as Trustee, as the same may be amended from time to time.
- --------------------------------------------------------------------------------
ContiMortgage Home Equity Loan Trust 1999-1, Home Equity Loan 100%
Pass-Through Certificate, Interest Only Class C Certificate,
issued pursuant to that certain Pooling and Servicing Agreement dated
as of March 1, 1999 among ContiSecurities Asset Funding Corp., as
Depositor, ContiMortgage Corporation, as Seller and Servicer,
ContiWest Corporation, as Seller, and Manufacturers and Traders Trust
Company, as Trustee, as the same may be amended from time to time.
- --------------------------------------------------------------------------------
ContiMortgage Home Equity Loan Trust 1999-2, Home Equity Loan 100%
Pass-Through Certificate, Interest Only Class C Certificate,
issued pursuant to that certain Pooling and Servicing Agreement dated
as of March 1, 1999 among ContiSecurities Asset Funding Corp., as
Depositor, ContiMortgage Corporation, as Seller and Servicer,
ContiWest Corporation, as Seller, and Manufacturers and Traders Trust
Company, as Trustee, as the same may be amended from time to time.
- --------------------------------------------------------------------------------
ContiMortgage Home Equity Loan Trust 1999-3, Home Equity Loan 100%
Pass-Through Certificate, Interest Only Class C Certificate, issued
pursuant to that certain Pooling and Servicing Agreement dated as of
June 1, 1999 among ContiSecurities Asset Funding Corp., as Depositor,
ContiMortgage Corporation, as Seller and Servicer, ContiWest
Corporation, as Seller, Norwest Bank Minnesota, National Association,
as Master Servicer, and Manufacturers and Traders Trust Company, as
Trustee, as the same may be amended from time to time.
- --------------------------------------------------------------------------------
- --------
* The percentage interests of these two certificates represent 100% of the Class
C certificates for the 1998-1 series. The total percentage interest being
pledged to the Secured Parties is 86.602%. The remaining 13.398% shall be
retained by the Grantor.
<PAGE>
Annex 3 to
Pledge and Security Agreement
Acknowledgment Of Pledge
The undersigned hereby acknowledges receipt of a copy of the
Pledge and Security Agreement, dated as of August 19, 1999 (the "Agreement"),
made by the Grantors party thereto in favor of Credit Suisse First Boston, New
York Branch as Collateral Agent. The undersigned agrees for the benefit of the
Secured Parties as follows:
1. The undersigned will be bound by the terms of the Agreement
and will comply with such terms insofar as such terms are applicable to the
undersigned.
2. The terms of Section 5.2(b) of the Agreement shall apply to
it, mutatis mutandis, with respect to all actions that may be required of it
pursuant to Section 5.2(b) of the Agreement.
[NAME OF ISSUER]
By:
Name:
Title:
Address for Notices
<PAGE>
Annex 4 to
Pledge and Security Agreement
CHIEF EXECUTIVE OFFICE AND LOCATION OF RECORDS
ContiFinancial Corporation
277 Park Avenue
New York, New York 10172
<PAGE>
Annex 5 to
Pledge and Security Agreement
-----------------------------
ADDRESS FOR NOTICES
ContiFinancial Corporation
277 Park Avenue
New York, New York 10172
Attention: Allan Fishman
Fax #: (212) 207-2868
with a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019-6092
Attention: Rich Miller
Fax #: (212) 259-6333
MASTER REPURCHASE AGREEMENT GOVERNING
PURCHASES AND SALES OF ASSETS
Dated as of August 9, 1999
Between:
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC., as Buyer
and
CONTIFINANCIAL CORPORATION, as Seller
1. APPLICABILITY
From time to time, the parties hereto shall, subject to the terms of
this Agreement, enter into transactions in which ContiFinancial Corporation
("Seller"), a Delaware corporation, agrees to transfer to Greenwich Capital
Financial Products, Inc. ("Buyer"), a Delaware corporation, certain Assets
against the transfer of funds by Buyer, with a simultaneous agreement by Buyer
to transfer to Seller such Assets at a date certain not later than thirty (30)
days after the date of transfer, as specified in the Purchase Request, against
the transfer of funds by Seller. Each such transaction shall be referred to
herein as a "Transaction" and shall be governed by this Agreement, unless
otherwise agreed in writing. Buyer shall, at the request of the Seller in
accordance with the provisions set forth in this Agreement, upon the completion
of a Transaction and receipt or giving, as applicable, of a Purchase Request,
enter additional Transactions with respect to the Assets, provided that the
duration of the Transactions shall not extend beyond the Final Repurchase Date
and the terms and conditions in this Agreement shall otherwise be satisfied.
2. DEFINITIONS
"Accepted Servicing Practices" means, with respect to any Purchased
Asset, those loan servicing practices set forth in the Interim Servicing
Addendum attached hereto as Exhibit XI, which Interim Servicing Addendum is
incorporated herein by reference.
"Acquisition Agreement" means, with respect to any Eligible Asset
and Fallout Asset, the document governing the acquisition of such Asset by the
Seller.
"Act of Insolvency" means, with respect to Seller and its Material
Subsidiaries, (i) the filing of a petition, commencing, or authorizing the
commencement of any case or proceeding under any bankruptcy, insolvency,
reorganization, liquidation, dissolution or similar law relating to the
protection of creditors of the Seller or any of its Material Subsidiaries, or
suffering any such petition or proceeding to be commenced by another; provided
that any actively disputed petition or proceeding commenced by another shall not
constitute an Act of Insolvency unless such petition or proceeding is not
dismissed within 30 days of its
<PAGE>
commencement, (ii) seeking the appointment of a receiver, trustee, custodian or
similar official for Seller or a Material Subsidiary or any substantial part of
the property of either, (iii) the appointment of a receiver, conservator, or
manager for Seller or a Material Subsidiary or any substantial part of the
property of either by any governmental agency or authority having the
jurisdiction to do so, (iv) the making or offering by Seller or a Material
Subsidiary of a composition with its respective creditors or a general
assignment for the benefit of creditors, (v) the admission in writing by Seller
or a Material Subsidiary of such party's inability to pay its ordinary course
trade debts as they become due or mature, or (vi) any Governmental Authority or
agency or any person, agency or entity acting or purporting to act under
Governmental Authority shall have taken any action to condemn, seize or
appropriate, or to assume custody or control of, all or any substantial part of
the property of Seller or a Material Subsidiary, or shall have taken any action
to displace the management of such party or to curtail its authority in the
conduct of the business of such party.
"Additional Eligible Asset" means an Eligible Asset provided by
Seller to Buyer or its designee pursuant to Section 4(a).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control" (together with
the correlative meanings of "controlled by" and "under common control with")
means possession, directly or indirectly, of the power (a) to vote 10% or more
of the securities (on a fully diluted basis) having ordinary voting power for
the directors or managing general partners (or their equivalent) of such Person,
or (b) to direct or cause the direction of the management or policies of such
Person, whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise.
"Affiliate Transaction" shall have the meaning assigned thereto in
Section 11(h) hereto.
"Agreement" means this Master Repurchase Agreement Governing
Purchases and Sales of Assets, as amended, supplemented or otherwise modified
from time to time.
"American General" means American General Finance, Inc., a Delaware
corporation.
"American General Loan" means a Mortgage Loan the origination of
which has been financed by American General pursuant to a certain warehouse
financing agreement or repurchase agreement by and between the Seller (or one of
its Affiliates) and American General (or one of its Affiliates).
"Appraised Value" means the reconciled value of the Mortgaged
Property as set forth in the appraisal prepared in accordance with the
Underwriting Guidelines made in connection with the origination of the related
Eligible Asset.
"Asset" means an Eligible Asset, a Fallout Asset or any other asset
as mutually agreed upon by Buyer and Seller.
- 2 -
<PAGE>
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) by
the Seller or any Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (i) any shares of Capital Stock of a
Subsidiary (other than directors' qualifying shares or shares required by
applicable law to be held by a Person other than the Seller or a Subsidiary),
(ii) all or substantially all the assets of any division or line of business of
the Seller or any Subsidiary, (iii) any other assets of the Seller or any
Subsidiary outside of the ordinary course of business of the Seller or such
Subsidiary, (iv) any Investment in a Strategic Alliance Client or (v) any Excess
Spread Receivables (other than in the case of (i), (ii), (iii), (iv) and (v)
above, (x) a disposition by a Subsidiary to the Seller or the Seller or a
Subsidiary to a Subsidiary, (y) a disposition that constitutes a Restricted
Payment permitted hereunder, or (z) a disposition of assets (including related
assets) for an aggregate consideration of $1.0 million or less).
"Asset Documents" means the documents comprising the Asset File.
"Asset File" means the documents and information required to be
delivered to the Custodian by the Seller for each Eligible Asset and Fallout
Asset, pursuant to the related Custodial Agreement, together with any additional
documents and information required to be delivered to Buyer or its designee
(including the Custodian).
"Asset Representations" means the Mortgage Loan Representations set
forth in Exhibit V hereto, and any other representations required for additional
Eligible Assets or Fallout Assets that may be accepted by Buyer from time to
time.
"Asset Schedule" means the schedule attached hereto as Exhibit I.
"Asset Tape" means a computer-readable magnetic transmission
containing the information with respect to each Asset, to be delivered by the
Seller to the Buyer pursuant to Section 3(b)(v) hereof and with the fields
indicated on Exhibit X attached hereto.
"Assignment and Conveyance" shall mean that certain agreement in the
form of Exhibit VII attached hereto by and between the Seller, the Buyer and the
Servicer, pursuant to which the Seller shall assign and convey to the Buyer all
of its right title and interest in and to the applicable Acquisition Agreement
and the applicable Servicing Agreement to the extent related to the Purchased
Assets hereunder.
"Assignment of Mortgage" means, with respect to any Mortgage, an
assignment of the Mortgage, notice of transfer or equivalent instrument in
recordable form, sufficient under the laws of the jurisdiction wherein the
related property is located to reflect the assignment and pledge of the
Mortgage.
"Available Amount" shall mean the Committed Amount minus the sum of
the aggregate Purchase Price with respect to Transactions outstanding hereunder.
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<PAGE>
"Board of Directors" means the Board of Directors of the Seller or
any committee thereof duly authorized to act on behalf of such Board of
Directors.
"Breach", as that term relates to any representation, warranty or
covenant in this Agreement, means that such representation or warranty was
incorrect or untrue in any material respect when made or repeated or deemed to
have been made or repeated, or Seller has failed to comply with a covenant in
any material respect.
"Breakage Costs" has the meaning specified in Section 3(f)(iii).
"Business Day" means any day other than (i) a Saturday or Sunday or
(ii) a day on which the New York Stock Exchange, the Federal Reserve Bank of New
York or the Custodian is authorized or obligated by law or executive order to be
closed or (iii) a day on which the Buyer is closed for business.
"Buyer" means Greenwich Capital Financial Products, Inc.
"Buyer's Account" has the meaning specified in Section 25(f).
"Capital Stock" of any Person means any and all shares, interests,
share capital, rights to subscribe for or purchase, warrants, options,
participations, or other equivalents of or interests or membership interests in
(however designated) equity of such Person, including any Preferred Stock, any
limited or general partnership interest and any limited liability company
membership interest (but excluding any debt securities convertible into such
equity), any rights to subscribe for or purchase any thereof.
"Cash Equivalents" means (a) securities with maturities of 90 days
or less from the date of acquisition issued or fully guaranteed or insured by
the United States Government or any agency thereof, (b) certificates of deposit
and eurodollar time deposits with maturities of 90 days or less from the date of
acquisition and overnight bank deposits of any commercial bank having capital
and surplus in excess of $500,000,000, (c) repurchase obligations of any
commercial bank satisfying the requirements of clause (b) of this definition,
having a term of not more than seven days with respect to securities issued or
fully guaranteed or insured by the United States Government, (d) commercial
paper of a domestic issuer rated at least A-1 or the equivalent thereof by
Standard and Poor's Ratings Group ("S&P") or P-1 or the equivalent thereof by
Moody's Investors Service, Inc. ("Moody's") and in either case maturing within
90 days after the day of acquisition, (e) securities with maturities of 90 days
or less from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States, by any political subdivision or
taxing authority of any such state, commonwealth or territory or by any foreign
government, the securities of which state, commonwealth, territory, political
subdivision, taxing authority or foreign government (as the case may be) are
rated at least A by S&P or A by Moody's, (f) securities with maturities of 90
days or less from the date of acquisition backed by standby letters of credit
issued by any commercial bank satisfying the requirements of clause (b) of this
definition or (g) shares of money market mutual or similar funds which invest
exclusively in assets satisfying the requirements of clauses (a) through (f) of
this definition.
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<PAGE>
"Change in Control" means the occurrence of any of the following
events:
(i) Any "person" (as such term is used in Section 13(d) and 14(d) of
the Exchange Act), other than any Permitted Holder, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that such person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 35% of the total voting power
of the Voting Stock of such Person; provided, however, that the Permitted
Holders beneficially own (as defined in Rule 13d-3 and Rule 13d-5 under
the Exchange Act), directly or indirectly, in the aggregate a lesser
percentage of the total voting power of the Voting Stock of the Seller or
any Material Subsidiary than such other person and do not have the right
or ability by voting power, contract or otherwise to elect or designate
for election a majority of the Board of Directors (for the purposes of
this clause (i), such other person shall be deemed to beneficially own any
Voting Stock of a corporation held by another corporation (a "parent
corporation"), if such other person is the beneficial owner (as defined
above for such person), directly or indirectly, of more than 35% of the
voting power of the Voting Stock of such parent corporation and the
Permitted Holders beneficially own (as defined above for the Permitted
Holders), directly or indirectly, in the aggregate a lesser percentage of
the voting power of the Voting Stock of such parent corporation and do not
have the right or ability by voting power, contract or otherwise to elect
or designate for election a majority of the board of directors of such
parent corporation);
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors (together
with any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Seller or any Material
Subsidiary was approved by a vote of 66-2/3% of the directors of the
Seller or any Material Subsidiary then still in office who were either
directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors then in office; or
(iii) the merger or consolidation of the Seller or any Material
Subsidiary with or into another Person or the merger of another Person
with or into the Seller or any Material Subsidiary, as the case may be, or
the liquidation, wind-up or dissolution of the Seller or any Material
Subsidiary, as the case may be, or the sale of all or substantially all
the assets of the Seller or any Material Subsidiary, as the case may be,
to another Person (other than a Person that is controlled by the Permitted
Holders), and, in the case of any such merger or consolidation, the
securities of the Seller or any Material Subsidiary, as the case may be,
that are outstanding immediately prior to such transaction and which
represent 100% of the aggregate voting power of the Voting Stock of the
Seller or any Material Subsidiary, as the case may be, are changed into or
exchanged for cash, securities or property, unless pursuant to such
transaction such securities are changed into or exchanged for, in addition
to any other consideration, securities of the surviving
- 5 -
<PAGE>
corporation that represent immediately after such transaction, at least a
majority of the aggregate voting power of the Voting Stock of the surviving
corporation; provided, however, that the sale by the Seller or its
Subsidiaries from time to time solely of Receivables to a trust for the
purpose solely of effecting one or more securitizations shall not be
treated hereunder as a sale of all or substantially all the assets of the
Seller.
Notwithstanding the foregoing, if at any time (i) Buyer shall have
no obligation to purchase Assets hereunder that were previously financed
by ContiTrade Services L.L.C. or California Lending Group, Inc. and (ii)
no Purchased Assets subject to Transactions constitute Assets previously
financed by ContiTrade Services L.L.C. or California Lending Group, Inc.,
then ContiTrade Services L.L.C. or California Lending Group, Inc. shall
not be considered Material Subsidiaries for purposes of the definition of
the term "Change of Control".
Notwithstanding anything contained in this Agreement to the
contrary, a Change of Control accompanied by an equity infusion in the
Seller of not less than $100,000,000 shall not constitute an Event of
Default under this Agreement for 60 days after the date of such equity
infusion, unless an additional Change of Control shall occur during such
60 day period.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Collateral" has the meaning specified in Section 6.
"Collateral Amount" means, with respect to any Transaction, the
amount obtained by application of the Collateral Amount Percentage to the Market
Value of the Purchased Assets for such Transaction.
"Collateral Amount Percentage" means (i) with respect to each
Eligible Asset (other than Collateralized Notes) (A) for the period from the
date of this Agreement until August 23, 1999, the percentage specified by the
Buyer in its sole discretion and (B) from and after August 23, 1999, 95%, (ii)
with respect to each Fallout Asset, the percentage applicable to such Asset that
is specified in Schedule 4 attached hereto, (iii) with respect to Collateralized
Notes, the percentage specified by the Buyer, if Buyer approves such Assets for
purchase hereunder, and (iv) with respect to all other Assets, the percentage
specified in writing by Buyer, if Buyer approves such Assets for purchase
hereunder; provided, however, that (A) each of the following categories of
Assets set forth below as a percentage of all Assets subject to Transactions
hereunder shall not exceed the applicable sublimits set forth below and (B):
(1) On and after August 23, 1999, Collateral Amount
Percentage shall be zero with respect to all Assets which in the
aggregate exceed the following applicable sublimits based on the
aggregate Collateral Amount of all Assets subject to Transactions
hereunder:
Fixed Rate Loan Adjustable Rate Loan
Sublimit Sublimit
-------- --------
- 6 -
<PAGE>
<TABLE>
<CAPTION>
LTV:
<S> <C> <C> <C>
>85% 20% until August 31, 1999; 15% until August 31,1999;
15% thereafter, provided Buyer may 10% thereafter, provided Buyer may
increase the percentage to 20% increase the percentage to 15%
following Seller's development of following Seller's development of
a High LTV/FICO program a High LTV/FICO program
satisfactory to Buyer satisfactory to Buyer
>90% 1% 0%
>100% 0% 0%
</TABLE>
(2) On and after August 23, 1999, Collateral Amount
Percentage shall be zero with respect to all Assets that are Second
Lien Mortgage Loans which in the aggregate exceed 10% of the aggregate
Collateral Amount of all such Assets subject to Transactions hereunder.
(3) On and after August 23, 1999, Collateral Amount
Percentage shall be zero with respect to all Assets that are Second
Lien Mortgage Loans which in the aggregate exceed the following
applicable sublimits based on the aggregate Collateral Amount of all
such Assets subject to Transactions hereunder:
CLTV Sublimit
>85% 25%
>90% 1%
>95% 0%
(4) On and after August 23, 1999, Collateral Amount
Percentage shall be zero with respect to all Assets that have FICO
scores less than 550 (to the extent a FICO score is available for such
Asset) which in the aggregate exceed the following applicable sublimits
based on the aggregate Collateral Amount of all such Assets subject to
Transactions hereunder:
Fixed Rate Loan Adjustable Rate Loan
Sublimit Sublimit
--------------------------- --------------------------------
10% until August 31, 1999; 10% until August 31, 1999; 5%
5% thereafter thereafter
(5) Collateral Amount Percentage shall be zero with
respect to all Assets that constitute American General Loans which in
the aggregate exceed 10% of the aggregate Collateral Amount of all
Assets subject to Transactions hereunder.
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<PAGE>
(6) On and after August 23, 1999, Collateral Amount
Percentage shall be zero with respect to all Assets that constitute
Section 32 Mortgage Loans which in the aggregate exceed 10% of the
aggregate Collateral Amount of all Assets subject to Transactions
hereunder.
(7) Collateral Amount Percentage shall be zero with
respect to all Empire Collateralized Notes (I) that exceed the
applicable Collateralized Note Sublimit or (II) which have not been
repurchased by Seller hereunder by the earlier of (x) 45 days after the
applicable Purchase Date and (y) November 3, 1999.
(8) Collateral Amount Percentage shall be zero with
respect to all Collateralized Notes that exceed the applicable
Collateralized Note Sublimit.
(9) Collateral Amount Percentage shall be zero (I)
with respect to all Eligible Assets that cease to qualify as either
Eligible Assets or Fallout Assets and (II) with respect to all Fallout
Assets that cease to qualify as Fallout Assets or exceed the Fallout
Loan Sublimit.
"Collateral Deficit" has the meaning specified in Section 4(a).
"Collateralized Note" means a promissory note made in favor of the
Seller, or a Subsidiary of Seller and endorsed by such subsidiary to the Seller,
and secured by pools of Underlying Mortgage Loans; provided, however, that the
obligor under such Collateralized Note has pledged and hypothecated to the
Seller, and has granted a continuing lien and first priority security interest
in favor of the Seller in collateral compromised of Eligible Assets; and
provided further, however, that the Seller has pledged such collateral to the
Buyer, has granted to Buyer a continuing lien on and first priority security
interest in such collateral, as of the related Purchase Date, and has delivered
to Buyer each of the documents set forth in Section 3(b)(xi), in form and
substance satisfactory to Buyer and its counsel.
"Collateralized Note Sublimit" means (i) with respect to all Empire
Collateralized Notes, $25,000,000, and (ii) with respect to all Collaterized
Notes other than Empire Collateralized Notes, $50,000,000.
"Combined LTV" or "CLTV" shall mean with respect to any Mortgage
Loan, the ratio of (a) the Par Amount as of the related date of origination of
such Second Lien Mortgage Loan of (i) the Second Lien Mortgage Loan plus (ii)
the mortgage loan constituting the first lien (if any) to (b) the Appraised
Value of the Mortgaged Property.
"Committed Amount" means $200,000,000 (provided that during the
Overadvance Period the amount shall be $250,000,000).
"Commitment Fee" means the commitment fee specified in the Master
Facilities Agreement.
- 8 -
<PAGE>
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with Seller within the meaning of
Section 4001 of ERISA or is part of a group which includes Seller and which is
treated as a single employer under Section 414 of the Code.
"Contractual Obligation" means as to any Person, any provision of
any agreement, instrument or other undertaking to which such Person is a party
or by which it or any of its property is bound or any provision of any security
issued by such Person.
"Custodial Agreement" means that certain custodial agreement, dated
as of August 9, 1999, among the Custodian, Buyer and Seller, as the same shall
be modified and supplemented and in effect from time to time.
"Custodian" means Manufacturers and Traders Trust Company, as
custodian under the Custodial Agreement, and its successors and permitted
assigns thereunder.
"Default" means an event that with notice or lapse of time or both
would become an Event of Default.
"Delinquent" means, with respect to any Asset, the period of time
from the date on which an Obligor fails to pay an obligation under the terms of
such Asset (without regard to any applicable grace periods) to the date on which
such payment is made.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any event
(i) matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in each case in whole or in part on or prior to the first anniversary of the
Stated Maturity of the Securities; provided, however, that any Capital Stock
that would not constitute Disqualified Stock but for provisions thereof giving
holders thereof the right to require such Person to repurchase or redeem such
Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to the first anniversary of the Stated Maturity of the
Securities shall not constitute Disqualified Stock if the "asset sale" or
"change of control" provisions applicable to such Capital Stock are not more
favorable to the holders of such Capital Stock that the provisions of the
Indenture.
"Eligible Asset" means a Mortgage Loan secured by a first or
second Mortgage lien on a one-to-four family residential Mortgaged Property or
Mixed Use Mortgaged Property as to which the Mortgage Loan Representations are
true and correct, and (i) which has not been subject to Transactions for a
period in excess of 90 days from the date on which it is first made subject to a
Transaction, (ii) which is not 29 days or more Delinquent, (iii) which was
originated not more than (A) sixty (60) days prior to the date the Mortgage Loan
is first subject to a Transaction provided such Mortgage Loan was originated by
the Seller or a Qualified Originator affiliated with the Seller or (B)
seventy-five (75) days prior to the date the Mortgage Loan is first subject to a
Transaction provided such Mortgage Loan was originated by a Qualified Originator
- 9 -
<PAGE>
not affiliated with the Seller, (iv) which has not been released from the
possession of the Custodian to the Seller or its designee in excess of the time
permitted by the Custodial Agreement, (v) which is not subject to a Material
Exception (as defined in the Custodial Agreement), (vi) which complies in all
material respects with the Underwriting Guidelines, (vii) which has been
originated by the Seller or a Qualified Originator, (viii) which has not been
subject to any prior financing or previously purchased by any Person other than
the Buyer pursuant to this Agreement or the Seller pursuant to an Acquisition
Agreement, except for American General Loans, and (ix) which, in the case of a
Second Lien Mortgage Loan, does not bear interest at an adjustable rate.
Eligible Asset shall also mean certain Collateralized Notes which Buyer has
approved for purchase hereunder.
"Empire Collateralized Note" means that certain Collateralized Note
secured by the Collateral defined in the Amended and Restated Interim Warehouse
and Security Agreement, dated as of March 29, 1995, among ContiTrade Services
Corporation (the "Lender") and Empire Funding Corp. (the "Borrower"), amending
and restating the Interim Warehouse and Security Agreement dated as of October
15, 1993, as amended by an agreement dated as of August 18, 1994 (the "Original
Warehouse Agreement") and conforming to the representations and warranties set
forth in Exhibit V(A) hereto.
"Empire Collateralized Note Representations" means the
representations and warranties set forth in Exhibit V(A) hereto.
"Engagement Letter" means that certain engagement letter, dated the
date of this Agreement, among Seller, ContiMortgage Corporation, ContiWest
Corporation, Greenwich Capital Markets, Inc. and Buyer relating to, among other
things, the securitization, after the date hereof, of certain mortgage loans
originated or purchased by Seller and its Affiliates.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA Affiliate" means any corporation or trade or business that is
a member of any group of organizations (i) described in Section 414(b) or (c) of
the Code of which the Seller is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which the Seller
is a member.
"Event of Default" has the meaning specified in Section 13.
"Exception" has the meaning specified in the Custodial Agreement.
"Excess Spread" means, over the life of a "pool" of Receivables that
have been sold by a Person to a trust or other Person in a securitization or
sale, the rights retained by such Person or its Subsidiaries at or subsequent to
the closing of such securitization or sale to receive cash flows attributable to
such "pool".
- 10 -
<PAGE>
"Excess Spread Receivable" of a Person means the contractual or
certificated right to Excess Spread capitalized on such Person's consolidated
balance sheet (the amount of which shall be the present value of the Excess
Spread, calculated in accordance with GAAP).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Existing Repo Facility" means the Master Repurchase Agreement
Governing Purchases and Sales of Eligible Assets, dated as of December 21, 1998,
between Seller and Buyer, as amended, supplemented or otherwise modified from
time to time.
"Exit Fee" means, (i) with respect to each Purchased Asset
repurchased by the Seller and sold by the Seller to a third party without the
Buyer's guaranty of or assumption of responsibility for the representations and
warranties relating to such Asset, an amount equal to 0.25% of the Par Amount of
such Asset on the applicable Repurchase Date, and (ii) with respect to each
Purchased Asset repurchased by the Seller and sold by the Seller to a third
party with the Buyer's guaranty of or assumption of responsibility for the
representations and warranties relating to such Asset, an amount equal to 1% of
the Par Amount of such Asset on the applicable Repurchase Date.
"Facility Documents" has the meaning specified in Section 3(a).
"Fallout Asset" means certain Mortgage Loans each of which (a)(i)
does not qualify as an Eligible Asset on the applicable Purchase Date or (ii)
qualifies as an Eligible Asset on the applicable Purchase Date but thereafter
ceases to be an Eligible Asset and (b) falls into one of the categories listed
on Schedule 4 hereto.
"Fallout Asset Sublimit" means $50,000,000.
"Federal Funds Rate" means, for any day, the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the Buyer from three
federal funds brokers of recognized standing selected by it.
"Final Repurchase Date" means the earlier of (i) March 31, 2000 and
(ii) the date of the occurrence of an uncured Event of Default.
"First Lien Mortgage Loan" means a Mortgage Loan secured by the lien
on the Mortgaged Property, subject to no prior liens on such Mortgaged Property.
"GAAP" means generally accepted accounting principles in effect in
the United States as amended from time to time.
"Governmental Authority" means any nation or government, any state,
agency, instrumentality or other political subdivision thereof, any entity
exercising executive, legislative,
- 11 -
<PAGE>
judicial, regulatory or administrative functions of or pertaining to government
and any court or arbitrator having jurisdiction over the Seller, any of its
Subsidiaries or any of its properties.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any Person and any obligation, direct or indirect, contingent or otherwise,
of such Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation of such Person
(whether arising by virtue of partnership arrangements, or by agreements to
keep-well, to purchase assets, goods, securities or services, to take-or-pay or
to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of such Indebtedness
or other obligation of the payment thereof or to protect such obligee against
loss in respect thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"HOEPA" means the Home Ownership and Equity Protection Act of 1994.
"Income" means, with respect to any Asset at any time, any principal
thereof then payable and all interest or dividends or other distributions
payable thereon less any related servicing fee(s) charged by the Servicer, as
approved by Buyer.
"Indebtedness" shall mean, of any Person at any date, without
duplication, (a) all indebtedness of such Person for borrowed money (whether by
loan or the issuance and sale of debt securities) or for the deferred purchase
price of property or services (other than current trade liabilities incurred in
the ordinary course of business and payable in accordance with customary
practices), (b) any other indebtedness of such Person which is evidenced by a
note, bond, debenture or similar instrument, (c) all obligations of such Person
under financing leases, (d) all obligations of such Person in respect of letters
of credit, acceptances or similar instruments issued or created for the account
of such Person and (e) all liabilities secured by any lien on any property owned
by such Person even though such Person has not assumed or otherwise become
liable for the payment thereof.
"Indenture" means the Indenture, dated as of August 15, 1996 between
Seller and Chase Manhattan Bank.
"Interest Period" means, with respect to any Transaction, (i)
initially, the period commencing on the Purchase Date and ending on the day
immediately preceding the next Payment Date (the "Interest Reset Date"), and
(ii) thereafter, each period commencing on the Payment Date of a month and
ending on the calendar day prior to the Payment Date of the next succeeding
month. Notwithstanding the foregoing: (A) no Interest Period may end after the
Final Repurchase Date; and (B) each Interest Period that would otherwise end on
a day that is not a Business Day shall end on the next succeeding Business Day.
"Interest Reset Date" has the meaning set forth in the definition of
Interest Period.
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<PAGE>
"Interim Servicer" means ContiMortgage Corporation in its capacity
as the party obligated to maintain or cause the Purchased Assets to be serviced
in accordance with Accepted Serving Practices during the Interim Servicing
Period in accordance with Section 25.
"Interim Servicing Period" means, with respect to any Purchased
Asset, the period commencing on the related Purchase Date and ending on the
earlier to occur of (i) the successful completion of the transfer to the
servicer of servicing of such Purchased Asset, including all applicable system
transfers, document transfers and mailing of required notices, and (ii) 30 days
after such Purchase Date; provided, that Buyer shall have the option to extend
the Interim Servicing Period for one or more 30-day periods upon written notice
to the Interim Servicer. The Buyer and Seller contemplate that such transfer of
servicing will be completed within 30 days after the Purchase Date of each
Purchased Asset.
"Investment" in any Person means any direct or indirect advance,
loan (other than advances to customers in the ordinary course of business that
are recorded as trade accounts on the balance sheet of the lender) or other
extensions of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person.
"Investment Company Act" means the Investment Company Act of 1940,
as amended.
"LIBO Base Rate" means for any Transaction, with respect to each day
during each Interest Period pertaining to such Transaction, the rate per annum
equal to the rate appearing at page 3750 of the Telerate Screen as one-month
"LIBOR" on the first day of such Interest Period, and if such rate shall not be
so quoted, the rate equal to the average of the rates per annum at which
deposits in dollars are offered for the relevant Interest Period to major banks
in the London interbank market by any three major banks, and if such rate is
unascertainable the rate per annum at which the Buyer is offered dollar deposits
at or about 11:00 a.m., New York City time, on such date by prime banks in the
interbank eurodollar market where the eurodollar and foreign currency exchange
operations in respect of its Transactions are then being conducted for delivery
on such day for a period of one month, and in an amount comparable to the amount
of the Transactions to be outstanding on such day.
"LIBO Rate" means with respect to each day during each Interest
Period pertaining to a Transaction, a rate per annum determined by the Buyer in
accordance with the following formula (rounded upwards to the nearest 1/100th of
one percent), which rate as determined by the Buyer shall be conclusive, absent
manifest error by the Buyer:
LIBO Base Rate
--------------------------------
1.00 - LIBO Reserve Requirements
"LIBO Reserve Requirements" means for any Interest Period for any
Transaction, the aggregate (without duplication) of the rates (expressed as a
decimal fraction) of reserve
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requirements in effect on such day or during such Interest Period, as applicable
(including, without limitation, basic, supplemental, marginal and emergency
reserves under any regulations of the Board of Governors of the Federal Reserve
System or other Governmental Authority having jurisdiction with respect
thereto), dealing with reserve requirements prescribed for eurocurrency funding
(currently referred to as "Eurocurrency Liabilities" in Regulation D of such
Board) maintained by a member bank of such Governmental Authority. As of the
date hereof, such reserve requirement is equal to zero.
"Lien" means any mortgage, lien, pledge, charge, security interest
or similar encumbrance.
"LTV" means with respect to any Asset, the ratio of (a) the Par
Amount of the Asset as of the date of origination (unless otherwise indicated)
to (b) the Appraised Value of the Mortgaged Property or if the loan was made in
connection with the purchase of the related Mortgaged Property, the lesser of
the Appraised Value and the sales price of such property.
"Losses" means, with respect to any Person (and its officers,
directors, agents and employees), any and all liabilities, losses, claims,
damages, judgments, costs and expenses of any kind (including reasonable
attorneys' fees and disbursements) which may be imposed on, incurred by, or
asserted against such Person (and its officers, directors, agents and
employees), relating to or arising out of, this Agreement, any other document or
agreement entered into between or among any of the parties to this Agreement in
connection herewith or any transaction contemplated hereby or thereby, and costs
and expenses incurred in connection with the enforcement or the preservation of
rights under this Agreement, or any amendment, supplement or modification of, or
any waiver or consent under or in respect of, this Agreement, any such other
document or agreement entered into between or among any of the parties to this
Agreement in connection herewith or any transaction contemplated hereby or
thereby, including, without limitation, those Losses resulting from a Breach.
Losses must be accounted for, documented in reasonable detail, and presented for
reimbursement.
"Market Value" means the value, determined by Buyer in its sole good
faith discretion, of the Mortgage Loans as if sold in their entirety to a single
third-party purchaser. Seller acknowledges that Buyer's determination of Market
Value is for the limited purpose of determining value hereunder without the
ability to perform customary purchaser's due diligence and is not necessarily
equivalent to a determination of the fair market value of the Mortgage Loans
achieved by obtaining competing bids in an orderly market in which the
originator/servicer is not in default and the bidders have adequate opportunity
to perform customary loan and servicing due diligence.
"Master Facilities Agreement" means that certain master facilities
agreement, dated the date of this Agreement, among Buyer, Greenwich Capital
Markets, Inc., Seller, ContiMortgage Corporation and ContiWest Corporation.
"Material Adverse Effect" means a material adverse effect upon (i)
the business operations, properties or assets of Seller and its Subsidiaries,
taken as a whole, (ii) the ability of Seller to perform its obligations, or of
Buyer to enforce any of its rights or remedies, under this
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Agreement or any of documents to be executed and/or delivered hereunder, (iii)
the validity or enforceability of any of the Facility Documents; or (iv) the
Collateral taken as a whole, in the case of (i), (ii), (iii) and (iv) above (A)
taking into consideration the financial condition of the Seller and its
Subsidiaries as of the date of this Agreement and (B) without taking into
consideration any further deterioration of the financial condition of the Seller
and its Subsidiaries after the date of this Agreement.
"Material Subsidiary" means (a) any Subsidiary identified as a
Material Subsidiary on Schedule 1 attached hereto, and (b) any Subsidiary
created or acquired after the date of this Agreement that is a Significant
Subsidiary of the Seller.
"Maximum Transaction Amount" means, at any time, the sum of (i) the
aggregate Purchase Price for Purchased Assets subject to Transactions and (ii)
the aggregate initial purchase price of mortgage loans subject to the Purchase
Facility.
"Mixed Use Mortgaged Property" means a Mortgage Loan secured by a
Mortgaged Property that is used primarily for residential purposes, but which is
also used for non-residential purposes.
"Monoline Insurance Company" means Ambac Assurance Corporation,
Municipal Bond Investors Assurance Corporation, Financial Guaranty Insurance
Company, Capital Markets Assurance Corporation, Financial Security Assurance
Inc. or GE Mortgage Insurance Company.
"Monthly Payment" means the scheduled monthly payment of principal
and interest on an Asset as adjusted in accordance with changes in the Note
Interest Rate pursuant to the provisions of the Note for an adjustable rate
Asset.
"Moody's" means Moody's Investor Service, Inc.
"Mortgage" means a mortgage, deed of trust, deed to secure debt or
other instrument, creating a valid and enforceable first or second lien (as
identified in the related Asset Tape) on an estate in fee simple in real
property and the improvements thereon, securing a Mortgage Note or similar
evidence of indebtedness (or, with respect to multifamily or commercial Mortgage
Loans, if accepted hereunder, the fee or leasehold estate, in real property
securing the Mortgage Note; and the assignment of rents and leases related
thereto).
"Mortgage Loan" means a mortgage loan which the Custodian has been
instructed to hold for the Buyer pursuant to the Custodial Agreement, and which
Mortgage Loan includes, without limitation, a Mortgage Note and related
Mortgage.
"Mortgage Loan Representations" means the representations set forth
in Exhibit V hereto.
"Mortgage Note" means a note or other evidence of indebtedness of a
Mortgagor secured by a Mortgage.
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<PAGE>
"Mortgaged Property" means the real property securing repayment of
the debt evidenced by a Mortgage Note.
"Mortgagee" means the record holder of a Mortgage Note secured by a
Mortgage.
"Mortgagor" means the obligor on a Mortgage Note and the grantor of
the related Mortgage.
"Multiemployer Plan" means a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Non-Excluded Taxes" has the meaning provided in Section 29(f)
hereof.
"Note" means a Mortgage Note or other promissory note or other
evidence of indebtedness of an Obligor.
"Note Interest Rate" means the annual rate of interest borne on a
Note, which shall be adjusted from time to time with respect to an adjustable
rate Mortgage Loan or other Asset.
"Obligor" means, with respect to an Asset, the mortgagor/borrower
thereunder.
"Officer's Certificate" means, with respect to any Person, a
certificate of its Responsible Officer.
"Overadvance Period" means, with respect to each calendar month, the
last three Business Days of such month and the first two Business Days of the
succeeding month.
"Par Amount" means, in respect of an Asset at any time, the
outstanding principal balance of such Asset at such time.
"Payment Date" means the first day of each calendar month, or if
such day is not a Business Day, the next succeeding ------------ Business Day.
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to subtitle A of Title IV of ERISA.
"Periodic Payment" has the meaning specified in Section 5(b).
"Permitted Holders" means lineal descendants of Jules Fribourg,
including any individual legally adopted; spouses of such descendants; trusts,
the beneficiaries of which are any of the foregoing; partnerships, corporations,
or other entities in which any of the foregoing (individually or collectively)
has a controlling interest; and charitable organizations established by any of
the foregoing.
"Permitted Investment" means an Investment by the Seller or any
Subsidiary in (i) a Subsidiary or a Person that will, upon the making of such
Investment, become a Subsidiary; provided, however, that the primary business of
such Subsidiary is a Related Business; (ii) a
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Strategic Alliance Client to the extent that such Investment consists of
options, warrants or other securities that are convertible or exchangeable for
equity securities of such Strategic Alliance Client and is received by the
Seller or a Subsidiary without the payment of any consideration other than the
concurrent provision by the Seller or such Subsidiary to such Strategic Alliance
Client of financing or asset securitization expertise on terms determined by the
Seller to be fair and reasonable to the Seller or such Subsidiary from a
financial point of view without taking into consideration any value that may
inhere in such option, warrant or convertible or exchangeable security; (iii)
another Person if as a result of such Investment such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all of
its assets to, the Seller or a Subsidiary; provided, however, that such Person's
primary business is a Related Business; (iv) Temporary Cash Investments; (v)
receivables owing to the Seller or any Subsidiary if created or acquired in the
ordinary course of business and payable or dischargeable in accordance with
customary trade terms; (vi) payroll, travel and similar advances to cover
matters that are expected at the time of such advances ultimately to be treated
as expenses for accounting purposes and that are made in the ordinary course of
business; (vii) loans or advances to employees made in the ordinary course of
business consistent with past practices of the Seller or such Subsidiary; (viii)
stock, obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Seller or any Subsidiary or in
satisfaction of judgments; (ix) any Person to the extent such Investment
represents the non-cash portion of the consideration received for an Asset
Disposition as permitted pursuant to the Indenture; (x) Receivables; (xi) a
Strategic Alliance Client to the extent such Investment consists of (A)
Indebtedness of such Strategic Alliance Client that is secured by Receivables
owned by such Strategic Alliance Client in an aggregate principal amount at any
time outstanding not to exceed 100% of the aggregate market value of such
Receivables; provided, however, that such Receivables are eligible to be
characterized under GAAP as held for sale on the balance sheet of such Strategic
Alliance Client and such Indebtedness has not been outstanding in excess of 364
days; and (B) Indebtedness of such Strategic Alliance Client that is secured by
Excess Spread Receivables owned by such Strategic Alliance Client; provided,
however, that such Excess Spread Receivables are attributed solely to one or
more "pools" of Receivables that were securitized in one or more transactions in
which the Seller or its Subsidiaries either acted as underwriters or placement
agent or provided all or a portion of the financing for such "pool" prior to
such securitization; and (xii) Excess Spread Receivables; provided, however,
that such Excess Spread Receivables represent interests in one or more "pools"
of Receivables that were securitized in one or more transactions in which the
Seller or its Subsidiaries acted as sponsor, underwriter or placement agent or
provided all or a portion of the financing for such "pool" prior to such
securitization.
"Person" means any individual, corporation, company, voluntary
association, partnership, joint stock company, joint venture, limited liability
company, trust, unincorporated organization or association, Governmental
Authority, or any other entity of whatever nature.
"Plan" means at a particular time, any employee benefit plan which
is covered by ERISA and in respect of which Seller or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
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"Post-Default Rate" means, in respect of any principal of any
Transaction or any other amount under this Agreement or any other Facility
Document that is not paid when due to the Buyer (whether at stated maturity, by
acceleration, by optional or mandatory prepayment or otherwise), a rate per
annum during the period from and including the due date to but excluding the
date on which such amount is paid in full equal to 2% per annum plus the Pricing
Rate otherwise applicable to such Transaction or other amount.
"Preferred Stock", as applied to the Capital Stock of any Person,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such Person,
over shares of Capital Stock of any other class of such Person.
"Price Differential" means, with respect to any Transaction
hereunder as of any date, the aggregate amount obtained by daily application of
the Pricing Rate for such Transaction to the Purchase Price for such Transaction
on a 360 day per year basis for the actual number of days during the period
commencing on (and including) the Purchase Date for such Transaction and ending
on (but excluding) the Repurchase Date (reduced by any amount of such Price
Differential previously paid by Seller to Buyer with respect to such
Transaction).
"Pricing Rate" means LIBO Rate plus 200 basis points or such rate as
otherwise mutually agreed to by the parties herein.
"Prime Rate" means the rate of interest published by The Wall Street
Journal, northeast edition, as the "prime rate".
"Property" means any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.
"Purchase Date" means the date on which Purchased Assets are
transferred by Seller to Buyer or its designee (including the Custodian) as
specified in the related Purchase Request.
"Purchase Facility" means that certain Master Mortgage Loan Purchase
Facility by and between the Buyer and the Seller dated as of August 9, 1999, as
the same may be amended, supplemented or otherwise modified from time to time.
"Purchase Price" means on each Purchase Date, the price at which
Assets are purchased by Buyer from Seller equal to the lesser of (a) 95% of Par
Amount, or (b) the Collateral Amount.
"Purchase Request" means a written notice to the Buyer of Seller's
request for a purchase of Eligible Assets by the Buyer, in the form of Exhibit I
hereto.
"Purchased Assets" means the Assets sold by Seller to Buyer in a
Transaction and any Substituted Assets.
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"Qualified Insurer" means an insurance company duly qualified as
such under the laws of the states in which the Mortgaged Property is located,
duly authorized and licensed in such states to transact the applicable insurance
business and to write the insurance provided and whose claims paying ability at
the time of determination is (i) rated not less than A3 by Moody's or A- or
better by Standard & Poor's or (ii) if such insurance company is not rated by
either Moody's or Standard & Poor's, rated A VII by Best's Insurance Reports.
"Qualified Originator" means the Seller, ContiMortgage Corporation,
ContiWest Corporation or another originator of Assets acceptable to the Buyer,
in its sole discretion.
"Receivables" means consumer and commercial loans, leases and
receivables purchased or originated by the Seller, any Subsidiary or a Strategic
Alliance Client in the ordinary course of business; provided, however, that for
purposes of determining the amount of a Receivable at any time, such amount
shall be determined in accordance with GAAP, consistently applied, as of the
most recent practicable date.
"Regulations T, U and X" means Regulations T, U and X of the Board
of Governors of the Federal Reserve System (or any successor), as the same may
be modified and supplemented and in effect from time to time.
"Related Business" means any consumer or commercial finance business
or any financial service business.
"Reorganization" means, with respect to any Multiemployer Plan, the
condition that such Plan is in reorganization within the meaning of Section 4241
of ERISA.
"Replacement Assets" has the meaning specified in Section 14(b)(ii).
"Reportable Event" means any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty day notice
period is waived under Sections .13, .14, .16, .18, .19 or .20 of PBGC Reg. ss.
4043.
"Repurchase Date" means the date on which Seller is to repurchase
the Purchased Assets from Buyer, including any date determined by application of
the provisions of Sections 3 or 14 hereof, or the Final Repurchase Date,
accelerated or otherwise, whichever date is earlier.
"Repurchase Price" means the price at which Purchased Assets are to
be transferred from Buyer or its designee (including the Custodian) to Seller
upon termination of a Transaction, which will be determined in each case as the
sum of (i) the Purchase Price, (ii) the Exit Fee (if any) and (iii) the Price
Differential as of the date of such determination decreased by all cash, Income
and Periodic Payments actually received by Buyer pursuant to Sections 4(a), 5(a)
and 5(b), respectively.
"Requirement of Law" means as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in
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each case applicable to or binding upon such Person or any of its Property or to
which such Person or any of its property is subject.
"Responsible Officer" means, as to any Person, the chief executive
officer, vice president and treasurer, or with respect to financial matters, the
chief financial officer or treasurer of such Person; provided, that in the event
any such officer is unavailable at any time he or she is required to take any
action hereunder, Responsible Officer shall mean any officer authorized to act
on such officer's behalf as demonstrated to the Buyer to its reasonable
satisfaction.
"Restricted Payment" means (i) the declaration or payment of any
dividends or any other distributions of any sort in respect to its Capital Stock
or similar payment to the direct or indirect holders of its Capital Stock (other
than (A) dividends or distributions payable solely in its Capital Stock (other
than Disqualified Stock), (B) dividends or distributions payable solely to the
Seller or a Subsidiary and (C) pro rata dividends or other distributions made by
a Subsidiary that is not a Wholly Owned Subsidiary to minority shareholders (or
owners of an equivalent interest in the case of a Subsidiary that is an entity
other than a corporation)), (ii) the purchase, redemption or other acquisition
or retirement for value of any Capital Stock of the Seller held by any Person or
of any Capital Stock of a Subsidiary held by any Affiliate of the Seller (other
than a Subsidiary), including the exercise of any option to exchange any Capital
Stock (other than into Capital Stock of the Seller that is not Disqualified
Stock), (iii) the purchase, repurchase, redemption defeasance or other
acquisition or retirement for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment of any Subordinated Obligations in
respect to such series (other than the purchase, repurchase or other acquisition
of such Subordinated Obligations purchased in anticipation of satisfying a
sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of acquisition).
"Second Lien Mortgage Loan" means a Mortgage Loan secured by the
lien on the Mortgaged Property, subject to only one prior lien on such Mortgaged
Property.
"Section 32 Mortgage Loan" means a Mortgage Loan secured by a
Mortgage on a one- to four-family residence which is subject to HOEPA and which
shall bear either fixed or adjustable rates of interest and shall have been
underwrittent in accordance with the Underwriting Guidelines.
"Securities" means the Securities issued under the Indenture.
"Security Agreement" means the Pledge and Security Agreement, dated
the date of this Agreement, made by Seller in favor of Buyer, as amended,
supplemented or otherwise modified from time to time.
"Seller" means ContiFinancial Corporation.
"Seller/Affiliate Agreement" shall have the meaning specified in
Section 25.
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"Servicer" means (i) Seller, provided that a Monoline Insurance
Company and its related rating agencies commit in writing to permit Seller to
act as Servicer in a securitization of Assets without unreasonable restrictions,
conditions or credit enhancement levels, as determined by Buyer in its
reasonable discretion, or (ii) if no such commitment is obtained or Seller
declines to undertake such function, any servicer expressly approved by Buyer in
writing in its sole discretion.
"Servicing Agreement" has the meaning specified in Section 25.
"Servicing Records" has the meaning specified in Section 25.
"Significant Subsidiary" means any Subsidiary that would be a
"Significant Subsidiary" of the Seller within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Single Employer Plan" means any Plan which is covered by Title IV
of ERISA, but which is not a Multiemployer Plan.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date specified in such security as the
fixed date on which the final payment of principal of such security is due and
payable, including pursuant to any mandatory redemption provision (but excluding
any provision providing for the repurchase of such security at the option of the
holder thereof upon the happening of any contingency unless such contingency has
occurred).
"Standard & Poor's" means Standard & Poor's Rating Services, a
division of the McGraw Hill Companies, Inc.
"Strategic Alliance Client" means any Person (other than a
Subsidiary) engaged in a Related Business to which the Seller provides, or
reasonably expects to provide, financing or asset securitization expertise in
return for asset-backed underwriting or placement agent commitments.
"Subordinated Obligation" means any Indebtedness of the Seller
(whether outstanding on the date hereof or thereafter incurred) which is
subordinate or junior in right of payment to the Securities pursuant to a
written agreement to that effect.
"Subservicer" means ContiMortgage Corporation or any subservicer
expressly approved by Buyer in writing in its sole discretion.
"Subservicing Notification Letter" has the meaning specified in
Section 25.
"Subsidiary" means, with respect to any Person, any other Person of
which at least a majority of the securities or other ownership interests having
by the terms thereof ordinary voting power to elect a majority of the board of
directors or other Persons performing similar functions of such corporation,
partnership or other entity (irrespective of whether or not at the
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time securities or other ownership interests of any other class or classes of
such corporation, partnership or other entity shall have or might have voting
power by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by such Person or one or more Subsidiaries of
such Person or by such Person and one or more Subsidiaries of such Person.
"Substituted Asset" means (i) with respect to any Eligible Asset,
another Eligible Asset, and (ii) with respect to any Fallout Asset, another
Fallout Asset or an Eligible Asset, in each case substituted for a Purchased
Asset in accordance with Section 9 hereof.
"Takeout Commitment" means an agreement by an investor or financial
institution to purchase Purchased Assets on a forward delivery basis.
"Takeout Investor" means the investor or financial institution which
agrees to purchase Purchased Assets pursuant to a Takeout Commitment.
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United States of America or any agency
thereof or obligations guaranteed by the United States of America or any agency
thereof, (ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company that is not an Affiliate of the Seller
and which is organized under the laws of the United States of America, any state
thereof or any foreign country recognized by the United States, and which bank
or trust company has capital, surplus and undivided profits aggregating in
excess of $50,000,000 (or the foreign currency equivalent thereof) and has
outstanding debt which is rate "A" (or such similar equivalent rating) or higher
by at least one nationally recognized statistical rating organization (as
defined in Rule 436 under the Securities and Exchange Act) or any money-market
fund sponsored by a registered broker dealer or mutual fund distributor, (iii)
repurchase obligations with a term of not more than 30 days for underlying
securities of the types described in clause (i) above entered into with a bank
meeting the qualifications described in clause (ii) above, (iv) investments in
commercial paper, maturing not more than 90 days after the date of acquisition,
issued by a corporation (other than an Affiliate of the Seller) organized and in
existence under the laws of the United States of America or any foreign country
recognized by the United States of America with a rating at the time as of which
any investment therein is made of "P-1" (or higher) according to Moody's
Investors Service, Inc. or "A-1" (or higher)
"Transaction" has the meaning specified in Section 1 hereof.
"Trust Receipt" shall have the meaning assigned thereto in the
Custodial Agreement.
"Underlying Mortgage Loans" means, with respect to each
Collateralized Note, the Mortgage Loans securing such Note which qualify as
Eligible Assets, and (i) which, in the case of a Mortgage Loan securing an
Empire Collateralized Note, (A) has a FICO score of at least (x) 660 if the LTV
of such Mortgage Loan is 100% or greater or (y) 620 if its LTV is less than
100%, (B) the weighted average FICO score of all such Mortgage Loans is at least
685 and
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(C) is not Delinquent, and (ii) which, in the case of Mortgage Loans securing a
Collateralized Note other than an Empire Collateralized Note, (A) no more than
$15,000,000 of such Mortgage Loans shall be from 45 to 60 days Delinquent and
(B) no more than $3,000,000 of such Mortgage Loans shall be from 60 to 90 days
Delinquent.
"Underwriting Guidelines" means the underwriting guidelines attached
as Exhibit IX hereto, as modified by the Underwriting Guideline modifications
attached as Exhibit IX(A) hereto, or such other guidelines mutually agreed upon
by Seller and Buyer.
"Uniform Commercial Code" or "UCC" means the Uniform Commercial Code
as in effect on the date hereof in the State of New York; provided that if by
reason of mandatory provisions of law, the perfection or the effect of
perfection or non-perfection of the security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than New York, "Uniform Commercial Code" or "UCC" shall mean the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or
non-perfection.
"Voting Stock" of a Person means all classes of Capital Stock or
other interests (including partnership interests or membership interests) of
such Person then outstanding and normally entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof.
"Warehouse Indebtedness" means, as to any Person, such Person's
obligations under repurchase agreements or other similar arrangements.
"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock
of which (other than directors' qualifying shares and shares held by other
Persons to the extent such shares are required by applicable law to be held by a
Person other than the Seller or a Subsidiary) is owned by the Seller or one or
more Wholly Owned Subsidiaries.
"Year 2000 Program" shall have the meaning provided thereto in
Section 10(b)(xxiv).
3. CONDITIONS PRECEDENT; INITIATION; PURCHASE REQUEST; TERMINATION; COMMITMENT
FEE; MAXIMUM TRANSACTION AMOUNT
(a) Conditions Precedent to Initial Transaction. Buyer's obligation
to enter into the initial Transaction hereunder is subject to the satisfaction,
immediately prior to or concurrent with such Transaction, of the conditions
precedent that Buyer shall have received the Commitment Fee, which shall be
non-refundable, and any other fees and expenses due from Seller and all of the
following documents, each of which shall be satisfactory to Buyer and its
counsel in form and substance (collectively, the "Facility Documents"):
(i) Agreement. This Agreement, duly completed, and executed
and delivered by Seller and the Interim Servicer;
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(ii) Custodial Agreement. The Custodial Agreement, duly
executed and delivered by Seller and the Custodian;
(iii) Security Agreement. The Security Agreement, duly
executed and delivered by Seller;
(iv) [Intentionally Omitted]
(v) Uniform Commercial Code Filings and Searches. Any filings
requested by Buyer or required under the Uniform Commercial Code, duly
completed, executed and delivered by Seller, and such evidence as required
by Buyer that all other actions have been taken that are necessary or, in
the sole discretion of the Buyer, desirable to perfect and protect the
security interests and Liens created pursuant to this Agreement; and
delivery of UCC searches;
(vi) Opinions of Seller's Counsel. An opinion or opinions of
counsel to the Seller and the Interim Servicer, addressing the matters set
forth in the form attached hereto as Exhibit VIII, dated the initial
Purchase Date and otherwise in form and substance acceptable to the Buyer
and covering such other matters incident to the transactions contemplated
by this Agreement as the Buyer may reasonably request;
(vii) Subservicing Notification Letter. The Subservicing
Notification Letter;
(viii) Organizational Documents. The Seller shall deliver to
Buyer a certificate of good standing and a certificate of its Secretary or
Assistant Secretary certifying: (A) a copy of its articles of
incorporation, (B) a copy of its by-laws; (C) the names and signatures of
the officers authorized on its behalf to execute, deliver and perform
under the Facility Documents, as applicable, and any other documents to be
delivered by it from time to time in connection therewith (on which the
Buyer may conclusively rely until such time as the Buyer shall receive
from the Seller a duly authorized revised certificate); and (D) a copy of
the resolutions of the Board of Directors of the Seller, authorizing
Seller to execute, perform, and deliver the Facility Documents, as
applicable;
(ix) Officer's Certificate. An Officer's Certificate of
Seller, regarding representations and warranties;
(x) Power of Attorney. A fully executed omnibus power of
attorney, substantially in the form of Exhibit III attached hereto,
irrevocably appointing Buyer its attorney-in-fact with full power to
complete and record the assignment of Purchased Assets, complete the
endorsement of the related Note or instrument and take such other steps as
may be necessary or desirable to enforce Buyer's rights against such
Purchased Assets and the related Trust Receipts, Asset Files, and
Servicing Records upon three (3) Business Days' written notice to Seller
and if Seller fails to act in a manner acceptable to
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Buyer, then Buyer may so act, provided that such notice need not be given
if an Event of Default has occurred;
(xi) Income Payment Letters. Fully executed irrevocable
letters of instructions to Subservicer, substantially in the form of
Exhibit IV attached hereto, directing such Subservicer to make all
payments of Income directly to Buyer;
(xii) True Sale Opinion. With respect to any Asset that was
funded in the name of or acquired by a Qualified Originator which is an
Affiliate of the Seller, the Buyer may, in its sole discretion, require
the Seller to provide evidence sufficient to satisfy the Buyer that such
Asset was acquired in a legal sale, including without limitation, an
opinion of counsel with respect thereto, in form and substance and from an
attorney, in both cases, acceptable to the Buyer in its sole discretion,
UCC financing statements, Acquisition Agreements, Affiliates'
organizational documents, etc.;
(xiii) Year 2000 Diligence. Satisfactory results of Year 2000
Program diligence;
(xiv) Insurance Policies. Insurance policies, or other
evidence of insurance acceptable to Buyer;
(xv) Related Documents. The Purchase Facility, the Engagement
Letter and the Master Facilities Agreement, duly completed, and executed
and delivered by Seller and each applicable Affiliate thereof;
(xvi) Other Documents. Such other documents as Buyer may
reasonably request, in form and substance reasonably acceptable to Buyer.
(b) Conditions Precedent to all Transactions. Buyer's obligation to
enter into each Transaction (including the initial Transaction) is subject to
the satisfaction of the following further conditions precedent, both immediately
prior to entering into such Transaction and also after giving effect thereto to
the intended use thereof:
(i) Seller shall have delivered to Buyer or its designee,
documents evidencing the transfer of the ownership of the related Assets
from Seller to Buyer, including delivery to Custodian of the Assets
File(s) and deliver of a duly executed bond power or transfer instrument
for the related Asset;
(ii) Seller shall have instructed the applicable Custodian,
debtor, trustee, paying agent, authenticating agent, transfer agent,
registrar, predecessor in interest, owner, and Servicer, if any, in
respect of the related Assets to: (A) reflect on their books and records
the transfer of such Assets to Buyer, as owner or secured party (if the
Assets are in the form of a security agreement), and (B) re-register in
the name of Buyer all Trust Receipts, collateral receipts or other
applicable instruments relating to each Purchased Asset on or prior to the
related Purchase Date;
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(iii) Custodian shall have delivered to Buyer all Trust
Receipt(s) relating to the Purchased Assets, and an Asset Schedule noting
such Exceptions as are acceptable to Buyer in its sole discretion in
respect of Assets to be sold hereunder on such Business Day, in each case
dated such Business Day and duly completed;
(iv) Seller shall have delivered a Purchase Request to Buyer,
at least two (2) Business Days prior to the proposed Purchase Date
specified in such Purchase Request;
(v) Seller shall have delivered to Buyer, no later than 2:00
p.m. New York time at least one (1) Business Day prior to the Purchase
Date, the Asset Schedule, and an Asset Tape with respect to each Asset to
be purchased on such Purchase Date and the Custodian shall have received
the Asset Schedule no later than 12:00 noon New York time one (1) Business
Day prior to such Purchase Date;
(vi) In the event Buyer has provided Seller with written
notice at least two (2) Business Days prior to its receipt of any Purchase
Request of its intent to conduct pre-funding due diligence prior to any
Purchase Date, Buyer shall have completed its due diligence to its
satisfaction with respect to each Asset to be purchased on the relevant
Purchase Date, and the results of such investigation (and all other legal
and documentary matters with respect to such Asset) supports the Mortgage
Loan Representations and shall be satisfactory to Buyer in its sole
discretion in accordance with Section 15 hereof.
(vii) No Event of Default or Default shall have occurred and
be continuing, and there shall not have occurred one or more events that,
in the reasonable judgment of the Buyer, constitutes or could reasonably
be expected to constitute a Material Adverse Effect;
(viii) Seller shall have provided Buyer with a copy of any
changes to Seller's Underwriting Guidelines prior to Buyer's purchase of
any Asset affected by such change and Buyer shall have approved such
changes;
(ix) Buyer shall have received the most recent available
servicing or like reports, if any, with respect to the Assets; and
(x) If requested by Buyer due to a question arising as to
validity, enforceability or compliance with law, an opinion or opinions of
counsel to the Seller and the Interim Servicer, addressing the matters set
forth in the form attached hereto as Exhibit VIII, then Seller shall, upon
the request of Buyer, deliver an opinion of counsel in such state
acceptable to the Buyer, substantially in the form of items number 11, 13
and 14 of Exhibit VIII.
(xi) With respect to any Collateralized Note, the Buyer shall
have received (1) the original Collateralized Note endorsed to the Buyer,
(2) the original certification and trust receipt issued by the applicable
Custodian with respect to the Mortgage Loans securing such Collateralized
Note, (3) a "notice of pledge" executed by
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the Seller and the applicable Custodian, and (4) a "notice and consent"
executed by the maker and each endorsee of the Collateralized Note.
(xii) All terms and conditions set forth in the Master
Facilities Agreement shall be satisfied to the reasonable satisfaction of
the Buyer.
(c) Initiation; Purchase Request.
(i) An agreement to enter into a Transaction shall be
initiated by Seller's delivery of an irrevocable Purchase Request to
Buyer; provided, however, that Buyer shall have no obligation to enter
into any Transaction hereunder, except as provided in subsection (g) of
this Section 3. Seller shall deliver to Buyer a Purchase Request at least
two (2) Business Days prior to the proposed Purchase Date for any
Transaction (unless otherwise agreed by the parties). Such Purchase
Request shall (A) specify the requested Purchase Date and Repurchase Date
and the other matters specified on the form attached hereto as Exhibit I,
and (B) include the Asset Schedule containing information with respect to
Assets that the Seller proposes to sell to Buyer in connection with such
Transaction. Each Purchase Request accepted by Buyer shall be irrevocable
and binding on Buyer and Seller. The Seller shall not be entitled to
initiate a Transaction hereunder and the Buyer shall have no obligation to
purchase any Assets hereunder if a Default or an Event of Default has
occurred or will result from such Transaction.
(ii) Notwithstanding anything set forth in Section 17 hereof,
any Purchase Request shall be deemed to have been received by Buyer upon
telephonic confirmation by Seller that Buyer has actually received such
Purchase Request.
(d) Limitation on Pricing Rate Used; Illegality. Anything herein to
the contrary notwithstanding, if, on or prior to the determination of the
Pricing Rate:
(i) the Buyer determines, which determination shall be
conclusive, that quotations of interest rates for the relevant deposits
referred to in the definition of "LIBO Base Rate" in Section 2 hereof are
not being provided in the relevant amounts or for the relevant maturities
for purposes of determining the Pricing Rates as provided herein; or
(ii) the Buyer determines, which determination shall be
conclusive, that the relevant rate of interest referred to in the
definition of "Pricing Rate" in Section 2 hereof upon the basis of which
the Pricing Rate is to be determined is not likely adequately to cover the
cost to the Buyer of purchasing the Assets using such Pricing Rate; or
(iii) it becomes unlawful for the Buyer to honor its
obligation to purchase Assets hereunder using a Pricing Rate based upon
the LIBO Rate;
then Buyer shall give the Seller prompt notice thereof and, so long as such
condition remains in effect, Seller shall, either repurchase all Purchased
Assets then subject to a Transaction or the
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Pricing Rate shall be determined based upon the rate selected by Buyer in a
manner that is reasonably satisfactory to Buyer so as to adequately reflect the
cost to Buyer of purchasing the Purchased Assets using such substituted Pricing
Rate (in which case Buyer shall continue to be obligated to enter into
additional Transactions using that substituted Pricing Rate).
(e) Additional Costs.
(i) If Buyer determines that additional amounts are necessary
to compensate Buyer for any costs that Buyer determines are attributable
to its using a LIBO Rate for the Pricing Rate or its obligation to use a
the LIBO Rate Pricing Rate hereunder, or any reduction in any amount
receivable by Buyer hereunder in respect of the Pricing Rate (such
increases in costs and reductions in amounts receivable being herein
called "Additional Costs"), resulting from any change that:
(A) shall subject Buyer to any tax, duty or other charge
in respect of such Pricing Rate or changes the basis of taxation of
any amounts payable to such Buyer under this Agreement in respect of
any of such Pricing Rate (excluding changes in the rate of tax on
the overall net income of such Buyer by the jurisdiction in which
Buyer has its principal office); or
(B) imposes or modifies any reserve, special deposit or
similar requirements relating to any Pricing Rate; or
(C) imposes any other condition affecting this Agreement
materially and adversely affecting Buyer's rights or the
transactions contemplated hereby or thereby, then Buyer shall give
prompt notice thereof and Seller shall either repurchase all
Purchased Assets subject to a Transaction or pay such Additional
Costs.
(ii) If any Requirement of Law (other than with respect to any
amendment made to the Buyer's certificate of incorporation and by-laws or
other organizational or governing documents) or any change in the
interpretation or application thereof or compliance by the Buyer with any
request or directive (whether or not having the force of law) from any
central bank or other Governmental Authority made subsequent to the date
hereof:
(A) shall subject the Buyer to any tax of any kind
whatsoever with respect to this Agreement or any Transaction made
hereunder (excluding net income taxes) or change the basis of
taxation of payments to the Buyer in respect thereof;
(B) shall impose, modify or hold applicable any reserve,
special deposit, compulsory advance or similar requirement against
assets held by, deposits or other liabilities in or for the account
of, advances or other extensions of credit by, or any other
acquisition of funds by, any office of the Seller which is not
otherwise included in the determination of the LIBO Base Rate
hereunder, and which is deemed applicable to Transactions;
(C) shall impose on the Buyer any other condition;
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and the result of any of the foregoing is to increase the cost to the
Buyer, by an amount which the Buyer deems to be material, of making,
continuing or maintaining any Transaction or to reduce any amount
receivable hereunder in respect thereof, then, in any such case, Buyer
shall give prompt notice thereof and the Seller shall either repurchase
all Purchased Assets subject to a Transaction or pay such Additional Costs
promptly, as will compensate the Buyer for such increased cost or reduced
amount receivable.
(iii) If the Buyer shall have determined that the adoption of
or any change in any Requirement of Law (other than with respect to any
amendment made to the Buyer's certificate of incorporation and by-laws or
other organizational or governing documents) regarding capital adequacy or
in the interpretation or application thereof or compliance by the Buyer or
any corporation controlling the Buyer with any request or directive
regarding capital adequacy (whether or not having the force of law) from
any Governmental Authority made subsequent to the date hereof shall have
the effect of reducing the rate of return on the Buyer's or such
corporation's capital as a consequence of its obligations hereunder to a
level below that which the Buyer or such corporation (taking into
consideration the Buyer's or such corporation's policies with respect to
capital adequacy) by an amount deemed by the Buyer to be material, then
from time to time, Buyer shall give prompt notice thereof and the Seller
shall either repurchase all Purchased Assets subject to a Transaction or
promptly pay such Additional Costs as will compensate the Buyer for such
reduction.
(iv) If the Buyer becomes entitled to claim any additional
amounts pursuant to this subsection, it shall promptly notify the Seller
of the event by reason of which it has become so entitled. Buyer shall
deliver to Seller a statement setting forth the amount and basis of
determination of any Additional Costs in such detail as determined in good
faith by Buyer to be adequate, it being agreed that such statement and the
method of its calculation shall be adequate and shall be conclusive and
binding upon Seller, absent manifest error.
(v) Notwithstanding anything in this subsection (e) to the
contrary, to the extent any notice or request pursuant to this subsection
(e) is given by Buyer more than five (5) Business Days after Buyer has
obtained or should have obtained knowledge of the occurrence of an event
giving rise to Additional Costs as described hereunder, Buyer shall not be
entitled to compensation under this subsection (e) for any Additional
Costs incurred or accruing prior to the giving of such notice to Seller.
(vi) Buyer will, to the extent of Additional Costs or
reductions in the amounts receivable referred to above relate to Buyer's
loans or commitments in general and are not specifically attributable to
amounts owing hereunder, use averaging and attribution methods which cover
all loans and commitments similar to the Transactions hereunder in similar
circumstances for comparable customers whether or not the documentation
for such other loans or commitments permits Buyer to make the
determination specified in this clause (vi).
(f) Termination and Repurchase.
(i) On the Repurchase Date, termination of the Transaction
will be effected by transfer to Seller or its designee of the Purchased
Assets (and any Income in
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respect thereof received by Buyer not previously credited or transferred
to, or applied to the obligations of, Seller pursuant to Section 5)
against the simultaneous transfer of the Repurchase Price plus any
Breakage Costs, as defined below, payable by Seller to Buyer pursuant to
paragraph 3(f)(iii) hereof, to an account of Buyer. Seller is obligated to
obtain the Asset Files from Buyer or its designee at Seller's expense on
the Repurchase Date.
(ii) Seller may at any time and from time to time repurchase
the Purchased Assets on other than a scheduled Repurchase Date, in whole
or in part, upon at least one (1) Business Day's irrevocable notice to
Buyer, specifying the new Repurchase Date for such repurchase and the
Repurchase Price. Such demand shall be made by Seller by telephone or
otherwise, no later than 1:00 p.m. New York time on the Business Day
immediately prior to the day on which such termination will be effective.
If any such notice is given, the Repurchase Price specified in such notice
shall be due and payable on the new Repurchase Date specified therein,
together with any amounts payable pursuant to the succeeding paragraph.
(iii) If Seller repurchases the Purchased Assets on any day
which is not a Repurchase Date for such Purchased Assets, Seller shall
indemnify Buyer and hold Buyer harmless from any loss or expense which
Buyer may sustain or incur arising from the reemployment of funds obtained
by Buyer hereunder or from fees payable to terminate the deposits from
which such funds were obtained, but not including loss of profit
("Breakage Costs"). Buyer shall deliver to Seller a statement setting
forth the amount and basis of determination of any Breakage Costs in such
detail as determined in good faith by Buyer to be adequate, it being
agreed that such statement and the method of its calculation shall be
adequate and shall be conclusive and binding upon Seller, absent manifest
error. This Section shall survive termination of this Agreement and
repurchase of all Purchased Assets subject to Transactions hereunder.
(iv) The Seller shall repurchase from the Buyer all Purchased
Assets outstanding on the Final Repurchase Date.
(v) With respect to any Purchased Asset repurchased by the
Seller pursuant to this Section 3(f), the Seller shall not resell any such
Asset to any Person for a purchase price less than the purchase price
applicable to such Assets set forth in the Purchase Facility.
(g) Commitment Fee; Maximum Transaction Amount. In consideration of
the Commitment Fee, Buyer shall, for the term of this Agreement, commit to
purchase Assets from Seller so long as (i) the Purchase Price for Assets to be
purchased on any single Purchase Date shall be at least $5,000,000, (ii) the
aggregate Purchase Price for Purchased Assets subject to Transactions at any one
time does not exceed the Committed Amount; (iii) the aggregate Purchase Price
for Fallout Assets subject to Transactions at any one time does not exceed the
Fallout Asset Sublimit; (iv) the aggregate Purchase Price for Empire
Collateralized Notes and all other Collateralized Notes subject to Transactions
at any one time does not exceed the applicable
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Collateralized Note Sublimit; (v) the Assets comply with the representations and
warranties set forth herein, or in the case of each Fallout Asset, the Seller
identifies on the applicable Asset Schedule each representation and warranty
that such Asset does not satisfy; and (vi) the conditions precedent set forth in
3(b) are satisfied. Buyer shall have no obligation to enter into any Transaction
if, as a result of such transaction, (i) the aggregate Purchase Price for all
Transactions subject to then outstanding Transactions under this Agreement shall
exceed the Committed Amount or (ii) the Maximum Transaction Amount shall exceed
$650,000,000. Buyer shall not enter into any Transaction if the aggregate
Purchase Price of such Purchased Assets exceeds the Available Amount.
4. COLLATERAL AMOUNT MAINTENANCE
(a) If at any time the aggregate Repurchase Price of Purchased
Assets subject to then outstanding Transactions is greater than the Collateral
Amount for such Transaction (a "Collateral Deficit"), then Buyer may by notice
to Seller, require Seller to transfer to Buyer or its designee (including the
Custodian) (at Buyer's option) additional Eligible Assets, ("Additional Eligible
Assets"), or cash, so that the Collateral Amount equals or exceeds the
Repurchase Price. Any cash remitted by Seller to Buyer pursuant to this Section
4(a) shall be deemed a payment of all or part of the Repurchase Price.
(b) Notice required pursuant to subsection (a) above may be given by
means of facsimile transmission. A notice for the payment or delivery in respect
of a Collateral Deficit received before 12:00 noon New York time on a Business
Day must be met not later than 4:00 p.m. New York time on the next Business Day
on which the notice was given. Any notice given on a Business Day after 12:00
noon New York time shall be met not later than 4:00 p.m. New York time on the
second Business Day following such notice. The failure of Buyer, on any one or
more occasions, to exercise its rights under subsection (a) of this Section
shall not change or alter the terms and conditions to which Seller is subject
under this Agreement or limit the right of the Buyer to exercise its rights at a
later date. Buyer agrees that a failure or delay to exercise its rights under
subsection (a) of this Section shall not limit its rights under this Agreement
or otherwise existing by law or in any way create additional rights for Seller.
(c) In the event that Seller fails to comply with the provisions of
this Section 4, Buyer shall have the option not to enter any additional
Transactions hereunder from the date of such failure, and to terminate this
Agreement.
5. INCOME PAYMENTS
(a) Where a particular Transaction's term extends over an Income
payment date for Purchased Assets subject to a Transaction, such Income shall be
the property of Buyer. All Income attributable to the Purchased Assets subject
to Transactions which is collected and received by the Seller or the Interim
Servicer, as the case may be, shall be remitted by the Seller or the Interim
Servicer, as the case may be, within two Business Days of such receipt, directly
to the Buyer's Account in accordance with the Accepted Servicing Practices,
until and unless Buyer directs Seller or Interim Servicer, as the case may be,
that such Income should be remitted as directed by Buyer for and on behalf of
Buyer or to remit such Income directly to Seller.
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(b) Notwithstanding that Buyer and Seller intend that the
Transactions hereunder be sales to Buyer of the Purchased Assets, Seller shall
pay by wire transfer to Buyer the accreted value of the Price Differential (less
any amount of such Price Differential previously paid by Seller to Buyer) (each
such payment, a "Periodic Payment") on the first Business Day of each month (the
"Payment Date").
6. SECURITY INTEREST
(a) Buyer and Seller intend that the Transactions hereunder be sales
to Buyer of the Purchased Assets and not loans from Buyer to Seller secured by
the Purchased Assets. However, in order to preserve Buyer's rights under this
Agreement in the event that a court or other forum recharacterizes the
Transactions hereunder as loans and as security for the performance by Seller of
all of Seller's obligations to Buyer under this Agreement and the Transactions
entered into pursuant to this Agreement, Seller grants Buyer, as collateral
security for any obligations outstanding under this Agreement, any outstanding
Transactions, any asset backed warehouse financing agreements or any other
repurchase agreements between Buyer or any of its Affiliates on the one hand and
Seller or any of its Affiliates on the other hand, a first priority security
interest in the Purchased Assets and all distributions in respect thereof, the
proceeds of any and all of the foregoing, Servicing Agreements and any other
arrangement for the servicing of the Purchased Assets (including the right to
contract for servicing), Servicing Records, servicing fees, insurance,
guarantees, indemnities and warranties and proceeds thereof, relating to the
Purchased Assets, Income, collections, custodial accounts and escrow accounts
relating to the Purchased Assets and any other contract rights (including the
right to receive principal and interest payments or finance charges with respect
to the Purchased Assets and the right to enforce such payments, and the
collateral securing such obligation), the Asset Documents and other agreements
or arrangements of whatever character from time relating to the Purchased
Assets, security agreements, financing statements, general intangibles,
investment property, inventory, instruments, chattel paper, equipment, goods,
accounts and other assets, whether real or personal property, relating to the
Purchased Assets or any interest in the Purchased Assets (including, without
limitation, the Collateralized Notes and the indebtedness evidenced thereby and
all collateral security therefor including, without limitation, all security
agreements, mortgage loans, deeds of trusts and all other assets and properties
securing such Collateralized Notes), securities backed by or representing an
interest in such Purchased Assets, Takeout Commitments and all collateral of
Seller, however defined, held from time to time by Buyer, and any and all
replacements, substitutions, distributions on or proceeds of any and all of the
foregoing (collectively, the "Collateral"). Seller represents that with respect
to all Purchased Assets in the form of a participation certificate or other
instrument evidencing ownership of an underlying pool of assets there has been a
UCC-1 financing statement filed evidencing the security interest of the issuer,
for the benefit of the holders of such certificate or instrument, in such pool
of assets, including any chattel paper related to such assets. Seller also
represents that, with respect to all Collateralized Notes subject to
Transactions, a UCC-1 financing statement has been filed and is in effect naming
Seller the secured party with respect to the collateral securing such
Collateralized Notes.
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(b) Seller shall pay all fees and expenses associated with
perfecting Buyer's security interest in the Collateral, or establishing Buyer's
Lien on Assets, including, without limitation, the cost of filing financing
statements under the Uniform Commercial Code and recording assignments of
Mortgage, as and when required by Buyer in its sole discretion.
7. PAYMENT, TRANSFER AND CUSTODY
(a) Unless otherwise mutually agreed in writing, all transfers of
funds hereunder shall be in immediately available funds.
(b) In connection with each sale, transfer, conveyance and
assignment, or pledge, on or prior to each Purchase Date with respect to each
Purchased Asset, the Seller shall deliver or cause to be delivered and released
to the Custodian the original documents consisting of the Asset File pertaining
to each of the Purchased Assets identified in the Asset Schedule delivered
therewith. On the Purchase Date, upon receipt of the Trust Receipt and Asset
Schedule containing no Material Exceptions (as defined in the Custodial
Agreement) or as otherwise acceptable to Buyer in its sole discretion, Buyer
shall transfer the Purchase Price for the Transaction to Seller to the account
specified by Seller in the Purchase Request (the "Seller's Account").
(c) On the Purchase Date for each Transaction, ownership of the
Purchased Assets shall be transferred to Buyer or its designee (including the
Custodian) simultaneous with the transfer of the Purchase Price to Seller's
Account. Seller, simultaneously with the delivery to Buyer or its designee
(including the Custodian) of the Purchased Assets relating to each Transaction
hereby sells, transfers, conveys and assigns to Buyer or its designee (including
the Custodian), all the right, title and interest of Seller in and to the
Purchased Assets together with all right, title and interest in and to the
proceeds of any related insurance policies. Upon transfer of the Purchased
Assets to Buyer as set forth-herein and until termination of any Transactions as
set forth in this Agreement, record title in the name of Seller to each
Purchased Asset shall be retained by Seller in trust, for the benefit of Buyer,
for the sole purpose of facilitating the servicing and the supervision of the
servicing of the Purchased Assets by Seller in accordance with Section 25
hereof.
(d) Buyer may deposit the Trust Receipts representing the Purchased
Assets, or direct that the Trust Receipts be deposited directly, with a designee
acting in the capacity of bailee for Buyer. If the Trust Receipts are delivered
to Buyer or its designee, Buyer or its designee shall exercise reasonable and
prudent care in the maintenance thereof, during the term of this Agreement.
(e) Any Asset Files not delivered to Buyer or its designee
(including the Custodian) are and shall be held in trust by Seller or its
designee for the benefit of Buyer as the owner thereof. Seller or its designee
shall maintain a complete copy of the Asset File and any originals of the Asset
Documents not delivered to Buyer or its designee. The possession of the Asset
File by Seller or its designee is at the will of the Buyer for the sole purpose
of servicing the related Purchased Asset, and such retention and possession by
the Seller or its designee is in a custodial capacity only. Each Asset File
retained or held by Seller or its designee shall be
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segregated on Seller's books and records from the other assets of Seller or its
designee and the books and records (including, without limitation, any computer
records or tapes) of Seller or its designee and shall be marked appropriately to
reflect clearly the sale of the related Purchased Asset to Buyer. Seller or its
designee (including the Custodian) shall release its custody of the Asset File
only in accordance with written instructions from Buyer and in accordance with
the Custodial Agreement, unless such release is required as incidental to the
servicing of the Purchased Assets or is in connection with a repurchase of any
Purchased Assets by Seller.
8. HYPOTHECATION OR PLEDGE OF PURCHASED ASSETS
Title to all Purchased Assets shall pass to Buyer and Buyer shall
have free and unrestricted use of all Purchased Assets. Nothing in this
Agreement shall preclude Buyer from engaging in repurchase transactions with the
Purchased Assets or otherwise pledging, repledging, hypothecating, or
rehypothecating the Purchased Assets, but no such transaction shall relieve
Buyer of its obligations to transfer Purchased Assets to Seller pursuant to
Section 3. Nothing contained in this Agreement shall obligate Buyer to segregate
any Purchased Assets delivered to Buyer by Seller.
9. SUBSTITUTION
(a) Subject to Section 9(b), Seller may, upon one (1) Business Day's
written notice to Buyer, with a copy to Custodian, substitute (i) other Eligible
Assets for any Eligible Assets or Fallout Assets subject to Transactions or (ii)
other Fallout Assets for any Fallout Assets subject to Transactions. Such
substitution shall be made by (i) transfer to the related Custodian of the Asset
Files for such other Eligible Assets, together with an Asset Schedule and
transfer to Seller or its designee of the Purchased Assets requested for
release, and (ii) wire transfer to Buyer of the Exit Fee related to the released
Assets to the extent such Assets are sold by the Seller to a Person other than
the Buyer on or after the substitution date. After substitution, the Substituted
Assets, shall be deemed to be Purchased Assets subject to the same Transaction
as the released Asset. The Custodian shall issue a new Asset Schedule to Buyer,
deleting the released Asset, and adding the substituted Purchased Asset.
(b) Notwithstanding anything to the contrary in this Agreement,
Seller may not substitute other Assets for any Purchased Assets if (i) after
taking into account such substitution, a Collateral Deficit were to occur, or
(ii) such substitution would cause a Breach of any provision of this Agreement,
or (iii) Buyer does not consent to such substitution.
(c) In the case of any Transaction for which the Repurchase Date is
other than the Business Day immediately following the Purchase Date and with
respect to which Seller does not have any existing right to substitute
substantially the same Assets for the Purchased Assets, Seller shall have the
right, subject to the proviso to this sentence, upon notice to Buyer, which
notice shall be given at or prior to 10 am (New York time) on such Business Day,
to substitute substantially the same Assets for any Purchased Asset; provided,
however, that Buyer may elect, by the close of business on the Business Day
notice is received, or by the close of the next Business Day if notice is given
after 10 am (New York time) on such day, not to accept such substitution. In the
event such substitution is accepted by Buyer, such substitution shall be made
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by Seller's transfer to Buyer of such other Assets and Buyer's transfer to
Seller of such Purchased Assets, and after such substitution, the Substituted
Assets shall be deemed to be Purchased Assets. In the event Buyer elects not to
accept such substitution, Buyer shall offer Seller the right to terminate the
Transaction.
(d) In the event Seller exercises its rights to substitute or
terminate under sub-paragraph (c), Seller shall be obligated to pay to Buyer, by
the close of the Business Day of such substitution or termination, as the case
may be, an amount equal to (A) Buyer's actual cost (including all fees, expenses
and commissions) of (i) entering into replacement transactions; (ii) entering
into or terminating hedge transactions; and/or (iii) terminating transactions or
substituting securities in like transactions with third parties in connection
with or as a result of such substitution or termination, and (B) to the extent
Buyer determines not to enter into replacement transactions, the loss incurred
by Buyer directly arising or resulting from such substitution or termination.
The foregoing amounts shall be solely determined and calculated by Buyer in good
faith, absent manifest error.
10. REPRESENTATIONS AND WARRANTIES
(a) Buyer and Seller Representations and Warranties. As of each
Purchase Date, each of Buyer and Seller represents and warrants to the other
that (i) it is duly authorized to execute and deliver this Agreement, to enter
into the Transactions contemplated hereunder and to perform its obligations
hereunder and it has taken all necessary action to authorize such execution,
delivery and performance; (ii) it will engage in such Transactions as principal
(or, if agreed in writing in advance of any Transaction by the other party
hereto, as agent for a disclosed principal); (iii) the person signing this
Agreement on its behalf is duly authorized to do so on its behalf (or on behalf
of any such disclosed principal); (iv) no approval, consent, authorization,
notice to, filing with, or other act by, or in respect of, any Governmental
Authority or any other Person is required or necessary in connection with the
Transactions contemplated by this Agreement, or with the execution, delivery,
performance, validity or enforceability of this Agreement or any Facility
Document (other than filings and recordings in respect of the Liens created
hereunder), or, if required, such approval, consent, authorization, notice, or
filing has been or will, prior to the Purchase Date, be obtained and will be in
full force and effect; (v) the execution, delivery, and performance of this
Agreement and the Transactions hereunder will not violate any law, regulation,
order, judgment, decree, ordinance, charter, by-law, or rule applicable to it or
its property or constitute a default (or an event which, with notice or lapse of
time, or both would constitute a default) under or result in a breach of any
material agreement or other instrument by which it is bound or by which any of
its assets are affected; (vi) it has received approval and authorization to
enter into this Agreement and each and every Transaction actually entered into
hereunder pursuant to its internal policies and procedures; and (vii) neither
this Agreement nor any Transaction or transfer of any Asset pursuant hereto is
entered into in contemplation of insolvency or with any intent to hinder, delay
or defraud any creditor.
(b) Seller Representations and Warranties. Seller represents and
warrants to Buyer that as of the Purchase Date for the purchase of any Assets by
Buyer from Seller and as of
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the date of this Agreement and any Transaction hereunder and at all times while
this Agreement and any Transaction thereunder is in full force and effect:
(i) All Documents True and Correct. All representations and
warranties made and all information, reports, financial statements,
exhibits, schedules, and documents or copies of documents furnished to
Buyer by or on behalf of Seller pursuant to or in connection with the
negotiation, preparation, delivery or performance of this Agreement and
the other Facility Documents, or with the transactions contemplated
hereby, are and will be true, correct, and complete in every material
respect or (in the case of projections, based on reasonable estimates), at
the time when made and at all times thereafter under this Agreement or, if
limited to a specific date, as of the date to which they refer, and no
such writing or information contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading. There is no fact known to a
Responsible Officer of the Seller that, after due inquiry, should
reasonably be expected to have a Material Adverse Effect that has not been
disclosed herein, in the other Facility Documents or in a report,
financial statement, exhibit, schedule, disclosure letter or other writing
furnished to the Buyer for use in connection with the transactions
contemplated hereby or thereby.
(ii) Due Authority and Organization. Seller is duly organized
and validly existing, and in good standing under the laws and regulations
of the state of Delaware, and is duly licensed, qualified to do business,
and in good standing under the laws of each jurisdiction in which the
nature of the business conducted by it makes such qualification necessary
and where failure so to qualify could be reasonably expected (either
individually or in the aggregate) to have a Material Adverse Effect.
Seller has the authority under its charter and by-laws and applicable law
to enter into this Agreement and to perform all acts contemplated hereby
or in connection herewith, and to borrow money, sell Assets, and grant
Liens hereunder; and has taken all corporate action necessary to authorize
the execution, delivery and performance of this Agreement and the other
Facility Documents to which it is a party and to authorize the sale, the
borrowings, and the granting of Liens on the terms and conditions of the
Agreement and the other Facility Documents, and is in compliance in all
material respects with all Requirements of Law, and has all governmental
licenses, authorizations, consents and approvals necessary to own and
operate its Property, to lease the Property it operates as lessee, and to
carry on its business as now being or as proposed to be conducted.
(iii) Binding Obligations. This Agreement and every other
document to be executed by Seller pursuant to this Agreement, is and will
be, duly and validly executed and delivered by the Seller and constitutes
a legal, valid, binding and subsisting obligation of Seller, enforceable
against the Seller in accordance with its respective terms, except that
(a) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws (whether statutory,
regulatory or decisional) now or hereafter in effect relating to
creditors' rights generally and (b) the remedy of specific performance and
injunctive and other forms of equitable relief may be
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subject to certain equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought, whether a proceeding
at law or in equity;
(iv) No Litigation. There is no action, suit, proceeding,
inquiry, investigation, arbitration or investigation, at law or in equity,
or before, or by any court, Governmental Authority, arbitrator, public
board or body pending, in each case, as to which Seller has received
service of process, or, to Seller's knowledge, threatened against or
affecting Seller or any of its Subsidiaries or against any of its or their
respective Properties or revenues, which, either in any one instance or in
the aggregate, which if adversely determined would individually or in the
aggregate result in any Material Adverse Effect, or in any material
impairment of the right or ability of Seller to carry on its business
substantially as now conducted, or to fulfill its obligations hereunder,
or in any material liability on the part of the Seller.
(v) Financial Statements.
(A) (i) The audited financial statements of the Seller
and its consolidated Subsidiaries as of March 31, 1999, heretofore furnished to
Buyer and as of the end of Seller's fiscal year, thereafter furnished to Buyer,
fairly present the financial position of Seller and its consolidated
subsidiaries on a consolidated basis as of March 31 of such year and for the one
year period then ended, subject to any qualifications set forth therein.
(ii) The unaudited quarterly financial statements of
the Seller and its consolidated Subsidiaries as of the most recent date of
delivery, are true complete and correct, and present fairly the consolidated
financial position of the Seller and its consolidated Subsidiaries as at such
dates and the consolidated results of their operations and their consolidated
cash flows for the fiscal quarter then ended, subject to any qualifications set
forth therein.
(B) Such financial statements, including the related
schedules and notes thereto, has been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved by such
accountants or Responsible Officer, as the case may be, and as disclosed
therein).
(C) Neither the Seller nor any of its consolidated
Subsidiaries had, at the date of the financial statement referred to above, any
material guarantee obligation, contingent liability or liability for taxes, or
any long-term lease or unusual forward or long-term commitment, including,
without limitation, any interest rate or foreign currency swap or exchange
transaction, or other financial derivative of the nature required to be
disclosed by GAAP in such financial statements, which is not reflected in the
foregoing statements or in the notes thereto.
(vi) [Intentionally Omitted.]
(vii) Investment Company Act and Other Limits on Incurring
Indebtedness. Seller is not required to be registered as an "investment company"
under the
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Investment Company Act of 1940, as amended, and Seller is not a company
"controlled" by an "investment company". Seller is not subject to regulation
under any Federal or state statute or regulation which limits its ability to
incur Indebtedness.
(viii) Transfer of Assets. All actions necessary to transfer
to Buyer the interests in the Eligible Assets and the Fallout Assets to be
purchased have been or are currently being taken and Seller has not offered or
sold, and will not offer or sell, any such Assets in any manner that would
render the issuance and sale of the such Assets a violation of Section 5 of the
Securities Act of 1933, as amended, or any state securities or "Blue Sky" laws
or require registration pursuant thereto, nor has it authorized, nor will it
authorize, any person to act in such manner;
(ix) Chief Executive Office; Chief Operating Office. The
Seller's chief executive office and Chief Operating Office on the date hereof
is, and for the immediately preceding four months, was located at 277 Park Ave.,
New York, New York 10172.
(x) Location of Books and Records. The location where the
Seller keeps its books and records (excluding all computer tapes and records
relating to the Assets which are held by the Subservicer) is its chief executive
office or its chief operating office.
(xi) Subsidiaries. Seller has identified on Schedule 1 of this
Agreement, each Material Subsidiary which exists on the date hereof.
(xii) No Legal Bar. The execution, delivery and performance of
this Agreement and the Facility Documents, the sale and borrowings hereunder and
the use of the proceeds thereof will not violate any Requirement of Law or
Contractual Obligation of the Seller or of any of its Material Subsidiaries and
will not result in, or require, the creation or imposition of any Lien (other
than the Liens created hereunder) on any of its or their respective Properties
or revenues pursuant to any such Requirement of Law or Contractual Obligation.
(xiii) Margin Regulations. No part of the proceeds of any
Transactions will be used for "purchasing" or "carrying" any "margin stock"
within the respective meanings of each of the quoted terms under, or for any
other purpose which violates or would be inconsistent with the provisions of
Regulations T, U, or X.
(xiv) Taxes. Each of the Seller and its Subsidiaries has filed
all Federal and state income tax returns and all other material tax returns that
are required to be filed by them and has paid all taxes due pursuant to such
returns or pursuant to any assessment received by any of them, except for any
such taxes or assessments, if any, that are being appropriately contested in
good faith by appropriate proceedings diligently conducted and with respect to
which adequate reserves in conformity with GAAP have been provided. The charges,
accruals and reserves on Seller's books in respect of taxes and other
governmental charges are, in Seller's opinion, adequate. No tax Lien has been
filed, and, to the knowledge of the Seller, no claim is being asserted, with
respect to any such tax or assessment.
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(xv) ERISA. Each Plan to which Seller, or any of its
Subsidiaries make direct contributions, and, to the knowledge of Seller, each
other Plan and each Multiemployer Plan, is in compliance in all material
respects with, and has been administered in all material respects in compliance
with, the applicable provisions of ERISA, the Code and any other federal or
state law.
(xvi) No Broker. Seller has not dealt with any broker,
investment banker, agent, or other person, except for Buyer, who may be entitled
to any commission or compensation in connection with the sale of Purchase Assets
pursuant to this Agreement.
(xvii) Collateral. (A) The provisions of this Agreement,
together with delivery of the Asset Files as contemplated herein are effective
to either (i) convey to the Buyer ownership of each Purchased Assets, or (ii)
create in favor of the Buyer a valid first priority perfected security interest
in all right, title and interest of the Seller, in, to, and under the
Collateral.
(B) Seller represents and warrants to Buyer (i) with
respect to each Collateralized Note (other than any Empire Collateralized Note)
purchased hereunder that such Collateralized Note is secured by Mortgage Loans
which conform in all respects to the appropriate representations and warranties
set forth above, including, without limitation, the representations and
warranties set forth in Exhibit V hereto and all other representations and
warranties that Buyer shall reasonably require from time to time, and (ii) with
respect to each Empire Collateralized Note purchased hereunder that such Empire
Collateralized Note is secured by Mortgage Loans which conform in all respects
to the representations and warranties set forth in Exhibit V(A) hereto.
(xviii) UCC Filing. Upon (1) receipt by the Custodian of each
Note, and (2) the filing of financing statements on Form UCC-1 naming the Buyer
as "Secured Party" and the Seller as "Debtor", and describing the Collateral, in
the jurisdictions and recording offices listed on Schedule 2 attached hereto, in
both instances, the security interests granted hereunder in the Collateral will
constitute fully perfected first-priority security interests (to the extent such
interest can be perfected by filing under the Uniform Commercial Code) under the
Uniform Commercial Code in all right, title and interest of the Seller in, to
and under such Collateral.
(xix) Origination Practices. The origination and collection
practices used by Seller or the Qualified Originator, if applicable, with
respect to each Asset (i) have been and are in all respects legal, proper,
prudent and customary in the origination and loan servicing business for that
type of asset, and (ii) are materially in accordance with the Underwriting
Guidelines attached hereto and the documentation is consistent in form and
substance with the Seller's loan documents approved by Buyer for use under this
Agreement, and each deviation therefrom would not be deemed to be material by a
prudent lender experienced in originating Assets of that nature, and in no event
will have a Material Adverse Effect.
(xx) [Intentionally Omitted]
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(xx) No Event of Default. Neither the Seller nor any of its
Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect which could reasonably be expected to have a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing
hereunder.
(xxi) No Violation of Environmental Laws. Neither Seller nor
any of its Subsidiaries has received any notice of violation, alleged violation,
non-compliance, liability or potential liability regarding environmental matters
or compliance with any environmental laws with regard to any of its Properties,
nor does Seller have knowledge or reason to believe that any such notice will be
received or is being threatened.
(xxii) True Sales. Any Asset funded in the name of or acquired
by a Qualified Originator which is an Affiliate of the Seller has been conveyed
to the Seller pursuant to a legal sale, and if so requested by the Buyer, is
covered by an opinion of counsel to that effect in form and substance acceptable
to the Buyer.
(xxiii) Selection Process. The Purchased Assets were selected
from among the Assets in Seller's portfolio as to which the representations and
warranties set forth in this Agreement could be made and such selection was not
intentionally made in a manner so as to result in a Material Adverse Effect upon
Buyer, or so as to intentionally result in Assets less desirable or less
valuable than other comparable assets owned by the Seller.
(xxiv) Computer System. Seller and Subservicer have each made
a full and complete assessment of all issues which may be related to the
occurrence of the year 2000, including all issues related to its computer
program and software (the "Year 2000 Issues"), and has a realistic and
achievable program for remediating the Year 2000 Issues on a timely basis (the
"Year 2000 Program"). Based on such assessment and on the Year 2000 Program,
Seller does not reasonably anticipate that Year 2000 Issues will have a material
adverse effect on Seller's operations or financial condition.
(c) Interim Servicer Representations and Warranties. Interim
Servicer represents and warrants to Buyer that, as of the Purchase Date for the
purchase of any Assets by Buyer from Seller and as of the date of this Agreement
and any Transaction hereunder and at all times while this Agreement and any
Transaction thereunder is in full force and effect, each of the representations
and warranties set forth in Subsection 7.01(b) of the Purchase Facility are true
and correct in all material respects.
11. NEGATIVE COVENANTS OF SELLER
On and as of the date of this Agreement and each Purchase Date and
until this Agreement is no longer in force with respect to any Transaction,
Seller covenants that it will not:
(a) exercise any right to change or consent to a change in a
Servicer of Purchased Assets without the prior written consent of the Buyer, or
permit any Person other than the Servicer or the Subservicer, as the case may
be, to service Purchased Assets without the prior written consent of Buyer;
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(b) after the occurrence and during the continuation of an Event of
Default make any Restricted Payment;
(c) take any action which would directly or indirectly impair or
adversely affect (i) Buyer's title to or lien on any Purchased Assets or any
other Collateral or (ii) the value of any Purchased Assets or any other
Collateral except, in the case of this clause (ii), any action solely relating
to, resulting solely from, or arising solely out of the financial condition of
the Seller;
(d) pledge, assign, convey, grant, bargain, sell, set over, deliver
or otherwise transfer any interest in the Purchased Assets to any Person other
than Buyer, nor will Seller create, incur, or permit to exist any Lien,
encumbrance or security interest in or on the Purchased Assets or any of the
Collateral;
(e) permit or allow others to amend, modify, terminate, or waive any
provision of any Purchased Asset in any manner which should reasonably be
expected to materially and adversely affect the value of such Purchased Asset;
(f) take any action which could reasonably be expected to result in
a Material Adverse Effect;
(g) engage, to any substantial extent, in any line or lines of
business activity other than the businesses now generally carried out by it, or
cease or take any action to cease (or permit any Subsidiary of Seller to cease
or to take any action to cease) to be in the business of originating Mortgage
Loans;
(h) (A) permit any of its Subsidiaries to sell, lease or otherwise
transfer any property or assets to, or purchase, lease or otherwise acquire any
property or assets from, or otherwise engage in any other transactions with, any
of its Affiliates (an "Affiliate Transaction") unless the terms thereof (i) are
no less favorable to the Seller or such Subsidiary than those that could be
obtained at the time of such transaction in arm's-length dealings with a Person
who is not such an Affiliate, (ii) if such Affiliate Transaction involves an
amount in excess of $2,000,000 (or the equivalent amount in any foreign
currency) (x) are set forth in writing and (y) have been approved by a majority
of the members of the Board of Directors having no personal stake in such
Affiliate Transaction and (iii) if such Affiliate Transaction involves an amount
in excess of $10,000,000 (or the equivalent amount in any foreign currency),
have been determined by a nationally recognized investment banking firm to be
fair from a financial standpoint, to the Seller and its Subsidiaries.
(B) Without limiting the generality of any other provisions
set forth in this Agreement, the provisions of this Section (A)(i) shall not
prohibit (i) any Permitted Investment, (ii) any issuance of securities, or other
payments, awards or grants in cash, securities or otherwise pursuant to, or the
funding of, employment arrangements, stock options and stock ownership plans
approved by the Board of Directors, (iii) the grant of stock options or similar
rights to employees and directors of the Seller pursuant to plans approved by
the Board of Directors, (iv) loans or advances to employees in the ordinary
course of business in accordance
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with the past practices of the Seller or its Subsidiaries, but in any event not
to exceed $10,000,000 (or the equivalent amount in any foreign currency) in
aggregate principal amount outstanding at any one time, (v) the payment of
reasonable fees to directors of the Seller and its Subsidiaries who are not
employees of the Seller or its Subsidiaries, (vi) any Affiliate Transactions
between the Seller and a Subsidiary or between consolidated Subsidiaries (in
each case other than any Subsidiary that is an "affiliate" (as such term is
defined in the Securities and Exchange Act) of any Affiliate (other than any
Subsidiary) of the Seller and (vii) transactions pursuant to any agreement as in
existence as of the date between the Seller or its Subsidiaries and Continental
Grain Company, a Delaware corporation, or one of its Subsidiaries.
(i) become an "investment company" or a company "controlled" by an
"investment company, within the meaning of the Investment Company Act, as
amended.
(j) move its chief executive office from its address as of the date
hereof unless it shall have provided Buyer 30 days' prior written notice of such
change and an amendment to the UCC-1 filed pursuant thereto.
12. AFFIRMATIVE COVENANTS OF SELLER
(a) Financial Statements. Seller covenants that promptly upon
preparation, but in no event later than 90 days following the end of each fiscal
quarter (other than the end of each fiscal year which is expressly addressed
below), Seller shall deliver to Buyer the financial statements of Seller and its
consolidated Subsidiaries as of the end of each fiscal quarter. In the event the
parties hereto agree to extend the term of this Agreement, Seller shall deliver
to Buyer promptly upon preparation, but in no event later than 105 days
following the end of such fiscal year, the audited financial statements of
Seller and its consolidated Subsidiaries as of the end of each fiscal year. Each
financial statement delivered pursuant to this Section 12(a) shall be
accompanied by a certificate of a Responsible Officer of the Seller, which
certificate shall state that said consolidated financial statement fairly
presents the consolidated and consolidating financial condition and results of
operations of the Seller and its consolidated Subsidiaries in accordance with
GAAP, consistently applied, as at the end of, and for, such period (subject to
normal year-end audit adjustments and any relevant qualifications) and which
shall also set forth the calculations demonstrating compliance with the
covenants set forth in Section 12(e) hereof.
(b) Reports. Seller, with respect to any Purchased Assets serviced
by Seller, Subservicer or any of Seller's Affiliates, shall periodically
deliver, or with respect to any other Purchased Assets, otherwise use its best
efforts to cause to be periodically delivered, to Buyer, the report, if any,
prepared by the relevant trustee or servicer setting forth payment activity
including the last paid-to date, defaults and delinquencies with respect to the
underlying loans or receivables in respect of each Purchased Asset and shall
prepare and deliver reports each month, detailing, with respect to all
Transactions, such information as Buyer may, from time to time, reasonably
request, including, but not limited to, purchase activity and valuation of
Purchased Assets, which reports shall be rendered no later than the 15th
calendar day of any month; provided, however, that such information (i) is of
the type usually provided by servicers and
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master servicers of such type of Purchased Asset and (ii) is available without
undue hardship or expenses being incurred by Seller, any of its Affiliates or
any servicer of the Purchased Assets.
(c) Compliance With Laws. Seller will comply in all material
respects with all laws, rules and regulations to which it is or may become
subject.
(d) Conduct of Business. Seller will do, and will cause each of its
Material Subsidiaries to do, all things necessary to remain duly incorporated,
validly existing and in good standing in its jurisdiction of incorporation and
will maintain all requisite authority to conduct its business in each
jurisdiction in which its business is conducted, except where such failure to
maintain such authority or be in good standing could not reasonably be expected
to have a Material Adverse Effect.
(e) [Intentionally Omitted]
(f) Year 2000 Compliance. The Seller shall take and shall cause each
of its Material Subsidiaries and Subservicer to take all such actions as are
reasonably necessary to successfully implement the Year 2000 Program and to
assure that the Year 2000 Issues will not have a material adverse effect on the
Seller's operations or financial condition. By September 30, 1999, the Seller
will provide written assurance that it is Year 2000 compliant (i.e., completed
all testing satisfactorily and taken all other steps reasonably necessary to
ensure Year 2000 readiness). If satisfactory assurances can not be made, Buyer
will have the right to cease further Transactions. After a 30 calendar day
remedy period, the non-compliance will constitute an Event of Default.
(g) Taxes. Each of the Seller and its Subsidiaries shall file all
Federal and state income tax returns and all other material tax returns that are
required to be filed by them and shall pay all taxes due pursuant to such
returns or pursuant to any assessment received by any of them, except for any
such taxes or assessments, if any, that may be appropriately contested in good
faith by appropriate proceedings diligently conducted and with respect to which
adequate reserves in conformity with GAAP have been provided.
(h) Notifications. Seller will notify Buyer in writing of any of the
following promptly upon learning of the occurrence thereof, describing the same
and, if applicable, any remedial steps being taken with respect thereto:
(i) The occurrence of an Event of Default or Default
hereunder;
(ii) The institution of any litigation, arbitration proceeding
or governmental proceeding which, in the opinion of counsel to Seller,
will have a Material Adverse Effect;
(iii) The occurrence of any event which would allow the
obligee under any material loan agreement to which Seller or any of its
Material Subsidiaries is bound to declare an event of default or
accelerate the obligations of Seller or any of its Material Subsidiaries
thereunder;
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(iv) The occurrence of an event of default under any servicing
agreement which relates to Purchased Assets to which the Seller or
Subservicer is a party;
(v) Promptly upon receipt of notice or knowledge that an
underlying Mortgaged Property has been damaged by waste, fire, earthquake
or earth movement, windstorm, flood, tornado or other casualty, or
otherwise damaged so as to affect adversely its Market Value;
(vi) Promptly upon receipt of notice or knowledge of (i) any
default related to any Purchased Asset, (ii) any Lien or security interest
(other than security interests created hereby) on, or claim asserted
against, any of the Purchased Assets or (iii) any event or change in
circumstances which could reasonably be expected to have a Material
Adverse Effect;
(vii) Promptly upon discovery that any representation or
warranty contained herein is untrue or incorrect in any material respect;
(viii) Promptly upon receipt of notice or knowledge of the
occurrence of Seller's inability or failure to meet the terms of any
covenant in any of the Facility Documents;
(ix) Promptly upon the entry of any judgment or decree against
Seller or any Material Subsidiary of Seller if the aggregate amount of all
judgments and decrees then outstanding against Seller or Seller's Material
Subsidiary exceeds $2,500,000;
(x) Promptly upon receipt of notice or knowledge that the
arrival of the year 2000 will materially and adversely affect Seller's
business or any Transactions executed herewith; and
(xi) Promptly upon the acquisition or formation of any
additional Material Subsidiaries.
(i) The Seller will defend the Purchased Assets against, and will
take such other action as is necessary to remove, any Lien, security interest or
claim on or to the Purchased Assets, other than the security interests created
hereunder, and the Seller will defend the right, title and interest of the Buyer
in and to any of the Purchased Assets against the claims and demands of all
Persons whomsoever.
(j) If at any time there exists a Collateral Deficiency, the Seller
shall cure same in accordance with Section 4(a) hereof.
(k) In the event that the Assets to be purchased would cause the
aggregate outstanding principal balance of Assets to consist of Mortgaged
Property from any state to exceed such concentration percentage as determined by
the Buyer in its sole good faith discretion then, upon request by the Buyer, the
Seller deliver an opinion of counsel acceptable to the Buyer in such state,
substantially in the form of items #12 and 13 of Exhibit VIII.
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(l) Within one (1) Business Day following a Change of Control of the
Seller, the Seller shall pay the Repurchase Price for all Transactions then
outstanding plus all other amounts due and owing to the Buyer hereunder.
(m) Within one (1) Business Day following a Default hereunder, the
Seller shall deliver to Buyer a duly executed Assignment and Conveyance.
13. EVENTS OF DEFAULT
(a) If any of the following events (each an "Event of Default")
occur, Seller and Buyer shall have the rights set forth in Section 14, as
applicable:
(i) Seller fails to pay the Repurchase Price in full when due
or Buyer fails to deliver the Purchased Assets against full payment
therefor;
(ii) Seller or Buyer fails to satisfy or perform any material
obligation or covenant under this Agreement (including any breach of the
obligations set forth in Section 4), or Seller or Buyer shall fail to
satisfy or perform any payment or purchase or repurchase obligation when
due hereunder;
(iii) an Act of Insolvency occurs with respect to Seller or
Buyer;
(iv) any Breach, occurs, other than a Breach of an Asset
Representation, or any Breach of an Asset Representation occurs, and such
Breach is not corrected within five (5) Business Days, or any certificate
furnished to the Buyer shall prove to have been false or misleading in any
material respect as of the time made or furnished;
(v) Seller or Buyer shall admit its inability to, or its
intention not to, perform any of its obligations hereunder;
(vi) any governmental, regulatory, or self-regulatory
authority takes any action to remove, limit, restrict, suspend or
terminate the rights, privileges, or operations of Seller or any of its
Material Subsidiaries, including suspension as an issuer, lender or
seller/servicer of related types of assets, which in each case materially
adversely affects the value of the Purchased Assets or Buyer's interest in
the Purchase Assets;
(vii) any Change of Control of the Seller or any Material
Subsidiary shall have occurred without the prior consent of the Buyer
which consent with respect to any Change of Control of a Material
Subsidiary shall not be unreasonably withheld;
(viii) Buyer, in its good faith judgment, believes that a
Material Adverse Effect has occurred;
(ix) The occurrence and continuance of a material "event of
default" or of an "event of termination" on the part of Seller under the
Purchase Facility or any other agreement between Seller (or an
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Affiliate thereof) on the one hand, and Buyer (or an Affiliate thereof) on
the other hand, which has not been waived by Buyer (or its Affiliate),
provided that such event of default or event of termination does not arise
solely as a result of a default under an agreement to which Seller (or its
Affiliate) is not a party;
(x) This Agreement shall for any reason cease to create a
valid, first priority security interest in any of the Purchased Assets
purported to be covered hereby.
(b) In making a determination as to whether an Event of Default has
occurred, Buyer shall be entitled to rely on reports published or broadcast by
media sources believed by Buyer to be generally reliable and on information
provided to it by any other sources believed by it to be generally reliable,
provided that Buyer reasonably and in good faith believes such information to be
accurate and has taken such steps as may be reasonable in the circumstances to
attempt to verify such information.
14. REMEDIES
(a) If an Event of Default occurs with respect to Seller, the
following rights and remedies are available to Buyer:
(i) At the option of Buyer, exercised by written notice to
Seller (which option shall be deemed to have been exercised, even if no
notice is given, immediately upon the occurrence of an Act of Insolvency),
the Repurchase Date for each Transaction hereunder shall be deemed
immediately to occur. Notwithstanding that the Repurchase Date shall be
deemed immediately to have occurred upon the exercise or deemed exercise
of such option by Buyer, for purposes of determining the Repurchase Price,
the Repurchase Date shall be the date specified in the Purchase Request
for such Transaction.
(ii) If Buyer exercises or is deemed to have exercised the
option referred to in subsection (a)(i) of this Section:
(A) Seller's obligations hereunder to repurchase all
Purchased Assets in such Transactions shall thereupon become immediately
due and payable;
(B) to the extent permitted by applicable law, the
Pricing Rate shall be the Post Default Rate; and
(C) all Income actually received by Buyer pursuant to
Section 5 shall be applied to the aggregate unpaid Repurchase Price owed
by Seller.
(iii) After two (2) Business Days' notice to Seller (which
notice need not be given if an Act of Insolvency shall have occurred, and
which may be the notice given under subsection (a)(i) of this Section),
Buyer may (A) immediately sell, without notice or demand of any kind, at a
public or private sale, on a servicing-released basis, and at such price
or prices as Buyer may reasonably deem satisfactory any or all Purchased
Assets subject to a Transaction hereunder or (B) in its sole discretion
elect, in lieu of selling all or a portion of such Purchased Assets, give
Seller credit for such
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Purchased Assets in an amount equal to the Market Value of the Purchased
Assets against the aggregate unpaid Repurchase Price and any other amounts
owing by Seller hereunder. The proceeds of any disposition of Purchased
Assets shall be applied first to the costs and expenses incurred by Buyer
in connection with Seller's Default; second to consequential damages,
including, but not limited to, costs of cover and/or related hedging
transactions; third to the Repurchase Price; and fourth to any other
outstanding obligation of Seller to Buyer or its Affiliates.
(iv) Buyer or an Affiliate thereof may deliver the Purchased
Assets which are subject to a Takeout Commitment, or a purchase commitment
by a purchaser, to the Takeout Investor, or such other purchaser, as the
case may be, in exchange for securities or cash, which securities or cash
shall then be treated as Purchased Assets, and Seller hereby irrevocably
appoints Buyer to act as its attorney-in-fact and agent to take such
action upon the occurrence of an Event of Default as may be necessary to
obtain such securities or cash.
(v) The parties recognize that it may not be possible to
purchase or sell all of the Purchased Assets on a particular Business Day,
or in a transaction with the same purchaser, or in the same manner because
the market for such Purchased Assets may not be liquid. In view of the
nature of the Purchased Assets, the parties agree that liquidation of a
Transaction or the underlying Purchased Assets does not require a public
purchase or sale and that a good faith private purchase or sale shall be
deemed to have been made in a commercially reasonable manner. Accordingly,
Buyer may elect, in its sole discretion, the time and manner of
liquidating any Purchased Asset and nothing contained herein shall (A)
obligate Buyer to liquidate any Purchased Asset on the occurrence of an
Event of Default or to liquidate all Purchased Assets in the same manner
or on the same Business Day or (B) constitute a waiver of any right or
remedy of Buyer. However, in recognition of the parties' agreement that
the Transactions hereunder have been entered into in consideration of and
in reliance upon the fact that all Transactions hereunder constitute a
single business and contractual relationship and that each Transaction has
been entered into in consideration of the other Transactions, the parties
further agree that Buyer shall use its best efforts to liquidate all
Transactions hereunder upon the occurrence of an Event of Default as
quickly as is prudently possible in the sole good faith discretion of
Buyer.
(vi) Buyer shall, without regard to the adequacy of the
security for Seller's obligations under this Agreement, be entitled to the
appointment of a receiver by any court having jurisdiction, without
notice, to take possession of and protect, collect, manage, liquidate, and
sell the Collateral or any portion thereof, and collect the payments due
with respect to the Collateral or any portion thereof. Seller shall pay
all costs and expenses incurred by Buyer in connection with the
appointment and activities of such receiver, including, without
limitation, reasonable out-of-pocket legal fees.
(vii) Seller agrees that Buyer may obtain an injunction or an
order of specific performance to compel Seller, as the Interim Servicer,
to fulfill its obligations as
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set forth in Section 25, if Seller, as the Interim Servicer, fails or
refuses to perform its obligations as set forth therein.
(viii) Seller shall be liable to Buyer for (A) the amount of
all expenses, including reasonable legal or other expenses incurred by
Buyer in connection with or as a consequence of an Event of Default, and
(B) actual damages, including, without limitation, all reasonable legal
fees and expenses and other costs incurred in connection with hedging or
covering transactions.
(ix) Buyer shall have all the rights and remedies provided
herein, provided by applicable federal, state, foreign, and local laws
(including, without limitation, the rights and remedies of a secured party
under the Uniform Commercial Code of the State of New York, to the extent
that the Uniform Commercial Code is applicable, and the right to offset
any mutual debt and claim), in equity, and under any other agreement
between Buyer and Seller.
(x) Buyer may exercise one or more of the remedies available
to Buyer immediately upon the occurrence of an Event of Default and,
except to the extent provided in subsections (a)(i) and (iii) of this
Section, at any time thereafter without notice to Seller. All rights and
remedies arising under this Agreement as amended from time-to-time
hereunder are cumulative and not exclusive of any other rights or remedies
which Buyer may have.
(xi) In addition to its rights hereunder, Buyer shall have the
right to proceed against any assets of Seller which may be in the
possession of Buyer, its Affiliates or their designee (including the
Custodian), including the right to liquidate such assets and to set off
the proceeds against monies owed by Seller to Buyer pursuant to this
Agreement. Buyer may set off cash, the proceeds of the liquidation of the
Purchased Assets, any Collateral or its proceeds, and all other sums or
obligations owed by Buyer or its Affiliates to Seller against all of
Seller's obligations to Buyer, whether under this Agreement, under a
Transaction, or under any other agreement between the parties, or
otherwise, whether or not such obligations are then due, without prejudice
to Buyer's right to recover any deficiency. Any cash, proceeds, or
property in excess of any amounts due, or which Buyer reasonably believes
may become due, to it from Seller shall be returned to Seller after
satisfaction of all obligations of Seller to Buyer.
(xii) Buyer may enforce its rights and remedies hereunder
without prior judicial process or hearing, and Seller hereby expressly
waives any defenses Seller might otherwise have to require Buyer to
enforce its rights by judicial process. Seller also waives any defense
Seller might otherwise have arising from the use of nonjudicial process,
enforcement and sale of all or any portion of the Collateral, or from any
other election of remedies. Seller recognizes that nonjudicial remedies
are consistent with the usages of the trade, are responsive to commercial
necessity and are the result of a bargain at arm's length.
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(b) Upon the occurrence of one or more Events of Default, and in
addition to the remedies otherwise provided herein, Buyer shall have the right
to obtain physical possession of the Servicing Records and all other files of
Seller relating to the Purchased Assets and all documents relating to the
Purchased Assets which are then or may thereafter come in to the possession of
Seller or any third party acting for Seller and Seller shall deliver to Buyer
such assignments as Buyer shall request. Seller shall be responsible for paying
any fees of any Subservicer resulting from the termination of a Subservicer due
to an Event of Default. Buyer shall be entitled to specific performance of all
agreements of Seller contained in this Agreement.
(c) If an Event of Default occurs with respect to Buyer, the
following rights and remedies are available to Seller:
(i) Upon tender by Seller of payment of the aggregate
Repurchase Price for all such Transactions, Buyer's right, title and
interest in all Purchased Assets subject to such Transactions shall be
deemed transferred to Seller, and Buyer shall deliver or cause to be
transferred all such Purchased Assets to Seller or its designee at Buyer's
expense.
(ii) If Seller exercises the option referred to in subsection
(b)(i) of this Section and Buyer fails to deliver or cause to be delivered
the Purchased Assets to Seller or its designee, after three (3) Business
Day's notice to Buyer, Seller may (A) purchase Assets or securities
("Replacement Assets") that are as similar as is reasonably practicable in
characteristics, outstanding principal amounts (as a pool) and Note
Interest Rate to any Purchased Assets that are not delivered by Buyer to
Seller or its designee as required hereunder or (B) in its sole discretion
elect, in lieu of purchasing Replacement Assets, to be deemed to have
purchased Replacement Assets at a price therefor on such date, equal to
the Market Value of the Purchased Assets.
(iii) Buyer shall be liable to Seller (A) with respect to
Purchased Assets (other than Additional Eligible Assets), for any excess
of the price paid (or deemed paid) by Seller for Replacement Assets
therefor over the Repurchase Price for such Purchased Assets, (B) with
respect to Additional Eligible Assets, for the price paid (or deemed paid)
by Seller for the Replacement Assets therefor, and (C) for actual damages,
including, without limitation, all costs incurred in connection with
hedging or covering transactions. In addition, Buyer shall be liable to
Seller for interest on such remaining liability with respect to each such
purchase (or deemed purchase) of Replacement Assets calculated on a
360-day year basis for the actual number of days during the period from
and including the date of such purchase (or deemed purchase) until paid in
full by Buyer. Such interest shall be at the greater of the Pricing Rate
or the Prime Rate.
15. DUE DILIGENCE
(a) Seller acknowledges that Buyer has the right to perform
continuing due diligence reviews with respect to the Assets for purposes of
verifying compliance with the representations, warranties and specifications
made hereunder, or otherwise (the "Due Diligence Review"), and Seller agrees
that upon prior notice to Seller, provided that, if a Default or Event
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of Default shall have occurred, then without notice, Buyer or its authorized
representatives will be permitted during normal business hours to examine,
inspect, and make copies and extracts of, the Asset Files, Servicing Records and
any and all documents, records, agreements, instruments or information relating
to such Assets in the possession or under the control of Seller, any other
Servicer or subservicer and/or the Custodian. Seller agrees that Buyer may, at
Buyer's sole expense and with prior notice to Seller, conduct additional Due
Diligence Reviews. Seller also shall make available to Buyer a knowledgeable
financial or accounting officer for the purpose of answering questions
respecting the Asset Files and the Assets. Without limiting the generality of
the foregoing, Seller acknowledges that Buyer may enter into Transactions with
the Seller based solely upon the information provided by Seller to Buyer and the
representations, warranties and covenants contained herein, and that Buyer, at
its option, has the right at any time to conduct a partial or complete due
diligence review on some or all of the Assets. Buyer may underwrite such Assets
itself or engage a mutually agreed upon third party underwriter to perform such
underwriting. Seller agrees to cooperate with Buyer and any third party
underwriter in connection with such underwriting, including, but not limited to,
providing Buyer and any third party underwriter with access to any and all
documents, records, agreements, instruments or information relating to such
Assets in the possession, or under the control, of Seller. Seller further agrees
that Seller shall reimburse Buyer for any and all out-of-pocket costs and
expenses reasonably incurred by Buyer in connection with Buyer's activities
pursuant to this Section 15.
16. SINGLE AGREEMENT
Buyer and Seller acknowledge that, and have entered hereunto and
will enter into each Transaction hereunder in consideration of and in reliance
upon the fact that, all Transactions hereunder constitute a single business and
contractual relationship and that each has been entered into in consideration of
the other Transactions. Accordingly, each of Buyer and Seller agrees (i) to
perform all of its obligations in respect of each Transaction hereunder, and
that a Default in the performance of any such obligations shall constitute a
Default by it in respect of all Transactions hereunder, (ii) that each of them
shall be entitled to set off claims and apply property held by them in respect
of any Transaction against obligations owing to them in respect of any other
Transactions hereunder and (iii) that payments, deliveries, and other transfers
made by either of them in respect of any Transaction shall be deemed to have
been made in consideration of payments, deliveries, and other transfers in
respect of any other Transactions hereunder, and the obligations to make any
such payments, deliveries, and other transfers may be applied against each other
and netted.
17. NOTICES AND OTHER COMMUNICATIONS
Unless another address is specified in writing by the respective
party to whom any written notice or other communication is to be given
hereunder, all such notices or communications shall be in writing or confirmed
in writing and delivered to the intended recipient at the "Address for Notices"
specified below its name on the signature pages hereof. Any notices or other
communications permitted or required hereunder shall be in writing and shall be
deemed conclusively to have been given if (a) personally delivered, (b) mailed
by registered or certified mail, postage prepaid, and return receipt requested,
(c) sent by express
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courier delivery service and received by the party to whom it is sent, or (d)
transmitted by confirmed telex or facsimile transmission (or any other type of
electronic transmission agreed upon by the parties).
18. ENTIRE AGREEMENT; SEVERABILITY
This Agreement constitutes the entire understanding between Buyer
and Seller with respect to the subject matter it covers and shall supersede any
existing agreements (including any summary of terms and conditions) between the
parties containing general terms and conditions for repurchase transactions
involving Assets. By acceptance of this Agreement, Buyer and Seller acknowledge
that they have not made, and are not relying upon, any statements,
representations, promises or undertakings not contained in this Agreement. Each
provision and agreement herein shall be treated as separate and independent from
any other provision or agreement herein and shall be enforceable notwithstanding
the unenforceability of any such other provision or agreement.
19. EFFECTIVENESS; BINDING EFFECT; ASSIGNABILITY
This Agreement shall become effective when it shall have been
executed by the Buyer and Seller and thereafter shall be binding upon and inure
to the benefit of the Buyer and Seller and their respective successors and
permitted assigns. The Seller may not assign or transfer any of its rights or
obligations hereunder without the prior written consent of the Buyer, which
consent may be granted or withheld in the Buyer's sole discretion. The Buyer may
assign all or any portion of its rights and obligations hereunder with the prior
consent of the Seller which shall not be unreasonably withheld or delayed. Any
request by Buyer for consent hereunder shall be deemed consented to by Seller if
not objected to by Seller in writing within two (2) Business Days' following
receipt thereof. If the Buyer so sells or assigns all or a portion of its rights
hereunder, any reference in this Agreement to the Buyer shall thereafter refer
to the Buyer and to the respective assignee to the extent of their respective
interests and the assignee shall have, to the extent of such assignment (unless
otherwise provided therein) the same rights and benefits as it would if it were
the Buyer. Each assignment pursuant to this Section shall be effected by the
Buyer (or its successor) and the assignee executing an assignment agreement
(appropriately completed) satisfactory to the Buyer. The Seller agrees to
execute such documents (including, without limitation, amendments to this
Agreement and the other Facility Documents) as shall be necessary to effect the
foregoing. Nothing in this Agreement, express or implied, shall give to any
Person, other than the parties to this Agreement and their successor hereunder,
any benefit or any legal or equitable right, power, remedy, or claim under this
Agreement.
20. TERMINABILITY
This Agreement shall be terminated on the Final Repurchase Date, and
any outstanding Transactions shall become due on such date. Notwithstanding any
such termination or the occurrence of an Event of Default, all of the
representations, warranties and covenants, and indemnities hereunder (including
those made in the Asset Representations) shall continue and survive.
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21. GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.
22. CONSENT TO JURISDICTION
The parties irrevocably agree to submit to the personal jurisdiction
of the United States District Court for the Southern District of New York, the
parties irrevocably waiving any objection thereto and waive all rights to a
trial by jury. If, for any reason, federal jurisdiction is not available, and
only if federal jurisdiction is not available, the parties irrevocably agree to
submit to the personal jurisdiction of the Supreme Court of the State of New
York, the parties irrevocably waiving any objection thereto and waive all rights
to a trial by jury.
23. NO WAIVERS, ETC.
No express or implied waiver of any Event of Default by either party
shall constitute a waiver of any other Event of Default and no exercise of any
remedy hereunder by any party shall constitute a waiver of its right to exercise
any other remedy hereunder. No modification or waiver of any provision of this
Agreement and no consent by any party to a departure herefrom shall be effective
unless and until such shall be in writing and duly executed by both of the
parties hereto. Any such waiver or modification shall be effective only in the
specific instance and for the specific purpose for which it was given.
24. INTENTIONALLY OMITTED
25. SERVICING
(a) The Interim Servicer, at the Buyer's option and request, as
independent contract interim servicer, shall interim service and administer the
Purchased Assets during the Interim Servicing Period in accordance with the
Accepted Servicing Practices. Upon the termination of the Interim Servicing
Period, the Interim Servicer shall cooperate fully with the Buyer and any
servicer to whom servicing or master servicing of any Purchased Asset is to be
transferred and shall promptly provide Buyer or such successor servicer, as
applicable, all documents and records reasonably requested by it to enable it to
assume the Interim Servicer's functions as servicer hereunder and shall within
one (1) Business Day of receipt transfer to the Buyer or such successor
servicer, as applicable, all amounts which should have been deposited in the
Buyer's Account by the Interim Servicer or which are thereafter received with
respect to the Purchased Assets, it being agreed that the Seller will pay all
fees and expenses incurred in connection with such transfer. A servicing
transfer shall be complete when the Buyer or its designated servicer confirms to
the Interim Servicer that it has received all necessary data and documents to
perform its primary servicing or master servicing function, as applicable, and
all required notices have been mailed by the Interim Servicer. Notwithstanding
the purchase of Purchased Assets by Buyer, during the Interim Servicing Period
the Interim Servicer shall continue to service the Purchased Assets for the
benefit of Buyer, and, if Buyer shall exercise its
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rights to pledge or hypothecate the Purchased Assets prior to the related
Repurchase Date pursuant to Section 8, for the benefit of Buyer's assigns. The
Interim Servicer may retain legal title to the Purchased Assets solely for the
purpose of servicing or supervising the servicing of such Purchased Assets
during the Interim Servicing Period. Any beneficial or equitable interest in
Purchased Assets shall remain in Buyer. The Buyer will pay the Interim Servicer
a monthly interim servicing fee to service the Purchased Assets to be calculated
in accordance with the terms and provisions of the Purchase Facility. To the
extent the Interim Servicer (or an Affiliate thereof) is authorized to
sub-service the Purchased Assets on behalf of the Servicer after the termination
of the Interim Servicing Period, the Buyer will pay such Subservicer a monthly
sub-servicing fee to be calculated in accordance with the terms and provisions
of the Purchase Facility. All servicing fees and compensation with respect to
the servicing of the Assets shall be customary, reasonable and consistent with
industry practice.
(b) The Seller agrees that the Seller assigns to the Buyer, and the
Buyer is the owner of the entire right, title and interest of the Seller, if
any, in and to all servicing rights and Servicing Records relating to the
Purchased Assets, including, but not limited to, any and all Servicing
Agreements, files, documents, records, data bases, computer tapes, copies of
computer tapes, proof of insurance coverage, insurance policies, appraisals,
other closing documentation, payment history records, and any other records
relating to or evidencing the servicing, of Purchased Assets (the "Servicing
Records"). Seller grants Buyer a security interest in all servicing fees and
rights relating to the Purchased Assets and all Servicing Records to secure the
obligation of Seller or its designee to service in conformity with this Section
and any other obligation of Seller to Buyer. Seller covenants to safeguard such
Servicing Records and to deliver them promptly to Buyer or its designee
(including the Custodian) at Buyer's request.
(c) If the Purchased Assets are serviced by a third party
Subservicer (including an Affiliate of Interim Servicer), Interim Servicer (i)
shall provide a copy of the servicing agreement to Buyer (the "Servicing
Agreement"); (ii) hereby irrevocably assigns to Buyer and Buyer's successors and
assigns all right, title, interest and the benefits of the Servicing Agreements
with respect to the Purchased Assets; and (iii) shall provide to Buyer a letter
from the Subservicer in the form attached hereto as Exhibit II (the
"Subservicing Notification Letter") to the effect that upon the earlier to occur
of (i) the termination of the Interim Servicing Period or (ii) the occurrence of
an Event of Default, Buyer may terminate the Servicing Agreement and transfer
such servicing to its designee, at no cost or expense to Buyer, it being agreed
that Seller will pay any and all fees required to terminate the Servicing
Agreement and will cooperate to effectuate the transfer of servicing to Buyer or
its designee including paying the costs of shipping the Servicing Records to
Buyer or its designee. If an Affiliate of Interim Servicer is servicing the
Purchased Assets, such Affiliate, Interim Servicer and Buyer shall enter a
Seller/Affiliate Agreement in the form of Exhibit VI hereto.
(d) Interim Servicer shall not employ sub-servicers other than the
Subservicer to service the Purchased Assets during the Interim Servicing Period
or thereafter without the prior written approval of Buyer. Seller shall cause
any sub-servicers engaged by Interim Servicer to execute a letter agreement with
Buyer acknowledging Buyer's ownership of the Purchased Assets and agreeing that,
upon notice from Buyer (or the Custodian on its behalf) that the Interim
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Servicing Period has terminated or an Event of Default has occurred and is
continuing hereunder, it shall deposit all Income with respect to the Purchased
Assets in the account specified in Section 5.
(e) Upon the earlier to occur of (i) the termination of the Interim
Servicing Period or (ii) the occurrence and continuance of an Event of Default
or (iii) the failure of the Interim Servicer or any sub-servicer to meet
Accepted Servicing Practices, Buyer may, in its sole discretion, (i) sell its
right to the Purchased Assets on a servicing-released basis or (ii) terminate
the Interim Servicer or any Subservicer or sub-servicer as servicer of the
Purchased Assets with or without cause, in each case without payment of any
termination fee, in which case Interim Servicer will promptly, within one (1)
Business Day, transfer servicing, or cause servicing to be transferred, to the
servicer designated by Buyer.
(f) The Interim Servicer shall use one or more of the following
types of accounts, in each case maintained at an institution that is independent
of and unaffiliated with Seller, into which all sums collected in respect of
Assets shall be deposited and maintained (the "Buyer's Account"): (i) a trust
account or accounts maintained for the benefit of Buyer with the trust
department of a federally chartered depository institution or trust company
acting in its fiduciary capacity or (ii) a trust account or accounts maintained
for the benefit of Buyer with the trust department of a state chartered
depository institution or trust company acting in its fiduciary capacity and
subject to regulations regarding fiduciary funds on deposit therein
substantially similar to 12 CFR ss. 9.10(b), or (iii) an account or accounts (a)
maintained with a depository institution the debt obligations of which are rated
by Standard & Poor's Ratings Group in one of its two highest rating categories
at the time of any deposit therein or (b) the deposits of which are insured by
the FDIC, to the limits established by the FDIC, and the uninsured deposits in
which are otherwise secured such that, as evidenced by an opinion of counsel,
Buyer has a claim with respect to the funds in such account or a perfected first
security interest against any collateral securing such funds that is superior to
claims of any other depositor or creditors of the depository institution with
which such account is maintained.
(g) Interim Servicer shall provide to Buyer on the 15th calendar day
of each month, (i) a remittance report with respect to all Purchased Assets
subject to any Transaction hereunder containing all of the information necessary
for Buyer to determine the Market Value of such Purchased Assets, and (ii) all
other reports specified in the Interim Servicing Addendum attached hereto as
Exhibit XI.
(h) Each of the terms and provisions contained in Exhibit 9 to the
Purchase Facility (together with all related definitions and ancillary
provisions) are hereby incorporated by reference as if set forth herein in their
entirety; provided, that (i) references to "Purchaser" shall mean and be a
reference to the Buyer as defined herein, (ii) references to "this Agreement",
"herein", "hereunder", and words of similar import shall mean and be a reference
to this Agreement, (iii) references to "Mortgage Loans" shall mean and be a
reference to Purchased Assets as defined herein, and (iv) references to Sections
in such incorporated Sections shall be references to Sections of the Purchase
Facility, provided that to the extent such referenced
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Sections are themselves incorporated in this Agreement by reference, references
herein to such Sections shall be such Sections as they are incorporated.
26. DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS
The parties acknowledge that they have been advised that in the case
of Transactions in which one of the parties is an "insured depository
institution" as that term is defined in Section 1831 (a) of Title 12 of the
United States Code, as amended, funds held by the financial institution pursuant
to a Transaction hereunder are not a deposit and therefore are not insured by
the Federal Deposit Insurance Corporation, the Savings Association Insurance
Fund or the Bank Insurance Fund, as applicable.
27. NETTING
If Buyer and Seller are "financial institutions" as now or
hereinafter defined in Section 4402 of Title 12 of the United States Code
("Section 4402") and any rules or regulations promulgated thereunder:
(a) All amounts to be paid or advanced by one party to or on behalf
of the other under this Agreement or any Transaction hereunder shall be deemed
to be "payment obligations" and all amounts to be received by or on behalf of
one party from the other under this Agreement or any Transaction hereunder shall
be deemed to be "payment entitlements" within the meaning of Section 4402, and
this Agreement shall be deemed to be a "netting contract" as defined in Section
4402.
(b) The payment obligations and the payment entitlements of the
parties hereto pursuant to this Agreement and any Transaction hereunder shall be
netted as follows. In the event that either party (the "Defaulting Party") shall
fail to honor any payment obligation under this Agreement or any Transaction
hereunder, the other party (the "Nondefaulting Party") shall be entitled to
reduce the amount of any payment to be made by the Nondefaulting Party to the
Defaulting Party by the amount of the payment obligation that the Defaulting
Party failed to honor.
28. CONFIDENTIALITY
This Agreement and its terms and contents are proprietary to Buyer
and to Seller and shall be held by Buyer and Seller in strict confidence and
shall not be disclosed to any third party without the consent of the other
except for (i) disclosure to such party's attorneys or accountants, provided
that such attorneys and accountants likewise agree to be bound by this covenant
of confidentiality or (ii) disclosure required by law, rule, regulation or order
of a court or other regulatory body.
29. COSTS, EXPENSES, TAXES AND INDEMNIFICATION
(a) The Seller agrees to pay on demand (i) all reasonable
out-of-pocket costs and expenses of the Buyer in connection with the
preparation, execution and delivery of this
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Agreement, and the administration, modification and amendment of this Agreement
(including, without limitation, (A) all due diligence costs pursuant to Section
15 hereof, collateral review, syndication, transportation, computer,
duplication, appraisal, audit, insurance, consultant, search, filing and
recording fees and expenses and (B) the reasonable fees and expenses of counsel
for the Buyer with respect thereto with respect to advising the Buyer as to its
rights and responsibilities, or the perfection, protection or preservation of
rights or interests, under this Agreement, with respect to negotiations with the
Seller or with other creditors of the Seller arising out of any Default or any
events or circumstances that may give rise to a Default and with respect to
presenting claims in or otherwise participating in or monitoring any bankruptcy,
insolvency or other similar proceeding involving creditors' rights generally and
any proceeding ancillary thereto with respect to the Seller) and (ii) all costs
and expenses of the Buyer in connection with the enforcement of this Agreement,
whether in any action, suit or litigation, any bankruptcy, insolvency or other
similar proceeding affecting creditors' rights generally (including, without
limitation, the reasonable fees and expenses of counsel for the Buyer with
respect thereto).
(b) Seller shall indemnify Buyer and hold it harmless against any
Losses incurred by Buyer as a result of any failure by Seller to timely deliver
the Assets subject to such Transaction, which Losses shall be limited to costs
reasonably incurred by Buyer by reason of the liquidation or re-employment of
funds acquired by Buyer to fund such Transaction. In addition, Buyer shall
undertake to take all commercially reasonable steps to mitigate Seller's
indemnity hereunder.
(c) Without limiting any other rights which Buyer or Seller have
hereunder or under applicable law, and in addition to any other indemnity
provided hereunder, (a) Seller hereby agrees to hold Buyer harmless from and
indemnify Buyer and its respective officers, directors, agents and employees
(each, an "Indemnified Party") any and all claims, damages, losses, liabilities
and expenses from and against any and all Losses incurred by or asserted or
awarded against any Indemnified Party directly arising out of, related to, or as
a result of this Agreement or any Transaction involving Assets, including any
investigation, proceeding or preparation of any defense in connection therewith,
whether or not such investigation, litigation or proceeding is brought by the
Seller, its members, or creditors or an Indemnified Party or any Indemnified
Party is otherwise a party thereto and whether or not the transactions
contemplated hereby are consummated, and Seller will reimburse each Indemnified
Party as the same is incurred upon receipt by the Seller of documentation
evidencing the same, excluding, however, Losses to the extent arising from the
gross negligence or willful misconduct on the part of Buyer. Without limiting
the generality of the foregoing, Seller agrees to pay on demand, and shall
indemnify Buyer for Losses relating to or resulting from:
(i) any representation or warranty made by Seller (or any
Responsible Officer or authorized agent of Seller) under or in connection
with this Agreement, any periodic report required to be furnished
hereunder or any other information or document delivered by Seller
pursuant hereto, which shall have been false or incorrect in any material
respect when made or deemed made, or any other Breach hereunder;
- 56 -
<PAGE>
(ii) the failure by Seller to comply with any applicable law,
rule or regulation with respect to any Transaction;
(iii) violations of any environmental law, rule or regulation
or any consumer credit laws, including without limitation ERISA, the Truth
in Lending Act and/or the Real Estate Settlement Procedures Act; or
(iv) the failure by Seller (if so requested by Buyer) to
execute and properly file, or any delay in executing and properly filing,
financing statements or other similar instruments or documents under the
Uniform Commercial Code of any applicable jurisdiction or other applicable
laws with respect to the Purchased Assets.
(v) the actual or alleged presence of Hazardous Materials on
any Mortgaged Property or any Environmental Action relating in any way to
any Mortgaged Property, except to the extent such claim, damage, loss,
liability or expense is found in a final, non-appealable judgment by a
court of competent jurisdiction to have resulted from such Indemnified
Party's gross negligence or willful misconduct.
(d) In any suit, proceeding or action brought by Buyer in connection
with any Purchased Asset for any sum owing thereunder, or to enforce any
provisions of any Purchased Asset, Seller will save, indemnify and hold Buyer
harmless from and against all expense, loss or damage suffered by reason of any
defense, set-off, counterclaim, recoupment or reduction or liability whatsoever
of the account debtor or obligor thereunder, arising out of a breach by Seller
of any obligation thereunder or arising out of any other agreement, Indebtedness
or liability at any time owing to or in favor of such account debtor or obligor
or its successors from Seller. Seller hereby acknowledges that, the obligation
of Seller hereunder is a recourse obligation of Seller.
(e) All payments made by the Seller under this Agreement shall be
made free and clear of, and without deduction or withholding for or on account
of, any present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, or other assessments, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority, including without limitation, excise, property, sale and franchise
taxes (including in each such case, any interest, penalties or additions
attributable to or imposes on or with respect to any such assessment) (all such
assessments, "Non-Excluded Taxes"), but excluding net income taxes and franchise
taxes imposed in lieu of net income taxes imposed on the Buyer as a result of a
present or former connection between the Buyer and the jurisdiction of the
Governmental Authority imposing such tax or any political subdivision or taxing
authority thereof or therein (other than any such connection arising solely from
the Buyer having executed, delivered or performed its obligations or received a
payment under, or enforced, this Agreement). If any such Non-Excluded Taxes are
required to be withheld from any amounts payable to the Buyer hereunder, the
amounts so payable to the Buyer shall be increased to the extent necessary to
yield to the Buyer, based on Buyer's effective tax rate in effect from time to
time, (after payment of all Non-Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement; provided, however, that the Seller shall not
- 57 -
<PAGE>
be required to increase any such amounts payable to the Buyer that is not
organized under the laws of the United States of America or a state thereof if
the Buyer fails to comply with the requirements of clause (f)(i) of this
Section. Whenever any Non-Excluded Taxes are payable by the Seller, as promptly
as possible thereafter the Seller shall send to the Buyer, as the case may be, a
certified copy of an original official receipt received by the Seller showing
payment thereof. If the Seller fails to pay any Non-Excluded Taxes when due to
the appropriate taxing authority or fails to remit to the Buyer the required
receipts or other required documentary evidence, the Seller shall indemnify the
Buyer for any incremental taxes, interest or penalties that may become payable
by the Buyer as a result of any such failure. The agreements in this Section
shall survive the termination of this Agreement and the payment of all amounts
payable hereunder.
(g) Without prejudice to the survival of any other agreement of the
Seller hereunder, the agreements and obligations of the Seller contained in this
Section shall survive the payment in full of the Repurchase Price and all other
amounts payable hereunder and delivery of the Purchased Assets by the Buyer
against full payment therefor.
30. SET-OFF
In addition to any rights and remedies of Buyer provided by this
Agreement and by law, Buyer shall have the right, without prior notice to
Seller, any such notice being expressly waived by Seller to the extent permitted
by applicable law, upon any amount becoming due and payable by Seller under this
Agreement, the Existing Repo Facility, the Purchase Facility, the Engagement
Letter or the Master Facilities Agreement (whether at the stated maturity, by
acceleration or otherwise) to set-off and appropriate and apply against such
amount any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by Buyer or any Affiliate
thereof to or for the credit or the account of Seller. Buyer agrees promptly to
notify Seller after any such set-off and application made by Buyer; provided
that the failure to give such notice shall not affect the validity of such
set-off and application.
31. MISCELLANEOUS
(a) Time is of the essence under this Agreement and all Transactions
and all references to a time shall mean New York time in effect on the date of
the action unless otherwise expressly stated in this Agreement.
(b) Buyer shall be authorized to accept orders and take any other
action affecting any accounts of Seller in response to instructions given in
writing or orally by telephone or otherwise by any person with apparent
authority to act on behalf of Seller, and Seller shall indemnify Buyer, defend,
and hold Buyer harmless from and against any and all Losses arising out of or in
connection with any action taken by Buyer in response to such instructions
received or reasonably believed to have been received from Seller.
- 58 -
<PAGE>
(c) If there is any conflict between the terms of this Agreement or
any Transaction entered into hereunder and the Custodial Agreement or any other
Facility Document, this Agreement shall prevail.
- 59 -
<PAGE>
(d) This Agreement may be executed in counterparts, each of which so
executed shall be deemed to be an original, but all of such counterparts shall
together constitute but one and the same instrument.
(f) The headings in this Agreement are for convenience of reference
only and shall not affect the interpretation or construction of this Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK]
- 60 -
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement as
of the date set forth above.
GREENWICH CAPITAL FINANCIAL
PRODUCTS, INC.,
Buyer
By:
---------------------------------
Name:
Title:
ADDRESS FOR NOTICES:
600 Steamboat Road
Greenwich, Connecticut 06830
Telephone: (203) 625-7921
Facsimile: (203) 618-2132
With a copy to:
Attention: General Counsel
Telephone: (203) 625-2700
Facsimile: (203) ____________
CONTIFINANCIAL CORPORATION,
Seller
By: /s/ Alan Fishman
---------------------------------
Name: Alan Fishman
Title:
By: /s/ Frank Baier
---------------------------------
Name: Frank Baier
Title:
ADDRESS FOR NOTICES:
277 Park Avenue
New York, New York 10172
Telephone: (212) 207-2808
Facsimile: (212) 207-5975
- 61 -
<PAGE>
With a copy to:
Attention: Alan Langus, General Counsel
Telephone: (212) 207-2822
Facsimile: (212) 207-2937
CONTIMORTGAGE CORPORATION,
Interim Servicer
By: /s/ Robert J. Babjak
---------------------------------
Name: Robert J. Babjak
Title:
By: /s/ Margaret M. Curry
---------------------------------
Name: Margaret M. Curry
Title:
ADDRESS FOR NOTICES:
338 South Warminster Rd
Hatboro, PA 19404-3430
Telephone: (212) 207-2808
Facsimile: (212) 207-5975
With a copy to:
Attention: Mary L. Gibbons, Chief Counsel
Telephone: (215) 347-3404
Facsimile: (215) 347-3400
- 62 -
<PAGE>
SCHEDULES
---------
SCHEDULE 1 SELLER'S MATERIAL SUBSIDIARIES
SCHEDULE 2 FILING JURISDICTIONS
SCHEDULE 3 INDEBTEDNESS DOCUMENTS
SCHEDULE 4 FALLOUT ASSETS
EXHIBITS
--------
EXHIBIT I Form of Purchase Request including the Eligible Asset Schedule
EXHIBIT II Interim Servicing Notification Letter
EXHIBIT III Form of Power of Attorney
EXHIBIT IV Letter of Instruction to Master Servicer and Servicers
EXHIBIT V Representations and Warranties Regarding Mortgage Loans
EXHIBIT V(A) Representations and Warranties Regarding Empire Mortgage Loans
EXHIBIT VI Seller/Affiliate Agreement
EXHIBIT VII Assignment and Conveyance Agreement
EXHIBIT VIII Opinion of Seller's Counsel
EXHIBIT IX Underwriting Guidelines
EXHIBIT IX(A) Modifications to Underwriting Guidelines
EXHIBIT X Asset Tape Fields
EXHIBIT XI Interim Servicing Addendum
- 63 -
<PAGE>
Schedule 1
----------
Seller's Material Subsidiaries
------------------------------
ContiMortgage Corporation
ContiWest Corporation
ContiTrade Services L.L.C.
California Lending Group, Inc.
[SPC that owns Excess Spread Receivable to be Pledged to Greenwich]
[Affiliates of Conti that are counterparties to swaps with Greenwich]
- 64 -
<PAGE>
Schedule 2
----------
Filing Jurisdictions
--------------------
Secretary of State of the State of New York
Secretary of County of New York County
Secretary of State of the State of Pennsylvania
Secretary of County of Montgomery County
- 65 -
<PAGE>
Schedule 3
----------
Indebtedness Documents
----------------------
Indenture, dated as of August 15, 1996, relating to the ContiFinancial
Corporation 8 3/8% Senior Notes Due 2003, as amended, supplemented or otherwise
modified from time to time
Credit Agreement, dated as of January 7, 1997, among ContiFinancial Corporation
and Credit Suisse First Boston, as amended, supplemented or otherwise modified
from time to time
Indenture, dated as of March 1, 1997, relating to the ContiFinancial Corporation
7-1/2% Senior Notes Due 2002, as amended, supplemented or otherwise modified
from time to time
Amended and Restated Letter of Credit and Reimbursement Agreement, dated as of
September 9, 1997, among ContiFinancial Corporation, Credit Suisse First Boston,
New York Branch and Dresdner Bank AG, New York Branch, as amended, supplemented
or otherwise modified from time to time
Indenture, dated March 4, 1998, relating to certain securities issuable by
ContiFinancial Corporation, as amended, supplemented or otherwise modified from
time to time
- 66 -
<PAGE>
Schedule 4
Fallout Assets
Collateral Amount
Mortgage Loan Category Time Period Percentage
- ---------------------- ----------- ----------
Delinquent Loan 30 - 59 days 90%
60 - 89 days 80%
90 - 119 days 50%
120+ days 0%
Sublimit Exception Loan 1st 60 days 90%
Next 30 days 85%
Thereafter 0%
Exception Loan in excess 1st 60 days 80%
of Exception Limit Next 30 days 75%
Thereafter 0%
Repurchased Loan 1st 60 days following repurchase 70%
Next 30 days 60%
Thereafter 0%
Category 4 Loan 1st 60 days 70%
Next 30 days 60%
Thereafter 0%
As used herein, the following terms shall have the following meanings:
"Category 4 Loan" means a Mortgage Loan that would qualify as an Exception Loan
except that it has an implied purchase price of less than 80% of the unpaid
principal balance thereof.
"Delinquent Loan" means a Mortgage Loan which is more than 29 days Delinquent.
"Sublimit Exception Loan" means a Mortgage Loan the Collateral Amount Percentage
of which would be zero as a result of one or more of the sublimits set forth in
the definition of the term "Collateral Amount Percentage", except that a
Mortgage Loan the Collateral Amount Percentage of which would be zero as a
result of paragraph (9) of the definition of the term "Collateral Amount
Percentage" shall not qualify as a Sublimit Exception Loan.
"Exception Limit" shall have the meaning for such term that is set forth in the
Purchase Facility.
"Exception Loan" shall have the meaning for such term that is set forth in the
Purchase Facility.
- 67 -
<PAGE>
"Repurchased Loan" means a Mortgage Loan (a) which has been repurchased by the
Seller (i) from the Buyer under the terms of the Purchase Facility or (ii) from
a securitization trust in accordance with Seller's obligation to repurchase
certain securitized mortgage loans, and (b) which has a Market Value greater
than 50% of the Par Amount of such Mortgage Loan.
- 68 -
<PAGE>
EXHIBIT I
Form of Purchase Request
[Date]
Greenwich Capital Financial Products, Inc.
600 Steamboat Road
Greenwich, Connecticut 06830
Ladies and Gentlemen:
Pursuant to Section 3(a) of the Master Repurchase Agreement
Governing Purchases and Sale of Assets dated as of August 9, 1999 (the
"Agreement") between you ("Buyer") and us ("Seller"), Seller hereby irrevocably
requests that Buyer enter into a repurchase transaction involving the following
Eligible Assets, to be governed by the Agreement:
Buyer: Greenwich Capital Financial Products, Inc.
Seller: ContiFinancial Corporation
Type of [Eligible] [Fallout] Assets:
Specific Assets to be Sold: Attached on Asset Schedule
Requested Purchase Date:
Par Amount (UPB):
Requested by
CONTIFINANCIAL CORPORATION
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
Exh I.1
<PAGE>
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.
By:
--------------------------------
Name:
Title:
Exh I.2
<PAGE>
EXHIBIT I
Asset Schedule
--------------
[Note: If any Asset to be sold to the Buyer constitutes a Fallout Asset, the
Seller shall list on this Schedule the reasons why such Asset does not qualify
as an Eligible Asset]
(1) the Seller's Mortgage Loan identifying number;
(2) the Mortgagor's first andlast name;
(3) the street address of the Mortgaged Property including the state and zip
code;
(4) a code indicating whether the Mortgaged Property is owner-occupied;
(5) the type of residential dwelling constituting the Mortgaged Property;
(6) the original months to maturity;
(7) the original date of the Mortgage Loan and the remaining months to
maturity from the Purchase Date, based on the original amortization
schedule;
(8) the Loan-to-Value Ratio at origination;
(9) the Mortgage Interest Rate in effect immediately following the Purchase
Date;
(10) the date on which the first Monthly Payment was due on the Mortgage Loan;
(11) the stated maturity date;
(12) the amount of the Monthly Payment at origination;
(13) with respect to each adjustable rate Mortgage Loan, the amount of the
Monthly Payment as of the Purchase Date;
(14) the last due date on which a Monthly Payment was actually applied to the
unpaid stated principal balance;
(15) the original principal amount of the Mortgage Loan;
(16) the stated principal balance of the Mortgage Loan as of the close of
business on the Purchase Date;
(17) with respect to each adjustable rate Mortgage Loan, the first adjustment
date;
(18) with respect to each adjustable rate Mortgage Loan, the gross margin;
(19) a code indicating the purpose of the loan (i.e., purchase financing,
refinancing);
(20) with respect to each adjustable rate Mortgage Loan, the maximum mortgage
interest rate under the terms of the Mortgage Note;
(21) with respect to each adjustable rate Mortgage Loan, the minimum mortgage
interest rate under the terms of the Mortgage Note;
(22) the mortgage interest rate at origination;
(23) with respect to each adjustable rate Mortgage Loan, the periodic rate cap;
(24) with respect to each adjustable rate Mortgage Loan, the first adjustment
date immediately following the Purchase Date;
(25) with respect to each adjustable rate Mortgage Loan, the index;
(26) the date on which the first Monthly Payment was due on the Mortgage Loan
and, if such date is not consistent with the due date currently in effect,
such due date;
(27) a code indicating whether the Mortgage Loan is an adjustable rate Mortgage
Loan or a fixed rate Mortgage Loan;
(28) a code indicating the documentation style (i.e., full, alternative or
reduced);
Exh I.3
<PAGE>
(29) a code indicating if the Mortgage Loan is subject to the provisions of
HOEPA;
(30) the Appraised Value of the Mortgaged Property;
(31) the sale price of the Mortgaged Property, if applicable;
(32) a code indicating whether the Mortgage is a First Lien or Second Lien;
(33) the Mortgagor's FICO score (to the extent a FICO score is available);
(34) a code indicating whether the Mortgage Loan is a retention mortgage loan;
(35) a code indicating if interest on such Mortgage Loan is calculated on a
30/360 basis;
(36) the Mortgagor's social security number;
(37) a code identifying origination source;
(38) a code indicating if the Mortgage Loan is a balloon Mortgage Loan;
(39) a code indicating the Mortgage Note class (borrower grade);
(40) with respect to each adjustable rate Mortgage Loan, the adjustment
frequency;
(41) the ratio of original principal balance of the Mortgage Loan to the
Mortgagor's income;
(42) a code indicating the prepayment penalty, if any; and
(43) with respect to any Second Lien Mortgage Loan, the outstanding principal
balance of the First Lien on the date of origination of such Second Lien
Mortgage Loan.
With respect to the Asset Schedules in the aggregate, the Asset Schedule shall
set forth the following information, as of the related Purchase Date: (1) the
number of Mortgage Loans; (2) the stated principal balance (or Par Amount) of
the Mortgage Loans; (3) the weighted average mortgage interest rate of the
Mortgage Loans; and (4) the weighted average maturity of the Mortgage Loans.
Exh I.4
<PAGE>
EXHIBIT II
INTERIM SERVICING NOTIFICATION LETTER
INTERIM SERVICING NOTIFICATION
CONTIFINANCIAL CORPORATION
277 Park Avenue
New York, New York 10172
August 9, 1999
To the Parties Receiving this Notification
Ladies and Gentlemen:
Reference is made to (i) the Master Repurchase Agreement
Governing Purchases and Sales of Assets ("Master Repurchase Agreement") dated as
of August 9, 1999, between Greenwich Capital Financial Products, Inc. ("Buyer")
and ContiFinancial Corporation ("Seller"). This letter of notification
("Notification") confirms the Seller's acknowledgment of Buyer's rights and
interest as to the matters set forth below. Capitalized terms used herein but
not defined shall have the meaning ascribed to such terms in the Master
Repurchase Agreement.
1. The Seller hereby acknowledges and agrees that the Buyer is the owner of
the Mortgage Loans set forth on Exhibit A attached hereto (the "Mortgage
Loans") and that in the event that such interest is recharacterized as a
loan, the Buyer has a perfected first lien priority interest in the
Mortgage Loans.
2. Upon receipt by you of this Notification, signed by Seller (which may be
in the form of a photocopy) certified by Buyer that the Interim Servicing
Period has terminated or an Event of Default has occurred, (a) you shall
make all remittances with respect to the Mortgage Loans in accordance with
the instructions of the Buyer and (b) in no event shall you remit any
funds in connection with the Mortgage Loans to the Seller.
3. You shall continue to service the Mortgage Loans serviced by you for the
benefit of the Buyer and its successors and assigns (as owner) in
accordance with the terms of the related servicing agreement.
4. This Notification may not be withdrawn, revoked, nullified or modified
without the written consent of the Buyer.
Exh II.1
<PAGE>
5. This Notification may be assigned in whole or in part by Buyer; and shall
inure to the benefit of the Buyer and their respective successors and
assigns.
Very truly yours,
CONTIFINANCIAL CORPORATION
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
THE UNDERSIGNED HEREBY CERTIFIES THAT (i) THE INTERIM SERVICING
PERIOD HAS TERMINATED OR (ii) AN EVENT OF DEFAULT HAS OCCURRED AND HEREBY
INSTRUCTS YOU TO FOLLOW THE INSTRUCTIONS SET FORTH HEREIN IN ADDITION TO ANY
OTHER INSTRUCTIONS OF THE UNDERSIGNED HEREAFTER:
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
Please acknowledge receipt and acceptance of the terms of this
Notification by signing below and returning a copy to Greenwich Capital
Financial Products, Inc.
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
Exh II.2
<PAGE>
EXHIBIT III
Exh III.2
Form of Power of Attorney
Notice: The powers granted by this document are broad and sweeping. They are
defined in New York General Obligations Law, Article 5, Title 15, sections
5-1502A through 51503, which expressly permits the use of any other different
form of power of attorney desired by the parties concerned.
Know All Men by These Presents, which are intended to constitute a GENERAL POWER
OF ATTORNEY pursuant to Article 5, Title 15 of the New York General Obligations
Law: That ContiFinancial Corporation ("Seller"), does hereby appoint Greenwich
Capital Financial Products, Inc. ("Buyer"), its attorney-in-fact to act in
Seller's name, place and stead in any way which Seller could do with respect to
(i) completing endorsements and recording instruments relating to the Assets
purchased by Buyer pursuant to a Master Repurchase Agreement Governing Purchases
and Sales of Assets dated as of August 9, 1999 between Seller and Buyer (the
"Repurchase Agreement") and to take such other steps as may be necessary or
desirable to enforce Buyer's rights under the Repurchase Agreement, and against
such Assets, the related Asset Files and the Servicing Records, to the extent
that Seller is permitted by law to act through an agent.
TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, SELLER HEREBY AGREES THAT ANY THIRD
PARTY RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT
HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO
SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OF SUCH REVOCATION
OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND SELLER ON ITS
OWN BEHALF AND ON BEHALF OF SELLER'S LEGAL REPRESENTATIVES AND ASSIGNS, HEREBY
AGREES TO INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY
AND ALL CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD
PARTY HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.
Exh III.1
<PAGE>
IN WITNESS WHEREOF, Seller has caused this Power of Attorney to be
executed and Seller's seal to be affixed this _____ day of __________, 1999.
CONTIFINANCIAL CORPORATION
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Name:
Title:
Exh III.2
<PAGE>
EXHIBIT IV
Letter of Instructions to Master Servicer and Subservicers
[Servicer]
Ladies/Gentlemen:
On August 9, 1999, ContiFinancial Corporation ("Seller") sold to
Greenwich Capital Financial Products, Inc. ("Buyer") all of Seller's right,
title and interest in and to the assets identified on Appendix A attached to
this letter and made a part hereof (the "Assets"). Accordingly, Seller hereby
unconditionally and irrevocably instructs you to pay to Buyer, pursuant to the
terms of our existing servicing arrangements, any and all monies received by you
on or after __________, 199__ which would have been payable from time to time by
you to Seller on account of or otherwise in connection with the Assets,
including, without limitation, any and all principal, interest, partial
prepayments, prepayments in full, penalties, advance payments, or expenses;
provided, however, that any such monies representing scheduled payments of
principal of or interest on such Assets due prior to __________, 199__ shall be
paid to Seller.
All such monies should be paid by you to the order of Buyer in the
manner and on the date such monies would have been payable to Seller, as
follows:
ABA #__________ for the account of Greenwich Capital Financial
Products, Inc.
Acct. #__________
Attn.: __________
Seller further instructs you that all rights and powers of Seller
under the existing servicing arrangements with respect to the Assets have been
transferred to Buyer and that Buyer has the sole right as the owner of the
Assets to direct your actions under such servicing arrangements with respect to
the Assets and to exercise such rights and powers.
Very truly yours,
CONTIFINANCIAL CORPORATION
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Name:
Title:
Exh IV.1
<PAGE>
EXHIBIT V
Representations and Warranties
Regarding Mortgage Loans
Reference is hereby made to the Purchase Facility for a statement of the terms
thereof. All terms used in this Exhibit V which are defined in the Purchase
Facility and which are not otherwise defined in this Agreement shall have the
same meanings herein as set forth therein.
Seller shall be deemed to make the following representations and warranties (and
such additional representations and warranties set forth in the Confirmation
with respect thereto) to the Buyer with respect to each Purchased Asset which is
a residential Mortgage Loan sold in a Transaction hereunder, as of the related
Purchase Date and as of each day such Transaction is in effect and except as
shall be specifically disclosed in the schedule attached to the Purchase
Request. With respect to any representations and warranties made to the best of
Seller's knowledge, to Seller's knowledge or in reliance on or based on
information, in the event that it is discovered that the circumstances with
respect to the related Mortgage Loan are not accurately reflected in such
representation and warranty notwithstanding the actual knowledge or lack of
knowledge of Seller, then, notwithstanding that such representation and warranty
is made to the best of Seller's knowledge, to Seller's knowledge or in reliance
on or based on information, the Market Value of such Mortgage Loans may, in the
Buyer's sole good faith discretion, be reduced to zero. It is understood and
agreed that the representations and warranties set forth in the Asset
Representations and the Confirmation, if any, shall survive delivery of the
Assets to Buyer or its designee (including the Custodian).
1. Mortgage Loans as Described. The information set forth in the Asset
Schedule with respect to the Mortgage Loan is complete, true, complete and
correct in all material respects.
2. Payments Current. On the applicable Purchase Date, and all other times,
all payments required to be made for the Mortgage Loan under the terms of
the Mortgage Note have been made and credited, provided that such Mortgage
Loan may be Delinquent for no more than 29 days.
3. No Outstanding Charges. There are no defaults in complying with the terms
of the Mortgage securing the Mortgage Loan, and all taxes, governmental
assessments, insurance premiums, water, sewer and municipal charges,
leasehold payments or ground rents which previously became due and owing
have been paid, or an escrow of funds has been established in an amount
sufficient to pay for every such item which is delinquent and which has
been assessed but is not yet due and payable. Neither the Seller nor the
Qualified Originator from which the Seller acquired the Mortgage Loan has
advanced funds, or induced, solicited or knowingly received any advance of
funds by a party other than the Mortgagor, directly or indirectly, for the
payment of any amount required under
<PAGE>
the Mortgage Loan, except for interest accruing from the date of the
Mortgage Note or date of disbursement of the proceeds of the Mortgage
Loan, whichever is earlier, to the day which precedes by one (1) month the
due date of the first installment of principal and interest thereunder.
4. Original Terms Unmodified. The terms of the Mortgage Note and Mortgage
have not been impaired, waived, altered or modified in any respect, from
the date of origination; except by a written instrument which has been
recorded, if necessary to protect the interests of the Buyer, and which
has been delivered to the Buyer or its designee and the terms of which are
reflected in the Asset Schedule. The substance of any such waiver,
alteration or modification has been approved by the title insurer, to the
extent required, and its terms are reflected on the Asset Schedule. No
Mortgagor in respect of the Mortgage Loan has been released, in whole or
in part, except in connection with an assumption agreement approved by the
title insurer, to the extent required by such policy, and which assumption
agreement is part of the Asset File delivered to the Buyer or its designee
and the terms of which are reflected in the Asset Schedule.
5. No Defenses. The Mortgage Loan is not subject to any right of rescission,
set-off, counterclaim or defense, nor will the operation of any of the
terms of the Mortgage Note or the Mortgage, or the exercise of any right
thereunder, render either the Mortgage Note or the Mortgage unenforceable,
in whole or in part and no such right of rescission, set-off, counterclaim
or defense has been asserted with respect thereto, and no Mortgagor in
respect of the Mortgage Loan was a debtor in any state or Federal
bankruptcy or insolvency proceeding at the time the Mortgage Loan was
originated. The Seller has no knowledge nor has it received any notice
that any Mortgagor in respect of the Mortgage Loan is a debtor in any
state or Federal bankruptcy or insolvency proceeding.
6. Hazard Insurance. A hazard insurance policy covering the Mortgaged
Property in an amount not less than the amount of the Mortgage Loan, plus
any senior liens, is in full force.
7. Compliance with Applicable Laws. Any and all requirements of any Federal,
state or local law including, without limitation, usury, truth-in-lending,
real estate settlement procedures, consumer credit protection, equal
credit opportunity or disclosure laws applicable to the Mortgage Loan have
been complied with by the Qualified Originator and the Seller and the
consummation by the Seller of the transactions contemplated hereby will
not involve the violation of any such laws or regulations.
8. No Satisfaction of Mortgage. The Mortgage has not been satisfied,
canceled, subordinated (other than, if a Second Lien Mortgage Loan, as
expressly set forth herein) or rescinded, in whole or in part, and the
Mortgaged Property has not been released from the lien of the Mortgage, in
whole or in part, nor has any instrument been executed that would effect
any such release, cancellation, subordination (other than, if a Second
Lien Mortgage Loan, in connection with the first lien referenced herein)
or rescission. The Seller has not waived the performance by the Mortgagor
of any action, if the Mortgagor's
<PAGE>
failure to perform such action would cause the Mortgage Loan to be in
default, nor has the Seller waived any default resulting from any action
or inaction by the Mortgagor.
9. Location and Type of Mortgaged Property. The Mortgaged Property consists
of a single parcel of real property with a detached single family
residence erected thereon, or a two- to four-family dwelling, or an
individual condominium unit in a low-rise condominium project, or an
individual unit in a planned unit development or a de minimis planned unit
development, provided, however, that no residence or dwelling is a mobile
home or a manufactured dwelling. Except with respect to the Mortgaged
Property securing a Mixed-Use Mortgage Loan, which may have a partial
commercial use, no portion of the Mortgaged Property is used for
commercial purposes.
10. Valid Lien. The Mortgage is a valid, subsisting, enforceable and perfected
(A) first lien or second lien on the Mortgaged ---------- Property,
including all buildings on the Mortgaged Property and all installations
and mechanical, electrical, plumbing, heating and air conditioning systems
located in or annexed to such buildings, and all additions, alterations
and replacements made at any time with respect to the foregoing. The lien
of the Mortgage is subject only to (i) the lien of current real property
taxes and assessments not yet due and payable; (ii) covenants, conditions
and restrictions, rights of way, easements and other matters of the public
record as of the date of recording acceptable to prudent mortgage lending
institutions generally and specifically referred to in the lender's title
insurance policy delivered to the originator of the Mortgage Loan and (a)
referred to or otherwise considered in the appraisal made for the
originator of the Mortgage Loan or (b) which do not adversely affect the
Appraised Value of the Mortgaged Property set forth in such appraisal;
(iii) other matters to which like properties are commonly subject which do
not materially interfere with the benefits of the security intended to be
provided by the Mortgage or the use, enjoyment, value or marketability of
the related Mortgaged Property; and (iv) in the case of a Second Lien
Mortgage Loan, a first lien on the Mortgaged Property.
11. Security Agreement. Any security agreement, chattel mortgage or equivalent
document related to and delivered in connection with the Mortgage Loan
establishes and creates a valid, subsisting and enforceable (A) first lien
and first priority security interest with respect to each Mortgage Loan
which is indicated to be a First Lien Mortgage Loan (as indicated on the
Asset Tape), or (B) second lien and second priority security interest with
respect to each Mortgage Loan which is indicated by Seller to be a Second
Lien Mortgage Loan (as reflected on the Asset Tape), in either case, on
the property described therein and Seller has full right to sell, pledge
and assign the same to Buyer. To the best of Seller's knowledge, the
Mortgaged Property was not, as of the date of origination of the Mortgage
Loan, subject to a mortgage, deed of trust, deed to secure debt or other
security instrument creating a lien subordinate to the lien of the
Mortgage.
12. Validity of Mortgage Documents. The Mortgage Note and the Mortgage and any
other agreement executed and delivered by a Mortgagor or guarantor, if
applicable, in connection with a Mortgage Loan are genuine, and each is
the legal, valid and binding
<PAGE>
obligation of the maker thereof enforceable in accordance with its terms,
except only as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement
of creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law). All
parties to the Mortgage Note, the Mortgage and any other such related
agreement had legal capacity to enter into the Mortgage Loan and to
execute and deliver the Mortgage Note, the Mortgage and any such agreement
and to convey the estate therein purported to be conveyed, and the
Mortgage Note, the Mortgage and any other such related agreement have been
duly and properly executed by such related parties. No fraud, error,
omission, misrepresentation, negligence or similar occurrence with respect
to a Mortgage Loan has taken place on the part of any Person, including,
without limitation, the Mortgagor, any appraiser, any builder or
developer, or any other party involved in the origination of the Mortgage
Loan. The Seller has reviewed all of the documents constituting the
Servicing File and has made such inquiries as it deems necessary to make
and confirm the accuracy of the representations set forth herein.
13. First Lien Consent. With respect to each Mortgage Loan which is a Second
Lien Mortgage Loan, (i) if the related first lien provides for negative
amortization, the LTV was calculated at the maximum principal balance of
such first lien that could result upon application of such negative
amortization feature, and (ii) either no consent for the Mortgage Loan is
required by the holder of the first lien or such consent has been obtained
and is contained in the Asset File.
14. Full Disbursement of Proceeds. The Mortgage Loan has been closed and the
proceeds of the Mortgage Loan have been fully disbursed and there is no
further requirement for future advances thereunder, and any and all
requirements as to completion of any on-site or off-site improvement and
as to disbursements of any escrow funds therefor have been complied with.
All costs, fees and expenses incurred in making or closing the Mortgage
Loan and the recording of the Mortgage were paid, and the Mortgagor is not
entitled to any refund of any amounts paid or due under the Mortgage Note
or Mortgage.
15. Ownership. The Seller is the sole owner and holder of the Mortgage Loan.
The Mortgage Loan is not assigned or pledged or otherwise conveyed or
encumbered except to Buyer, and the Seller has good, indefeasible and
marketable title thereto, and has full right to sell, transfer, pledge and
assign the Mortgage Loan to the Buyer free and clear of any encumbrance,
equity, participation interest, lien, pledge, charge, claim or security
interest, and has full right and authority subject to no interest or
participation of, or agreement with, any other party, to assign, transfer
and pledge each Mortgage Loan pursuant to this Agreement and following the
pledge of each Mortgage Loan, the Buyer will hold such Mortgage Loan free
and clear of any encumbrance, equity, participation interest, lien,
pledge, charge, claim or security interest except any such security
interest created pursuant to the terms of Agreement.
16. Doing Business. All parties which have had any interest in the Mortgage
Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or,
during the period in which they
<PAGE>
held and disposed of such interest, were) (i) in compliance with any and
all applicable licensing requirements of the laws of the state wherein the
Mortgaged Property is located, and (ii) either (A) organized under the
laws of such state, (B) qualified to do business in such state, (C) a
Federal savings and loan association, a savings bank or a national bank
having a principal office in such state, or (D) not doing business in such
state.
17. Title Insurance. The Seller holds a title insurance policy or a marked-up
title commitment, title insurance binder or title certificate which is in
full force and effect; which has an insurance limit at least as great as
the outstanding principal balance of the Mortgage Loan; which names the
Seller, its successors and assigns, as the insured party and which is
issued by an Qualified Insurer that is qualified to do business in the
jurisdiction where the Mortgaged Property is located. Said policy shall:
o Insure the lien of the Mortgage consistent with the agreed-upon lien
priority;
o Insure the absence of any prior lien of taxes or other assessments;
o Disclose whether all taxes and other lienable assessments due as of
the date of the policy have been paid-in-full; and
o Disclose all other matters to which the Mortgaged Property is
subject.
18. No Defaults; Right to Cure; No Failure to Cure. If a First Lien Mortgage
Loan, there is no default, breach, violation or event of acceleration
existing under the Mortgage or the Mortgage Note and no event has occurred
which, with the passage of time or with notice and the expiration of any
grace or cure period, would constitute a default, breach, violation or
event of acceleration other than those payment delinquencies permitted by
paragraph 2 hereof, and neither the Seller nor its predecessors have
waived any default, breach, violation or event of acceleration. With
respect to each Mortgage Loan which is indicated by Seller to be a Second
Lien Mortgage Loan (as reflected on the Asset Schedule) (i) the prior
mortgage is in full force and effect, (ii) there is no default, breach,
violation or event of acceleration existing under such prior mortgage or
the related mortgage note, (iii) no event has occurred which, with the
passage of time or with notice and the expiration of any grace or cure
period, would constitute a default, breach, violation or event of
acceleration thereunder other than those payment delinquencies permitted
by paragraph 2 hereof, and either (A) the prior mortgage contains a
provision which allows or (B) applicable law requires, the mortgagee under
the Second Lien Mortgage Loan to receive notice of, and affords such
mortgagee an opportunity to cure any default under the First Lien Mortgage
Loan, by payment in full or otherwise under the prior mortgage, and Seller
has not received notice of any such default which has not been cured.
19. No Mechanics' Liens. There are no mechanics' or similar liens or claims
which have been filed for work, labor or material (and no rights are
outstanding that under the law could
<PAGE>
give rise to such liens) affecting the Mortgaged Property which are or may
be liens prior to, or equal or coordinate with, the lien of the Mortgage.
20. Location of Improvements; No Encroachments. All improvements which were
considered in determining the Appraised Value of the Mortgaged Property
lie wholly within the boundaries and building restriction lines of the
Mortgaged Property, and no improvements on adjoining properties encroach
upon the Mortgaged Property. No improvement located on or being part of
the Mortgaged Property is in violation of any applicable zoning and
building law, ordinance or regulation.
21. Origination; Payment Terms. The Mortgage Loan was originated or purchased
by or in conjunction with a mortgagee approved by the Secretary of Housing
and Urban Development pursuant to Sections 203 and 211 of the National
Housing Act, a savings and loan association, a savings bank, a commercial
bank, credit union, insurance company or similar banking institution which
is supervised and examined by a Federal or state authority. Principal
payments on the Mortgage Loan commenced no more than 60 days after funds
were disbursed in connection with the Mortgage Loan. The Note Interest
Rate is adjusted, with respect to adjustable rate Mortgage Loans, on each
Interest Rate Adjustment Date to equal the Index plus the Gross Margin
(rounded up or down to the nearest .125%), subject to the Interest Rate
Cap. The Mortgage Note is payable each month in equal monthly installments
of principal and interest, which installments of interest, with respect to
adjustable rate Mortgage Loans, are subject to change due to the
adjustments to the Note Interest Rate on each Interest Rate Adjustment
Date, with interest calculated and payable in arrears, sufficient to
amortize the Mortgage Loan fully by the stated maturity date, over an
original term of not more than 30 years from commencement of amortization.
The due date of the first payment under the Mortgage Note is no more than
60 days from the date of the Mortgage Note.
22. Customary Provisions. The Mortgage Note has a stated maturity. The
Mortgage contains customary and enforceable provisions such as to render
the rights and remedies of the holder thereof adequate for the realization
against the Mortgaged Property of the benefits of the security provided
thereby, including, (i) in the case of a Mortgage designated as a deed of
trust, by trustee's sale, and (ii) otherwise by judicial foreclosure. Upon
default by a Mortgagor on a Mortgage Loan and foreclosure on, or trustee's
sale of, the Mortgaged Property pursuant to the proper procedures, the
holder of the Mortgage Loan will be able to deliver good and merchantable
title to the Mortgaged Property. There is no homestead or other exemption
available to a Mortgagor which would interfere with the right to sell the
Mortgaged Property at a trustee's sale or the right to foreclose the
Mortgage.
23. Conformance with Underwriting Guidelines. The Mortgage Loan was generally
underwritten in accordance with the applicable Qualified Originator's
Underwriting Guidelines applicable to Mortgage Loans.
24. Occupancy of the Mortgaged Property. As of the Purchase Date, the
Mortgaged Property is lawfully occupied under applicable law. All
inspections, licenses and certificates
<PAGE>
required to be made or issued with respect to all occupied portions of the
Mortgaged Property and, with respect to the use and occupancy of the same,
including but not limited to certificates of occupancy and fire
underwriting certificates, have been made or obtained from the appropriate
authorities. The Seller has not received notification from any
Governmental Authority that the Mortgaged Property is in material
non-compliance with such laws or regulations, is being used, operated or
occupied unlawfully or has failed to have or obtain such inspection,
licenses or certificates, as the case may be. The Seller has not received
notice of any violation or failure to conform with any such law,
ordinance, regulation, standard, license or certificate. The Mortgagor
represented at the time of origination of the Mortgage Loan that the
Mortgagor would occupy the Mortgaged Property as the Mortgagor's primary
residence.
25. No Additional Collateral. Except as otherwise disclosed to the Buyer, the
Mortgage Note is not and has not been secured by any collateral except the
lien of the corresponding Mortgage and the security interest of any
applicable security agreement or chattel mortgage.
26. Deeds of Trust. In the event the Mortgage constitutes a deed of trust, a
trustee, authorized and duly qualified under applicable law to serve as
such, has been properly designated and currently so serves and is named in
the Mortgage, and no fees or expenses are or will become payable by the
Buyer or its designee or the Buyer to the trustee under the deed of trust,
except in connection with a trustee's sale after default by the Mortgagor.
27. Delivery of Mortgage Documents. The Mortgage Note, the Mortgage, the
Assignment of Mortgage and any other documents required to be delivered
under the Custodial Agreement for each Mortgage Loan have been delivered
to the Buyer or its designee. The Custodian is in possession of a
complete, true and accurate Asset File with respect to each Eligible Asset
which is to be purchased.
28. Transfer of Mortgage Loans. The Assignment of Mortgage is in recordable
form and is acceptable for recording under the laws of the jurisdiction in
which the Mortgaged Property is located.
29. Due-On-Sale. The Mortgage contains an enforceable provision for the
acceleration of the payment of the unpaid principal balance of the
Mortgage Loan in the event that the Mortgaged Property is sold or
transferred without the prior written consent of the mortgagee thereunder.
30. No Buydown Provisions; No Graduated Payments or Contingent Interests. The
Mortgage Loan does not contain provisions pursuant to which Monthly
Payments are paid or partially paid with funds deposited in any separate
account established by the Seller, the Mortgagor, or anyone on behalf of
the Mortgagor, or paid by any source other than the Mortgagor nor does it
contain any other similar provisions which may constitute a "buydown"
provision. The Mortgage Loan is not a graduated payment mortgage loan and
<PAGE>
the Mortgage Loan does not have a shared appreciation or other contingent
interest feature.
31. Consolidation of Future Advances. Any future advances made to the
Mortgagor prior to the Purchase Date have been consolidated with the
outstanding principal amount secured by the Mortgage, and the secured
principal amount, as consolidated, bears a single interest rate and single
repayment term. The lien of the Mortgage securing the consolidated
principal amount is expressly insured as having (A) first lien priority
with respect to each Mortgage Loan which is indicated by such Seller to be
a First Lien Mortgage Loan (as reflected on the Asset Schedule), or (B)
second lien priority with respect to each Mortgage Loan which is indicated
by Seller to be a Second Lien Mortgage Loan (as reflected on the Asset
Schedule), in either case, by a title insurance policy, an endorsement to
the policy insuring the mortgagee's consolidated interest or by other
title evidence. The consolidated principal amount does not exceed the
original principal amount of the Mortgage Loan.
32. Mortgaged Property Undamaged. The Mortgaged Property is undamaged by
waste, fire, earthquake or earth movement, windstorm, flood, tornado or
other casualty so as to affect adversely the value of the Mortgaged
Property as security for the Mortgage Loan or the use for which the
premises were intended and each Mortgaged Property is in good repair.
There have not been any condemnation proceedings with respect to the
Mortgaged Property and the Seller has no knowledge of any such
proceedings.
33. Collection Practices; Escrow Deposits; Interest Rate Adjustments. To the
best of the Seller's knowledge, the origination and collection practices
used by the originator, each servicer of the Mortgage Loan and the Seller
with respect to the Mortgage Loan have been in all respects materially in
compliance with Accepted Servicing Practices, applicable laws and
regulations, and have been in all respects legal and proper. With respect
to escrow deposits and escrow payments (other than with respect to each
Mortgage Loan which is indicated by such Seller to be a Second Lien
Mortgage Loan and for which the mortgagee under the prior mortgage lien is
collecting escrow payments (as reflected on the Asset Schedule), all such
payments are in the possession of, or under the control of, the Seller and
there exist no deficiencies in connection therewith for which customary
arrangements for repayment thereof have not been made. All escrow payments
have been collected in full compliance with state and federal law. An
escrow of funds is not prohibited by applicable law and has been
established in an amount sufficient to pay for every item that remains
unpaid and has been assessed but is not yet due and payable. No escrow
deposits or escrow payments or other charges or payments due the Seller
have been capitalized under the Mortgage or the Mortgage Note. All Note
Interest Rate adjustments have been made in strict compliance with state
and federal law and the terms of the related Mortgage Note. Any interest
required to be paid pursuant to state, federal and local law has been
properly paid and credited. The Mortgage Loan is denominated in U.S.
Dollars.
<PAGE>
34. Conversion to Fixed Interest Rate. With respect to adjustable rate
Mortgage Loans, the Mortgage Loan is not convertible to a fixed interest
rate Mortgage Loan.
35. Other Insurance Policies. No action, inaction or event has occurred and no
state of facts exists or has existed that has resulted or will result in
the exclusion from, denial of, or defense to coverage under any applicable
special hazard insurance policy or bankruptcy bond, irrespective of the
cause of such failure of coverage. In connection with the placement of any
such insurance, no commission, fee, or other compensation has been or will
be received by the Seller or by any officer, director, or employee of the
Seller or any designee of the Seller or any corporation in which the
Seller or any officer, director, or employee had a financial interest at
the time of placement of such insurance.
36. Soldiers' and Sailors' Civil Relief Act. The Mortgagor has not notified
the Seller, and the Seller has no knowledge, of any relief requested or
allowed to the Mortgagor under the Soldiers' and Sailors' Civil Relief Act
of 1940.
37. Appraisal. All required documentation has been received by the Servicer.
Each of the documents and instruments included in the Asset File and in
the Servicing File is duly executed and in due and proper form and each
such document or instrument is in a form generally acceptable to prudent
institutional mortgage lenders that regularly originate and purchase
Mortgage Loans. The Servicing File contains an appraisal of the related
Mortgaged Property signed prior to the approval of the Mortgage Loan
application by a qualified appraiser, duly appointed by the Seller, who
had no interest, direct or indirect in the Mortgaged Property or in any
loan made on the security thereof, and whose compensation is not affected
by the approval or disapproval of the Mortgage Loan, and the appraisal and
appraiser both satisfy the requirements of Title XI of the Federal
Institutions Reform, Recovery, and Enforcement Act of 1989 as amended and
the regulations promulgated thereunder, as in effect on the date the
Mortgage Loan was originated. In the event that the Mortgage Loan had a
principal balance at origination equal to or greater than (a) $300,000
with respect to each Mortgage Loan as to which the related Mortgaged
Property is located in California, and (b) $250,000 in all other cases,
the Servicing File contains a drive-by appraisal performed not more than
30 days prior to the applicable Purchase Date which confirms the Appraised
Value of the Mortgaged Property.
38. Disclosure Materials. The Mortgagor has executed a statement to the effect
that the Mortgagor has received all disclosure materials required by
applicable law with respect to the making of adjustable rate mortgage
loans, and the Seller maintains such statement in the Servicing File.
39. Construction or Rehabilitation of Mortgaged Property. No Mortgage Loan was
made in connection with the construction or rehabilitation of a Mortgaged
Property or facilitating the trade-in or exchange of a Mortgaged Property.
<PAGE>
40. No Defense to Insurance Coverage. No action has been taken or failed to be
taken, no event has occurred and no state of facts exists or has existed
on or prior to the Purchase Date (whether or not known to the Seller on or
prior to such date) which has resulted or will result in an exclusion
from, denial of, or defense to coverage under any private mortgage
insurance (including, without limitation, any exclusions, denials or
defenses which would limit or reduce the availability of the timely
payment of the full amount of the loss otherwise due thereunder to the
insured) whether arising out of actions, representations, errors,
omissions, negligence, or fraud of the Seller, the related Mortgagor or
any party involved in the application for such coverage, including the
appraisal, plans and specifications and other exhibits or documents
submitted therewith to the insurer under such insurance policy, or for any
other reason under such coverage, but not including the failure of such
insurer to pay by reason of such insurer's breach of such insurance policy
or such insurer's financial inability to pay.
41. Capitalization of Interest. The Mortgage Note does not by its terms
provide for negative amortization or forbearance of interest.
42. No Equity Participation. No document relating to the Mortgage Loan
provides for any contingent or additional interest in the form of
participation in the cash flow of the Mortgaged Property or a sharing in
the appreciation of the value of the Mortgaged Property. The indebtedness
evidenced by the Mortgage Note is not convertible to an ownership interest
in the Mortgaged Property or the Mortgagor and the Seller has not financed
nor does it own directly or indirectly, any equity of any form in the
Mortgaged Property or the Mortgagor.
43. Proceeds of Mortgage Loan. The proceeds of the Mortgage Loan have not been
and shall not be used to satisfy, in whole or in part, any debt owed or
owing by the Mortgagor to the Seller or any Affiliate or correspondent of
Seller.
44. Origination Date. The Origination Date is no earlier than (A) sixty (60)
days prior to the date the Mortgage Loan is first subject to a Transaction
provided such Mortgage Loan was originated by the Seller or a Qualified
Originator affiliated with the Seller or (B) seventy-five (75) days prior
to the date the Mortgage Loan is first subject to a Transaction provided
such Mortgage Loan was originated by a Qualified Originator not affiliated
with the Seller.
45. Qualified Originator. The Mortgage Loan has been originated by, and, if
applicable, purchased by the Seller from, a Qualified Originator.
46. Mortgage Submitted for Recordation. The Mortgage either has been or will
promptly be submitted for recordation in the appropriate governmental
recording office of the jurisdiction where the Mortgaged Property is
located.
47. LTV; CLTV. No adjustable rate First Lien Mortgage Loan or Second Lien
Mortgage Loan has an LTV or a CLTV, as applicable, greater than 90%, and
no fixed rate First
<PAGE>
Lien Mortgage Loan or Second Lien Mortgage Loan has an LTV or a CLTV, as
applicable, greater than 100%.
48. Signatures and Statements. All signatures, names, addresses, amounts and
other statements entered in the documentation referred to above, are, to
the best knowledge of Seller, true and correct.
49. Securitizable Asset. The Eligible Asset shall be of a type and quality
which the Buyer determines, in its reasonable discretion, is eligible for
sale in the secondary market or for securitization without unreasonable
credit enhancement.
50. No Foreclosure. There has been no default by a Mortgagor on a Mortgage
Loan resulting in the foreclosure on, or trustee's sale of, the Mortgaged
Property.
51. True Sale. Any Mortgage Loan funded in the name of or acquired by a
Qualified Originator which is an Affiliate of the Seller has been conveyed
to the Seller pursuant to a legal sale, and if so requested by the Buyer,
is covered by an opinion of counsel to that effect in form and substance
acceptable to the Buyer.
Purchase Facility:
(i) The information with respect to each Mortgage Loan and the information
set forth in the related Mortgage Loans Schedule is true and correct as of the
Cut-off Date;
(ii) The Mortgage Note, the Mortgage, the Assignment of Mortgage and any
other documents required to be delivered with respect to each Mortgage Loan
pursuant to the Custodial Agreement, have been delivered to the Custodian all in
compliance with the specific requirements of the Custodial Agreement. With
respect to each Mortgage Loan, the Seller is in possession of a complete
Mortgage File in compliance with Exhibit 5, except for such documents as have
been delivered to the Custodian and except for the Servicing File, which has
been delivered to the Interim Servicer;
(iii) Each Mortgage Loan is an Eligible Mortgage Loan or an Exception Loan
within the applicable Exception Limit;
(iv) Each Mortgaged Property is improved by a Residential Dwelling. If the
Residential Dwelling on the Mortgaged Property is a condominium unit or a unit
in a planned unit development (other than a de minimis planned unit development)
such condominium or planned unit development project meets the eligibility
requirements of Fannie Mae and Freddie Mac;
(v) No Second Lien Mortgage Loan had a CLTV at origination equal to or
greater than 95%. No Mortgage Loan had a combined LTV (including the amount of
all liens senior to or subordinate to the lien of the related Mortgage) greater
than 100%;
<PAGE>
(vi) Each Mortgage Note with respect to the Mortgage Loans will provide
for a schedule of substantially level and equal Monthly Payments which are
sufficient to amortize fully the principal balance of such Mortgage Note on or
before its maturity date. Unless stated on the Mortgage Loan Schedule, no
Mortgage Loan has a balloon payment feature;
(vii) As of the Closing Date, each Mortgage is a valid and subsisting
first lien on the Mortgaged Property with respect to each Mortgage Loan which is
indicated to be a First Lien (as reflected on the related Mortgage Loan
Schedule) or second lien on the Mortgaged Property with respect to each Mortgage
Loan which is indicated to be a Second Lien Mortgage Loan (as reflected on the
related Mortgage Loan Schedule) and subject in all cases to the exceptions to
title set forth in the title insurance policy or attorney's opinion of title
with respect to the related Mortgage Loan, which exceptions are generally
acceptable to banking institutions in connection with their regular mortgage
lending activities, and such other exceptions to which similar properties are
commonly subject and which do not individually, or in the aggregate, materially
and adversely affect the benefits of the security intended to be provided by
such Mortgage;
(viii) Immediately prior to the transfer and assignment of the Mortgage
Loans, the Seller held good and indefeasible title to, and was the sole owner
of, each Mortgage Loan (including the related Mortgage Note) conveyed by such
Seller subject to no liens, charges, mortgages, encumbrances or rights of others
except as set forth in clause (vii) or other liens which will be released
simultaneously with such transfer and assignment; and immediately upon the
transfer and assignment herein contemplated, the Purchaser will hold good and
indefeasible title to, and be the sole owner of, each Mortgage Loan subject to
no liens, charges, mortgages, encumbrances or rights of others except as set
forth in paragraph (vii) or other liens which will be released simultaneously
with such transfer and assignment;
(ix) No payment required to be made on the Mortgage Loan is more than 29
days delinquent from its contractual Due Date as of the close of business on the
related Closing Date; the Seller has not advanced funds, or induced, solicited
or knowingly received any advance of funds from a party other than the owner of
the related Mortgaged Property, directly or indirectly, for the payment of any
amount required by the Mortgage Note or Mortgage; such Mortgage Loan was
originated no later than 60 days prior to the related Closing Date; and there
has been no delinquency, exclusive of any period of grace, in any payment by the
Mortgagor thereunder since origination;
(x) There is no delinquent tax or assessment lien on any Mortgaged
Property, and each Mortgaged Property is free of substantial damage and is in
good repair;
(xi) There is no valid and enforceable offset, defense or counterclaim to
any Mortgage Note or Mortgage, including the obligation of the related Mortgagor
to pay the unpaid principal of or interest on such Mortgage Note;
(xii) There is no mechanics' lien or claim for work, labor or material
affecting any Mortgaged Property which is or may be a lien prior to, or equal
with, the lien of the related
<PAGE>
Mortgage except those which are insured against by any title insurance policy
referred to in paragraph (xiv) below;
(xiii) Each Mortgage Loan at the time it was made complied in all material
respects with applicable state and federal laws and regulations, including,
without limitation, the federal Truth-in-Lending Act and other consumer
protection laws, usury, equal credit opportunity, disclosure and recording laws;
(xiv) With respect to each Mortgage Loan either (a) an attorney's opinion
of title has been obtained but no title policy has been obtained, or (b) a
lender's title insurance policy, issued in standard American Land Title
Association form by a title insurance company authorized to transact business in
the state in which the related Mortgaged Property is situated, in an amount at
least equal to the original balance of such Mortgage Loan, insuring the
mortgagee's interest under the related Mortgage Loan as the holder of a valid
first or second mortgage lien of record on the real property described in the
related Mortgage, subject only to exceptions of the character referred to in
paragraph (vii) above, was effective on the date of the origination of such
Mortgage Loan, and, as of the Closing Date, such policy is valid and thereafter
such policy shall continue in full force and effect;
(xv) The improvements upon each Mortgaged Property are covered by a valid
and existing hazard insurance policy with a generally acceptable carrier that
provides for fire and extended coverage representing coverage not less than the
least of (A) the outstanding principal balance of the related Mortgage Loan
(together, in the case of a Second Lien Mortgage Loan, with the outstanding
principal balance of the Senior Lien), (B) the minimum amount required to
compensate for damage or loss on a replacement cost basis or (C) the full
insurable value of the Mortgaged Property;
(xvi) If any Mortgaged Property is in an area identified in the Federal
Register by the Federal Emergency Management Agency as having special flood
hazards, a flood insurance policy in a form meeting the requirements of the
current guidelines of the Flood Insurance Administration is in effect with
respect to such Mortgaged Property with a generally acceptable carrier in an
amount representing coverage not less than the least of (A) the outstanding
principal balance of the related Mortgage Loan (together, in the case of a
Second Lien Mortgage Loan, with the outstanding principal balance of the Senior
Lien), (B) the minimum amount required to compensate for damage or loss on a
replacement cost basis or (C) the maximum amount of insurance that is available
under the Flood Disaster Protection Act of 1973;
(xvii) Each Mortgage and Mortgage Note is the legal, valid and binding
obligation of the maker thereof and is enforceable in accordance with its terms,
except only as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
considered in a proceeding or action in equity or at law), and all parties to
each Mortgage Loan had full legal capacity to execute all documents relating to
such Mortgage Loan and convey the estate therein purported to be conveyed;
<PAGE>
(xviii) The Seller has caused and will cause to be performed any and all
acts required to be performed to preserve the rights and remedies of the
Purchaser in any insurance policies applicable to any Mortgage Loans including,
without limitation, any necessary notifications of insurers, assignments of
policies or interests therein, and establishments of co-insured, joint loss
payee and mortgagee rights in favor of the Purchaser;
(xix) As of the Closing Date, no more than 1.0% of the aggregate Stated
Principal Balance of the Mortgage Loans will be secured by Mortgaged Properties
located within any single zip code area;
(xx) Each original Mortgage was recorded or is in the process of being
recorded, and all subsequent assignments of the original Mortgage have been
delivered for recordation or have been recorded in the appropriate jurisdictions
wherein such recordation is necessary to perfect the lien thereof as against
creditors of or purchasers from the Seller delivering the related Mortgage Loan;
(xxi) The terms of each Mortgage Note and each Mortgage have not been
impaired, altered or modified in any respect, except by a written instrument
which has been recorded, if necessary, to maintain the lien priority of the
Mortgage, and which have been delivered to the Custodian; the substance of any
such waiver, alteration or modification is reflected on the related Mortgage
Loan Schedule. No instrument of waiver, alteration or modification has been
executed, and no Mortgagor has been released, in whole or in part, except in
connection with an assumption agreement, which assumption agreement has been
delivered to the Custodian and the terms of which are reflected in the related
Mortgage Loan Schedule;
(xxii) The proceeds of each Mortgage Loan have been fully disbursed, and
there is no obligation on the part of the mortgagee to make future advances
thereunder. Any and all requirements as to completion of any onsite or off-site
improvements and as to disbursements of any escrow funds therefor have been
complied with. All costs, fees and expenses incurred in making or closing or
recording such Mortgage Loans were paid;
(xxiii) The related Mortgage Note is not and has not been secured by any
collateral, pledged account or other security except the lien of the
corresponding Mortgage;
(xxiv) No Mortgage Loan was originated under a buydown plan;
(xxv) No Mortgage Loan has a shared appreciation feature, or other
contingent interest feature;
(xxvi) Each Mortgaged Property is located in the state identified in the
respective Schedule of Mortgage Loans and consists of one or more parcels of
real property with a residential dwelling erected thereon;
<PAGE>
(xxvii) Each Mortgage contains a provision for the acceleration of the
payment of the unpaid principal balance of the related Mortgage Loan in the
event the related Mortgaged Property is sold without the prior consent of the
mortgagee thereunder;
(xxviii) Any advances made after the date of origination of a Mortgage
Loan but prior to the Cut-off Date have been consolidated with the outstanding
principal amount secured by the related Mortgage, and the secured principal
amount, as consolidated, bears a single interest rate and single repayment term
reflected on the respective Schedule of Mortgage Loans. The consolidated
principal amount does not exceed the original principal amount of the related
Mortgage Loan. No Mortgage Note permits or obligates the Seller to make future
advances to the related Mortgagor at the option of the Mortgagor;
(xxix) There is no proceeding pending or threatened for the total or
partial condemnation of any Mortgaged Property, nor is such a proceeding
currently occurring, and each Mortgaged Property is undamaged by waste, fire,
water, flood, earthquake or earth movement;
(xxx) All of the improvements which were included for the purposes of
determining the Appraised Value of any Mortgaged Property lie wholly within the
boundaries and building restriction lines of such Mortgaged Property, and no
improvements on adjoining properties encroach upon such Mortgaged Property,
unless any such improvements and are stated in the title insurance policy and
affirmatively insured;
(xxxi) No improvement located on or being part of any Mortgaged Property
is in violation of any applicable zoning law or regulation. All inspections,
licenses and certificates required to be made or issued with respect to all
occupied portions of each Mortgaged Property and, with respect to the use and
occupancy of the same, including but not limited to certificates of occupancy
and fire underwriting certificates, have been made or obtained from the
appropriate authorities and such Mortgaged Property is lawfully occupied under
the applicable law;
(xxxii) With respect to each Mortgage constituting a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in such Mortgage, and no fees or
expenses are or will become payable by the Purchaser to the trustee under the
deed of trust, except in connection with a trustee's sale after default by the
related Mortgagor;
(xxxiii) Each Mortgage contains customary and enforceable provisions which
render the rights and remedies of the holder thereof adequate for the
realization against the related Mortgaged Property of the benefits of the
security, including (A) in the case of a Mortgage designated as a deed of trust,
by trustee's sale and (B) otherwise by judicial foreclosure. There is no
homestead or other exemption available to the related Mortgagor which would
materially interfere with the right to sell the related Mortgaged Property at a
trustee's sale or the right to foreclose the related Mortgage. The Mortgagor has
not notified the Seller and the Seller has no knowledge of any relief requested
or allowed to the Mortgagor under the Soldiers and Sailors Civil Relief Act of
1940;
<PAGE>
(xxxiv) There is no default, breach, violation or event of acceleration
existing under any Mortgage or the related Mortgage Note and no event which,
with the passage of time or with notice and the expiration of any grace or cure
period, would constitute a default, breach, violation or event of acceleration;
and the Seller has not waived any default, breach, violation or event of
acceleration. With respect to each Mortgage Loan which is indicated to be a
Second Lien Mortgage Loan (as reflected on the related Mortgage Loan Schedule)
(i) the Mortgage Note is in full force and effect, (ii) there is no default,
breach, violation or event of acceleration existing under such Mortgage Note
mortgage or the related mortgage note, (iii) no event which, with the passage of
time or with notice and the expiration of any grace or cure period, would
constitute a default, breach, violation or event of acceleration thereunder, and
either (A) the Mortgage Note mortgage contains a provision which allows or (B)
applicable law requires, the mortgagee under the second lien Mortgage Loan to
receive notice of, and affords such mortgagee an opportunity to cure any default
by payment in full or otherwise under the Mortgage Note mortgage;
(xxxv) No instrument of release or waiver has been executed in connection
with any Mortgage Loan, and no Mortgagor has been released, in whole or in part,
except in connection with an assumption agreement which has been approved by the
primary mortgage guaranty insurer, if any, and which has been delivered to the
Purchaser;
(xxxvi) Each Mortgage Loan was originated based upon a full appraisal,
which included an interior inspection of the subject property and was made and
signed, prior to the approval of the Mortgage Loan application, by a qualified
appraiser, duly appointed by the originator, who had no interest, direct or
indirect in the Mortgaged Property or in any loan made on the security thereof,
whose compensation is not affected by the approval or disapproval of the
Mortgage Loan. Each appraisal of the Mortgage Loan was made in accordance with
the relevant provisions of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989;
(xxxvii) The Mortgage Loans were not selected for inclusion in the related
Mortgage Loan Package by the Seller on any basis intended to adversely affect
the Purchaser;
(xxxviii) The Seller has any actual knowledge that there exist any
hazardous substances, hazardous wastes or solid wastes, as such terms are
defined in the Comprehensive Environmental Response Compensation and Liability
Act, the Resource Conservation and Recovery Act of 1976, or other federal, state
or local environmental legislation on any Mortgaged Property;
(xxxix) Seller was properly licensed or otherwise authorized, to the
extent required by applicable law, to originate or purchase each Mortgage Loan;
and the consummation of the transactions herein contemplated, including, without
limitation, the receipt of the ownership of the Mortgage Loans by the Purchaser
will not involve the violation of such laws;
(xl) With respect to each Mortgaged Property subject to a ground lease (i)
the current ground lessor has been identified and all ground rents which have
previously become due and owing have been paid; (ii) the ground lease term
extends, or is automatically renewable, for at least five years beyond the
maturity date of the related Mortgage Loan; (iii) the ground lease has
<PAGE>
been duly executed and recorded; (iv) the amount of the ground rent and any
increases therein are clearly identified in the lease and are for predetermined
amounts at predetermined times; (v) the ground rent payment is included in the
borrower's monthly payment as an expense item; (vi) the Purchaser has the right
to cure defaults on the ground lease; and (vii) the terms and conditions of the
leasehold do not prevent the free and absolute marketability of the Mortgaged
Property;
(xli) All taxes, governmental assessments, insurance premiums, water,
sewer and municipal charges, leasehold payments or ground rents which previously
became due and owing have been paid, or an escrow of funds has been established
in an amount sufficient to pay for every such item which remains unpaid and
which has been assessed but is not yet due and payable;
(xlii) As of the Closing Date, neither Seller has received a notice of
default of any Mortgage Loan secured by any Mortgaged Property which has not
been cured by a party other than such Seller;
(xliii) All of the Adjustable Rate Mortgage Loans are in a first lien
position;
(xliv) The Seller shall, at its own expense, cause each Mortgage Loan to
be covered by a Tax Service Contract which is assignable to the Purchaser or its
designee; provided however, that if the Seller fails to purchase such Tax
Service Contract, the Seller shall be required to reimburse the Purchaser for
all costs and expenses incurred by the Purchaser in connection with the purchase
of any such Tax Service Contract;
(xlv) Each Mortgage Loan was originated by an affiliate of Seller and was
conveyed to Seller pursuant to a legal sale, and if so requested by the
Purchaser, is covered by an opinion of counsel to that effect in form and
substance acceptable to the Purchaser;
(xlvi) In the event that the Mortgage Loan had a principal balance at
origination equal to or greater than (a) $300,000 with respect to each Mortgage
Loan as to which the related Mortgaged Property is located in California, and
(b) $250,000 in all other cases, the Mortgage File contains a drive-by appraisal
performed not more than 30 days prior to the Closing Date which confirms that
the LTV of the Mortgage Loan satisfies the Underwriting Guidelines for the
applicable loan program;
(xlvii) Except to the extent that the Mortgage Loan is an AmGen Mortgage
Loan, the Mortgage Loan has not been previously financed or purchased by any
third party. Following the purchase of such Mortgage Loan, the aggregate unpaid
principal balance of the AmGen Mortgage Loans shall not exceed 10% of the
aggregate unpaid principal balance of all of the Portfolio Mortgage Loans
purchased hereunder;
(xlviii) No Mortgage Loan was made in connection with (a) the construction
or rehabilitation of a Mortgaged Property; (b) facilitating the trade-in or
exchange of a Mortgaged
<PAGE>
Property; (c) facilitating the sale of an REO property or (d) the refinancing of
a delinquent mortgage loan originated or acquired by Seller which was more than
60 days delinquent;
(xlix) No Fixed Rate Mortgage Loan has an LTV greater than 100% and no
Adjustable Rate Mortgage Loan has an LTV greater than 90%;
(l) All parties which have had any interest in the Mortgage Loan, whether
as mortgagee, assignee, pledgee or otherwise, are (or, during the period in
which they held and disposed of such interest, were) in compliance with any and
all applicable "doing business" and licensing requirements of the laws of the
state wherein the Mortgaged Property is located;
(li) The Mortgage Loan was originated (within the meaning of the Secondary
Mortgage Market Enhancement Act of 1984) by a savings and loan association, a
savings bank, a commercial bank or similar banking institution which is
supervised and examined by a federal or state authority, or by a mortgagee
approved as such by the Secretary of HUD;
(lii) The origination and collection practices used by the Seller and any
other originator with respect to each Mortgage Note and Mortgage have been in
all respects legal, proper, prudent and customary in the mortgage origination
and servicing industry. The Mortgage Loan has been serviced by the Seller and
any predecessor servicer in accordance with the terms of the Mortgage Note.
[With respect to escrow deposits and Escrow Payments, if any, (other than with
respect to each Mortgage Loan which is indicated to be a Second Lien Mortgage
Loan and for which the mortgagee under the Mortgage Note is collecting Escrow
Payments), all such payments are in the possession of, or under the control of,
the Seller and there exist no deficiencies in connection therewith for which
customary arrangements for repayment thereof have not been made.] No escrow
deposits or Escrow Payments or other charges or payments due the Seller have
been capitalized under any Mortgage or the related Mortgage Note and no such
escrow deposits or Escrow Payments are being held by the Seller for any work on
a Mortgaged Property which has not been completed;
(liii) The Mortgage Loan was underwritten in accordance with the
Underwriting Guidelines in effect at the time the Mortgage Loan was originated;
<PAGE>
(liv) No error, omission, misrepresentation, negligence, fraud or similar
occurrence with respect to a Mortgage Loan has taken place on the part of any
person, including without limitation the Mortgagor, any appraiser, any builder
or developer, or any other party involved in the origination of the Mortgage
Loan or in the application of any insurance in relation to such Mortgage Loan;
(lv) The Assignment of Mortgage is in recordable form and is acceptable
for recording under the laws of the jurisdiction in which the Mortgaged Property
is located;
(lvi) No Mortgage Loan which is a Cash-out Refinancing was originated in
the State of Texas;
(lvii) With respect to each Mortgage Loan which is a Second Lien, (i) if
the related Mortgage Note provides for negative amortization, the LTV was
calculated at the maximum principal balance of such Mortgage Note that could
result upon application of such negative amortization feature, and (ii) either
no consent for the Mortgage Loan is required by the holder of the Mortgage Note
or such consent has been obtained and is contained in the Mortgage File; and
(lviii) With respect to each Mortgage Loan which is subject to the
provisions of HOEPA, the Mortgage Loan is identified as such on the Mortgage
Loan Schedule, and the related Mortgage File contains a notice from the
originator and a copy of a notice to each entity which was a purchaser or
assignee of the Mortgage Loan satisfying the provisions of HOEPA and the
regulations issued thereunder to the effect that the Mortgage Loan is subject to
special truth-in-lending rules.
<PAGE>
EXHIBIT V(A)
Representations and Warranties
Regarding Empire Mortgage Loans
(a) The Borrower represents and warrants to the Lender that:
(1) It has been duly organized and is validly existing as a
corporation under the laws of its state of incorporation.
(2) It is duly qualified in each state in which it transacts
business and is not in default of such state's applicable laws, rules and
regulations.
(3) It has the requisite power and authority and legal right to own
and grant a lien on all of its right, title and interest in and to the
Collateral and to execute and deliver, engage in the transactions contemplated
by, and perform and observe the terms and conditions of, this Agreement, the
Secured Note and the Custodial Agreement.
(4) It is solvent and is not in default under any mortgage,
borrowing agreement or other instrument or agreement pertaining to indebtedness
for borrowed money, and the execution and delivery by it of this Agreement and
the Custodial Agreement and the execution by it of the Secured Note will not
result in any violation of any such mortgage, instrument or agreement.
(5) All of its audited and unaudited financial statements, budgets
and certificates or any certificates of its officers furnished to the Lender are
true and complete and do not omit to disclose any material liabilities,
contingent or otherwise, or other facts relevant to its condition. All such
audited and unaudited financial statements have been prepared in accordance with
GAAP.
(6) This Agreement, the Secured Note and the Custodial Agreement
have each been duly authorized and executed by it and each is valid, binding and
enforceable against it in accordance with its terms, and the execution, delivery
and performance by it of this Agreement and the Custodial Agreement and the
execution by it of the Secured Note do not conflict with, or will not result in
a breach of, any term or provision of its certificate of incorporation or
by-laws or any material agreement or instrument to which it is bound (including,
without limitation, its license from HUD as an authorized originator and
servicer of Title I Loans) or any law, rule, regulation, order, judgment, writ,
injunction or decree applicable to it of any court, regulatory body,
administrative agency or governmental body having jurisdiction over it.
(7) No consent, approval, authorization or order of, registration or
filing with, or notice to any governmental authority or court is required under
applicable law in connection with the execution, delivery and performance by it
of this Agreement, the Custodial Agreement and the Secured Note.
Exh V(A)-1
<PAGE>
(8) There is no action, proceeding or investigation pending or, to
the best knowledge of it, threatened against it before any court, administrative
agency or other tribunal (A) asserting the invalidity of this Agreement, the
Custodial Agreement or the Secured Note, (B) seeking to prevent the consummation
of any of the transactions contemplated by this Agreement, the Custodial
Agreement or the Secured Note, or (C) which might materially and adversely
affect the validity of the Home Improvement Loans or the performance by it of
its obligations under, or the validity or enforceability of, this Agreement, the
Custodial Agreement or the Secured Note.
(9) Since the date of this Agreement, there has been no change in
the business, operations, financial condition, properties or prospects of it
which would have a material adverse affect on its ability to perform its
obligations under this Agreement, the Custodial Agreement or the Secured Note.
(b) With respect to each Title I Loan delivered by the Borrower to the
Custodian, the Borrower represents and warrants to the Lender that:
(1) Such Title I Loan and all accompanying documents are complete
and authentic and all signatures thereon are genuine.
(2) Such Title I Loan arose from a bona fide dealer or direct loan,
as defined in the Title I Regulations, complying with all applicable state and
Federal laws and regulations, to persons having legal capacity to contract and
is not subject to any defense, set-off or counterclaim
(3) All amounts represented to be payable on such Title I Loan are,
in fact, payable in accordance with the provisions of such Title I Loan.
(4) No default has occurred in any provisions of such Title I Loan.
(5) The terms of the Note and the Mortgage, if a Mortgage is
required by the Title I Regulations, relating to such Title I Loan have not been
impaired, waived, altered or modified in any respect, except by written
instruments reflected in the documents delivered to the Custodian pursuant to
Section 2 of the Custodial Agreement, and no provision of such Note or Mortgage
has been "whited out" or erased unless such modification has been initialed by
each of the parties to such Title I Loan. No instrument of waiver, alteration or
modification has been executed, and the Obligor has not been released from the
related Mortgage, if any, in whole or in part, except in connection with an
assumption agreement, which assumption agreement is part of the mortgage file
and the terms of which are reflected in the documents delivered to the Custodian
pursuant to Section 2 of the Custodial Agreement, and the Borrower shall allow
no assumption of any Mortgage.
(6) Any property subject to any security interest given in
connection with such Title I Loan is not subject to any encumbrance other than a
stated mortgage or mortgages.
Exh V(A)-2
<PAGE>
(7) It has good and indefeasible title to, and was the sole owner
of, such Title I Loan subject to no liens, charges, mortgages, participations,
encumbrances or rights of others other than liens released simultaneously with
such pledge.
(8) Such Title I Loan conforms to the description thereof as set
forth on the related Title I Loan Schedule.
(9) All payments required to be made up to the date 30 days prior to
the date such Title I Loan is pledged hereunder (the "Pledge Date") on such
Title I Loan under the terms of the Note have been made. The Borrower has not
advanced funds, or induced, solicited or knowingly received any advance of funds
from a party other than the Obligor, directly or indirectly, for the payment of
any amount required by such Title I Loan.
(10) The Note and the Mortgage, if any, relating to such Title I
Loan are not subject to any litigation, including, without limitation, any
bankruptcy or insolvency proceeding, set-off, counterclaim or defense, including
the defense of usury, nor will the operation of any of the terms of the Note and
the Mortgage, if any, or the exercise of any right thereunder, render either the
Note or the Mortgage, if any, unenforceable, in whole or in part, or subject to
any right of rescission, set-off, counterclaim or defense, including the defense
of usury, and no such right of rescission, set-off, counterclaim or defense has
been asserted with respect thereto.
(11) Any and all requirements of any federal, state or local law
applicable to such Title I Loan have been complied with including, without
limitation, all consumer laws.
(12) The Mortgage, if any, relating to such Title I Loan has not
been satisfied, cancelled or subordinated, in whole, or rescinded, and the
Mortgaged Property has not been released from the lien of the Mortgage, in whole
or in part, nor has any instrument been executed that would effect any such
release, cancellation, subordination or rescission.
(13) The Mortgage, if any, relating to such Title I Loan is a valid,
subsisting and enforceable lien on the Mortgaged Property, including the land
and all buildings on the Mortgaged Property.
(14) The Note and the related Mortgage, if any, relating to such
Title I Loan are genuine and each is the legal, valid and binding obligation of
the maker thereof, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting creditors' rights in general and by general principles of
equity.
(15) All parties to the Note and the Mortgage, if any, relating to
such Title I Loan had legal capacity at the time to enter into the Title I Loan
and to execute and deliver the Note and the Mortgage, if a mortgage is required
by the Title I Regulations, and the Note and the Mortgage, if any, have been
duly and properly executed by such parties.
Exh V(A)-3
<PAGE>
(16) As of the Pledge Date, the proceeds of such Title I Loan have
been fully disbursed and there is no requirement for future advances thereunder,
and any and all requirements set forth in the Title I Loan documents have been
complied with.
(17) If a mortgage is required by the Title I Regulations with
respect to such Title I Loan, it has possession of a title document with respect
to such Title I Loan reflecting that title to the Mortgaged Property is vested
at least 50% in the Obligor under such Title I Loan.
(18) To the best of its knowledge, there is no default, breach,
violation or event of acceleration existing under the Mortgage, if any, or the
Note relating to such Title I Loan and there is no event which, with the passage
of time or with notice and/or the expiration of any grace or cure period, would
constitute a default, breach, violation or event of acceleration, and it has not
waived any default, breach, violation or event of acceleration.
(19) If a mortgage is required by the Title I Regulations with
respect to such Title I Loan, to the best of its knowledge, there is no
proceeding pending for the total or partial condemnation of the related
Mortgaged Property.
(20) The related Mortgage, if any, contains customary and
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the Mortgaged Property of the
benefits of the security provided thereby, including, (i) in the case of a
Mortgage designated as a deed of trust, by trustee's sale, and (ii) otherwise,
by judicial foreclosure.
(21) Such Title I Loan is a FHA Title I property improvement loan
(as defined in 24 C.F.R. Parts 201 and 202) underwritten by the Borrower in
accordance with FHA requirements for the Title I loan program as set forth in 24
C.F.R. Parts 201 and 202, and the Borrower has submitted such Title I Loan to
FHA for inclusion in the Title I program.
(22) Such Title I Loan is a fixed rate mortgage loan; the stated
fixed rate of interest on such Title I Loan is at least equal the Interest Rate
plus 300 basis points; the Note shall mature within not less than 24 months nor
more than 20 years and 32 days; the Note is payable in monthly installments of
principal and interest, with interest payable in arrears, and requires a monthly
payment which is sufficient to amortize the original principal balance over the
original term and to pay interest at the related annual interest rate; and the
Note does not provide for any extension of the original term.
(23) If a mortgage is required by the Title I Regulations with
respect to such Title I Loan, the related Note is not, and has not been, secured
by any collateral except the lien of the corresponding Mortgage.
(24) If a mortgage is required by the Title I Regulations with
respect to such Title I Loan and if the Mortgage constitutes a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in the Mortgage, or a valid
substitution of trustee has been recorded or may be recorded and no
extraordinary fees or expenses are, or will become, payable by the Lender to the
trustee
Exh V(A)-4
<PAGE>
under the deed of trust, except in connection with default proceedings
and a trustee's sale after default by the Obligor.
(25) The Borrower has no knowledge of any circumstances or
conditions not reflected in the representations set forth herein, or in the
documents delivered to the Custodian pursuant to Section 2 of the Custodial
Agreement, or, if a mortgage is required by the Title I Regulations with respect
to such Title I Loan, in the mortgage file with respect to the Mortgage, the
Mortgaged Property or the Obligor which in its opinion could reasonably be
expected to materially and adversely affect the value of the Mortgaged Property,
or the marketability of such Title I Loan or cause such Title I Loan to become
delinquent or otherwise in default.
(26) Such Title I Loan is serviced by the Borrower or by a
subservicer pursuant to the terms and conditions of a subservicing agreement to
which the Lender has consented in writing.
(27) All disclosures required by the Real Estate Settlement
Procedures Act, by Regulation X promulgated thereunder and by Regulation Z of
the Board of Governors of the Federal Reserve System promulgated pursuant to the
statute commonly known as the Truth-in-Lending Act and the Notice of the Right
of Rescission required by said statute and regulation have been properly made
and given with respect to such Title I Loan.
(28) Such Title I Loan is in respect of a home improvement loan
(including improvements to existing manufactured or mobile homes that qualify as
real property) and is not a loan in respect of the purchase of manufactured
homes or mobile homes or the land on which such manufactured homes or mobile
homes will be placed.
(29) Such Title I Loan is not more than 29 days contractually
delinquent.
(30) The proceeds of such Title I Loan have been or, with respect to
Direct Loans, will be used for improvements on the Obligor's Mortgaged Property
in compliance with the Title I Regulations.
(c) With respect to every Conventional Home Improvement Loan delivered to the
Custodian, the Borrower represents and warrants to the Lender that:
(1) Such Conventional Home Improvement Loan and all accompanying
documents are complete and authentic and all signatures thereon are genuine.
(2) Such Conventional Home Improvement Loan arose from a bona fide
loan, complying with all applicable state and Federal laws and regulations, to
persons having legal capacity to contract and is not subject to any defense,
set-off or counterclaim.
(3) All amounts represented to be payable on such Conventional Home
Improvement Loan are, in fact, payable in accordance with the provisions of such
Conventional Home Improvement Loan.
Exh V(A)-5
<PAGE>
(4) No default has occurred in any provisions of such Conventional
Home Improvement Loan.
(5) The terms of the Note and the Mortgage, if a Mortgage is
required by the Conventional Home Improvement Loan Underwriting Guidelines, have
not been impaired, waived, altered or modified in any respect, except by written
instruments reflected in the documents delivered to the Custodian pursuant to
Section 2 of the Custodial Agreement, and no provision of such Note or Mortgage
has been "whited out" or erased unless such modification has been initialed by
each of the parties to such Conventional Home Improvement Loan. No instrument of
waiver, alteration or modification has been executed, and the Obligor has not
been released from the related Mortgage, if any, in whole or in part, except in
connection with an assumption agreement, which assumption agreement is part of
the mortgage file and the terms of which are reflected in the documents
delivered to the Custodian pursuant to Section 2 of the Custodial Agreement, and
the Borrower shall allow no assumption of any Mortgage.
(6) Any property subject to any security interest given in
connection with such Conventional Home Improvement Loan is not subject to any
encumbrance other than a stated mortgage or mortgages.
(7) It has good and indefeasible title to, and was the sole owner
of, such Conventional Home Improvement Loan subject to no liens, charges,
mortgages, participations, encumbrances or rights of others other than liens
released simultaneously with such pledge. description thereof as set forth on
the related Conventional Home Improvement Loan Schedule.
(9) All payments required to be made up to the date 30 days prior to
the date such Conventional Home Improvement Loan is pledged hereunder (the
"Pledge Date") on such Conventional Home Improvement Loan under the terms of the
Note have been made. The Borrower has not advanced funds, or induced, solicited
or knowingly received any advance of funds from a party other than the Obligor,
directly or indirectly, for the payment of any amount required by such
Conventional Home Improvement Loan.
(10) The Note and the Mortgage, if any, relating to such
Conventional Home Improvement Loan are not subject to any litigation, including,
without limitation, any bankruptcy or insolvency proceeding, set-off,
counterclaim or defense, including the defense of usury, nor will the operation
of any of the terms of the Note and the Mortgage, if any, or the exercise of any
right thereunder, render either the Note or the Mortgage, if any, unenforceable,
in whole or in part, or subject to any right of rescission, set-off,
counterclaim or defense, including the defense of usury, and no such right of
rescission, set-off, counterclaim or defense has been asserted with respect
thereto.
(11) Any and all requirements of any federal, state or local law
applicable to such Conventional Home Improvement Loan have been complied with
including, without limitation, all consumer laws.
Exh V(A)-6
<PAGE>
(12) The Mortgage, if any, relating to such Conventional Home
Improvement Loan has not been satisfied, cancelled or subordinated, in whole, or
rescinded, and the Mortgaged Property has not been released from the lien of the
Mortgage, in whole or in part, nor has any instrument been executed that would
effect any such release, cancellation, subordination or rescission.
(13) The Mortgage, if any, relating to such Conventional Home
Improvement Loan is a valid, subsisting and enforceable lien on the Mortgaged
Property, including the land and all buildings on the Mortgaged Property.
(14) The Note and the related Mortgage, if any, relating to such
Conventional Home Improvement Loan are genuine and each is the legal, valid and
binding obligation of the maker thereof, enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting creditors' rights in general and
by general principles of equity.
(15) All parties to the Note and the Mortgage, if any, relating to
such Conventional Home Improvement Loan had legal capacity at the time to enter
into the Conventional Home Improvement Loan and to execute and deliver the Note
and the Mortgage, if a mortgage is required by the Conventional Home Improvement
Loan Underwriting Guidelines, and the Note and the Mortgage, if any, have been
duly and properly executed by such parties.
(16) As of the Pledge Date, the proceeds of such Conventional Home
Improvement Loan have been fully disbursed and there is no requirement for
future advances thereunder, and any and all requirements set forth in the
Conventional Home Improvement Loan documents have been complied with.
(17) If a mortgage is required by the Conventional Home Improvement
Loan Underwriting Guidelines with respect to such Conventional Home Improvement
Loan, it has possession of a title document with respect to such Conventional
Home Improvement Loan reflecting that title to the Mortgaged Property is fully
vested in the Obligor under such Conventional Home Improvement Loan.
(18) To the best of its knowledge, there is no default, breach,
violation or event of acceleration existing under the Mortgage, if any, or the
Note relating to such Conventional Home Improvement Loan and there is no event
which, with the passage of time or with notice and/or the expiration of any
grace or cure period, would constitute a default, breach, violation or event of
acceleration, and it has not waived any default, breach, violation or event of
acceleration.
(19) If a mortgage is required by the Conventional Home Improvement
Loan Underwriting Guidelines with respect to such Conventional Home Improvement
Loan, to the best of its knowledge, there is no proceeding pending for the total
or partial condemnation of the related Mortgaged Property.
Exh V(A)-7
<PAGE>
(20) The related Mortgage, if any, contains customary and
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the Mortgaged Property of the
benefits of the security provided thereby, including, (i) in the case of a
Mortgage designated as a deed of trust, by trustee's sale, and (ii) otherwise,
by judicial foreclosure.
(21) Such Conventional Home Improvement Loan is a home improvement
loan underwritten by the Borrower in accordance with the Conventional Home
Improvement Loan Underwriting Guidelines.
(22) Such Conventional Home Improvement Loan is a fixed rate
mortgage loan; the stated fixed rate of interest on such Conventional Home
Improvement Loan is at least equal the Interest Rate plus 300 basis points; the
Note shall mature within not less than 24 months nor more than 20 years and 32
days; the Note is payable in monthly installments of principal and interest,
with interest payable in arrears, and requires a monthly payment which is
sufficient to amortize the original principal balance over the original term and
to pay interest at the related annual interest rate; and the Note does not
provide for any extension of the original term.
(23) If a mortgage is required by the Conventional Home Improvement
Loan Underwriting Guidelines with respect to such Conventional Home Improvement
Loan, the related Note is not, and has not been, secured by any collateral
except the lien of the corresponding Mortgage.
(24) If a mortgage is required by the Conventional Home Improvement
Loan Underwriting Guidelines with respect to such Conventional Home Improvement
Loan and if the Mortgage constitutes a deed of trust, a trustee, duly qualified
under applicable law to serve as such, has been properly designated and
currently so serves and is named in the Mortgage, or a valid substitution of
trustee has been recorded or may be recorded and no extraordinary fees or
expenses are, or will become, payable by the Lender to the trustee under the
deed of trust, except in connection with default proceedings and a trustee's
sale after default by the Obligor.
(25) The Borrower has no knowledge of any circumstances or
conditions not reflected in the representations set forth herein, or in the
documents delivered to the Custodian pursuant to Section 2 of the Custodial
Agreement, or, if a mortgage is required by the Conventional Home Improvement
Loan Underwriting Guidelines with respect to such Conventional Home Improvement
Loan, in the mortgage file with respect to the Mortgage, the Mortgaged Property
or the Obligor which in its opinion could reasonably be expected to materially
and adversely affect the value of the Mortgaged Property, or the marketability
of such Conventional Home Improvement Loan or cause such Conventional Home
Improvement Loan to become delinquent or otherwise in default.
(26) Such Conventional Home Improvement Loan is serviced by the
Borrower or by a subservicer pursuant to the terms and conditions of a
subservicing agreement to which the Lender has consented in writing.
Exh V(A)-8
<PAGE>
(27) All disclosures required by the Real Estate Settlement
Procedures Act, by Regulation X promulgated thereunder and by Regulation Z of
the Board of Governors of the Federal Reserve System promulgated pursuant to the
statute commonly known as the Truth-in-Lending Act and the Notice of the Right
of Rescission required by said statute and regulation have been properly made
and given with respect to such Conventional Home Improvement Loan.
(28) Such Conventional Home Improvement Loan is in respect of a home
improvement loan (including improvements to existing manufactured or mobile
homes that qualify as real property) and is not a loan in respect of the
purchase of manufactured homes or mobile homes or the land on which such
manufactured homes or mobile homes will be placed.
(29) Such Conventional Home Improvement Loan is not more than 29
days contractually delinquent.
(30) The proceeds of such Conventional Home Improvement Loan have
been or, with respect to Direct Loans, will be used for improvements on the
Obligor's Mortgaged Property.
Exh V(A)-9
<PAGE>
EXHIBIT VI
SELLER/AFFILIATE AGREEMENT
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.
600 Steamboat Road
Greenwich, Connecticut 06830
As of August 9, 1999
ContiFinancial Corporation
277 Park Avenue
New York, New York 10172
Attention:
Gentlemen:
Reference is made to (i) the Master Repurchase Agreement Governing
Purchases and Sales of Assets ("Master Repurchase Agreement") dated as of August
9, 1999, between Greenwich Capital Financial Products, Inc. ("Buyer") and
ContiFinancial Corporation ("Seller"). This letter agreement ("Letter
Agreement") confirms the agreement among Seller and ContiMortgage Corporation
each in its capacity as servicer ("Subservicer") and Buyer as to the matters set
forth below. Capitalized terms used herein but not defined shall have the
meaning ascribed to such terms in the Master Repurchase Agreement.
1. The Subservicer hereby represents and warrants to the Buyer that as of the
date of execution of this Letter Agreement and at each Purchase Date, the
representations and warranties on Exhibit A hereto are true and correct.
2. The Subservicer hereby acknowledges and agrees that the Buyer is the owner
of the Mortgage Loans and all of the servicing rights thereto and, in
connection therewith, the Subservicer has no rights in the Mortgage Loans,
including the servicing rights thereto, with the exception of those
limited servicing rights granted to it by Buyer pursuant to this Letter
Agreement.
3. (a) The Subservicer is hereby appointed as servicer of the Mortgage Loans
pursuant to the terms of this Letter Agreement, which servicing rights
shall be immediately terminable by Buyer upon the earlier of (i) the
termination of the Interim Servicing Period, (ii) the occurrence of an
Event of Default under the Repurchase Agreement, whether or not the
Subservicer is in any way implicated in such Event of Default, (iii) a
Subservicer Termination Event (as such term is defined in Exhibit B
hereto), or (iv) 30 days prior written notice.
4. (b) Upon such termination, the Subservicer will promptly arrange for the
transfer of servicing (including all funds and Servicing Records held) of
the specified Mortgage
Exh VI.1
<PAGE>
Loans to the designee of the Buyer in accordance with customary mortgage
banking standards for such transfers.
5. The Subservicer shall service the Mortgage Loans serviced by it for the
benefit of the Buyer and their successors and assigns (as owner) in
accordance with the terms of the Master Repurchase Agreement and Custodial
Agreement, the terms of which are incorporated herein, and Accepted
Servicing Practices. "Accepted Servicing Practices" shall mean those
servicing practices set forth in the Interim Servicing Addendum attached
as Exhibit XI to the Master Repurchase Agreement, which Interim Servicing
Addendum is incorporated herein by reference. Buyer is aware that the
Subservicer may be entitled to a servicing fee payable by the Seller.
Subservicer acknowledges that Buyer is not liable to Subservicer for such
or any other fees or expenses.
6. If requested by either (a) Buyer at any time following an Event of Default
of Seller under the Master Repurchase Agreement or (b) a person or entity
("Subsequent Owner"), (at its sole option) which has acquired ownership of
the related Mortgage Loans, through or from Buyer, the Subservicer shall
promptly enter into a market-standard whole loan servicing agreement
substantially in the form typically entered into by affiliates of New York
investment banks as owners of whole loans with respect to the Mortgage
Loans then serviced by it.
7. Subservicer hereby indemnifies and holds harmless Buyer and its successors
assigns from and against any losses, liabilities, damages, judgments,
costs (including attorney fees) and expenses incurred by Buyer or such
successors or assigns in any way related to a breach by Subservicer of any
covenant, representation or warranty of Subservicer herein.
8. This letter Agreement is not assignable by Subservicer; may be assigned in
whole or in part by Buyer; and shall inure to the benefit of Subservicer
and Buyer and their respective successors and assigns.
9. This Letter Agreement shall not be changed except by a written instrument
signed by each of the parties, shall be governed by and construed in
accordance with the internal laws of the State of New York without
reference to principles of conflicts of laws, and shall be binding upon
and inure to the benefit of the parties and their respective successors
and assigns, provided, however that neither this Letter Agreement nor any
rights in respect of the servicing of the Mortgage Loans (including,
without limitation, the right to possession of any Servicing Records)
shall be assignable by Subservicer to any Person other than an affiliate
of the Subservicer without the prior written consent of Buyer, and
Subservicer shall give Buyer prior written notice of any assignment to an
affiliate. The Subservicer, at its sole cost, may subcontract its
obligations hereunder or portions thereof provided it remains liable for
all obligations hereunder but shall continue either (a) to retain all
Servicing Records and documentation necessary to service the Mortgage
Loans hereunder, or (b) to maintain authority over such Servicing Records
and documentation in cases where transferring possession of such Servicing
Records and
Exh VI.2
<PAGE>
documentation is necessary to do business with outside counsel, leasing
agents and other similar third party contractors, unless, in either case,
Buyer otherwise agrees.
Very truly yours,
GREENWICH CAPITAL FINANCIAL
PRODUCTS, INC.
By:
----------------------------
ACCEPTED AND AGREED TO:
CONTIFINANCIAL CORPORATION
By:
----------------------------
Name:
Title:
CONTIMORTGAGE CORPORATION
By:
----------------------------
Name:
Title:
Exh VI.3
<PAGE>
EXHIBIT A
REPRESENTATIONS AND WARRANTIES OF SERVICER
1. The Subservicer is duly organized, validly existing and in good standing
under the laws of the state of its organization and is qualified to
transact business in and is in good standing under the laws of each state
in which it is necessary for it to be so qualified in order to carry on its
business as now being conducted and has all licenses necessary to carry on
its business as now being conducted expect where the failure to so qualify
or have such license would not have a material adverse effect on the
Subservicer's ability to enter into this Letter Agreement and to consummate
the transactions contemplated hereby, on the Mortgage Loans or on the
ability of Subservicer or its assigns to enforce the Mortgage Loans; the
Subservicer has full corporate power and authority to execute, deliver and
perform under this Letter Agreement, and to consummate the transactions set
forth herein, this Letter Agreement has been fully executed and delivered
by the Subservicer and constitutes the valid and legally binding obligation
of the Subservicer enforceable against the Subservicer in accordance with
its respective terms, except that (i) the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, receivership and other
similar laws relating to creditors' rights generally and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and such remedies may be subject to the
discretion of the court which any proceeding therefor may be brought;
2. The Subservicer is not required to obtain the consent of any other party or
obtain the consent, license (except those licenses already obtained by the
Subservicer prior to the date of this Letter Agreement), approval or
authorization of, or make any registration or declaration with, any
governmental authority, bureau or agency in connection with the execution,
delivery, performance, validity or enforceability of this Letter Agreement.
3. The consummation of the transactions contemplated by this Letter Agreement
will not result in the breach of any term or provision of the certificate
of incorporation or by-laws of the Subservicer or result in the violation
of any law, rule, regulation, order, judgment or decree to which the
Subservicer or its property or the Mortgage Loans are subject;
4. The Subservicer is not a party to, bound by or in breach or violation of
any indenture or other agreement or instrument, or subject to or in
violation of any statute, order or regulation of any court, regulatory
body, administrative agency or governmental body having jurisdiction over
it, which materially and adversely affects, or may in the future materially
and adversely affect, the ability of the Subservicer to perform its
obligations under this Letter Agreement or the interest of the Buyer in any
material respect; and
5. There are no actions, suits proceedings or investigations pending or, to
the Subservicer's knowledge, threatened against the Subservicer, before any
court, regulatory body, administrative agency or other tribunal or
governmental instrumentality (A) asserting the invalidity of this Letter
Agreement, (B) seeking to prevent the consummation of any of the
transactions contemplated by this letter Agreement, (C) seeking any
determination or ruling that might materially and adversely affect the
performance by the Subservicer of its obligations under, or the validity or
enforceability of, this Letter Agreement, or (D) that could have a material
adverse effect on the Mortgage Loans.
6. The Subservicer's fidelity bond and errors and omissions insurance policy,
a copy of which was furnished to Buyer, is in full force and effect, and
Subservicer shall give Buyer at least 30 days' prior written notice of any
change in such status.
EXH. A-1
<PAGE>
EXHIBIT B
SERVICER TERMINATION EVENT:
"Subservicer Termination Event" means the occurrence of any of the following:
1. Any failure by Subservicer to make any material deposit into an account
required to be made hereunder and the continuance of such failure for a
period of one (1) Business Day after Subservicer has become aware, or
should have become aware, that such deposit was required;
2. Failure on Subservicer's part to observe or perform in any material respect
any covenant or agreement in this Letter Agreement, which failure continues
unremedied for fifteen (15) days after the date on which written notice of
such failure, requiring the same to be remedied, shall have been given to
Subservicer by Custodian or Buyer or to Subservicer and Custodian by Buyer
or, if such remedy cannot reasonably be cured within fifteen (15) days,
failure on the part of the Subservicer to commence or pursue a remedy
within such fifteen days, or failure of the Subservicer to reasonably
pursue such remedy thereafter;
3. Any representation or warranty made by the Servicer in this Letter
Agreement or any related agreement is incorrect or untrue in any material
respect (to the extent that any such representation or warranty does not
incorporate a materiality limitation in its terms);
4. Any assignment by Subservicer of its duties or rights hereunder, or any
attempt to make such an assignment except as permitted by this Letter
Agreement;
5. Any failure by Subservicer to maintain its rating, if any, as a servicer or
originator of mortgage loans or land contracts;
6. Any independent certified public accountant shall have issued an opinion to
the effect that the Subservicer's servicing practices have not been
conducted in compliance with the Uniform Single Audit Program for Mortgage
Bankers and that there are material exceptions;
7. A court or other governmental authority having jurisdiction in the premises
shall have entered a decree or order for relief in respect of Subservicer
in an involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or shall have appointed a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of Subservicer, as the case may be, for any substantial
liquidation of its affairs, and such order remains undischarged and
unstayed for at least 60 days;
8. Subservicer shall have commenced a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
shall have consented to the entry of an order for relief in an involuntary
case under any such law, or shall have consented to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee, custodian
or sequestrator (or other similar official) of Subservicer or for any
substantial part of its property, or shall have made any general assignment
for the benefit of its creditors, or shall have failed to, or admitted in
writing its inability to, pay its debts as they become due, or shall have
taken any corporate action in furtherance of the foregoing.
EXH. B-1
<PAGE>
EXHIBIT VII
Assignment and Conveyance Agreement
This is an Assignment and Conveyance Agreement ("Conveyance
Agreement") made this 9th day of August, 1999, among Greenwich Capital Financial
Products, Inc., ContiFinancial Corporation (the "Seller") and ContiMortgage
Corporation (the "Servicer"). The Buyer and the Seller wish to enter, from time
to time, into transactions (each, a "Transaction") pursuant to which the Buyer
shall agree to purchase Assets (defined in the Master Repurchase Agreement
referred to below) originated by ContiMortgage Corporation, ContiWest
Corporation or ContiTrade Services, L.L.C. (each as applicable, the "Company")
and thereafter purchased by the Seller pursuant to the Agreement for Sale,
Purchase and Servicing of Assets by and between Seller and ContiTrade Services,
L.L.C. dated as of March 1, 1998, the Master Agreement for Sale, Purchase and
Servicing of Mortgages by and between Seller and ContiWest Corporation dated as
of September 18, 1998, and the Master Agreement for Sale, Purchase and Servicing
of Mortgages by and between Seller and Servicer, as seller, dated as of
September 18, 1998 (each as applicable, the "Acquisition and Servicing
Agreement"), between the Seller and each Company, as applicable and serviced by
the Servicer pursuant to the applicable Acquisition and Servicing Agreement,
such Assets purchased by the Buyer, "Purchased Assets"), with a simultaneous
agreement by the Seller to repurchase such Purchased Assets on the Repurchase
Date, in accordance with the terms and conditions of the Master Repurchase
Agreement Governing Purchases and Sales of Assets (the "Master Repurchase
Agreement"), dated as of August 9, 1999, between the Buyer and the Seller and a
request for purchase (the "Purchase Request") by the Seller (as to each
Transaction, the related Purchase Request, the related Transaction Notice (as
defined below) and the Master Repurchase Agreement are referred to collectively
herein as the "Repurchase Agreement"). The custody of the Purchased Assets shall
be maintained by Manufacturers and Traders Trust Company (the "Custodian")
pursuant to that certain Custodial Agreement dated as of August 9, 1999 among
Buyer, Seller and Custodian. All terms not otherwise defined herein shall have
the meanings set forth in the Master Repurchase Agreement.
In consideration of the mutual promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree that the Purchased Assets
identified on the schedule attached hereto shall be subject to the terms of this
Conveyance Agreement.
WARRANTIES
1. The Company and the Seller warrant and represent that attached
hereto as Exhibit One is a true, accurate and complete copy of each Purchase and
Servicing Agreement which agreements are in full force and effect as of the date
hereof and have not been waived, amended or modified in any respect nor have any
notices of termination been given thereunder.
ASSIGNMENT
2. The Seller hereby assigns to the Buyer all of its right, title,
and interest in, to, and under the Acquisition and Servicing Agreement to the
extent of the Purchased Assets. Notwithstanding the Seller's assignment herein
of all of its right, title and interest, in, to, and under the Acquisition and
Servicing Agreement to the extent of the Purchased Assets, the Seller shall not
be relieved of its obligations under the Acquisition and Servicing Agreement (as
incorporated hereunder and made a part hereof) to the extent of the Purchased
Assets and shall be the sole obligor to the Servicer thereunder with respect to
the Purchased Assets.
3. From and after the date hereof and until the Seller repurchases
the Purchased Assets from the Buyer pursuant to the Repurchase Agreement, the
Buyer hereby authorizes and directs the Servicer to remit all Income from, and
all proceeds of, the Purchased Assets to the Seller, and to otherwise deal with
the Seller in all respects pursuant to the applicable Acquisition and Servicing
Agreement (each as incorporated hereunder and made a part hereof), in each case
until otherwise notified by the Buyer. The Buyer shall so notify the Servicer
only in the event that the Buyer determines that the Seller is in default under
the Master Repurchase Agreement or the related agreements. The receipt of such
Income and proceeds by the Seller shall not create nor imply any interest or
right whatsoever of the Seller in or to the Purchased Assets or such Income or
proceeds. The Seller shall have no right to terminate the Servicer as Servicer
of the Purchased Assets or amend the applicable Acquisition and Servicing
Agreement without the prior written consent of the Buyer (which consent shall
not be unreasonably withheld).
GOVERNING LAW
4. THIS CONVEYANCE AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICTS OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT
TO THE EXTENT PREEMPTED BY FEDERAL LAW.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Conveyance
Agreement the day and year first above written.
GREENWICH CAPITAL FINANCIAL
PRODUCTS, INC.
By:
--------------------------------
Name:
Title:
CONTIFINANCIAL CORPORATION
By:
--------------------------------
its Member
By:
--------------------------------
Name:
Title:
ACKNOWLEDGED AND AGREED TO BY:
CONTIMORTGAGE CORPORATION
By:
--------------------------------
Name:
Title:
<PAGE>
Schedule 1 to Assignment and
Conveyance Agreement
Asset Schedule
<PAGE>
Exhibit One to Assignment and
Conveyance Agreement
Purchase and Servicing Agreements
<PAGE>
EXHIBIT VIII
Opinion of Counsel
(date)
Greenwich Capital Financial Products, Inc.
address
Dear Sirs and Mesdames:
We have acted as counsel to ContiFinancial, a [_________]
corporation (the "Seller"), with respect to certain matters in connection with
that certain Master Repurchase Agreement Governing Purchases and Sales of
Assets, dated as of August 9, 1999 (the "Agreement"), by and between the Seller
and Greenwich Capital Financial Products, Inc. (the "Buyer"), provided for under
the Transaction Documents described below, whereby Seller may sell to Buyer, and
Buyer will purchase from, and agree to retransfer to, Seller, upon certain terms
and conditions set forth in the Agreement, Asset [originated or acquired by
Seller]. Capitalized terms used in this Opinion not otherwise defined herein
have the same meanings set forth in the Agreement.
In [our] [my] capacity as counsel to Seller, [we] [I] have examined
the following documents as executed in connection with the Agreement:
1. Master Repurchase Agreement Governing Purchases and Sales of
Assets, dated as of _______________, 199_ (defined above as
the "Agreement");
2. Custodial Agreement dated _______________, 199_ between Buyer
and the related Custodian;
3. Uniform Commercial Code ("UCC") Financing Statements listed on
Schedule 1 (collectively, the "Financing Statements"),
attached to this letter, naming the Seller as debtor and the
Buyer as secured party and describing the Collateral (as
defined in the Agreement) as to which security interests may
be perfected by filing under the UCC of the States listed on
Schedule 1 (the "Filing Collateral"), which I understand will
be filed in the filing offices listed on Schedule 1 (the
"Filing Offices");
4. Power of Attorney from Seller to Buyer (the form of which is
attached to the Agreement as Exhibit III);
5. Servicing Agreement dated _______________, 199_, between
Seller and Servicer; and
6. UCC Search Reports listed on Schedule 2, attached to this
letter, as to UCC Financing Statements (collectively, the "UCC
Search Report");
7. Articles of Incorporation of [ ] , certified by....
8. Certificate of Good Standing for Seller issued by the
9. Bylaws and Minute Book of Seller
10. Such other documents, records and papers as we have deemed
necessary and relevant as a basis for this opinion.
The documents listed in paragraphs 1-6 are collectively referred to
as the "Transaction Documents." The documents list in paragraphs 8-11 are
collectively referred to as the "Organizational Documents." All the documents
listed in paragraph 1-11 are collectively referred to as the "Documents."
[We] [I] have assumed the authenticity of all documents submitted to
us/me as originals, the genuineness of all signatures, the legal capacity of
natural persons and the conformity to the originals of all documents.
Based upon the foregoing and upon such investigation as we have
deemed necessary, it is [our] [my] opinion that:
1. The Seller is a [________] corporation duly organized, validly
existing and in good standing under the laws of [__________] and is qualified to
transact business in, and is in good standing under, the laws of the state[s] of
[ states ].
2. The Seller has the corporate power and authority to carry on its
business as presently conducted, to own and operate the property and assets now
being operated by it, to engage in the transactions contemplated by the
Transaction Documents and all requisite corporate power, authority and legal
right to execute, perform and deliver Transaction Documents and observe the
terms and conditions of such instruments. The Seller has all requisite corporate
power sell and pledge assets, to borrow and to grant a security interest in the
Collateral pursuant to the Agreement, and to perform all of its obligations
under the Agreement.
3. The execution and delivery of the Transaction Documents by the
Seller, and the performance of the obligations contemplate therein, including
the sale of Purchased Assets by the Seller and the pledge of the Collateral
under the Agreement, have been duly and validly authorized by all necessary
corporate action on the part of the Seller. Each of Transaction Documents have
been executed and delivered by the Seller and are legal, valid and binding
agreements enforceable in accordance with their respective terms against the
Seller, subject to bankruptcy laws and other similar laws of general application
affecting rights of creditors and subject to the application of the rules of
equity, including those respecting the availability of specific performance,
none of which will materially interfere with the realization of the benefits
provided thereunder or with the Buyer's security interest in the Purchased
Assets.
4. No approval, consent, authorization, order of, notice to, or
filing or registration with or other act by or in respect of any Governmental
Authority or any other Person is required or necessary in connection with the
Transactions contemplated by this Agreement or the granting of a security
interest thereunder, or with the execution, delivery, performance, validity or
enforceability of this Agreement or any Facility Document. No approval of
holders of capital stock of Seller other than such as have been obtained and are
in effect are required under applicable law to consummate the Agreement, and no
approvals are required pursuant to a shareholders agreement or other Contractual
Obligation which is binding on Seller in order to consummate the Agreement.
5. Each of the Transaction Documents to which Seller is a party is
the valid and binding obligation of Seller, enforceable against Seller in
accordance with its respective terms, except as may be limited by: (i)
bankruptcy, insolvency, reorganization, moratorium and other laws affecting the
rights of creditors generally of the collection of debtor's obligations
generally, and (ii) general principles of equity (regardless of whether
considered in a proceeding in equity or at law).
6. The execution, delivery and performance by the Seller of, and the
consummation of the transactions contemplated by, the Transaction Documents do
not and will not (a) violate or conflict with any provision of the Seller's
Articles of Incorporation or by-laws, (b) violate, conflict with or require the
authorization, consent, approval or action of any governmental or regulatory
agency or authority under any applicable law, rule or regulation or ordinance,
(c) violate or conflict with any order, writ, injunction or decree of any court
or Governmental Authority or agency or any arbitral award applicable to the
Seller of which I/we have knowledge (after due inquiry) or (d) conflict with,
result in a breach of, constitute a default under, require any consent under, or
result in the acceleration or required prepayment of any Indebtedness pursuant
to the terms of, mortgage, indenture, contract, agreement, lease, instrument,
restriction, judgment, ruling, injunction, decree or other obligation or court
order of which I/we have knowledge (after due inquiry) to which the Seller is a
party or by which it is bound or to which it or any of its properties or assets
is subject, or (except for the Liens created pursuant to the Agreement) result
in the creation or imposition of any Lien, charge or encumbrance upon any
Property of the Seller pursuant to the terms of any such agreement or instrument
to which the Seller is a party or by which any of its properties is bound.
7. There is no action, suit, proceeding or investigation or
litigation before any court, public board or body pending or, to the best of
[our] [my] knowledge, after due inquiry, threatened against the Seller which, in
[our] [my] judgment, either in any one instance or in the aggregate, would be
reasonably likely to result in any material adverse change in the properties,
business or financial condition, or prospects of the Seller or in any material
impairment of the right or ability of the Seller to carry on its business
substantially as now conducted or in any material liability on the part of the
Seller or which would draw into question the validity of Transaction Documents
or the Assets or of any action taken or to be taken in connection with the
transactions contemplated thereby, or which would be reasonably likely to impair
materially the ability of the Seller to perform under the terms of the
Transaction Documents or the Assets.
8. The Agreement is effective to create, in favor of the Buyer, a
valid security interest under the UCC in all of the right, title and interest of
the Seller in, to and under the Collateral as collateral security for all
obligations of the payment or performance of Seller under or pursuant to the
Transaction Documents, which security interests, upon filing of the UCC
Financing Statements will be perfected under the UCC, except that (a) such
security interests will continue in Collateral after its sale, exchange or other
disposition only to the extent provided in Section 9-306 of the UCC, (b) the
security interests in Collateral in which the Seller acquires rights after the
commencement of a case under the Bankruptcy Code in respect of the Seller may be
limited by Section 552 of the Bankruptcy Code.
9. When the Mortgage Notes are delivered to the Custodian, endorsed
in blank by a duly authorized officer of the Seller, the security interest
referred to in paragraph 8 above in the Mortgage Notes will constitute a fully
perfected first priority security interest in all right, title and interest of
the Seller therein, in the Mortgage Note.
10. (a) Upon the filing of financing statements on Form UCC-1 naming
the Buyer as "Secured Party" and the Seller as "Debtor", and describing the
Collateral, in the jurisdictions and recording offices listed on Schedule 1
attached hereto, the security interests referred to in paragraph 9 above are in
the appropriate form for filing with the states listed on Schedule 1 and will
constitute fully perfected security interests under the UCC in all right, title
and interest of the Seller in, to and under such Collateral, which can be
perfected by filing under the UCC.
(b) The UCC Search Report sets forth the proper filing offices and
the proper debtors necessary to identify those Persons who have on file in the
jurisdictions listed on Schedule 1 financing statements covering the Filing
Collateral as of the dates and times specified on Schedule 2. Except for the
matters listed on Schedule 2, the UCC Search Report identifies no Person who has
filed in any Filing Office a financing statement describing the Filing
Collateral prior to the effective dates of the UCC Search Report.
[11. The Assignments of Mortgage are in recordable form, except for
the insertion of the name of the assignee, and upon the name of the assignee
being inserted, are acceptable for recording under the laws of the state where
each related Mortgaged Property is located.]
12. The Seller is duly registered as a [____________] in each state
in which Assets were originated to the extent such registration is required by
applicable law, and has obtained all other licenses and governmental approvals
in each jurisdiction to the extent that the failure to obtain such licenses and
approvals would render any Asset unenforceable or would materially and adversely
affect the ability of the Seller to perform any of its obligations under, or the
enforceability of, the Asset Documents.
[13. Assuming that all other elements necessary to render a Mortgage
Loan legal, valid, binding and enforceable were present in connection with the
execution, delivery and performance of each Mortgage Loan (including completion
of the entire Mortgage Loan fully, accurately and in compliance with all
applicable laws, rules and regulations) and assuming further that no action was
taken in connection with the execution, delivery and performance of each
Mortgage Loan (including in connection with the sale of the related Mortgaged
Property) that would give rise to a defense to the legality, validity, binding
effect and enforceability of such Mortgage Loan, nothing in the forms of such
Mortgage Loans, as attached hereto as Exhibit A, would render such Mortgage
Loans other than legal, valid, binding and enforceable.]
[14. Assuming their validity, binding effect and enforceability in
all other respects (including completion of the entire Mortgage Loan fully,
accurately and in compliance with all applicable laws, rules and regulations),
the forms of Mortgage Loans attached hereto as Exhibit A are in sufficient
compliance with ________ law and Federal consumer protection laws so as not to
be rendered void or voidable at the election of the Mortgagor thereunder.]
Very truly yours,
<PAGE>
Seller's Underwriting Guidelines
EXHIBIT IX
<PAGE>
EXHIBIT IX(A)
Underwriting Guidelines Modifications
1. No loans to facilitate REO or to rewrite loans delinquent more than 60
days.
2. Homes listed for sale are not eligible for refinancing transactions.
3. Property conditions must be average or better as reported by the appraiser
or as observable from photos in file.
4. No mixed use after 8/31/99.
5. Retention Loans (as defined in the Purchase Facility) must meet
Underwriting Guidelines (as modified) except that the appraisal may be up
to 18 months old.
6. Purchase money transactions require verification of downpayment and
verification of source.
7. No escrow holdbacks for completion or repair of property.
8. If the proposed mortgagor owns the property under a land contract, the
appraised value used to compute the LTV for the proposed loan may not be
higher than the mortgagor's land contract purchase price unless it can be
demonstrated (via utility or tax invoices or otherwise) that the mortgagor
has owned the property for at least 12 months.
9. If credit is to be given for mortgagor payments under a lease option or
land contract, the payments must be independently verified via a source
other than the lessor or the seller under the land contract (e.g.,
cancelled checks).
EXH. IX(A)-1
<PAGE>
EXHIBIT X
Asset Tape Fields
<PAGE>
EXHIBIT XI
Interim Servicing Addendum
Reference is hereby made to the Purchase Facility for a statement of
the terms thereof. All terms used in this Exhibit XI which are defined in the
Purchase Facility and which are not otherwise defined in this Agreement shall
have the same meanings herein as set forth therein.
Subsection 11.01 Interim Servicer.
The Interim Servicer, as independent contract servicer, shall
interim service and administer the Mortgage Loans in accordance with this
Agreement during the Interim Servicing Period and shall have full power and
authority, acting alone, to do or cause to be done any and all things in
connection with such interim servicing and administration which the Interim
Servicer may deem necessary or desirable and consistent with the terms of this
Agreement.
Consistent with the terms of this Agreement, the Interim Servicer
may waive, modify or vary any term of any Mortgage Loan or consent to the
postponement of strict compliance with any such term or in any manner grant
indulgence to any Mortgagor if in the Interim Servicer's reasonable and prudent
determination such waiver, modification, postponement or indulgence is not
materially adverse to the Purchaser; provided, however, that unless the Interim
Servicer has obtained the prior written consent of the Purchaser, the Interim
Servicer shall not permit any modification with respect to any Mortgage Loan
that would change the Mortgage Interest Rate, defer or forgive the payment
thereof or of any principal or interest payments, reduce the outstanding
principal amount (except for actual payments of principal), make additional
advances of additional principal or extend the final maturity date on such
Mortgage Loan. Without limiting the generality of the foregoing, the Interim
Servicer shall continue, and is hereby authorized and empowered, to execute and
deliver on behalf of itself, and the Purchaser, all instruments of satisfaction
or cancellation, or of partial or full release, discharge and all other
comparable instruments, with respect to the Mortgage Loans and with respect to
the Mortgaged Property. If reasonably required by the Interim Servicer, the
Purchaser shall furnish the Interim Servicer with any powers of attorney at the
Purchaser's option and other documents necessary or appropriate to enable the
Interim Servicer to carry out its interim servicing and administrative duties
under this Agreement.
In interim servicing and administering the Mortgage Loans, the
Interim Servicer shall employ procedures including collection procedures and
exercise the same care that it customarily employs and exercises in servicing
and administering mortgage loans for its own account and mortgage loans which
are securitized by Purchaser in a rated transaction, giving due consideration to
accepted mortgage servicing practices of prudent lending institutions (such
practices, "Accepted Servicing Practices"). If Interim Servicer elects to
utilize a subservicer to perform any or all of Interim Servicer's duties
hereunder, Interim Servicer shall remain liable as though such duties were
performed directly by Interim Servicer and Interim Servicer shall be responsible
for the payment of any and all fees of any such subservicer.
Subsection 11.02 Collection of Mortgage Loan Payments.
<PAGE>
Continuously from the date hereof until the principal and interest
on all Mortgage Loans are paid in full, the Interim Servicer shall proceed
diligently to collect all payments due under each Mortgage Loan when the same
shall become due and payable and shall, to the extent such procedures shall be
consistent with this Agreement, follow such collection procedures as it follows
with respect to mortgage loans comparable to the Mortgage Loans and held for its
own account. Further, the Interim Servicer shall take special care in
ascertaining and estimating annual ground rents, taxes, assessments, water
rates, fire and hazard insurance premiums and all other charges that, as
provided in the Mortgage, will become due and payable to the end that the
installments payable by the Mortgagors will be sufficient to pay such charges as
and when they become due and payable.
Subsection 11.03 Realization Upon Defaulted Mortgage Loans.
(a) The Interim Servicer shall use its best efforts, consistent with
the procedures that the Interim Servicer would use in servicing loans for its
own account, to foreclose upon or otherwise comparably convert the ownership of
such Mortgaged Properties as come into and continue in default and as to which
no satisfactory arrangements can be made for collection of delinquent payments
pursuant to Subsection 11.01. The Interim Servicer shall use its best efforts to
realize upon defaulted Mortgage Loans in such a manner as will maximize the
receipt of principal and interest by the Purchaser, taking into account, among
other things, the timing of foreclosure proceedings. The foregoing is subject to
the provisions that, in any case in which Mortgaged Property shall have suffered
damage, the Interim Servicer shall not be required to expend its own funds
toward the restoration of such property in excess of $2,000 unless it consults
with the Purchaser with respect to a course of action to be taken and determines
in its discretion (i) that such restoration will increase the proceeds of
liquidation of the related Mortgage Loan to the Purchaser after reimbursement to
itself for such expenses, and (ii) that such expenses will be recoverable by the
Interim Servicer through Insurance Proceeds or Liquidation Proceeds from the
related Mortgaged Property, as contemplated in Subsection 11.05. In the event
that any payment due under any Mortgage Loan is not paid when the same becomes
due and payable, or in the event the Mortgagor fails to perform any other
covenant or obligation under the Mortgage Loan and such failure continues beyond
any applicable grace period, the Interim Servicer shall take such action as it
shall deem to be in the best interest of the Purchaser. In the event that any
payment due under any Mortgage Loan remains delinquent for a period of ninety
(90) days or more, the Interim Servicer shall notify the Purchaser and receive
instruction as to whether to commence foreclosure proceedings in accordance with
Accepted Servicing Practices. The Interim Servicer shall be responsible for all
costs and expenses incurred by it in any such proceedings; provided, however,
that it shall be entitled to reimbursement thereof from the related Mortgaged
Property, as contemplated in Subsection 11.05.
(b) Notwithstanding the foregoing provisions of this Subsection
11.03, with respect to any Mortgage Loan as to which the Interim Servicer has
received actual notice of, or has actual knowledge of, the presence of any toxic
or hazardous substance on the related Mortgaged Property the Interim Servicer
shall not either (i) obtain title to such Mortgaged Property as a result of or
in lieu of foreclosure or otherwise, or (ii) otherwise acquire possession of, or
take any other action, with respect to, such Mortgaged Property if, as a result
of any such action, the Purchaser would be considered to hold title to, to be a
mortgagee-in-possession of, or to be an owner or operator of such Mortgaged
Property within the meaning of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time, or any
comparable law, unless the Interim Servicer has immediately consulted with the
Purchaser with respect to a course of action to be taken in accordance with
Accepted Servicing Practices.
<PAGE>
The cost of the environmental audit report contemplated by this
Subsection 11.03 shall be advanced by the Interim Servicer, subject to the
Interim Servicer's right to be reimbursed therefor from the Custodial Account as
contemplated in Subsection 11.05.
If the Interim Servicer determines, as described above, that it is
in the best economic interest of the Purchaser to take such actions as are
necessary to bring any such Mortgaged Property into compliance with applicable
environmental laws, or to take such action with respect to the containment,
clean-up or remediation of hazardous substances, hazardous materials, hazardous
wastes, or petroleum-based materials affecting any such Mortgaged Property, then
the Interim Servicer shall take such action as it deems to be in the best
economic interest of the Purchaser. The cost of any such compliance,
containment, cleanup or remediation shall be advanced by the Interim Servicer,
subject to the Interim Servicer's right to be reimbursed therefor from the
Custodial Account as contemplated in Subsection 11.05.
(c) Proceeds received in connection with any Final Recovery
Determination, as well as any recovery resulting from a partial collection of
Insurance Proceeds or Liquidation Proceeds in respect of any Mortgage Loan, will
be applied in the following order of priority: first, to reimburse the Interim
Servicer for any related unreimbursed Servicing Advances; second, to accrued and
unpaid interest on the Mortgage Loan, to the date of the Final Recovery
Determination; and third, as a recovery of principal of the Mortgage Loan.
Subsection 11.04 Establishment of Custodial Accounts; Deposits in
Custodial Accounts.
The Interim Servicer shall segregate and hold all funds collected
and received pursuant to each Mortgage Loan separate and apart from any of its
own funds and general assets.
The Interim Servicer shall deposit in the Custodial Account within
24 hours of receipt, and retain therein the following payments and collections
received by it subsequent to the Cut-off Date, or received by it prior to the
Cut-off Date but allocable to a period subsequent thereto, other than in respect
of principal and interest on the Mortgage Loans due on or before the Cut-off
Date:
(i) all payments on account of principal on the Mortgage Loans
including any Principal Prepayments and any prepayment penalties or premiums;
(ii) all payments on account of interest on the Mortgage Loans;
(iii) all Liquidation Proceeds;
(iv) all Insurance Proceeds including amounts required to be
deposited pursuant to Subsections 11.10 and 11.11, other than proceeds to be
held in the Escrow Account and applied to the restoration or repair of the
Mortgaged Property or released to the Mortgagor in accordance with the Interim
Servicer's normal servicing procedures, the loan documents or applicable law;
<PAGE>
(v) all Condemnation Proceeds affecting any Mortgaged Property which
are not released to the Mortgagor in accordance with the Interim Servicer's
normal servicing procedures, the loan documents or applicable law;
(vi) all proceeds of any Mortgage Loan repurchased in accordance
with Subsections 7.03 and 7.04 and all amounts required to be deposited by the
Seller in connection with shortfalls in principal amount of Qualified Substitute
Mortgage Loans pursuant to Subsection 7.03;
(vii) any amounts required to be deposited by the Interim Servicer
pursuant to Subsection 11.11 in connection with the deductible clause in any
blanket hazard insurance policy. Such deposit shall be made from the Interim
Servicer's own funds, without reimbursement therefor;
(viii) any amounts required to be deposited by the Interim Servicer
in connection with any REO Property pursuant to Subsection 11.13; and
(ix) any amounts required to be deposited in the Custodial Account
pursuant to Subsections 11.19 or 11.20.
The foregoing requirements for deposit in the Custodial Account shall be
exclusive, it being understood and agreed that, without limiting the generality
of the foregoing, payments in the nature of late payment charges, assumption
fees, to the extent permitted by Subsection 11.01, and the Interim Servicing Fee
as permitted by Section 11.21, need not be deposited by the Interim Servicer in
the Custodial Account. Such Custodial Account shall be an Eligible Account. Any
interest or earnings on funds deposited in the Custodial Account by the
depository institution shall accrue to the benefit of the Purchaser. The Interim
Servicer shall give notice to the Purchaser of the location of the Custodial
Account when established and prior to any change thereof.
Subsection 11.05 Permitted Withdrawals From the Custodial Account.
The Purchaser, as owner of the Custodial Account, shall be entitled
to withdraw any and all funds deposited in the Custodial Account as owner
thereto. All withdrawals from the Custodial Account shall be made by the
Purchaser and the Interim Servicer shall have no withdrawal rights with respect
thereto.
Simultaneously with the delivery of the Remittance Report, the
Interim Servicer shall deliver an invoice to the Purchaser, along with
reasonable documentation, requesting payment for the following:
<PAGE>
(i) to pay the Interim Servicer for unreimbursed Servicing Advances,
the Interim Servicer's right to payment pursuant to this subclause (i) with
respect to any Mortgage Loan being limited to related Liquidation Proceeds,
Condemnation Proceeds, Insurance Proceeds and such other amounts as may be
collected by the Interim Servicer from the Mortgagor or otherwise relating to
the Mortgage Loan, it being understood that, in the case of such reimbursement,
the Interim Servicer's right thereto shall be prior to the rights of the
Purchaser, except that, where the Interim Servicer is required to repurchase a
Mortgage Loan, pursuant to Subsection 7.03, the Interim Servicer's right to such
payment shall be subsequent to the payment to the Purchaser of the Repurchase
Price pursuant to Subsection 7.03 and all other amounts required to be paid to
the Purchaser with respect to such Mortgage Loans;
(ii) to pay the Interim Servicer with respect to each Mortgage Loan
that has been repurchased pursuant to Subsection 7.03 all amounts received
thereon and not distributed as of the date on which the related Repurchase Price
is determined; and
(iii) to pay, or to reimburse the Interim Servicer for advances in
respect of, expenses incurred in connection with any Mortgage Loan pursuant to
Subsection 11.03(b), but only to the extent of amounts received in respect of
the Mortgage Loans to which such expense is attributable.
Absent a good faith dispute on the amount set forth on such invoice,
the Purchaser shall remit to the Interim Servicer the amount specified in such
invoice within five (5) Business Days of receipt thereof by the Purchaser.
In the event that any amount is mistakenly deposited into the
Custodial Account by the Interim Servicer, the Purchaser shall withdraw such
amount from the Custodial Account and remit it to the Interim Servicer as
quickly as possible, and if possible on the date the Purchaser receives
notification from the Interim Servicer of such mistaken deposit.
Subsection 11.06 Establishment of Escrow Accounts; Deposits in
Escrow Accounts.
The Interim Servicer shall segregate and hold all funds collected
and received pursuant to each Mortgage Loan which constitute Escrow Payments
separate and apart from any of its own funds and general assets and shall
establish and maintain one or more Escrow Accounts, in the form of time deposit
or demand accounts. The creation of any Escrow Account shall be evidenced by
Escrow Account Letter Agreement in the form of Exhibit 8.
The Interim Servicer shall deposit in the Escrow Account or Accounts
within 24 hours of receipt, and retain therein, (i) all Escrow Payments
collected on account of the Mortgage Loans, for the purpose of effecting timely
payment of any such items as required under the terms of this Agreement, and
(ii) all Insurance Proceeds which are to be applied to the restoration or repair
of any Mortgaged Property. The Interim Servicer shall make withdrawals therefrom
only to effect such payments as are required under this Agreement, and for such
other purposes as shall be as set forth or in accordance with Subsection 11.08.
The Interim Servicer shall be entitled to retain any interest paid on funds
deposited in the Escrow Account by the depository institution other than
interest on escrowed funds required by law to be paid to the Mortgagor and, to
the extent required by law, the Interim Servicer shall pay interest on escrowed
funds to the Mortgagor notwithstanding that the Escrow Account is non-interest
bearing or that interest paid thereon is insufficient for such purposes.
Subsection 11.07 Permitted Withdrawals From Escrow Account.
<PAGE>
Withdrawals from the Escrow Account may be made by the Interim
Servicer (i) to effect timely payments of ground rents, taxes, assessments,
water rates, hazard insurance premiums and comparable items, (ii) to reimburse
the Interim Servicer for any Servicing Advance made by the Interim Servicer with
respect to a related Mortgage Loan but only from amounts received on the related
Mortgage Loan which represent late payments or collections of Escrow Payments
thereunder, (iii) to refund to the Mortgagor any funds as may be determined to
be overages, (iv) for transfer to the Custodial Account in accordance with the
terms of this Agreement, (v) for application to restoration or repair of the
Mortgaged Property, (vi) to pay to the Interim Servicer, or to the Mortgagor to
the extent required by law, any interest paid on the funds deposited in the
Escrow Account, or (vii) to clear and terminate the Escrow Account on the
termination of this Agreement.
Subsection 11.08 Payment of Taxes, Insurance and Other Charges.
With respect to each Mortgage Loan, the Interim Servicer shall
maintain accurate records reflecting the status of ground rents, taxes,
assessments, water rates and other charges which are or may become a lien upon
the Mortgaged Property and the status of fire and hazard insurance coverage and
shall obtain, from time to time, all bills for the payment of such charges,
including insurance renewal premiums and shall effect payment thereof prior to
the applicable penalty or termination date and at a time appropriate for
securing maximum discounts allowable, employing for such purpose deposits of the
Mortgagor in the Escrow Account which shall have been estimated and accumulated
by the Interim Servicer in amounts sufficient for such purposes, as allowed
under the terms of the Mortgage and applicable law. To the extent that the
Mortgage does not provide for Escrow Payments, the Interim Servicer shall
determine that any such payments are made by the Mortgagor at the time they
first become due. The Interim Servicer assumes full responsibility for the
timely payment of all such bills and shall effect timely payments of all such
bills irrespective of the Mortgagor's faithful performance in the payment of
same or the making of the Escrow Payments and shall make advances from its own
funds to effect such payments.
Upon the termination of the Interim Servicing Period or the transfer
of servicing with respect to any Mortgage Loan, the successor servicer shall
reimburse the Interim Servicer for amounts the Interim Servicer actually
expended as interim servicer pursuant to this Agreement for which the Interim
Servicer would have otherwise been entitled to be reimbursed and which would
otherwise have been recovered by the Interim Servicer pursuant to this Agreement
but for the appointment of the successor servicer.
Subsection 11.09 Transfer of Accounts.
The Interim Servicer may transfer the Custodial Account or the
Escrow Account to a different depository institution from time to time. Such
transfer shall be made only upon obtaining the consent of the Purchaser, which
consent shall not be unreasonably withheld. In any case, the Custodial Account
and Escrow Account shall be Eligible Accounts.
Subsection 11.10 Maintenance of Hazard Insurance.
<PAGE>
The Interim Servicer shall cause to be maintained for each Mortgage
Loan fire and hazard insurance with extended coverage as is customary in the
area where the Mortgaged Property is located in an amount which is at least
equal to the lesser of (i) the amount necessary to fully compensate for any
damage or loss to the improvements which are a part of such property on a
replacement cost basis or (ii) the outstanding principal balance of the Mortgage
Loan, in each case in an amount not less than such amount as is necessary to
prevent the Mortgagor and/or the Mortgagee from becoming a co-insurer. If the
Mortgaged Property is in an area identified on a Flood Hazard Boundary Map or
Flood Insurance Rate Map issued by the Flood Emergency Management Agency as
having special flood hazards and such flood insurance has been made available,
the Interim Servicer will cause to be maintained a flood insurance policy
meeting the requirements of the current guidelines of the Federal Insurance
Administration with a generally acceptable insurance carrier, in an amount
representing coverage not less than the lesser of (i) the outstanding principal
balance of the Mortgage Loan or (ii) the maximum amount of insurance which is
available under the National Flood Insurance Act of 1968 or the Flood Disaster
Protection Act of 1973, as amended. The Interim Servicer also shall maintain on
any REO Property, fire and hazard insurance with extended coverage in an amount
which is at least equal to the lesser of (i) the maximum insurable value of the
improvements which are a part of such property and (ii) either (A) the
outstanding principal balance of the related Mortgage Loan at the time it became
an REO Property plus accrued interest at the Mortgage Interest Rate and related
Servicing Advances with respect to each First Lien Mortgage Loan or (B) with
respect to each Second Lien Mortgage Loan, the sum of the outstanding principal
balance of the First Lien Mortgage Loan and the outstanding principal balance of
the Second Lien Mortgage Loan plus accrued interest at the Mortgage Interest
Rate and related Servicing Advances, liability insurance and, to the extent
required and available under the National Flood Insurance Act of 1968 or the
Flood Disaster Protection Act of 1973, as amended, flood insurance in an amount
as provided above. Pursuant to Subsection 11.04, any amounts collected by the
Interim Servicer under any such policies other than amounts to be deposited in
the Escrow Account and applied to the restoration or repair of the Mortgaged
Property or REO Property, or released to the Mortgagor in accordance with the
Interim Servicer's normal servicing procedures, shall be deposited in the
Custodial Account. Any cost incurred by the Interim Servicer in maintaining any
such insurance shall not, for the purpose of calculating distributions to the
Purchaser, be added to the unpaid principal balance of the related Mortgage
Loan, notwithstanding that the terms of such Mortgage Loan so permit. It is
understood and agreed that no earthquake or other additional insurance need be
required by the Interim Servicer of the Mortgagor or maintained on property
acquired in respect of the Mortgage Loan, other than pursuant to such applicable
laws and regulations as shall at any time be in force and as shall require such
additional insurance. All such policies shall be endorsed with standard
mortgagee clauses with loss payable to the Interim Servicer, or upon request to
the Purchaser, and shall provide for at least thirty days prior written notice
of any cancellation, reduction in the amount of, or material change in, coverage
to the Interim Servicer. The Interim Servicer shall not interfere with the
Mortgagor's freedom of choice in selecting either his insurance carrier or
agent, provided, however, that the Interim Servicer shall not accept any such
insurance policies from insurance companies unless such companies currently
reflect a General Policy Rating of A:VI or better in Best's Key Rating Guide and
are licensed to do business in the state wherein the property subject to the
policy is located.
Subsection 11.11 Maintenance of Mortgage Impairment Insurance
Policy.
<PAGE>
In the event that the Interim Servicer shall obtain and maintain a
mortgage impairment or blanket policy issued by an insurer that has a Best
rating of A:VI insuring against hazard losses on all of Mortgaged Properties
securing the Mortgage Loans, then, to the extent such policy provides coverage
in an amount equal to the amount required pursuant to Subsection 11.10 and
otherwise complies with all other requirements of Subsection 11.10, the Interim
Servicer shall conclusively be deemed to have satisfied its obligations as set
forth in Subsection 11.10, it being understood and agreed that such policy may
contain a deductible clause, in which case the Interim Servicer shall, in the
event that there shall not have been maintained on the related Mortgaged
Property or REO Property a policy complying with Subsection 11.10, and there
shall have been one or more losses which would have been covered by such policy,
deposit in the Custodial Account the amount not otherwise payable under the
blanket policy because of such deductible clause. In connection with its
activities as servicer of the Mortgage Loans, the Interim Servicer agrees to
prepare and present, on behalf of the Purchaser, claims under any such blanket
policy in a timely fashion in accordance with the terms of such policy. Upon
request of the Purchaser, the Interim Servicer shall cause to be delivered to
the Purchaser a certified true copy of such policy and a statement from the
insurer thereunder that such policy shall in no event be terminated or
materially modified without thirty days prior written notice to the Purchaser.
Subsection 11.12 Fidelity Bond, Errors and Omissions Insurance.
The Interim Servicer shall maintain, at its own expense, a blanket
fidelity bond and an errors and omissions insurance policy, with broad coverage
with responsible companies that would meet the requirements of Fannie Mae or
Freddie Mac on all officers, employees or other persons acting in any capacity
with regard to the Mortgage Loans to handle funds, money, documents and papers
relating to the Mortgage Loans. The fidelity bond and errors and omissions
insurance shall be in the form of the Mortgage Banker's Blanket Bond and shall
protect and insure the Interim Servicer against losses, including forgery,
theft, embezzlement, fraud, errors and omissions and negligent acts of such
persons. Such fidelity bond shall also protect and insure the Interim Servicer
against losses in connection with the failure to maintain any insurance policies
required pursuant to this Agreement and the release or satisfaction of a
Mortgage Loan without having obtained payment in full of the indebtedness
secured thereby. No provision of this Subsection 11.12 requiring the fidelity
bond and errors and omissions insurance shall diminish or relieve the Interim
Servicer from its duties and obligations as set forth in this Agreement. The
minimum coverage under any such bond and insurance policy shall be at least
equal to the corresponding amounts required by Fannie Mae in the Fannie Mae
Servicing Guide or by Freddie Mac in the Freddie Mac Interim Servicers' and
Servicers' Guide. Upon request of the Purchaser, the Interim Servicer shall
cause to be delivered to the Purchaser a certified true copy of the fidelity
bond and insurance policy and a statement from the surety and the insurer that
such fidelity bond or insurance policy shall in no event be terminated or
materially modified without thirty days' prior written notice to the Purchaser.
Subsection 11.13 Title, Management and Disposition of REO Property.
In the event that title to the Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be taken in the name of the person designated by the Purchaser, or in the
event such person is not authorized or permitted to hold title to real property
in the state where the REO Property is located, or would be adversely affected
under the "doing business" or tax laws of such state by so holding title, the
deed or certificate of sale shall be taken in the name of such Person or Persons
as shall be consistent with an opinion of counsel obtained by the Interim
Servicer from an attorney duly licensed to practice law in the state where the
REO Property is located. Any Person or Persons holding such title other than the
Purchaser shall acknowledge in writing that such title is being held as nominee
for the benefit of the Purchaser.
<PAGE>
The Interim Servicer shall either itself or through an agent
selected by the Interim Servicer, manage, conserve, protect and operate each REO
Property (and may temporarily rent the same) in the same manner that it manages,
conserves, protects and operates other foreclosed property for its own account,
and in the same manner that similar property in the same locality as the REO
Property is managed. The Interim Servicer shall cause each REO Property to be
inspected promptly upon the acquisition of title thereto and shall cause each
REO Property to be inspected at least annually thereafter. The Interim Servicer
shall make or cause to be made a written report of each such inspection. Such
reports shall be retained in the Mortgage File and copies thereof shall be
forwarded by the Interim Servicer to the Purchaser. The Interim Servicer shall
use its best efforts to dispose of the REO Property as soon as possible and
shall sell such REO Property in any event within one year after title has been
taken to such REO Property, unless the Interim Servicer determines, and gives
appropriate notice to the Purchaser, that a longer period is necessary for the
orderly liquidation of such REO Property. If a period longer than one year is
necessary to sell any REO property, (i) the Interim Servicer shall report
monthly to the Purchaser as to the progress being made in selling such REO
Property and (ii) if, with the written consent of the Purchaser, a purchase
money mortgage is taken in connection with such sale, such purchase money
mortgage shall name the Interim Servicer as mortgagee, and a separate servicing
agreement between the Interim Servicer and the Purchaser shall be entered into
with respect to such purchase money mortgage.
The Interim Servicer shall deposit or cause to be deposited, within
twenty four (24) hours of receipt, in the Custodial Account all revenues
received with respect to the related REO Property and shall advance funds
necessary for the proper operation, management and maintenance of the REO
Property, including the cost of maintaining any hazard insurance pursuant to
Subsection 11.10 hereof and the fees of any managing agent acting on behalf of
the Interim Servicer. The Purchaser shall reimburse any such advance pursuant to
Subsection 11.05. The Interim Servicer shall separately account for each REO
Property and any amounts received with respect thereto.
The Interim Servicer shall furnish to the Purchaser on the fifteenth
calendar day of each month or the next following Business Day if such fifteenth
day is not a Business Day, an operating statement for each REO Property covering
the operation of each REO Property for the previous month. Such operating
statement shall be accompanied by such other information as the Purchaser shall
reasonably request.
Each REO Disposition shall be carried out by the Interim Servicer at
such price and upon such terms and conditions as the Interim Servicer deems to
be in the best interest of the Purchaser only with the prior written consent of
the Purchaser. If as of the date title to any REO Property was acquired by the
Interim Servicer there were outstanding unreimbursed Servicing Advances with
respect to the REO Property, the Interim Servicer, upon an REO Disposition of
such REO Property, shall be entitled to reimbursement for any related
unreimbursed Servicing Advances from proceeds received in connection with such
REO Disposition. The proceeds from the REO Disposition shall be deposited in the
Custodial Account within twenty four hours of receipt and the Purchaser shall
thereafter reimburse such unreimbursed Servicing Advances to the Interim
Servicer.
Subsection 11.14 [Reserved]
<PAGE>
Subsection 11.15 Remittance Reports.
No later than the fifteenth calendar day of each month or the next
following Business Day if such 15th calendar day is not a Business Day, the
Interim Servicer shall furnish to the Purchaser or its designee in electronic
form, and by hard copy, the monthly data for the prior month in form and
substance acceptable to the Purchaser, together with such other information with
respect to the Mortgage Loans as the Purchaser may reasonably require to
allocate distributions made pursuant to this Agreement and provide appropriate
statements with respect to such distributions.
Subsection 11.16 Statements to the Purchaser.
Upon request of the Purchaser, and not later than the fifteenth day
of each month, the Interim Servicer shall forward to the Purchaser or its
designee a statement prepared by the Interim Servicer setting forth the status
of the Custodial Account as of the close of business on such date and showing,
for the period covered by such statement, the aggregate amount of deposits into
the Custodial Account of each category of deposit specified in Subsection 11.04.
Subsection 11.17 Real Estate Owned Reports.
Together with the statement furnished pursuant to Subsection 11.02,
with respect to any REO Property, the Interim Servicer shall furnish to the
Purchaser a statement covering the Interim Servicer's efforts in connection with
the sale of such REO Property and any rental of such REO Property incidental to
the sale thereof for the previous month, together with the operating statement.
Such statement shall be accompanied by such other information as the Purchaser
shall reasonably request.
Subsection 11.18 Liquidation Reports.
Upon the foreclosure sale of any Mortgaged Property or the
acquisition thereof by the Purchaser pursuant to a deed-in-lieu of foreclosure,
the Interim Servicer shall submit to the Purchaser a liquidation report with
respect to such Mortgaged Property.
Subsection 11.19 Assumption Agreements.
<PAGE>
The Interim Servicer shall, to the extent it has knowledge of any
conveyance or prospective conveyance by any Mortgagor of the Mortgaged Property
(whether by absolute conveyance or by contract of sale, and whether or not the
Mortgagor remains or is to remain liable under the Mortgage Note and/or the
Mortgage), exercise its rights to accelerate the maturity of such Mortgage Loan
under any "due-on-sale" clause applicable thereto; provided, however, that the
Interim Servicer shall not exercise any such rights if prohibited by law from
doing so. If the Interim Servicer reasonably believes it is unable under
applicable law to enforce such "due-on-sale" clause, the Interim Servicer shall
enter into an assumption agreement with the person to whom the Mortgaged
Property has been conveyed or is proposed to be conveyed, pursuant to which such
person becomes liable under the Mortgage Note and, to the extent permitted by
applicable state law, the Mortgagor remains liable thereon. Where an assumption
is allowed pursuant to this Subsection 11.01, the Interim Servicer is authorized
to enter into a substitution of liability agreement with the person to whom the
Mortgaged Property has been conveyed or is proposed to be conveyed pursuant to
which the original Mortgagor is released from liability and such Person is
substituted as Mortgagor and becomes liable under the related Mortgage Note. Any
such substitution of liability agreement shall be in lieu of an assumption
agreement.
In connection with any such assumption or substitution of liability,
the Interim Servicer shall follow the underwriting practices and procedures of
prudent mortgage lenders in the state in which the related Mortgaged Property is
located and Accepted Servicing Practices. With respect to an assumption or
substitution of liability, Mortgage Interest Rate, the amount of the Monthly
Payment, and the final maturity date of such Mortgage Note may not be changed.
The Interim Servicer shall notify the Purchaser that any such substitution of
liability or assumption agreement has been completed by forwarding to the
Purchaser the original of any such substitution of liability or assumption
agreement, which document shall be added to the related Mortgage File and shall,
for all purposes, be considered a part of such Mortgage File to the same extent
as all other documents and instruments constituting a part thereof.
Notwithstanding the foregoing paragraphs of this Subsection or any
other provision of this Agreement, the Interim Servicer shall not be deemed to
be in default, breach or any other violation of its obligations hereunder by
reason of any assumption of a Mortgage Loan by operation of law or any
assumption which the Interim Servicer may be restricted by law from preventing,
for any reason whatsoever. For purposes of this Subsection 11.19, the term
"assumption" is deemed to also include a sale of the Mortgaged Property subject
to the Mortgage that is not accompanied by an assumption or substitution of
liability agreement.
Subsection 11.20 Satisfaction of Mortgages and Release of Mortgage
Files.
Upon the payment in full of any Mortgage Loan, or the receipt by the
Interim Servicer of a notification that payment in full will be escrowed in a
manner customary for such purposes the Interim Servicer will act in accordance
with Accepted Servicing Practices. In addition, upon the request of the
Purchaser at any time, the Interim Servicer shall notify the Purchaser of any
Mortgage Loans which have been paid in full or as to which the Interim Servicer
has received notification that a payoff in full will be made. Upon request by
the Interim Servicer, the Purchaser, shall promptly release the related mortgage
documents to the Interim Servicer and the Interim Servicer shall prepare and
process any satisfaction or release. No expense incurred in connection with any
instrument of satisfaction or deed of reconveyance shall be chargeable to the
Custodial Account or the Purchaser.
In the event the Interim Servicer satisfies or releases a Mortgage
without having obtained payment in full of the indebtedness secured by the
Mortgage or should it otherwise prejudice any right the Purchaser may have under
the mortgage instruments, the Interim Servicer, upon written demand, shall remit
to the Purchaser the then outstanding principal balance of the related Mortgage
Loan by deposit thereof in the Custodial Account. The Interim Servicer shall
maintain the fidelity bond insuring the Interim Servicer against any loss it may
sustain with respect to any Mortgage Loan not satisfied in accordance with the
procedures set forth herein.
<PAGE>
From time to time and as appropriate for the servicing or
foreclosure of the Mortgage Loan the Purchaser shall, upon request of the
Interim Servicer and delivery to the Purchaser of a servicing receipt signed by
a Servicing Officer, release the requested portion of the Mortgage File held by
the Purchaser to the Interim Servicer. Such servicing receipt shall obligate the
Interim Servicer to return the related Mortgage documents to the Purchaser when
the need therefor by the Interim Servicer no longer exists, unless the Mortgage
Loan has been liquidated and the Liquidation Proceeds relating to the Mortgage
Loan have been deposited in the Custodial Account or the Mortgage File or such
document has been delivered to an attorney, or to a public trustee or other
public official as required by law, for purposes of initiating or pursuing legal
action or other proceedings for the foreclosure of the Mortgaged Property either
judicially or non-judicially, and the Interim Servicer has delivered to the
Purchaser a certificate of a Servicing Officer certifying as to the name and
address of the Person to which such Mortgage File or such document was delivered
and the purpose or purposes of such delivery. Upon receipt of a certificate of a
Servicing Officer stating that such Mortgage Loan was liquidated, the servicing
receipt shall be released by the Purchaser to the Interim Servicer.
Subsection 11.21 Servicing Compensation.
As compensation for its services hereunder, the Interim Servicer
shall be entitled to retain from interest payments on the Mortgage Loans the
amounts provided for as the Interim Servicing Fee for such calendar month. The
Interim Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder and shall not be entitled to
reimbursement therefor except as specifically provided for.
Subsection 11.22 Notification of Adjustments.
On each Adjustment Date, the Interim Servicer shall make interest
rate adjustments for each Adjustable Rate Mortgage Loan in compliance with the
requirements of the related Mortgage and Mortgage Note. The Interim Servicer
shall execute and deliver the notices required by each Mortgage and Mortgage
Note regarding interest rate adjustments. The Interim Servicer also shall
provide timely notification to the Purchaser of all applicable data and
information regarding such interest rate adjustments and the Interim Servicer's
methods of implementing such interest rate adjustments. Upon the discovery by
the Interim Servicer or the Purchaser that the Interim Servicer has failed to
adjust a Mortgage Interest Rate or a Monthly Payment pursuant to the terms of
the related Mortgage Note and Mortgage, the Interim Servicer shall immediately
deposit in the Custodial Account from its own funds the amount of any interest
loss caused thereby without reimbursement therefor.
Subsection 11.23 Statement as to Compliance.
<PAGE>
The Interim Servicer will deliver to the Purchaser not later than 90
days following the end of each fiscal year of the Interim Servicer, which as of
the Closing Date ends on the last day in December in each calendar year, an
Officers' Certificate stating, as to each signatory thereof, that (i) a review
of the activities of the Interim Servicer during the preceding year and of
performance under this Agreement has been made under such officers' supervision
and (ii) to the best of such officers' knowledge, based on such review, the
Interim Servicer has fulfilled all of its obligations under this Agreement
throughout such year, or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officer and the
nature and status thereof. Copies of such statement shall be provided by the
Purchaser to any Person identified as a prospective purchaser of the Mortgage
Loans.
Subsection 11.24 Independent Public Accountants' Servicing Report.
Not later than 90 days following the end of each fiscal year of the
Interim Servicer, the Interim Servicer at its expense shall cause a firm of
independent public accountants (which may also render other services to the
Interim Servicer) which is a member of the American Institute of Certified
Public Accountants to furnish a statement to the Purchaser or its designee to
the effect that such firm has examined certain documents and records relating to
the servicing of the Mortgage Loans under this Agreement or of mortgage loans
under pooling and servicing agreements (including the Mortgage Loans and this
Agreement) substantially similar one to another (such statement to have attached
thereto a schedule setting forth the pooling and servicing agreements covered
thereby) and that, on the basis of such examination conducted substantially in
compliance with the Uniform Single Attestation Program for Mortgage Bankers,
such firm confirms that such servicing has been conducted in compliance with
such pooling and servicing agreements except for such significant exceptions or
errors in records that, in the opinion of such firm, the Uniform Single
Attestation Program for Mortgage Bankers requires it to report. Copies of such
statement shall be provided by the Purchaser to any Person identified as a
prospective purchaser of the Mortgage Loans.
Subsection 11.25 Access to Certain Documentation.
The Interim Servicer shall provide to the Office of Thrift
Supervision, the FDIC and any other federal or state banking or insurance
regulatory authority that may exercise authority over the Purchaser access to
the documentation regarding the Mortgage Loans serviced by the Interim Servicer
required by applicable laws and regulations. Such access shall be afforded
without charge, but only upon reasonable request and during normal business
hours at the offices of the Interim Servicer. In addition, access to the
documentation will be provided to the Purchaser and any Person identified to the
Interim Servicer by the Purchaser without charge, upon reasonable request during
normal business hours at the offices of the Interim Servicer.
Subsection 11.26 Reports and Returns to be Filed by Interim
Servicer.
The Interim Servicer shall comply with Code rules and regulations
and other applicable laws and prepare and report information, statements or
other filings required to be delivered to any governmental taxing authority or
to any Purchaser pursuant to any applicable law with respect to the Mortgage
Loans and the transactions contemplated hereby in accordance with Accepted
Servicing Practices. In addition, the Interim Servicer shall provide the
Purchaser with such information concerning the Mortgage Loans as is necessary
for the Purchaser to prepare its federal income tax return as any Purchaser may
reasonably request from time to time.
<PAGE>
In accordance with Accepted Servicing Practices, the Interim
Servicer shall file information reports with respect to the receipt of mortgage
interest received in a trade or business, reports of foreclosures and
abandonments of any Mortgaged Property and information returns relating to
cancellation of indebtedness income with respect to any Mortgaged Property.
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MASTER MORTGAGE LOAN PURCHASE FACILITY
CONTIFINANCIAL CORPORATION
Seller
CONTIMORTGAGE CORPORATION
Interim Servicer
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.
Purchaser
----------------
Dated as of August 9, 1999
Fixed and Adjustable Rate
First and Second Lien Residential Mortgage Loans
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
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SECTION 1. Definitions........................................................1
SECTION 2. Purchase and Sale of Mortgage Loans...............................18
SECTION 3. Mortgage Loan Schedules...........................................19
SECTION 4. Purchase Price....................................................19
Subsection 4.01 Initial Purchase Price ....................................19
Subsection 4.02 Deferred Purchase Price ...................................20
Subsection 4.03 Purchase Price Adjustment .................................22
Subsection 4.04 Purchased Interest 23
SECTION 5. Examination of Mortgage Files ....................................23
SECTION 6. Conveyance from Seller to Purchaser...............................23
Subsection 6.01 Conveyance of Mortgage Loans; Possession of
Servicing Files ...........................................24
Subsection 6.02 Books and Records .........................................24
Subsection 6.03 Delivery of Mortgage Loan Documents .......................24
SECTION 7. Representations, Warranties and Covenants of the Seller:
Remedies for Breach...............................................25
Subsection 7.01 Representations and Warranties Respecting the Seller ......25
Subsection 7.02 Representations and Warranties Regarding
Individual Mortgage Loans .................................28
Subsection 7.03 Remedies for Breach of Representations and Warranties .....28
Subsection 7.04 Repurchase of Certain Mortgage Loans ......................31
SECTION 8. Closing; Conditions Precedent.....................................31
SECTION 9. Closing Documents.................................................33
SECTION 10.Costs.............................................................35
SECTION 11.Interim Servicer's Servicing Obligations..........................35
SECTION 12.Removal of Mortgage Loans from Inclusion under This
Agreement Upon a Whole Loan Transfer or a Pass-Through Transfer...35
SECTION 13.The Seller........................................................38
Subsection 13.01 Indemnification by the Seller ...........................38
Subsection 13.02 Merger or Consolidation of the Seller and Interim
Servicer ................................................38
Subsection 13.03 Limitation on Liability of the Interim Servicer and
Others ..................................................39
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<PAGE>
Subsection 13.04 Interim Servicer Not to Resign ..........................39
Subsection 13.05 No Transfer of Servicing ................................40
Subsection 13.06 Joint and Several Liability .............................40
Subsection 13.07 Right of Set-off ........................................40
SECTION 14. DEFAULT .........................................................40
Subsection 14.01 Events of Default .......................................40
Subsection 14.02 Waiver of Defaults ......................................42
SECTION 15. Termination......................................................42
SECTION 16. Successor to the Interim Servicer................................43
SECTION 17. Financial Statements.............................................44
SECTION 18. Mandatory Delivery: Grant of Security Interest...................44
SECTION 19. Notices..........................................................45
SECTION 20. Severability Clause..............................................45
SECTION 21. Counterparts.....................................................46
SECTION 22. Governing Law....................................................46
SECTION 23. Intention of the Parties.........................................46
SECTION 24. Successors and Assigns...........................................46
SECTION 25. Waivers..........................................................47
SECTION 26. Exhibits.........................................................47
SECTION 27. Nonsolicitation..................................................47
SECTION 28. General Interpretive Principles..................................47
SECTION 29. Reproduction of Documents........................................48
SECTION 30. Further Agreements...............................................48
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<PAGE>
Page
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EXHIBITS
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EXHIBIT 1 SELLER'S OFFICER'S CERTIFICATE
EXHIBIT 2 FORM OF OPINION OF COUNSEL TO THE SELLERS
EXHIBIT 3 SECURITY RELEASE CERTIFICATION
EXHIBIT 4 ASSIGNMENT AND CONVEYANCE
EXHIBIT 5 CONTENTS OF EACH MORTGAGE FILE
EXHIBIT 6 FORM OF CUSTODIAL AGREEMENT
EXHIBIT 7 [RESERVED]
EXHIBIT 8 FORM OF ESCROW ACCOUNT LETTER AGREEMENT
EXHIBIT 9 SERVICING ADDENDUM
EXHIBIT 10 FORM OF CONFIRMATION
EXHIBIT 11 BUY-UP/BUY-DOWN SCHEDULE
EXHIBIT 12 UNDERWRITING GUIDELINES
EXHIBIT 13 MODIFICATIONS TO UNDERWRITING GUIDELINES
EXHIBIT 14 REPRESENTATIONS AND WARRANTIES
SCHEDULE I MORTGAGE LOAN SCHEDULE
SCHEDULE 2 MATERIAL SUBSIDIARIES
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<PAGE>
MASTER MORTGAGE LOAN PURCHASE FACILITY
This is a MASTER MORTGAGE LOAN PURCHASE FACILITY, dated as of August
9, 1999, by and among Greenwich Capital Financial Products, Inc., having an
office at 600 Steamboat Road, Greenwich, Connecticut 06830 (the "Purchaser"),
ContiFinancial Corporation, having an office at 277 Park Avenue, New York, New
York 10172 (the "Seller") and ContiMortgage Corporation having an address at One
ContiPark, 338 South Warminster Road, Hatboro, Pennsylvania 19040 (the "Interim
Servicer").
W I T N E S S E T H :
WHEREAS, subject to the terms and conditions of this Agreement, the
Seller shall sell, from time to time, to the Purchaser, and, the Purchaser shall
purchase, from time to time, from the Seller, certain conventional fixed and
adjustable rate residential first and second lien mortgage loans, (the "Mortgage
Loans") as described herein on a servicing-released basis, and which shall be
delivered in groups of whole loans on various dates as provided herein (each, a
"Closing Date");
WHEREAS, each Mortgage Loan is secured by a mortgage, deed of trust
or other security instrument creating a first or second lien on a residential
dwelling located in the jurisdiction indicated on the Mortgage Loan Schedule for
the related Mortgage Loan Package, which is to be annexed hereto on each Closing
Date as Schedule I; and
WHEREAS, the Purchaser, the Seller and the Interim Servicer wish to
prescribe the manner of the conveyance, interim servicing and control of the
Mortgage Loans;
NOW, THEREFORE, in consideration of the premises and mutual
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Purchaser, the
Seller and the Interim Servicer agree as follows:
SECTION 1. Definitions. For purposes of this Agreement the following
capitalized terms shall have the respective meanings set forth below.
Act of Insolvency: With respect to Seller or Interim Servicer and
their Material Subsidiaries, (i) the filing of a petition, commencing, or
authorizing the commencement of any case or proceeding under any bankruptcy,
insolvency, reorganization, liquidation, dissolution or similar law relating to
the protection of creditors of the Seller or the Interim Servicer or one of its
Material Subsidiaries, or suffering any such petition or proceeding to be
commenced by another; provided that any actively disputed petition or proceeding
commenced by another shall not constitute an Act of Insolvency unless such
petition or proceeding is not dismissed within 30 days of its commencement, (ii)
seeking the appointment of a receiver, trustee, custodian or similar official
for Seller, Interim Servicer or a Material Subsidiary or any substantial part of
the property of either, (iii) the appointment of a receiver, conservator, or
manager for Seller or Interim Servicer or a Material Subsidiary or any
substantial part of the property of either by any governmental agency or
authority
<PAGE>
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having the jurisdiction to do so, (iv) the making or offering by Seller or
Interim Servicer or a Material Subsidiary of a composition with its respective
creditors or a general assignment for the benefit of creditors, (v) the
admission in writing by Seller or Interim Servicer or a Material Subsidiary of
such party's inability to pay its ordinary course trade debts as they become due
or mature, or (vi) any Governmental Authority or agency or any person, agency or
entity acting or purporting to act under Governmental Authority shall have taken
any action to condemn, seize or appropriate, or to assume custody or control of,
all or any substantial part of the property of Seller or Interim Servicer or a
Material Subsidiary, or shall have taken any action to displace the management
of such party or to curtail its authority in the conduct of the business of such
party.
Adjustable Rate Mortgage Loan: A Mortgage Loan which provides for
the adjustment of the Mortgage Interest Rate payable in respect thereto.
Adjustment Date: With respect to each Adjustable Rate Mortgage Loan,
the date set forth in the related Mortgage Note on which the Mortgage Interest
Rate on such Adjustable Rate Mortgage Loan is adjusted in accordance with the
terms of the related Mortgage Note.
Agreement: This Master Mortgage Loan Purchase Facility including all
exhibits, schedules, amendments and supplements hereto.
American General: American General Finance, Inc., a Delaware
corporation.
AmGen Mortgage Loan: Any Mortgage Loan that was previously financed
by American General pursuant to any facility with American General, or one of
its affiliates, as lender or purchaser.
Applicable Sublimit Percent Limitations: As of any date of
determination, the maximum percentage (as measured by unpaid principal balance
as of such date) of the aggregate unpaid principal balance of the Mortgage Loans
purchased by Purchaser under this Agreement and not previously sold pursuant to
a Whole Loan Transfer or a Pass-Through Transfer, which are represented by the
product categories set forth below:
Product Maximum Percentage
Fixed Rate, Second Lien Mortgage Loans 10% of the unpaid principal balance
of the Fixed RateMortgage Loans
Fixed Rate Mortgage Loans with an LTV 15% of the unpaid principal balance
in excess of 85% of the Fixed Rate Mortgage Loans
Fixed Rate Mortgage Loans with an LTV 1% of the unpaid principal balance
in excess of 90% of the Fixed Rate Mortgage Loans
Adjustable Rate Mortgage Loans with 10% of the unpaid principal balance
of the
<PAGE>
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an LTV in excess of 85% Adjustable Rate Mortgage Loans
Second Lien Mortgage Loans with a 25% of the unpaid principal balance
CLTV in excess of 85% of the Second Lien Mortgage Loans
Second Lien Mortgage Loans with a 1% of the unpaid principal balance
CLTV in excess of 90% Second Lien Mortgage Loans
Mortgage Loans with a FICO Prior to August 31, 1999, l0% of the
less than 550 unpaid score principal balance of the
Mortgage Loans for which a FICO score
is available, and thereafter 5% of the
unpaid principal balance of the
Mortgage Loan for which a FICO score
is available
HOEPA Mortgage Loans 10% of the unpaid principal balance of
the Portfolio Mortgage Loans
Appraised Value: With respect to any Mortgaged Property, the lesser
of (i) the value thereof as determined by an appraisal made for the originator
of the Mortgage Loan at the time of origination of the Mortgage Loan, and (ii)
the purchase price paid for the related Mortgaged Property by the Mortgagor with
the proceeds of the Mortgage Loan, provided, however, in the case of a
Refinanced Mortgage Loan, such value of the Mortgaged Property is based solely
upon the value determined by an appraisal made for the originator of such
Refinanced Mortgage Loan at the time of origination of such Refinanced Mortgage
Loan; provided further, that notwithstanding the foregoing, with respect to any
Retention Mortgage Loan the appraisal described in clause (i) may have been
obtained not more than 18 months prior to the origination date for such
Retention Mortgage Loan.
Assignment and Conveyance: An assignment and conveyance of the
Mortgage Loans purchased on a Closing Date in the form annexed hereto as Exhibit
4.
Assignment of Mortgage: An individual assignment of the Mortgage,
notice of transfer or equivalent instrument in recordable form, sufficient under
the laws of the jurisdiction wherein the related Mortgaged Property is located
to give record notice of the sale of the Mortgage to the Purchaser.
Business Day: Any day other than (a) a Saturday or Sunday, or (b) a
day on which the New York Stock Exchange, the Federal Reserve Bank of New York,
the Custodian or savings and loan institutions in the State of New York,
Pennsylvania or Connecticut are authorized or obligated by law or executive
order to be closed or (c) a day on which the Purchaser is closed for business.
<PAGE>
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Capital Stock: With respect to any Person means any and all shares,
interests, share capital, rights to subscribe for or purchase, warrants,
options, participations, or other equivalents of or interests or membership
interests in (however designated) equity of such Person, including any Preferred
Stock, any limited or general partnership interest and any limited liability
company membership interest (but excluding any debt securities convertible into
such equity), any rights to subscribe for or purchase any thereof.
Carve-out Mortgage Loan: Any Eligible Mortgage Loan (a) which a
Seller is required to sell to American General pursuant to the terms of the
Commitment Agreement, dated as of January 29, 1999 among the Seller,
ContiMortgage Corporation and American General (the "American General Purchase
Agreement") in order to satisfy the minimum delivery requirements under such
agreement as in effect on the date hereof, (b) which the Seller, with the prior
written consent of the Purchaser, sells to any third party or to American
General in excess of the minimum delivery requirements under the American
General Purchase Agreement as in effect on the date hereof or (c) which the
Seller sells to any third party as part of a pool of mortgage loans with a
purchase price which is equal to or greater than the prevailing Initial Purchase
Price specified under this Agreement.
Cash-out Refinancing: A Refinanced Mortgage Loan the proceeds of
which were in excess of the principal balance of any existing senior mortgage on
the related Mortgaged Property and related closing costs, and were used to pay
any existing first mortgage, related closing costs and subordinate mortgages on
the related Mortgaged Property.
Change in Control: With respect to the Seller or any Material
Subsidiary the occurrence of any of the following events:
(i) Any "person" (as such term is used in Section 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), other than any Permitted Holder, is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that such person shall be
deemed to have "beneficial ownership" of all shares that any
such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time),
directly or indirectly, of more than 35% of the total voting
power of the Voting Stock of such Person; provided, however,
that the Permitted Holders beneficially own (as defined in
Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly, in the aggregate a lesser percentage of the total
voting power of the Voting Stock of the Seller or such
Material Subsidiary than such other person and do not have the
right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the Board of
Directors of the Seller or such Material Subsidiary (for the
purposes of this clause (i), such other person shall be deemed
to beneficially own any Voting Stock of a corporation
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held by another corporation (a "parent corporation"), if such
other person is the beneficial owner (as defined above for
such person), directly or indirectly, of more than 35% of the
voting power of the Voting Stock of such parent corporation
and the Permitted Holders beneficially own (as defined above
for the Permitted Holders), directly or indirectly, in the
aggregate a lesser percentage of the voting power of the
Voting Stock of such parent corporation and do not have the
right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the board of
directors of such parent corporation);
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of
Directors of the Seller or such Material Subsidiary, as the
case may be, (together with any new directors whose election
by such Board of Directors or whose nomination for election by
the shareholders of the Seller or such Material Subsidiary, as
the case may be, was approved by a vote of 66-2/3% of the
directors of the Seller or such Material Subsidiary, as the
case may be, then still in office who were either directors at
the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason
to constitute a majority of the Board of Directors then in
office; or
(iii) the merger or consolidation of the Seller or such Material
Subsidiary, as the case may be, with or into another Person or
the merger of another Person with or into the Seller or such
Material Subsidiary, as the case may be, or the liquidation,
wind-up or dissolution of the Seller or such Material
Subsidiary, as the case may be, or the sale of all or
substantially all the assets of the Seller or such Material
Subsidiary, as the case may be, to another Person (other than
a Person that is controlled by the Permitted Holders), and, in
the case of any such merger or consolidation, the securities
of the Seller or such Material Subsidiary, as the case may be,
that are outstanding immediately prior to such transaction and
which represent 100% of the aggregate voting power of the
Voting Stock of the Seller or such Material Subsidiary, as the
case may be, are changed into or exchanged for cash,
securities or property, unless pursuant to such transaction
such securities are changed into or exchanged for, in addition
to any other consideration, securities of the surviving
corporation that represent immediately after such transaction,
at least a majority of the aggregate voting power of the
Voting Stock of the surviving corporation; provided, however,
that the sale by the Seller or its Subsidiaries from time to
time solely of the consumer and commercial loans, leases and
receivables purchased or originated or acquired by the Seller
to a trust for the purpose solely of effecting one
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or more securitizations shall not be treated hereunder as a
sale of all or substantially all the assets of the Seller.
For purposes of this definition of Change of Control, neither
ContiTrade Services, L.L.C. nor California Lending Group shall
constitute a Material Subsidiary.
Notwithstanding anything contained in this Agreement to the
contrary, a Change in Control accompanied by an equity
infusion in the Seller of not less than $100,000,000 shall not
constitute an Event of Default under this Agreement for 60
days after the date of such equity infusion, unless an
additional Change of Control shall occur during such 60 day
period.
Closing Date: The date or dates on which the Purchaser from time to
time shall purchase and a Seller from time to time shall sell to the Purchaser,
the Mortgage Loans listed on the related Mortgage Loan Schedule with respect to
the related Mortgage Loan Package.
Closing Documents: With respect to the initial Closing Date, the
documents required pursuant to Section 9(a) and 9(b) and with respect to any
other Closing Date, the documents required pursuant to Section 9(b).
Code: The Internal Revenue Code of 1986, or any successor statute
thereto.
Combined Loan-to-Value Ratio or CLTV: As of any date for any Second
Lien Mortgage Loan, the fraction, expressed as a percentage, the numerator of
which is the sum of (a) the original principal balance of the Mortgage Loan,
plus (b) the unpaid principal balance of any first mortgage loan secured by the
Mortgaged Property as of such date, and the denominator of which is the
Appraised Value of the related Mortgaged Property.
Condemnation Proceeds: All awards, compensation and settlements in
respect of a taking of all or part of a Mortgaged Property by exercise of the
power of condemnation or the right of eminent domain.
Confirmation: With respect to any Mortgage Loan Package purchased
and sold on any Closing Date, the letter agreement between the Purchaser and the
Seller, in the form annexed hereto as Exhibit 10 (including any exhibits,
schedules and attachments thereto), setting forth the terms and conditions of
such transaction and describing the Mortgage Loans to be purchased by the
Purchaser on such Closing Date. A Confirmation may relate to more than one
Mortgage Loan Package to be purchased on one or more Closing Dates hereunder.
Custodial Account: The separate account established by Purchaser, in
its own name and for its own benefit, as identified to the Seller by the
Purchaser.
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Custodial Agreement: The agreement governing the retention of the
originals of each Mortgage Note, Mortgage, Assignment of Mortgage and other
Mortgage Loan Documents, a form of which agreement is annexed hereto as Exhibit
6.
Custodian: Manufacturers and Traders Trust Company, a New York
banking corporation, in its capacity as the custodian under the Custodial
Agreement, or its successor in interest or assigns, or any successor custodian.
Cut-off Date: With respect to each Mortgage Loan Package, a date to
be mutually agreed upon between the Seller and the Purchaser, as set forth in
the related Confirmation.
Deferred Purchase Price: Shall have the meaning set forth in
Subsection 4.02.
Deleted Mortgage Loan: A Mortgage Loan replaced or to be replaced by
a Qualified Substitute Mortgage Loan.
Disposed Mortgage Loan: Shall have the meaning set forth in
Subsection 4.02.
Disposition Expenses: With respect to each Mortgage Loan, an amount
equal to the excess of (i) all reasonable out-of-pocket expenses incurred by
Purchaser in connection with the purchase and resale of such Mortgage Loans
(including out-of-pocket legal, due diligence, servicing transfer expenses and
any hedging losses (offset by any hedging gains)) over (ii) 0.25% of the unpaid
principal balance of such Mortgage Loan as of the related Cut-off Date.
Due Date: With respect to each Mortgage Loan, the day of the
calendar month on which the related Monthly Payment is due on a Mortgage Loan,
exclusive of any days of grace.
Eligible Account: Either (i) an account or accounts maintained with
a federal or state chartered depository institution or trust company the
short-term unsecured debt obligations of which (or, in the case of a depository
institution or trust company that is the principal subsidiary of a holding
company, the short-term unsecured debt obligations of such holding company) are
rated A-1 by S&P or Prime-1 by Moody's (or a comparable rating if another rating
agency is specified by the Purchaser by written notice to the Interim Servicer)
at the time any amounts are held on deposit therein, (ii) an account or accounts
the deposits in which are fully insured by the FDIC or (iii) a trust account or
accounts maintained with a federal or state chartered depository institution or
trust company acting in its fiduciary capacity. Eligible Accounts may bear
interest.
Eligible Mortgage Loan: A first or second lien residential mortgage
loan originated by ContiMortgage Corporation or acquired by ContiMortgage
Corporation (i) that is not more than 29 days delinquent; (ii) that was
underwritten in accordance with the Underwriting Guidelines acceptable to the
Purchaser as verified in accordance with Section 4 hereof; (iii) that was
originated by ContiMortgage Corporation not more than 60 days prior to the
proposed Closing Date or if such Mortgage Loan was not originated by
ContiMortgage Corporation, that was originated not more than 75 days prior to
the proposed Closing Date, and (iv) that meets the criteria of established
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purchasers of loans of such type as reasonably determined by Purchaser in good
faith and in consultation with the Seller.
Escrow Account: The separate trust account or accounts created and
maintained pursuant to this Agreement which shall be entitled "ContiMortgage
Corporation, as servicer, in trust for the Purchaser and various Mortgagors,
Fixed and Adjustable Rate Mortgage Loans," established at a financial
institution acceptable to the Purchaser.
Escrow Payments: The amounts constituting ground rents, taxes,
assessments, water charges, sewer rents, fire and hazard insurance premiums and
other payments required to be escrowed by the Mortgagor with the Mortgagee
pursuant to the terms of any Mortgage Note or Mortgage.
Event of Default: Any one of the events enumerated in Subsection
14.01.
Exception Limit: With respect to each Mortgage Loan Package, the
maximum amount of Exception Loans which Purchaser shall be obligated to purchase
on the related Closing Date at the standard Initial Purchase Price, which amount
shall be equal to (a) with respect to each Closing Date occurring prior to the
date which is 60 days following the date hereof, 10% of the unpaid principal
balance of the Mortgage Loans constituting the Mortgage Loan Package, not more
than 50% of which shall consist of Exception Loans with material appraised value
or LTV exceptions showing a variance of 10% (which percentage shall be raised to
15% if the Seller demonstrates to the reasonable satisfaction of the Purchaser
that whole loan purchasers of loans similar to the Eligible Loans generally
accept a variance in appraised value or LTV exceptions equal to or greater than
15%) or more as determined by the Purchaser; and (b) thereafter, 5% of the
unpaid principal balance of the Mortgage Loans constituting the Mortgage Loan
Package.
Exception Loan: Any mortgage loan that a Seller offers to sell to
the Purchaser hereunder which has a material exception to the Underwriting
Guidelines as determined by the Purchaser without appropriate compensating
factors but which the Purchaser determines in its reasonable discretion has an
implied Initial Purchase Price of not less than 80% of the outstanding principal
balance of such mortgage loan; provided, however, that any such mortgage loan
which Purchaser has determined, following its underwriting, is an Eligible
Mortgage Loan shall not constitute an Exception Loan without demonstrable
evidence presented to the Seller that such mortgage loan is an Exception Loan
and without the Seller having had reasonable opportunity to consult with
Purchaser regarding such categorization. No Mortgage Loan with an implied
Initial Purchase Price of less than 80% shall be eligible for sale hereunder
unless the Seller and the Purchaser mutually agree to revise the Initial
Purchase Price for such Mortgage Loan.
Facility Limit: Shall have the meaning set forth in Section 2.
Facility Termination Date: The earliest of (i) the date on which the
Purchaser purchases Mortgage Loans pursuant to this Agreement with aggregate
outstanding principal balance
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equal to the Maximum Purchase Amount, (ii) March 31, 2000, or (iii) the date on
which an Event of Default occurs.
Fannie Mae: Fannie Mae, a federally chartered and privately owned
corporation existing under the Federal National Mortgage Association Charter Act
or any successor thereto.
FDIC: The Federal Deposit Insurance Corporation, or any successor
thereto.
First Lien: With respect to each Mortgaged Property, the lien of the
mortgage, deed of trust or other instrument securing a mortgage note which
creates a first lien on the Mortgaged Property.
Final Recovery Determination: With respect to any defaulted Mortgage
Loan or any REO Property (other than a Mortgage Loan or REO Property purchased
by the Seller pursuant to this Agreement), a determination made by the Interim
Servicer that all Insurance Proceeds, Liquidation Proceeds and other payments or
recoveries which the Interim Servicer, in its reasonable good faith judgment,
expects to be finally recoverable in respect thereof have been so recovered. The
Interim Servicer shall maintain records, prepared by a servicing officer of the
Interim Servicer, of each Final Recovery Determination.
Fixed Rate Mortgage Loan: A Mortgage Loan with respect to which the
Mortgage Interest Rate set forth in the Mortgage Note is fixed for the term of
such Mortgage Loan.
Freddie Mac: The Federal Home Loan Mortgage Corporation or any
successor thereto.
Funding Limit: As defined in Section 2 hereof.
Governmental Authority: Any nation or government, any state, agency,
instrumentality or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any court or arbitrator having jurisdiction over
the Seller or Interim Servicer, any of their Subsidiaries or any of their
properties.
Gross Margin: With respect to any Adjustable Rate Mortgage Loan, the
fixed percentage amount set forth in the related Mortgage Note and the related
Mortgage Loan Schedule that is added to the Index on each Adjustment Date in
accordance with the terms of the related Mortgage Note to determine the new
Mortgage Interest Rate for such Mortgage Loan.
HOEPA: The Home Ownership and Equity Protection Act of 1994.
Holdback: As defined in Subsection 4.01(b).
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HUD: The United States Department of Housing and Urban Development
or any successor thereto.
Indebtedness Documents: Those document listed on Schedule 3 hereto.
Index: With respect to any Adjustable Rate Mortgage Loan, the index
identified on the Mortgage Loan Schedule and set forth in the related Mortgage
Note for the purpose of calculating the interest rate thereon.
Initial Closing Date: The Closing Date on which the Purchaser
purchases and the Seller sells the first Mortgage Loan Package hereunder.
Initial Purchase Price: As defined in Subsection 4.01.
Insurance Proceeds: With respect to each Mortgage Loan, proceeds of
insurance policies insuring the Mortgage Loan or the related Mortgaged Property.
Interim Servicer Material Adverse Effect: A material adverse effect
upon (i) the business operations, properties or assets of the Interim Servicer,
(ii) the ability of the Interim Servicer to perform its obligations, or of the
Purchaser to enforce any of its rights or remedies, under this Agreement with
respect to servicing or any of documents to be executed and/or delivered
hereunder which relate to servicing, or (iii) the validity or enforceability of
this Agreement, in the case of (i), (ii) and (iii) above (a) taking into
consideration the financial condition of the Interim Servicer and its
Subsidiaries as of the date of this Agreement and (b) without taking into
consideration any further deterioration of the financial condition of the
Interim Servicer and its Subsidiaries after the date of this Agreement.
Interim Servicer Termination Event: Either (a) the breach of any
representation, warranty, covenant or agreement under this Agreement or the
Custodial Agreement by the Interim Servicer in its capacity as interim servicer,
or (b) any action is taken by any governmental, regulatory, or self-regulatory
authority to remove, limit, restrict, suspend or terminate the rights,
privileges, or operations of the Interim Servicer, including suspension as an
issuer, lender or seller/servicer of related types of assets, or (c) an Interim
Servicer Material Adverse Effect shall occur, which in the case of (a) or (b)
above results in a material adverse effect on the value of any Mortgage Loan,
the Purchaser's interest in any Mortgage Loan or the Interim Servicer's ability
to perform its obligations under this Agreement.
Interim Servicing Fee: With respect to each Mortgage Loan, the
amount of the annual servicing fee the Purchaser shall pay to the Interim
Servicer, which shall, for each month, be equal to one-twelfth of the product of
(a) the Interim Servicing Fee Rate and (b) the unpaid principal balance of the
Mortgage Loan. If the Interim Servicing Period includes any partial month, the
Interim Servicing Fee for such month shall be pro rated at a per diem rate based
upon a 30-day month.
Interim Servicing Fee Rate: The per annum rate at which the Interim
Servicing Fee accrues, which rate shall be equal to (i) during the period that
the Interim Servicer provides interim servicing, 0.50% per annum and (ii) during
the period the Interim Servicer acts as subservicer pursuant to Section 12(b)(7)
of this Agreement, 0.50% per annum less the annual fee payable to the related
servicer.
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Interim Servicing Period: With respect to any Mortgage Loan, the
period commencing on the related Closing Date and ending on the earlier of the
thirtieth day following the Closing Date and completion of a servicing transfer
with respect to such Mortgage Loan; provided, however that the Interim Servicing
Period may be extended for additional periods of thirty days by written notice
to the Interim Servicer from the Purchaser.
Liquidation Proceeds: Amounts, other than Insurance Proceeds and
Condemnation Proceeds, received in connection with the liquidation of a
defaulted Mortgage Loan through trustee's sale, foreclosure sale or otherwise,
other than amounts received following the acquisition of REO Property.
Loan-to-Value Ratio or LTV: With respect to any Mortgage Loan as of
any date of determination, the ratio on such date of the outstanding principal
amount of the Mortgage Loan, to the Appraised Value of the Mortgaged Property.
Material Adverse Effect: A material adverse effect upon (i) the
business operations, properties or assets of the Seller and its Subsidiaries,
taken as a whole or of ContiMortgage Corporation, in its capacity as orginator
of the Mortgage Loans, (ii) the ability of Seller or ContiMortgage Corporation,
in its capacity as orginator of the Mortgage Loans, to perform its obligations,
or of the Purchaser to enforce any of its rights or remedies, under this
Agreement or any of documents to be executed and/or delivered hereunder, (iii)
the validity or enforceability of this Agreement; or (iv) the Mortgage Loans
taken as a whole, in the case of (i), (ii), (iii) and (iv) above (a) taking into
consideration the financial condition of the Seller and ContiMortgage
Corporation, in its capacity as orginator of the Mortgage Loans, and their
Subsidiaries as of the date of this Agreement and (b) without taking into
consideration any further deterioration of the financial condition of the Seller
or ContiMortgage Corporation, in its capacity as orginator of the Mortgage
Loans, and their Subsidiaries after the date of this Agreement.
Material Subsidiary: means (a) any Subsidiary identified as a
Material Subsidiary on Schedule 2 attached hereto, and (b) any Subsidiary
created or acquired after the date hereof that would be a "Significant
Subsidiary" of the Seller within the meaning of Rule 1-02 under Regulation S-X
promulgated by the Securities Exchange Commission.
Maximum Mortgage Interest Rate: With respect to each Adjustable Rate
Mortgage Loan, a rate that is set forth on the related Mortgage Loan Schedule
and in the related Mortgage Note and is the maximum interest rate to which the
Mortgage Interest Rate on such Mortgage Loan may be increased on any Adjustment
Date.
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Maximum Purchase Amount: One billion dollars ($1,000,000,000),
subject to increase as provided in Section 2(c).
Minimum Mortgage Interest Rate: With respect to each Adjustable Rate
Mortgage Loan, a rate that is set forth on the related Mortgage Loan Schedule
and in the related Mortgage Note and is the minimum interest rate to which the
Mortgage Interest Rate on such Mortgage Loan may be decreased on any Adjustment
Date.
Monthly Payment: With respect to any Mortgage Loan, the scheduled
combined payment of principal and interest payable by a Mortgagor under the
related Mortgage Note on each Due Date.
Moody's: Moody's Investors Service, Inc. or its successor in
interest.
Mortgage: The mortgage, deed of trust or other instrument creating a
first or second lien (as indicated on the Mortgage Loan Schedule) on Mortgaged
Property securing the Mortgage Note.
Mortgage File: The items pertaining to a particular Mortgage Loan
referred to in Exhibit 5 annexed hereto, and any additional documents required
to be added to the Mortgage File pursuant to this Agreement or the related
Confirmation.
Mortgage Interest Rate: With respect to each Fixed Rate Mortgage
Loan, the fixed annual rate of interest provided for in the related Mortgage
Note and, with respect to each Adjustable Rate Mortgage Loan, the annual rate
that interest accrues on such Adjustable Rate Mortgage Loan from time to time in
accordance with the provisions of the related Mortgage Note.
Mortgage Loan: Each first or second lien, residential mortgage loan,
sold, assigned and transferred to the Purchaser pursuant to this Agreement and
the related Confirmation and identified on the Mortgage Loan Schedule annexed to
this Agreement on such Closing Date, which Mortgage Loan includes without
limitation the Mortgage File, the Monthly Payments, Principal Prepayments,
Liquidation Proceeds, Condemnation Proceeds, Insurance Proceeds, REO Disposition
proceeds, and all other rights, benefits, proceeds and obligations arising from
or in connection with such Mortgage Loan.
Mortgage Loan Documents: The documents listed in Section 2 of the
Custodial Agreement pertaining to any Mortgage Loan.
Mortgage Loan Package: The Mortgage Loans listed on a Mortgage Loan
Schedule, delivered to the Custodian and the Purchaser at least five (5)
Business Days prior to the related Closing Date (or such lesser period mutually
agreed upon) and attached to this Agreement as Schedule I on the related Closing
Date.
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Mortgage Loan Schedule: With respect to each Mortgage Loan Package,
the schedule of Mortgage Loans to be annexed hereto as Schedule I (or a
supplement thereto) on each Closing Date for the Mortgage Loan Package delivered
on such Closing Date in both hard copy and electronic modem, such schedule
setting forth the following information with respect to each Mortgage Loan in
the Mortgage Loan Package: (1) the Seller's Mortgage Loan identifying number;
(2) the Mortgagor's first and last name; (3) the street address of the Mortgaged
Property including the state and zip code; (4) a code indicating whether the
Mortgaged Property is owner-occupied; (5) the type of Residential Dwelling
constituting the Mortgaged Property; (6) the original months to maturity; (7)
the original date of the Mortgage Loan and the remaining months to maturity from
the Cut-off Date, based on the original amortization schedule; (8) the
Loan-to-Value Ratio at origination; (9) the Mortgage Interest Rate in effect
immediately following the Cut-off Date; (10) the date on which the first Monthly
Payment was due on the Mortgage Loan; (11) the stated maturity date; (12) the
amount of the Monthly Payment at origination; (13) with respect to each
Adjustable Rate Mortgage Loan, the amount of the Monthly Payment as of the
Cut-off Date; (14) the last Due Date on which a Monthly Payment was actually
applied to the unpaid Stated Principal Balance; (15) the original principal
amount of the Mortgage Loan; (16) the Stated Principal Balance of the Mortgage
Loan as of the close of business on the Cut-off Date; (17) with respect to each
Adjustable Rate Mortgage Loan, the first Adjustment Date; (18) with respect to
each Adjustable Rate Mortgage Loan, the Gross Margin; (19) a code indicating the
purpose of the loan (i.e., purchase financing, refinancing); (20) with respect
to each Adjustable Rate Mortgage Loan, the Maximum Mortgage Interest Rate under
the terms of the Mortgage Note; (21) with respect to each Adjustable Rate
Mortgage Loan, the Minimum Mortgage Interest Rate under the terms of the
Mortgage Note; (22) the Mortgage Interest Rate at origination; (23) with respect
to each Adjustable Rate Mortgage Loan, the Periodic Rate Cap; (24) with respect
to each Adjustable Rate Mortgage Loan, the first Adjustment Date immediately
following the Cut-off Date; (25) with respect to each Adjustable Rate Mortgage
Loan, the Index; (26) the date on which the first Monthly Payment was due on the
Mortgage Loan and, if such date is not consistent with the Due Date currently in
effect, such Due Date; (27) a code indicating whether the Mortgage Loan is an
Adjustable Rate Mortgage Loan or a Fixed Rate Mortgage Loan; (28) a code
indicating the documentation style (i.e., full, alternative or reduced); (29) a
code indicating if the Mortgage Loan is subject to the provisions of HOEPA; (30)
the Appraised Value of the Mortgaged Property; (31) the sale price of the
Mortgaged Property, if applicable; (32) a code indicating whether the Mortgage
is a First Lien or Second Lien; (33) the Mortgagor's FICO score (to the extent a
FICO score is available); (34) a code indicating whether the Mortgage Loan is a
Retention Mortgage Loan; (35) a code indicating if interest on such Mortgage
Loan is calculated on a 30/360 basis; (36) the Mortgagor's social security
number; (37) a code identifying origination source; (38) a code indicating if
the Mortgage Loan is a balloon Mortgage Loan; (39) a code indicating the
Mortgage Note class (borrower grade); (40) with respect to each Adjustable Rate
Mortgage Loan, the adjustment frequency; (41) the ratio of original principal
balance of the Mortgage Loan to the Mortgagor's income; (42) a code indicating
the prepayment penalty, if any; and (43) with respect to any Second Lien
Mortgage Loan, the outstanding principal balance of the First Line on the date
of origination of such Second Lien Mortgage Loan. With respect to the Mortgage
Loan Package in the aggregate, the Mortgage Loan Schedule shall set forth the
following information, as of the related Cut-off Date: (1) the number of
Mortgage Loans; (2) the Stated Principal Balance of the Mortgage Loans; (3) the
weighted average Mortgage Interest Rate
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of the Mortgage Loans; and (4) the weighted average maturity of the Mortgage
Loans. Schedule I hereto shall be supplemented as of each Closing Date to
reflect the addition of the Mortgage Loan Schedule with respect to the related
Mortgage Loan Package.
Mortgage Note: The original executed note or other evidence of the
Mortgage Loan indebtedness of a Mortgagor.
Mortgaged Property: The Mortgagor's real property securing repayment
of a related Mortgage Note, consisting of a fee simple interest in a single
parcel of real property improved by a Residential Dwelling.
Mortgagee: The mortgagee or beneficiary named in the Mortgage and
the successors and assigns of such mortgagee or beneficiary.
Mortgagor: The obligor on a Mortgage Note, the owner of the
Mortgaged Property and the grantor or mortgagor named in the related Mortgage
and such grantor's or mortgagor's successor's in title to the Mortgaged
Property.
Officer's Certificate: A certificate signed by the Chairman of the
Board or the Vice Chairman of the Board or a President or a Vice President and
by the Treasurer or the Secretary or one of the Assistant Treasurers or
Assistant Secretaries of the Person on behalf of whom such certificate is being
delivered.
One Month LIBOR: The rate per annum equal to the rate published by
Bloomberg or if such rate is not available, the rate appearing at page 3750 of
the Telerate Screen as one-month LIBOR on such date, and if such rate shall not
be so quoted, the rate per annum at which the Purchaser is offered Dollar
deposits at or about 11:00 A.M., eastern time, on such date by prime banks in
the interbank eurodollar market where the eurodollar and foreign currency and
exchange operations are then being conducted for delivery on such day for a
period of one month.
Opinion of Counsel: A written opinion of counsel, who may be
salaried counsel for the Person on behalf of whom the opinion is being given,
reasonably acceptable to each Person to whom such opinion is addressed.
Pass-Through Transfer: The sale or transfer of some or all of the
Mortgage Loans by the Purchaser to a trust to be formed as part of a publicly
issued or privately placed mortgage-backed securities transaction.
Periodic Rate Cap: With respect to each Adjustable Rate Mortgage
Loan and any Adjustment Date therefor, a number of percentage points per annum
that is set forth in the related Mortgage Loan Schedule and in the related
Mortgage Note, which is the maximum amount by which the Mortgage Interest Rate
for such Adjustable Rate Mortgage Loan may increase (without regard to the
Maximum Mortgage
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Interest Rate) or decrease (without regard to the Minimum Mortgage Interest
Rate) on such Adjustment Date from the Mortgage Interest Rate in effect
immediately prior to such Adjustment Date.
Permitted Holders: The lineal descendants of Jules Fribourg,
including any individual legally adopted; spouses of such descendants; trusts,
the beneficiaries of which are any of the foregoing; partnerships, corporations,
or other entities in which any of the foregoing (individually or collectively)
has a controlling interest; and charitable organizations established by any of
the foregoing.
Person: An individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
Portfolio Mortgage Loan: As defined in Section 2 hereof.
Preferred Stock: As applied to the Capital Stock of any Person,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such Person,
over shares of Capital Stock of any other class of such Person.
Principal Prepayment: Any payment or other recovery of principal on
a Mortgage Loan which is received in advance of its scheduled Due Date,
including any prepayment penalty or premium thereon, which is not accompanied by
an amount of interest representing scheduled interest due on any date or dates
in any month or months subsequent to the month of prepayment.
Qualified Substitute Mortgage Loan: A mortgage loan substituted for
a Deleted Mortgage Loan pursuant to the terms of this Agreement which must, on
the date of such substitution, (i) have an outstanding principal balance, after
application of all scheduled payments of principal and interest due during or
prior to the month of substitution, not in excess of the Stated Principal
Balance of the Deleted Mortgage Loan as of the Due Date in the calendar month
during which the substitution occurs, (ii) have a Mortgage Interest Rate not
less than (and not more than one percentage point in excess of) the Mortgage
Interest Rate of the Deleted Mortgage Loan, (iii) have a remaining term to
maturity not greater than (and not more than one year less than) that of the
Deleted Mortgage Loan, (iv) have a Due Date acceptable to Purchaser, (v) have a
Loan-to-Value Ratio as of the date of substitution equal to or lower than the
Loan-to-Value Ratio of the Deleted Mortgage Loan as of such date, (vi) conform
to each representation and warranty set forth in Subsection 7.02 of this
Agreement and (vii) be the same type of mortgage loan (i.e. fixed or adjustable
rate with the same Gross Margin and Index as the Deleted Mortgage Loan). In the
event that one or more mortgage loans are substituted for one or more Deleted
Mortgage Loans, the amounts described in clause (i) hereof shall be determined
on the basis of aggregate principal balances, the Mortgage Interest Rates
described in clause (ii) hereof shall be determined on the basis of weighted
average Mortgage Interest Rates and shall be satisfied as to each such mortgage
loan, the terms described in clause (iii) shall be determined on the basis of
weighted average remaining terms to maturity, the Loan-to-Value Ratios described
in clause (v) hereof shall be satisfied as to
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each such mortgage loan and, except to the extent otherwise provided in this
sentence, the representations and warranties described in clause (vi) hereof
must be satisfied as to each Qualified Substitute Mortgage Loan or in the
aggregate, as the case may be.
Refinanced Mortgage Loan: A Mortgage Loan the proceeds of which were
not used to purchase the related Mortgaged Property.
REO Disposition: The final sale by the Interim Servicer of any REO
Property.
REO Property: A Mortgaged Property acquired as a result of the
liquidation of a Mortgage Loan.
Repurchase Price: With respect to any Mortgage Loan, a price equal
to (i) the product of the Stated Principal Balance of such Mortgage Loan times
the purchase price percentage previously paid for the Mortgage Loan (including
the Initial Purchase Price (taking into account any retained Holdback) and with
respect to any Mortgage Loan sold pursuant to a Whole Loan Transfer the Deferred
Purchase Price to the extent paid), plus (ii) interest on such Stated Principal
Balance at the Mortgage Interest Rate from and including the last Due Date
through which interest has been paid by or on behalf of the Mortgagor to the
first day of the month following the date of repurchase, less amounts received
in respect of such repurchased Mortgage Loan which are being held in the
Custodial Account for distribution in connection with such Mortgage Loan.
Residential Dwelling: A single (one-to-four) family residential
dwelling, which may include condominiums and townhouses, manufactured housing
which is real property under applicable state law or small multifamily or
mixed-use property, but shall not include co-operatives or mobile homes.
Retention Mortgage Loan: A Mortgage Loan which was originated by
ContiMortgage Corporation to refinance an existing mortgage loan which was
originated or acquired by ContiMortgage Corporation and as to which the Seller
or servicer of the Mortgage Loan received a request for payoff or other
indication that the mortgage loan will be paid off.
Second Lien: With respect to each Mortgaged Property, the lien of
the mortgage, deed of trust or other instrument securing a mortgage note which
creates a second lien on the Mortgaged Property.
Second Lien Mortgage Loan: A Mortgage Loan secured by the lien on
the Mortgaged Property, subject to one prior lien on such Mortgaged Property
securing financing obtained by the related Mortgagor.
Servicing Addendum: The terms and conditions attached hereto as
Exhibit 9 which will govern the servicing of the Mortgage Loans by the Interim
Servicer during the Interim Servicing Period.
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Servicing Advances: All customary, reasonable and necessary
"out-of-pocket" costs and expenses incurred by the Interim Servicer in the
performance of its servicing obligations, including, but not limited to, the
cost of (i) preservation, restoration and repair of a Mortgaged Property, (ii)
any enforcement or judicial proceedings with respect to a Mortgage Loan,
including foreclosure actions and (iii) the management and liquidation of REO
Property.
Servicing File: With respect to each Mortgage Loan, the file
retained by the Interim Servicer consisting of originals of all documents in the
Mortgage File which are not delivered to the Purchaser or the Custodian and
copies of the Mortgage Loan Documents set forth in Section 2 of the Custodial
Agreement.
S&P: Standard & Poor's Ratings Group or its successor in interest.
Stated Principal Balance: As to each Mortgage Loan as of any date of
determination, (i) the principal balance of the Mortgage Loan as of the Cut-off
Date after giving effect to payments of principal received on or before such
date, minus (ii) all amounts previously distributed to the Purchaser with
respect to the related Mortgage Loan representing payments or recoveries of
principal.
Subsidiary: With respect to any Person, any other Person of which at
least a majority of the securities or other ownership interests having by the
terms thereof ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions of such corporation,
partnership or other entity (irrespective of whether or not at the time
securities or other ownership interests of any other class or classes of such
corporation, partnership or other entity shall have or might have voting power
by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by such Person or one or more Subsidiaries of
such Person or by such Person and one or more Subsidiaries of such Person.
Tax Service Contract: A transferable contract maintained for the
Mortgaged Property with a tax service provider for the purpose of obtaining
current information from local taxing authorities relating to such Mortgaged
Property.
Underwriting Guidelines: The general underwriting guidelines dated
February, 1999 attached hereto as Exhibit 12, as modified by the Underwriting
Guideline modifications attached as Exhibit 13 hereto, or such other mutually
agreed guidelines.
Voting Stock: With respect to any Person means all classes of
Capital Stock or other interests (including partnership interests or membership
interests) of such Person then outstanding and normally entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof.
Whole Loan Transfer: Any sale or transfer of some or all of the
Mortgage Loans by the Purchaser to a third party, which sale or transfer is not
a Pass-Through Transfer.
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SECTION 2. Purchase and Sale of Mortgage Loans.
(a) From time to time prior to the Facility Termination Date, the
Seller hereby agrees to offer to sell to the Purchaser all Eligible Mortgage
Loans which are not Carve-out Mortgage Loans, and upon satisfaction of the
conditions precedent set forth in Section 8 herein and subject to the terms of
this Agreement, the Purchaser agrees to purchase such Eligible Mortgage Loans
having an aggregate principal balance on the related Cut-off Date in an amount
as set forth in the related Confirmation. Notwithstanding the foregoing, the
Purchaser shall not have any obligation to purchase any Mortgage Loans to the
extent that, after taking into account the Mortgage Loans to be purchased on any
proposed Closing Date, (i) the aggregate principal amount of Mortgage Loans (as
of their representative Cut-off Dates) purchased by the Purchaser hereunder and
held by the Purchaser as of such proposed Closing Date and not sold or
transferred in connection with a Whole Loan Transfer or a Pass-Through Transfer
(such Mortgage Loans, the "Portfolio Mortgage Loans") would exceed $500,000,000
(the "Funding Limit"); (ii) the aggregate principal amount of Mortgage Loans (as
of their representative Cut-off Dates) purchased by the Purchaser from the
Seller under this Agreement would exceed the Maximum Purchase Amount; or (iii)
the sum of the amount determined under clause (i) above, plus the aggregate
amount of the advances outstanding under (a) the Master Repurchase Agreement
Governing Purchases and Sales of Assets (the "Master Repurchase Agreement")
dated as of August 9, 1999 among the Seller and the Purchaser plus (b) any
financing or repurchase facility between the Seller and the Purchaser relating
to assets of Empire Funding Corp. or California Lending Group, Inc. doing
business as United Lending Group, Inc., would collectively exceed $650,000,000
(the "Facility Limit"). The Seller shall not offer more than one Mortgage Loan
Package for sale to the Purchaser in any one week period or such shorter period
as mutually agreed. The Purchaser agrees to provide not less than 30 days prior
notice of any change in the criteria considered by the Purchaser in connection
with determining whether any Mortgage Loan is an Eligible Mortgage Loan pursuant
to clause (ii) and (iv) of the definition of Eligible Mortgage Loan; provided
that, the Seller shall use best efforts to implement any changes in its program
which are requested by the Purchaser sooner than such 30 day period to the
extent reasonably practicable. The Purchaser and the Seller agree that upon the
occurrence of an Interim Servicer Termination Event, the Purchaser, may, but
shall have no obligation to, purchase any Mortgage Loans hereunder prior to the
date a successor servicer assumes the responsibilities of the Interim Servicer
hereunder; provided that, in the event a successor servicer has not assumed the
responsibilities of the Interim Servicer hereunder within two weeks of its
occurrence, the Purchaser shall have the right to terminate its obligation to
purchase Mortgage Loans hereunder pursuant to Section 14.02.
(b) As of each Closing Date, after giving effect to the purchase of
the related Mortgage Loan Package to be made on such date, the Mortgage Loans
will comply with the Applicable Sublimit Percent Limitations.
(c) The Seller shall have the right, in their sole discretion, to
increase the Maximum Purchase Amount hereunder from one billion dollars
($1,000,000,000) to one and one half billion dollars ($1,500,000,000) by
providing written notice to the Purchaser of such election
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and by delivering to the Purchaser a commitment increase fee equal to $625,000.
In order to make such election, such written notice and the commitment increase
fee must be received by the Purchaser not later than January 31, 2000.
(d) The Seller agrees that prior to the Facility Termination Date,
neither the Seller nor any affiliate shall commit to sell any Eligible Mortgage
Loan other than a Carve-out Mortgage Loan for sale to any third party without
the prior written consent of the Purchaser.
(e) In the event that any Eligible Mortgage Loan purchased hereunder
was originated by any third party and subsequently sold to the Purchaser
hereunder, in addition to the Seller making the representations and warranties
provided in Section 7 of this Agreement, the Seller shall use its reasonable
best efforts to assign to the Purchaser any representations and warranties made
by such third party and the related remedies with respect to the breach of any
such representations and warranties.
SECTION 3. Mortgage Loan Schedules. The Seller shall deliver the
Mortgage Loan Schedule for a Mortgage Loan Package to be purchased on a
particular Closing Date to the Purchaser at least five (5) Business Days (or
such lesser period mutually agreed upon) prior to the related Closing Date.
SECTION 4. Purchase Price.
Subsection 4.01. Initial Purchase Price
(a) Subject to the Holdback set forth in Subsection 4.01(b), the
initial purchase price for each Eligible Mortgage Loan and each Exception Loan
which would not cause the Exception Limit to be exceeded shall be equal to the
Initial Purchase Price Percentage multiplied by the Stated Principal Balance of
such Mortgage Loan as of the related Cut-off Date (the "Initial Purchase
Price"). The Initial Purchase Price Percentage for each Eligible Mortgage Loan
and each Exception Loan which would not cause the Exception Limit to be exceeded
shall be determined pursuant to the pricing matrix attached hereto as Exhibit
11. The percentage of par used to calculate the Initial Purchase Price with
respect to any Mortgage Loan which is not an Eligible Mortgage Loan or which is
an Exception Loan which would cause the Exception Limit with respect to any
Mortgage Loan Package to be exceeded shall be an amount mutually agreed upon
between the Purchaser and the Seller without regard to the percentage determined
pursuant to such pricing matrix.
In addition to the Initial Purchase Price as described above, the
Purchaser shall pay to the Seller, at closing, accrued interest on the Stated
Principal Balance of each Mortgage Loan as of the related Cut-off Date at its
Mortgage Interest Rate, net of the Interim Servicing Fee Rate, from the last
paid through date for such Mortgage Loan through the day prior to the related
Closing Date, both inclusive and determined on an actual over 360 basis.
(b) An amount equal to four percent (4%) of the outstanding
principal balance of each Mortgage Loan purchased on any Closing Date (the
"Holdback") will be deferred
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and paid to the Seller as follows: (i) two percent (2%) of the outstanding
principal balance of such Mortgage Loan shall be paid on the date that Purchaser
verifies that each Mortgage Loan in the Mortgage Loan Package either conforms to
the Underwriting Guidelines or is an Exception Loan included within the related
Exception Limit, and (ii) two percent (2%) of the outstanding principal balance
of such Mortgage Loan shall be paid within five (5) Business Days following
successful completion of the transfer of servicing with respect to such Mortgage
Loan to the designee of the Purchaser as provided in Section 11 hereof. The
Purchaser agrees to use reasonable efforts to complete the verification
contemplated in clause (i) above within 2 to 3 Business Days during regular flow
periods and within 5 Business Days during peak flow periods. In the event that
the Purchaser determines that any Mortgage Loan does not conform to the
Underwriting Guidelines, the Purchaser shall have the right to retain the
related Holdback and require the Seller to repurchase such Mortgage Loan at the
Initial Purchase Price minus the amount of any retained Holdback.
Notwithstanding anything to the contrary in this Section 4, in the event that
transfer of servicing with respect to any Mortgage Loan has not occurred prior
to the date the Purchaser determines that such Mortgage Loan does not conform to
the Underwriting Guidelines and is not an Exception Loan included within the
related Exception Limit, then, in the event that the Seller does not repurchase
such Mortgage Loan pursuant to Section 7.03, the Purchaser shall determine the
market value of such Mortgage Loan in its sole reasonable discretion and may
apply and set off the entire Holdback to the extent necessary to appropriately
reflect the market value of such Mortgage Loan.
Subsection 4.02. Deferred Purchase Price
Upon the disposition of a Mortgage Loan by the Purchaser pursuant to
a Whole Loan Transfer or Pass-Through Transfer (a "Disposed Mortgage Loan"), the
Purchaser shall pay to the Seller a deferred purchase price (the "Deferred
Purchase Price") from the proceeds of such Whole Loan Transfer or Pass-Through
Transfer (including the proceeds from the sale of the servicing rights with
respect to such Mortgage Loan) in an amount as set forth in this Subsection
4.02.
(a) Subject to the provisions of Subsection 4.02(c), with respect to
any Disposed Mortgage Loan sold pursuant to a Whole Loan Transfer, the Deferred
Purchase Price shall equal (i) 75%, times (ii) the cash proceeds received by
Purchaser in excess of the sum of (A) 102.25% of the unpaid principal balance of
such Disposed Mortgage Loan, plus (B) Disposition Expenses.
(b) Subject to the provisions of Subsection 4.02(c), with respect to
any Disposed Mortgage Loan sold pursuant to a Pass-Through Transfer, the
Deferred Purchase Price shall be calculated as follows:
(i) If the cash proceeds of such sale exceed 102.25% of the unpaid
principal balance of the Disposed Mortgage Loan plus
Disposition Expenses (as defined below), such cash and
non-cash consideration shall be distributed in the following
amounts and priority:
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(A) to the Purchaser, all cash proceeds up to 102.25% of the
unpaid principal balance of such Disposed Mortgage Loan plus
Disposition Expenses;
(B) to the Seller and the Purchaser pro rata, 75% and 25%,
respectively, of all cash proceeds from the sale of such
Disposed Mortgage Loan in excess of the amount distributed to
the Purchaser in clause (b) (i) (A) above;
(C) to the Purchaser, a security representing 25% of any remaining
non-cash consideration received and proceeds thereon;
provided, however, that the Purchaser shall instead receive a
security representing 50% of any remaining non-cash
consideration received and proceeds thereon (in lieu of the
lien or security interest specified under clause (b)(i)(D)) in
the event that the Seller is prohibited to grant the lien or
security interest specified under clause (b)(i)(D) due to the
provisions of any of the Indebtedness Documents; and
(D) to the Seller, a security representing 75% of any remaining
non-cash consideration received and proceeds; provided, that
such security shall be pledged to the securitization trust or
to the Purchaser, as applicable, to secure any obligation to
repurchase Disposed Mortgage Loans from the trust or the
Purchaser; provided further, however, that the Seller shall
instead receive a security representing 50% of any remaining
non-cash consideration received and proceeds thereon in the
event that the Seller is prohibited to grant the lien or
security interest specified under this clause (b)(i)(D) due to
the provisions of any of the Indebtedness Documents; provided,
further, that in either case the Purchaser's and the Seller's
interest under clauses (b)(i)(C) and (b)(i)(D) shall be pari
passu.
(ii) If the cash proceeds from the sale of such Disposed Mortgage Loan
are less than 102.25% plus Disposition Expenses, such cash and
non-cash consideration shall be distributed in the following amounts
and priority:
(A) to the Purchaser, all cash received;
(B) to the Purchaser, a security in an amount equal to the
difference between (i) 102.25% plus Disposition Expenses and
(ii) gross cash proceeds received pursuant to subclause
(b)(ii)(A) above. Such security shall bear interest at the
rate of One Month LIBOR plus 5%, with interest to be
compounded monthly;
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(C) to the Purchaser, a security representing 25% of any remaining
non-cash consideration received and proceeds thereon;
provided, however, that the Purchaser shall instead receive a
security representing 50% of any remaining non-cash
consideration received and proceeds thereon (in lieu of the
lien or security interest specified under clause (b)(ii)(D))
in the event that the Seller is prohibited to grant the lien
or security interest specified under clause (b)(ii)(D) due to
the provisions of any of the Indebtedness Documents; and
(D) to the Seller, a security representing 75% of any remaining
non-cash consideration received and proceeds; provided, that
such security shall be pledged to the securitization trust or
to the Purchaser, as applicable, to secure any obligation to
repurchase Disposed Mortgage Loans from the trust or the
Purchaser; provided further, however, that the Seller shall
instead receive a security representing 50% of any remaining
non-cash consideration received and proceeds thereon in the
event that the Seller is prohibited to grant the lien or
security interest specified under this clause (b)(ii)(D) due
to the provisions of any of the Indebtedness Documents;
provided, further, that in either case the Purchaser's and the
Seller's interest under clauses (b)(ii)(C) and (b)(ii)(D)
shall be pari passu.
(c) Notwithstanding the provisions of this Subsection 4.02, in no
event shall the Deferred Purchase Price with respect to any Mortgage Loan exceed
an amount equal to six percent (6%) of the Initial Purchase Price paid by the
Purchaser for such Mortgage Loan.
Subsection 4.03. Purchase Price Adjustment
On the date which is 18 months following the date on which any
Mortgage Loan is subject to a Pass-Through Transfer or a Whole Loan Transfer in
which the Purchaser received cash and non-cash consideration in excess of
102.25% of the unpaid principal balance of such Mortgage Loan plus Disposition
Expenses, the Purchaser shall pay to the Seller a purchase price adjustment
equal to (i) one-eighth of one percent (0.125%) times the aggregate unpaid
principal balance of such Mortgage Loan as of the pool disposition cut-off date
of such Pass-Through Transfer or Whole Loan Transfer less (ii) the total amount
of the losses actually realized by the Purchaser or reasonably estimated by the
Purchaser to be realized as a result of any repurchases by the Purchaser of such
Mortgage Loans resulting from a breach of a representation or warranty in
Section 7 hereof or in any document entered into in connection with a
Pass-Through Transfer or Whole Loan Transfer pursuant to Section 12(b)(3) or any
obligations or claims resulting from a breach of such a representation or
warranty that exist on behalf of the Purchaser to repurchase such Mortgage Loan
or any other Mortgage Loan which was subject to such Pass-Through Transfer or
Whole Loan Transfer. For purposes of this Section 4.03, the Purchaser's losses
on any Mortgage Loan shall be equal to the sum of (a) any unreimbursed
indemnification expenses incurred or to be incurred by the Purchaser in
connection with such Mortgage Loan, and (b) the excess, if any, of (i) the
amount paid or to be paid
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by the Purchaser in connection with any such repurchase, over (ii) the total
proceeds received by the Purchaser with respect to such Mortgage Loan pursuant
to such Whole Loan Transfer or Pass-Through Transfer, net of the expenses of
such sale or other disposition and the reasonable expenses of the repurchase and
resale of such Mortgage Loan.
Subsection 4.04. Purchased Interest.
The Purchaser shall own and be entitled to receive with respect to
each Mortgage Loan purchased, (1) all recoveries of principal collected after
the Cut-off Date, (2) all payments of interest on the Mortgage Loans net of the
Interim Servicing Fee during the Interim Servicing Period and any subservicing
fee payable pursuant to Section 12(b)(7) of this Agreement, and (3) all rights
to service the Mortgage Loan (it being understood that the Purchaser may from
time to time at its option retain the Interim Servicer to service the Mortgage
Loan as set forth in this Agreement during the Interim Servicing Period as
provided herein or as provided pursuant to Section 12(b)(7)). The Stated
Principal Balance of each Mortgage Loan as of the related Cut-off Date is
determined after application to the reduction of principal of payments of
principal received on or before the related Cut-off Date.
SECTION 5. Examination of Mortgage Files. In addition to the rights
granted to the Purchaser under the related Confirmation to underwrite the
Mortgage Loans and review the Mortgage Files prior to the Closing Date, prior to
the related Closing Date, the Seller shall (a) deliver to the Custodian in
escrow, for examination with respect to each Mortgage Loan to be purchased on
such Closing Date, the related Mortgage File, including the Assignment of
Mortgage, pertaining to each Mortgage Loan, or (b) make the related Mortgage
File available to the Purchaser for examination at the Seller's offices or such
other location as shall otherwise be agreed upon by the Purchaser and the
Seller. Such examination may be made by the Purchaser or its designee at any
reasonable time before or after the related Closing Date. If the Purchaser makes
such examination prior to the related Closing Date and identifies any Mortgage
Loans that do not conform to the terms of the related Confirmation or the
Underwriting Guidelines, such Mortgage Loans may, at the Purchaser's option, be
rejected for purchase by the Purchaser. If not purchased by the Purchaser, such
Mortgage Loans shall be deleted from the related Mortgage Loan Schedule. The
Purchaser may, at its option and without notice to the Seller, purchase all or
part of any Mortgage Loan Package without conducting any partial or complete
examination. The fact that the Purchaser has conducted or has determined not to
conduct any partial or complete examination of the Mortgage Files shall not
affect the Purchaser's (or any of its successors') rights to demand repurchase
or other relief or remedy provided for in this Agreement.
SECTION 6. Conveyance from Seller to Purchaser.
Subsection 6.01. Conveyance of Mortgage Loans; Possession of
Servicing Files.
The Seller, simultaneously with the payment of the Initial Purchase
Price, shall execute and deliver to the Purchaser an Assignment and Conveyance
with respect to the related
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Mortgage Loan Package in the form attached hereto as Exhibit 4. The Servicing
File retained by the Interim Servicer with respect to each Mortgage Loan
pursuant to this Agreement shall be appropriately identified in the Interim
Servicer 's computer system to reflect clearly the sale of such related Mortgage
Loan to the Purchaser. The Interim Servicer shall release from its custody the
contents of any Servicing File retained by it only in accordance with this
Agreement, except when such release is required in connection with a repurchase
of any such Mortgage Loan pursuant to Subsection 7.03 or 7.04.
Subsection 6.02. Books and Records.
Record title to each Mortgage and the related Mortgage Note as of
the related Closing Date shall be in the name of the Seller or an affiliate, the
Purchaser, the Custodian or one or more designees of the Purchaser, as the
Purchaser shall designate. Notwithstanding the foregoing, beneficial ownership
of each Mortgage and the related Mortgage Note shall be vested solely in the
Purchaser or the appropriate designee of the Purchaser, as the case may be. All
rights arising out of the Mortgage Loans including, but not limited to, all
funds received by the Seller or the Interim Servicer after the related Cut-off
Date on or in connection with a Mortgage Loan as provided in Section 4 shall be
vested in the Purchaser or one or more designees of the Purchaser; provided,
however, that all such funds received on or in connection with a Mortgage Loan
as provided in Section 4 shall be received and held by the Seller in trust for
the benefit of the Purchaser or the assignee of the Purchaser, as the case may
be, as the owner of the Mortgage Loans pursuant to the terms of this Agreement.
It is the express intention of the parties that the transactions
contemplated by this Agreement be, and be construed as, a sale of the Mortgage
Loans by the Seller and not a pledge of the Mortgage Loans by the Seller to the
Purchaser to secure a debt or other obligation of the Seller. Consequently, the
sale of each Mortgage Loan shall be reflected as a sale on the Seller's business
records, tax returns and financial statements.
Subsection 6.03. Delivery of Mortgage Loan Documents.
Pursuant to the Custodial Agreement to be executed among and
delivered by the Purchaser, the Custodian and the Seller prior to the Initial
Closing Date, the Seller shall from time to time in connection with each Closing
Date, at least five (5) Business Days prior to such Closing Date, deliver and
release to the Custodian those Mortgage Loan Documents as required by the
Custodial Agreement with respect to each Mortgage Loan to be purchased and sold
on the related Closing Date and set forth on the related Mortgage Loan Schedule
delivered with such Mortgage Loan Documents.
The Custodian shall certify its receipt of all such Mortgage Loan
Documents required to be delivered pursuant to the Custodial Agreement for the
related Closing Date, as evidenced by the Trust Receipt and Initial
Certification of the Custodian in the form annexed to the Custodial Agreement.
The Interim Servicer shall be responsible for maintaining the Custodial
Agreement
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during the Interim Servicing Period. The fees and expenses of the Custodian
shall be paid by the Seller.
The Seller shall forward to the Custodian original documents
evidencing an assumption, modification, consolidation or extension of any
Mortgage Loan entered into in accordance with this Agreement within two weeks of
their execution, provided, however, that the Seller shall provide the Custodian
with a certified true copy of any such document submitted for recordation within
two weeks of its execution, and shall provide the original of any document
submitted for recordation or a copy of such document certified by the
appropriate public recording office to be a true and complete copy of the
original reasonably promptly upon receipt and in any case within 180 days of its
submission for recordation.
SECTION 7. Representations, Warranties and Covenants of the Seller:
Remedies for Breach.
Subsection 7.01. Representations and Warranties Respecting the
Seller.
(a) The Seller represents, warrants and covenants to the Purchaser
as of the initial Closing Date and each subsequent Closing Date or as of such
date specifically provided herein or in the applicable Assignment and Conveyance
that:
(i) The Seller is duly organized, validly existing and in good
standing under the laws of the state of its incorporation and is in compliance
with any and all applicable "doing business" and licensing requirements of the
laws of each state in which the conduct of its business requires it to do so;
(ii) The Seller has the full power and authority to hold each
Mortgage Loan, to sell each Mortgage Loan, and to execute, deliver and perform,
and to enter into and consummate, all transactions contemplated by this
Agreement. The Seller has duly authorized the execution, delivery and
performance of this Agreement, has duly executed and delivered this Agreement,
and this Agreement, assuming due authorization, execution and delivery by the
Purchaser, constitutes a legal, valid and binding obligation of the Seller,
enforceable against it in accordance with its terms except as the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors rights generally and by principles of
equity (whether considered in a proceeding or action in equity or at law);
(iii) The execution and delivery of this Agreement by the Seller and
the performance of and compliance with the terms of this Agreement will not
violate the Seller's articles of incorporation or by-laws or constitute a
default under or result in a breach or acceleration of, any material contract,
agreement or other instrument to which the Seller is a party or which may be
applicable to the Seller or its assets;
(iv) The Seller is not in violation of, and the execution and
delivery of this Agreement by the Seller and its performance and compliance with
the terms of this Agreement will
<PAGE>
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not constitute a violation with respect to, any order or decree of any court or
any order or regulation of any federal, state, municipal or governmental agency
having jurisdiction over the Seller or its assets, which violation might have
consequences that would materially and adversely affect the condition (financial
or otherwise) or the operation of the Seller or its assets or might have
consequences that would materially and adversely affect the performance of its
obligations and duties hereunder;
(v) There are no actions or proceedings against, or investigations
of, the Seller before any court, administrative or other tribunal (A) that might
prohibit its entering into this Agreement, (B) seeking to prevent the sale of
the Mortgage Loans or the consummation of the transactions contemplated by this
Agreement or (C) that might prohibit or materially and adversely affect the
performance by the Seller of its obligations under, or the validity or
enforceability of, this Agreement;
(vi) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Seller of, or compliance by the Seller with, this Agreement
or the consummation of the transactions contemplated by this Agreement, except
for such consents, approvals, authorizations or orders, if any, that have been
obtained prior to the Closing Date;
(vii) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of the Seller, and the
transfer, assignment and conveyance of the Mortgage Notes and the Mortgages by
the Seller pursuant to this Agreement are not subject to the bulk transfer or
any similar statutory provisions;
(viii) The information delivered by the Seller to the Purchaser with
respect to the Seller's loan loss, foreclosure and delinquency experience for
the twelve (12) months immediately preceding the Initial Closing Date on
mortgage loans underwritten to the same standards as the Mortgage Loans and
covering mortgaged properties similar to the Mortgaged Properties, is true and
correct in all material respects; and
(ix) Neither this Agreement nor any written statement, report or
other document prepared and furnished or to be prepared and furnished by the
Seller pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of material fact or omits to
state a material fact necessary to make the statements contained herein or
therein not misleading.
(b) The Interim Servicer represents, warrants and covenants to the
Purchaser as of the initial Closing Date and each subsequent Closing Date or as
of such date specifically provided herein or in the applicable Assignment and
Conveyance:
(i) The Interim Servicer is duly organized, validly existing and in
good standing under the laws of the state of Delaware and is and will remain in
compliance with the laws of each
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state in which any Mortgaged Property is located to the extent necessary to
ensure the enforceability of each Mortgage Loan and the servicing of the
Mortgage Loan in accordance with the terms of this Agreement;
(ii) The Interim Servicer has the full power and authority to
execute, deliver and perform, and to enter into and consummate, all transactions
contemplated by this Agreement. The Interim Servicer has duly authorized the
execution, delivery and performance of this Agreement, has duly executed and
delivered this Agreement, and this Agreement, assuming due authorization,
execution and delivery by the Purchaser, constitutes a legal, valid and binding
obligation of the Interim Servicer, enforceable against it in accordance with
its terms except as the enforceability thereof may be limited by bankruptcy,
insolvency or reorganization;
(iii) The execution and delivery of this Agreement by the Interim
Servicer and the performance of and compliance with the terms of this Agreement
will not violate the Interim Servicer's articles of incorporation or by-laws or
constitute a default under or result in a breach or acceleration of, any
material contract, agreement or other instrument to which the Interim Servicer
is a party or which may be applicable to the Interim Servicer or its assets;
(iv) The Interim Servicer is not in violation of, and the execution
and delivery of this Agreement by the Interim Servicer and its performance and
compliance with the terms of this Agreement will not constitute a violation with
respect to, any order or decree of any court or any order or regulation of any
federal, state, municipal or governmental agency having jurisdiction over the
Interim Servicer or its assets, which violation might have consequences that
would materially and adversely affect the condition (financial or otherwise) or
the operation of the Interim Servicer or its assets or might have consequences
that would materially and adversely affect the performance of its obligations
and duties hereunder;
(v) With respect to any Mortgage Loan, in the event that the Interim
Servicer retains record title, the Interim Servicer shall retain such record
title to each Mortgage, each related Mortgage Note and the related Mortgage
Files with respect thereto in trust for the Purchaser as the owner thereof and
only for the purpose of servicing and supervising the servicing of each Mortgage
Loan;
(vi) There are no actions or proceedings against, or investigations
of, the Interim Servicer before any court, administrative or other tribunal (A)
that might prohibit its entering into this Agreement, (B) seeking to prevent the
consummation of the transactions contemplated by this Agreement or (C) that
might prohibit or materially and adversely affect the performance by the Interim
Servicer of its obligations under, or the validity or enforceability of, this
Agreement;
(vii) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Interim Servicer of, or compliance by the Interim Servicer
with, this Agreement or the consummation of the transactions contemplated by
this Agreement, except for such consents, approvals, authorizations or orders,
if any, that have been obtained prior to the Closing Date;
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(viii) The information delivered by the Interim Servicer to the
Purchaser with respect to the Interim Servicer's loan loss, foreclosure and
delinquency experience for the twelve (12) months immediately preceding the
Initial Closing Date on mortgage loans underwritten to the same standards as the
Mortgage Loans and covering mortgaged properties similar to the Mortgaged
Properties, is true and correct in all material respects; and
(ix) Neither this Agreement nor any written statement, report or
other document prepared and furnished or to be prepared and furnished by the
Interim Servicer pursuant to this Agreement or in connection with the
transactions contemplated hereby contains any untrue statement of material fact
or omits to state a material fact necessary to make the statements contained
herein or therein not misleading.
Subsection 7.02. Representations and Warranties Regarding Individual
Mortgage Loans.
The Seller hereby represents and warrants to the Purchaser that, as
to each Mortgage Loan, as of the related Closing Date for such Mortgage Loan,
the representations and warranties set forth on Exhibit 14 hereto are true and
correct.
Subsection 7.03. Remedies for Breach of Representations and
Warranties.
It is understood and agreed that the representations and warranties
set forth in Subsections 7.01 and 7.02 shall survive the sale of the Mortgage
Loans to the Purchaser and shall inure to the benefit of the Purchaser,
notwithstanding any restrictive or qualified endorsement on any Mortgage Note or
Assignment of Mortgage or the examination or lack of examination of any Mortgage
File. Upon discovery by the Seller, the Interim Servicer or the Purchaser of a
breach of any of the foregoing representations and warranties which materially
and adversely affects the value of the Mortgage Loans or the interest of the
Purchaser (or which materially and adversely affects the interests of the
Purchaser in the related Mortgage Loan in the case of a representation and
warranty relating to a particular Mortgage Loan), the party discovering such
breach shall give prompt written notice to the others.
Within 45 days of the earlier of either discovery by or notice to
the Seller of any breach of a representation or warranty which materially and
adversely affects the value of a Mortgage Loan or the Mortgage Loans, the Seller
shall use its best efforts promptly to cure such breach in all material respects
and, if such breach cannot be cured, the Seller shall, at the Purchaser's
option, repurchase such Mortgage Loan at the Repurchase Price. In the event that
a breach shall involve any representation or warranty set forth in Subsection
7.01(a) and such breach cannot be cured within 45 days of the earlier of either
discovery by or notice to the Seller of such breach, all of the Mortgage Loans
shall, at the Purchaser's option, be repurchased by the Seller at the Repurchase
Price. The Seller shall, at the request of the Purchaser and assuming that the
Seller has a Qualified Substitute Mortgage Loan, rather than repurchase the
Mortgage Loan as provided above, remove such Mortgage Loan and substitute in its
place a Qualified Substitute Mortgage Loan or
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Loans; provided that such substitution shall be effected not later than 120 days
after the related Closing Date. If the Seller has no Qualified Substitute
Mortgage Loan, it shall repurchase the deficient Mortgage Loan. Any repurchase
of a Mortgage Loan(s) pursuant to the foregoing provisions of this Subsection
7.03 shall occur on a date designated by the Purchaser and shall be accomplished
(i) during the Interim Servicing Period by deposit in the Custodial Account of
the amount of the Repurchase Price and (ii) following the Interim Servicing
Period, by wire transfer of immediately available funds on the repurchase date
to an account designated by the Purchaser. Notwithstanding the foregoing, in the
event that the Purchaser, in its reasonable discretion, determines that any
breach of a representation or warranty is not curable, the Purchaser may by
written notice direct the Seller to repurchase such Mortgage Loan within 5
Business Days.
At the time of repurchase of any deficient Mortgage Loan, the
Purchaser shall reassign the repurchased Mortgage Loan to the Seller and direct
the Custodian to deliver to the Seller any documents held by the Custodian
relating to the repurchased Mortgage Loan and shall represent and warrant to the
Seller that the Purchaser has full right to convey the Mortgage Loan to the
Seller free of any claims, liens and encumbrances and that the Purchaser has
taken no action to impair the value of such Mortgage Loan. In addition, the
Purchaser shall use reasonable best efforts to cause the Servicer to represent
and warrant that it has serviced such Mortgage Loans in accordance with
applicable law and customary servicing procedures. In the event the Repurchase
Price is deposited in the Custodial Account, the Seller shall, simultaneously
with such deposit, give written notice to the Purchaser that such deposit has
taken place. Upon such repurchase, the related Mortgage Loan Schedule shall be
amended to reflect the withdrawal of the repurchased Mortgage Loan from this
Agreement.
As to any Deleted Mortgage Loan for which the Seller substitutes a
Qualified Substitute Mortgage Loan or Loans, the Seller shall effect such
substitution by delivering to the Purchaser for such Qualified Substitute
Mortgage Loan or Loans the Mortgage Note, the Mortgage, the Assignment of
Mortgage and such other documents and agreements as are required by the
Custodial Agreement, with the Mortgage Note endorsed as required therein. The
Seller shall (i) during the Interim Servicing Period deposit in the Custodial
Account the Monthly Payment due on such Qualified Substitute Mortgage Loan or
Loans in the month following the date of such substitution and (ii) following
the Interim Servicing Period, shall remit to the Purchaser by wire transfer of
immediately available funds the Monthly Payment due on such Qualified Substitute
Mortgage Loan or Loans in the month following the date of such substitution.
Monthly Payments due with respect to Qualified Substitute Mortgage Loans in the
month of substitution will be retained by the Seller. For the month of
substitution, distributions to the Purchaser will include the Monthly Payment
due on such Deleted Mortgage Loan in the month of substitution, and the Seller
shall thereafter be entitled to retain all amounts subsequently received by the
Seller in respect of such Deleted Mortgage Loan. The Seller shall give written
notice to the Purchaser that such substitution has taken place and shall amend
the Mortgage Loan Schedule to reflect the removal of such Deleted Mortgage Loan
from the terms of this Agreement and the substitution of the Qualified
Substitute Mortgage Loan. Upon such substitution, such Qualified Substitute
Mortgage Loan or Loans shall be subject to the terms of this Agreement in all
respects, and the Seller shall be deemed to have
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made with respect to such Qualified Substitute Mortgage Loan or Loans, as of the
date of substitution, the covenants, representations and warranties set forth in
Subsections 7.01 and 7.02.
For any month in which the Seller substitutes one or more Qualified
Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the Seller
will determine the amount (if any) by which the aggregate principal balance of
all such Qualified Substitute Mortgage Loans as of the date of substitution is
less than the aggregate Stated Principal Balance of all such Deleted Mortgage
Loans (after application of scheduled principal payments due in the month of
substitution). An amount equal to the product of the amount of such shortfall
multiplied by the Repurchase Price shall be distributed by the Seller in the
month of substitution pursuant to the Servicing Addendum. Accordingly, on the
date of such substitution, the Seller will (i) during the Interim Servicing
Period deposit in the Custodial Account from its own funds an amount equal to
such amount and (ii) following the Interim Servicing Period, remit to the
Purchaser from its own funds by wire transfer of immediately available funds an
amount equal to such amount.
In addition to such cure, repurchase and substitution obligation,
the Seller shall indemnify the Purchaser and hold it harmless against any
losses, damages, penalties, fines, forfeitures, reasonable and necessary legal
fees and related costs, judgments, and other costs and expenses resulting from
any claim, demand, defense or assertion of any third party based on or grounded
upon, or resulting from, a breach of the Seller's representations and warranties
contained in this Section 7. It is understood and agreed that the obligations of
the Seller set forth in this Subsection 7.03 to cure or repurchase a defective
Mortgage Loan and to indemnify the Purchaser as provided in this Subsection
7.03, and the obligations of the Seller as provided in this Agreement including,
but not limited to Subsection 13.07, constitute the sole remedies of the
Purchaser respecting a breach of the foregoing representations and warranties.
Any cause of action against the Seller relating to or arising out of
the breach of any representations and warranties made in Subsections 7.01 or
7.02 shall accrue as to any Mortgage Loan upon (i) discovery of such breach by
the Purchaser or notice thereof by the Seller to the Purchaser, (ii) failure by
the Seller to cure such breach or repurchase such Mortgage Loan as specified
above, and (iii) demand upon the Seller by the Purchaser for compliance with the
relevant provisions of this Agreement.
In the event that the Seller fails to repurchase or substitute for a
defective Mortgage Loan pursuant to this Section 7.03, in addition to any other
remedies available to the Purchaser hereunder, the Purchaser shall have the
right to offset amounts owed with respect thereto from future purchases of
Mortgage Loans from the Seller and may apply such amount directly against any
Holdback with respect to any Mortgage Loan.
Subsection 7.04 Repurchase of Certain Mortgage Loans.
In the event that the first or second contractually due Monthly
Payment on any Mortgage Loan is not made within 45 days of the related Due Date
for such Monthly Payment, then, the Seller shall, within three (3) Business
Days, repurchase such Mortgage Loan at the Repurchase
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Price, which shall be accomplished (i) during the Interim Servicing Period by
deposit in the Custodial Account of the amount of the Repurchase Price and (ii)
following the Interim Servicing Period, by wire transfer of immediately
available funds on the repurchase date to an account designated by the
Purchaser. In the event that the Seller fails to repurchase any Mortgage Loan
pursuant to this Section 7.04, in addition to any other remedies available to
the Purchaser hereunder, the Purchaser shall have the right to offset amounts
owed with respect thereto from future purchases of Mortgage Loans from the
Seller and may apply such amount directly against any Holdback with respect to
any Mortgage Loan.
SECTION 8. Closing; Conditions Precedent. The closing for each
Mortgage Loan Package shall take place on the related Closing Date. At the
Purchaser's option, the closing shall be either: by telephone, confirmed by
letter or wire as the parties shall agree, or conducted in person, at such place
as the parties shall agree.
The closing for the Mortgage Loans to be purchased on each Closing
Date shall be subject to each of the following conditions precedent:
(a) all of the representations and warranties of the Seller under
this Agreement shall be true and correct in all material
respects as of the related Closing Date and no event shall
have occurred which, with notice or the passage of time, would
constitute a default under this Agreement;
(b) the Purchaser shall have received, or the Purchaser's
attorneys shall have received in escrow, all Closing Documents
as specified in Section 9(b), in such forms as are agreed upon
and acceptable to the Purchaser, duly executed by all
signatories other than the Purchaser as required pursuant to
the terms hereof;
(c) the Seller shall have delivered and released to the Custodian
all documents required pursuant to the Custodial Agreement;
(d) the Seller shall have delivered and released to the Purchaser
five days (or such shorter mutually agreed upon period) prior
to such Closing Date with respect to each Mortgage Loan being
purchased, a file that contains Seller's Mortgage Loan number,
the outstanding principal balance, interest paid-to-date and
delinquency status as of the end of business on the
Cut-Off-Date, and such other information reasonably requested
by Purchaser;
(e) the Purchaser's satisfactory completion of a pre-funding due
diligence investigation with respect to the Mortgage Loans,
including a review of credit and legal files, as set forth in
Section 5 and the Seller shall have substituted new mortgage
loans with regard to any Mortgage Loans that Purchaser
identified as not meeting the Underwriting Guidelines;
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(f) following such purchase, the aggregate amount of Mortgage
Loans purchased by Purchaser under this Agreement but not
removed pursuant to a Whole Loan Transfer or a Pass-Through
Transfer (measured by unpaid principal balance of the date of
purchase by Purchaser) shall not exceed the Funding Limit or
the Facility Limit;
(g) following such purchase, the aggregate amount of Mortgage
Loans purchased by Purchaser under this Agreement (measured by
unpaid principal balance of the date of purchase by Purchaser)
shall not exceed the Maximum Purchase Amount;
(h) No Event of Default shall exist and be continuing;
(i) following such purchase, the Applicable Sublimit Percent
Limitations of the aggregate amount of Mortgage Loans
purchased by Purchaser under this Agreement but not removed
pursuant to a Whole Loan Transfer or a Pass-Through Transfer
(measured as a percentage of the unpaid principal balance of
the date of purchase by Purchaser) will not be exceeded;
(j) The Purchaser shall have received all fees and expenses due
and payable to the Purchaser prior to such Closing Date as to
which Purchaser has provided an invoice not less than five (5)
Business Days prior to the Closing Date;
(k) all other terms and conditions of that certain Master
Facilities Agreement, dated August 9, 1999 among the Seller,
the Purchaser, Greenwich Capital Markets, Inc., ContiMortgage
Corporation, ContiSecurities Asset Funding Corp. III, and
ContiSecurities Asset Funding Corp. IV; and
(l) all other terms and conditions of this Agreement shall have
been complied with.
Subject to the foregoing conditions, the Purchaser shall pay to the
Seller on the related Closing Date the Initial Purchase Price, plus accrued
interest pursuant to Section 4, by wire transfer of immediately available funds
to the account designated by the Seller.
SECTION 9. Closing Documents.
(a) On or before the Initial Closing Date, the Seller and the
Interim Servicer, as applicable, shall submit to the Purchaser fully executed
originals of the following documents:
1. this Agreement, in four counterparts;
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2. the Custodial Agreement, in six counterparts, in the form
attached as Exhibit 6 hereto;
3. as Escrow Account Letter Agreement in the form attached as
Exhibit 8 hereto;
4. an Officer's Certificate, in the form of Exhibit 1 hereto,
including all attachments thereto;
5. an Opinion of Counsel to the Seller and the Interim Servicer,
in the form of Exhibit 2 hereto;
6. an "true sale" opinion from counsel to the Seller, in a form
reasonably acceptable to the Purchaser;
7. an Opinion of Counsel to the Custodian, in a form acceptable
to the Purchaser;
8. the Underwriting Guidelines;
9. the Master Repurchase Agreement, in four counterparts;
10. the Pledge and Security Agreement, made by the Seller and
ContiMortgage Corporation in favor of the Purchaser and
Greenwich Capital Markets, Inc., in four counterparts, in form
and substance acceptable to the Purchaser;
11. that certain Master Facilities Agreement, dated August 9, 1999
among the Seller, the Purchaser, Greenwich Capital Markets,
Inc., ContiFunding Corporation, ContiSecurities Asset Funding
Corp. III, and ContiSecurities Asset Funding Corp. IV;
12. that certain engagement letter, dated August 9, 1999, among
the Seller, ContiMortgage Corporation, ContiSecurities Asset
Funding Corp. III, ContiSecurities Asset Funding Corp. IV,
Greenwich Capital Markets, Inc. and the Purchaser; and
13. such other documents as the Purchaser may reasonably request,
in form and substance reasonably acceptable to the Purchaser.
(b) The Closing Documents for the Mortgage Loans to be purchased on
each Closing Date (including the initial Closing Date) shall consist of fully
executed originals of the following documents:
1. the related Confirmation;
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2. the related Mortgage Loan Schedule, one copy to be attached
hereto and one copy to be attached to the Custodian's
counterpart of the Custodial Agreement, as the Mortgage Loan
Schedule thereto;
3. a Custodian's Trust Receipt and Initial Certification, as
required under the Custodial Agreement, in a form acceptable
to the Purchaser;
4. an Officer's Certificate from the Seller, in the form of
Exhibit 1 hereto, including all attachments thereto;
5. if requested by the Purchaser due to a question arising as to
validity, enforceability or compliance with law, an Opinion of
Counsel to the Seller and the Interim Servicer, in the form of
Exhibit 2 hereto and in the event that the Mortgage Loans to
be sold would cause the aggregate outstanding principal
balance of Mortgage Loans sold hereunder and secured by
Mortgaged Properties from any state to exceed 10% of the
aggregate outstanding principal balance of Mortgage Loans sold
hereunder, then the Seller shall, upon request by the
Purchaser, deliver an opinion of counsel acceptable to the
Purchaser in such state, substantially in the form of items
number 8, 9 and 10 of Exhibit 2;
6. if requested by the Purchaser, an Opinion of Counsel to the
Custodian, in a form acceptable to the Purchaser;
7. a Security Release Certification, in the form of Exhibit 3
hereto executed by any Person, as requested by the Purchaser,
if any of the Mortgage Loans has at any time been subject to
any security interest, pledge or hypothecation for the benefit
of such Person;
8. a certificate or other evidence of merger or change of name,
signed or stamped by the applicable regulatory authority, if
any of the Mortgage Loans were acquired by the Seller by
merger or acquired or originated by the Seller while
conducting business under a name other than its present name,
if applicable; and
9. an Assignment and Conveyance in the form of Exhibit 4 hereto.
SECTION 10. Costs. All other costs and expenses incurred in
connection with the transfer and delivery of the Mortgage Loans, including
without limitation recording fees, fees for title policy endorsements and
continuations, fees for recording Assignments of Mortgage, the fees of the
Custodian during the Interim Servicing Period and the Seller's attorney's fees,
shall be paid by the Seller. The Seller agrees to pay the legal, due diligence
and other costs and expenses incurred
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in connection with the preparation and negotiation of documentation related to
this Agreement (including fees and expenses of Purchaser's counsel).
SECTION 11. Interim Servicer's Servicing Obligations. The Interim
Servicer, as independent interim servicer, shall interim service and administer
the Mortgage Loans during the Interim Servicing Period in accordance with the
terms and provisions set forth in the Servicing Addendum attached as Exhibit 9,
which Servicing Addendum is incorporated herein by reference. The obligations
and responsibilities of the Interim Servicer, as interim servicer, shall
terminate upon the termination of the Interim Servicing Period unless terminated
with respect to all or a portion of the Mortgage Loans on an earlier date at the
option of the Purchaser in accordance with the terms of this Agreement.
The Interim Servicer shall cooperate fully with the Purchaser and
any servicer to whom the servicing or master servicing of any Mortgage Loan is
to be transferred and shall promptly provide the Purchaser or such successor
servicer, as applicable, all documents and records reasonably requested by it to
enable it to assume the Interim Servicer's functions as servicer hereunder and
shall within one (1) Business Day of receipt transfer to the Purchaser or such
successor servicer, as applicable, all amounts which then have been or should
have been deposited in the Custodial Account by the Interim Servicer or which
are thereafter received with respect to the Mortgage Loans. A servicing transfer
shall be complete when the Purchaser or its designated servicer confirms to the
Interim Servicer that it has received all necessary data and documents to
perform its primary servicing or master servicing function, as applicable, and
all required notices have been mailed by the Interim Servicer. The Purchaser and
the Seller contemplate that the servicing transfer with respect to any Mortgage
Loan shall be completed within 30 days following the related Closing Date and
the Purchaser agrees to cooperate with the Interim Servicer to effect such
transfer as promptly as possible.
SECTION 12. Removal of Mortgage Loans from Inclusion under This
Agreement Upon a Whole Loan Transfer or a Pass-Through
Transfer.
(a) The Seller, the Interim Servicer and the Purchaser agree that
with respect to the Mortgage Loans purchased by the Purchaser hereunder, the
Purchaser shall use its reasonable best efforts to effect either:
(1) one or more Whole Loan Transfers; and/or
(2) one or more Pass-Through Transfers.
(b) With respect to each Whole Loan Transfer or Pass-Through
Transfer, as the case may be, entered into by the Purchaser, the Seller and the
Interim Servicer agrees:
(1) to cooperate fully with the Purchaser and any prospective
purchaser with respect to all reasonable requests and due
diligence procedures including participating in meetings with
rating agencies, bond insurers and such other
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parties as the Purchaser shall designate and participating in
meetings with prospective purchasers of the Mortgage Loans or
interests therein and providing information reasonably
requested by such purchasers;
(2) to execute all agreements and documents necessary or
appropriate in order to effect such Whole Loan Transfer or
Pass-Through Transfer provided that each party thereto is
given an opportunity to review and reasonably negotiate in
good faith the content of such documents not specifically
referenced or provided for herein;
(3) with respect to any Whole Loan Transfer or Pass-Through
Transfer, the Seller and the Interim Servicer shall make the
representations and warranties regarding itself and the Seller
shall remake the representations and warranties regarding the
Mortgage Loans as of the related Closing Date for such
Mortgage Loans, modified to the extent necessary to accurately
reflect the pool statistics of the Mortgage Loans which are
actually subject to such Whole Loan Transfer or Pass-Through
Transfer. The Seller acknowledges that the representations and
warranties provided pursuant to this Agreement are intended to
satisfy the requirements of monoline insurance companies in
connection with any Pass-Through Transfers or the requests of
any third party purchasers of the Mortgage Loans in connection
with any Whole Loan Transfers of the Mortgage Loans and agrees
to make any additional representations and warranties (to the
extent that the Seller has made such representations and
warranties in any prior transaction) as of the related Closing
Date for such Mortgage Loan as any such insurer or third party
purchaser shall require;
(4) to deliver to the Purchaser for inclusion in any prospectus or
other offering material such publicly available information
regarding the Seller and the Interim Servicer, their financial
condition and their mortgage loan delinquency, foreclosure and
loss experience and any additional information requested by
the Purchaser, and to deliver to the Purchaser any similar non
public, unaudited financial information, in which case the
Purchaser shall bear the cost of having such information
audited by certified public accountants if the Purchaser
desires such an audit, or as is otherwise reasonably requested
by the Purchaser and which the Seller or the Interim Servicer
is capable of providing without unreasonable effort or
expense, and to indemnify the Purchaser and its affiliates for
material misstatements contained in such information;
(5) to deliver to the Purchaser and to any Person designated by
the Purchaser, at the Purchaser's expense, such statements and
audit letters of reputable, certified public accountants
pertaining to information provided by the Seller
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or the Interim Servicer pursuant to clause 4 above as shall be
reasonably requested by the Purchaser;
(6) to deliver to the Purchaser, and to any Person designated by
the Purchaser, such legal documents and in-house Opinions of
Counsel as are customarily delivered by originators or
servicers, as the case may be, and reasonably determined by
the Purchaser to be necessary in connection with Whole Loan
Transfers or Pass-Through Transfers, as the case may be, such
in-house Opinions of Counsel for a Pass-Through Transfer to be
in the form reasonably acceptable to the Purchaser; and
(7) if requested by the Purchaser, to negotiate and execute one or
more subservicing agreements between the Seller and any master
servicer which is generally considered to be a prudent master
servicer in the secondary mortgage market, designated by the
Purchaser in its sole discretion after consultation with the
Seller and/or one or more custodial and servicing agreements
among the Purchaser, the Seller and a third party
custodian/trustee which is generally considered to be a
prudent custodian/trustee in the secondary mortgage market
designated by the Purchaser in its sole discretion after
consultation with the Seller, in either case for the purpose
of pooling the Mortgage Loans with other Mortgage Loans for
resale or securitization. The subservicing fee rate payable to
the Seller in connection with any such subservicing agreement
shall be equal to 0.50% per annum minus the applicable fee
payable to the master servicer in the related Pass-Through
Transfer. The Interim Servicer may decline to act as
subservicer in any transaction if it deems the subservicing
fee payable in connection therewith to be uneconomical and it
provides reasonable prior notice to the Purchaser of such
determination. In addition, the Interim Servicer may request
that it be the subservicer pursuant to any Pass-Through
Transfer, provided that such request is accompanied by a
written commitment from a monoline insurance company and any
related rating agencies permitting the Interim Servicer to act
as subservicer in a securitization which would include
mortgage loans of a type similar to the Mortgage Loans.
With respect to each Whole Loan Transfer or Pass-Through Transfer,
as the case may be, entered into by the Purchaser, the Purchaser shall, to the
extent that the Purchaser, in its sole discretion, deems necessary to maximize
value on the related Mortgage Loans, (a) directly restate the representations
and warranties with respect to such Mortgage Loans or (b) agree to repurchase
any Mortgage Loan which the Seller fails to repurchase due to the breach of a
representation or warranty by the Seller. In no event shall such restatement or
backup by the Purchaser be deemed to relieve the Seller of its obligation to
restate representations and warranties under this Section 12 or to repurchase
any Mortgage Loan as a result of a breach of a representation and warranty. In
addition, in no event shall the Purchaser make any representation or warranty,
or have any other responsibility hereunder, with respect to any Carve-out
Mortgage Loan.
<PAGE>
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SECTION 13. The Seller and the Interim Servicer.
Subsection 13.01. Additional Indemnification by the Seller and the
Interim Servicer.
In addition to the indemnification provided in Subsection 7.03, the
Seller and the Interim Servicer, shall jointly and severally indemnify the
Purchaser and hold the Purchaser harmless against any and all claims, losses,
damages, penalties, fines, forfeitures, reasonable and necessary legal fees and
related costs, judgments, and any other costs, fees and expenses that the
Purchaser may sustain in any way related to the failure of the Seller or the
Interim Servicer, to perform its obligations under this Agreement including but
not limited to the Interim Servicer's obligation to service and administer the
Mortgage Loans in compliance with the terms of this Agreement.
Subsection 13.02. Merger or Consolidation of the Seller and Interim
Servicer.
The Seller and the Interim Servicer shall each keep in full force
and effect its existence, rights and franchises as a corporation under the laws
of the state of its incorporation except as permitted herein, and shall obtain
and preserve its qualification to do business as a foreign corporation in each
jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of this Agreement or any of the Mortgage Loans, and
to enable the Seller or Interim Servicer to perform its duties under this
Agreement.
Any Person into which the Seller or the Interim Servicer may be
merged or consolidated, or any corporation resulting from any merger, conversion
or consolidation to which the Seller or the Interim Servicer shall be a party,
or any Person succeeding to the business of the Seller or the Interim Servicer,
shall be the successor of such party hereunder, without the execution or filing
of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding; provided, however, that the
successor or surviving Person shall be the Seller or the Interim Servicer, as
applicable, or an institution whose deposits are insured by FDIC or a company
whose business is the origination and servicing of mortgage loans and, if
applicable, shall satisfy any requirements of Section 16 with respect to the
qualifications of a successor to the Interim Servicer.
Subsection 13.03. Limitation on Liability of the Interim Servicer
and Others.
Neither the Interim Servicer nor any of the officers, employees or
agents of the Interim Servicer shall be under any liability to the Purchaser for
any action taken or for refraining from the taking of any action in good faith
in connection with the servicing of the Mortgage Loans pursuant to this
Agreement, or for errors in judgment; provided, however, that this provision
shall not protect the Interim Servicer or any such person against any breach of
warranties or representations made herein, or failure to perform its obligations
in compliance with any standard of care set forth in this Agreement, or any
liability which would otherwise be imposed by reason of any breach of the terms
and conditions of this Agreement. The Interim Servicer and any officer,
<PAGE>
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employee or agent of the Interim Servicer may rely in good faith on any document
of any kind prima facie properly executed and submitted by any Person respecting
any matters arising hereunder. The Interim Servicer shall not be under any
obligation to appear in, prosecute or defend any legal action which is not
incidental to its obligation to sell or duty to service the Mortgage Loans in
accordance with this Agreement and which in its opinion may result in its
incurring any expenses or liability; provided, however, that the Interim
Servicer may, with the consent of the Purchaser, undertake any such action which
it may deem necessary or desirable in respect to this Agreement and the rights
and duties of the parties hereto. In such event, the legal expenses and costs of
such action and any liability resulting therefrom shall be expenses, costs and
liabilities for which the Purchaser shall be liable, the Interim Servicer shall
be entitled to reimbursement therefor from the Purchaser upon written demand
except when such expenses, costs and liabilities are subject to the Interim
Servicer's indemnification under Subsections 7.03 or 13.01.
Subsection 13.04. Interim Servicer Not to Resign.
The Interim Servicer shall not assign this Agreement or resign from
the obligations and duties hereby imposed on it except by mutual consent of the
Interim Servicer and the Purchaser or upon the determination that its servicing
duties hereunder are no longer permissible under applicable law and such
incapacity cannot be cured by the Interim Servicer in which event the Interim
Servicer may resign as interim servicer. Any such determination permitting the
resignation of the Interim Servicer as interim servicer shall be evidenced by an
Opinion of Counsel to such effect delivered to the Purchaser which Opinion of
Counsel shall be in form and substance acceptable to the Purchaser. No such
resignation shall become effective until a successor shall have assumed the
Interim Servicer 's responsibilities and obligations hereunder in the manner
provided in Section 16.
Subsection 13.05. No Transfer of Servicing.
With respect to the retention of the Interim Servicer to service the
Mortgage Loans during the Interim Servicing Period, the Interim Servicer
acknowledges that the Purchaser has acted in reliance upon the Interim Servicer
's independent status, the adequacy of its servicing facilities, plan,
personnel, records and procedures, its integrity, reputation and financial
standing and the continuance thereof. Without in any way limiting the generality
of this Section, the Interim Servicer shall not either assign this Agreement or
the servicing hereunder or delegate its rights or duties hereunder or any
portion thereof, or sell or otherwise dispose of all or substantially all of its
property or assets, without the prior written approval of the Purchaser, which
consent will not be unreasonably withheld.
Subsection 13.06. Joint and Several Liability.
The Seller and the Interim Servicer are jointly and severally liable
for all representations, warranties, covenants, indemnities and obligations
(including repurchase obligations) of the Seller or the Interim Servicer under
this Agreement. Purchaser may deal exclusively with the Seller or the Interim
Servicer in connection with any claims for repurchase and/or indemnification
pursuant to the terms of this Agreement.
<PAGE>
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Subsection 13.07. Right of Set-off.
In addition to its rights hereunder, in the event that the Seller
fails to repurchase a Mortgage Loan pursuant to Subsection 7.03 or Subsection
7.04, or either the Seller or the Interim Servicer fails to indemnify the
Purchaser pursuant to Subsection 7.03 or Subsection 13.01 of this Agreement, or
upon the occurrence of any Event of Default, the Purchaser shall have the right,
without prior notice to the Seller, any such notice being expressly waived by
the Seller to the extent permitted by applicable law, to proceed against any of
the Seller's or the Interim Servicers' assets (including without limitation any
right to any Initial Purchase Price, Holdback, Deferred Purchase Price, Purchase
Price Adjustment, or Interim Servicing Fee and any collateral held pursuant to
any warehouse, repurchase or other financing facility) which may be in the
possession of the Purchaser, any of the Purchaser's affiliates or its designee
(including the Custodian), including the right to set-off such amounts against
monies owed by the Seller or the Interim Servicer to the Purchaser pursuant to
this Agreement, without prejudice to the Purchaser's right to recover any
deficiency. Notwithstanding the foregoing, the Purchaser agrees to provide prior
notice of a set-off against the Initial Purchase Price of any Mortgage Loans to
be delivered to the Purchaser following the Purchaser's decision to effect such
set-off.
SECTION 14. DEFAULT.
Subsection 14.01. Events of Default.
In case one or more of the following Events of Default by the Seller
or the Interim Servicer shall occur and be continuing, that is to say:
(i) failure on the part of the Seller duly to observe or perform any
material covenants or agreements on its part set forth in this Agreement or in
the Custodial Agreement which continues unremedied for a period of three
Business Days after the date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the Seller by the Purchaser or
by the Custodian; or
(ii) an Act of Insolvency occurs with respect to the Seller or the
Interim Servicer;
(iii) The Seller or the Interim Servicer shall admit its inability
to, or its intention not to, perform any of its obligations hereunder;
(iv) any governmental, regulatory, or self-regulatory authority
takes any action to remove, limit, restrict, suspend or terminate the rights,
privileges, or operations of the Seller or any of its Material Subsidiaries,
including suspension as an issuer, lender or seller/servicer of related types of
assets, which suspension materially adversely affects the value of the Mortgage
Loans or Purchaser's interest in the Mortgage Loans;
<PAGE>
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(v) The Seller or the Interim Servicer dissolves, merges or
consolidates with another entity unless it is the surviving party, or sells,
transfers, or otherwise disposes of a material portion of its business or
assets, without the Purchaser's prior written consent;
(vi) The Purchaser, in its good faith judgment, believes that a
Material Adverse Effect has occurred;
(vii) An Interim Servicer Termination Event has occurred and a
successor servicer has not assumed the responsibilities of the Interim Servicer
hereunder within two weeks of such occurrence; or
(viii) the Interim Servicer knowingly and willfully fails to deposit
any amount required to be deposited in the Custodial Account at the time
required under this Agreement, or the Interim Servicer fails to deposit any
amount required to be deposited in the Custodial Account within two (2) Business
Days of notice by the Purchaser of its failure to deposit such amount (and which
initial failure was not knowing and willful) or the Interim Servicer is
determined to have failed to deposit any amount required to be deposited in the
Custodial Account for a second time (whether or not knowing and willful); or
(ix) the Interim Servicer attempts to assign its right to servicing
compensation hereunder; or
(x) any Change in Control of the Seller or any Material Subsidiary
shall have occurred without the prior consent of the Purchaser which consent
with respect to any Change of Control of a Material Subsidiary shall not be
unreasonably withheld; or
(xi) The occurrence and continuance of a material "event of default"
or of an "event of termination" on the part of Seller or the Interim Servicer
under any agreement between the Seller or the Interim Servicer (or an affiliate
thereof) on the one hand, and the Purchaser (or an affiliate thereof) on the
other hand, which has not been waived by the Purchaser (or its affiliate),
provided that such event of default or event of termination does not arise
solely as a result of a default under an agreement to which the Seller or the
Interim Servicer (or its affiliate) is not a party; or
(xii) The Seller's failure to repurchase any Mortgage Loan or
indemnify the Purchaser as required under this Agreement which continues
unremedied for a period of two (2) Business Days following notice to the Seller;
then, and in each and every such case, following such Event of Default, the
Purchaser, by notice in writing to the Seller and the Interim Servicer may, in
addition to whatever rights the Purchaser may have at law or equity (or as
otherwise set forth in this Agreement) to damages, including injunctive relief
and specific performance, (a) terminate all the rights and obligations of the
Interim Servicer as interim servicer under this Agreement, and (b) terminate
Purchaser's commitment to purchase any further Mortgage Loans pursuant to this
Agreement. On or after the receipt by the Interim Servicer
<PAGE>
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of such written notice, all authority and power of the Interim Servicer to
interim service the Mortgage Loans under this Agreement shall on the date set
forth in such notice pass to and be vested in the successor appointed pursuant
to Section 16.
Subsection 14.02. Waiver of Defaults.
The Purchaser may waive any default by the Seller or the Interim
Servicer in the performance of its obligations hereunder and its consequences.
Upon any such waiver of a past default, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been remedied for
every purpose of this Agreement. No such waiver shall extend to any subsequent
or other default or impair any right consequent thereon except to the extent
expressly so waived.
SECTION 15. Termination. The respective obligations and
responsibilities of the Interim Servicer , as interim servicer, shall terminate
at the expiration of the Interim Servicing Period unless terminated on an
earlier date at the option of the Purchaser or pursuant to Section 14. Upon
written request from the Purchaser in connection with any such termination, the
Seller or the Interim Servicer shall prepare, execute and deliver, any and all
documents and other instruments, place in the Purchaser's possession all
Mortgage Files, and do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement or assignment of the Mortgage Loans and
related documents, or otherwise, at the Seller's sole expense. The Interim
Servicer agrees to cooperate with the Purchaser and such successor in effecting
the termination of the Interim Servicer's responsibilities and rights hereunder
as interim servicer, including, without limitation, the transfer to such
successor for administration by it of all cash amounts which shall at the time
be credited by the Interim Servicer to the Custodial Account or Escrow Account
or thereafter received with respect to the Mortgage Loans.
SECTION 16. Successor to the Interim Servicer. Prior to termination
of the Interim Servicer's responsibilities and duties under this Agreement
pursuant to Section 12, 14 or 15, the Purchaser shall (i) succeed to and assume
all of the Interim Servicer's responsibilities, rights, duties and obligations
under this Agreement, or (ii) appoint a successor which shall succeed to all
rights and assume all of the responsibilities, duties and liabilities of the
Interim Servicer as interim servicer under this Agreement. In connection with
such appointment and assumption, the Purchaser may make such arrangements for
the compensation of such successor out of payments on Mortgage Loans as it and
such successor shall agree. In the event that the Interim Servicer's duties,
responsibilities and liabilities as interim servicer under this Agreement should
be terminated pursuant to the aforementioned Sections, the Interim Servicer
shall discharge such duties and responsibilities during the period from the date
it acquires knowledge of such termination until the effective date thereof with
the same degree of diligence and prudence which it is obligated to exercise
under this Agreement, and shall take no action whatsoever that might impair or
prejudice the rights or financial condition of the Purchaser or such successor.
The termination of the Interim Servicer as interim servicer pursuant to the
aforementioned Sections shall not become effective until a successor shall be
appointed pursuant to this Section 16 and shall in no event relieve the Seller
or the Interim Servicer of the representations and warranties made pursuant to
Subsections 7.01 and
<PAGE>
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7.02 and the remedies available to the Purchaser under Subsection 7.03 or 7.04,
it being understood and agreed that the provisions of such Subsections 7.01,
7.02 and 7.03 and 7.04 shall be applicable to the Seller and the Interim
Servicer notwithstanding any such resignation or termination of the Interim
Servicer, or the termination of this Agreement.
Any successor appointed as provided herein shall execute,
acknowledge and deliver to the Interim Servicer and to the Purchaser an
instrument accepting such appointment, whereupon following a completion of the
servicing transfer (as contemplated in Section 11 hereof) such successor shall
become fully vested with all the rights, powers, duties, responsibilities,
obligations and liabilities of the Interim Servicer, with like effect as if
originally named as a party to this Agreement and the Custodial Agreement
provided, however, that such successor shall not assume, and Interim Servicer
shall indemnify such successor for, any and all liabilities arising out of the
Interim Servicer's acts as servicer. Any termination of the Interim Servicer as
servicer pursuant to Section 12, 14 or 15 shall not affect any claims that the
Purchaser may have against the Interim Servicer arising prior to any such
termination or resignation or remedies with respect to such claims.
The Interim Servicer shall timely deliver to the successor the funds
in the Custodial Account and the Escrow Account and the Mortgage Files and
related documents and statements held by it hereunder and the Interim Servicer
shall account for all funds. The Interim Servicer shall execute and deliver such
instruments and do such other things all as may reasonably be required to more
fully and definitely vest and confirm in the successor all such rights, powers,
duties, responsibilities, obligations and liabilities of the Interim Servicer as
servicer. The successor shall make arrangements as it may deem appropriate to
reimburse the Interim Servicer for amounts the Interim Servicer actually
expended as servicer pursuant to this Agreement which the successor is entitled
to retain hereunder and which would otherwise have been recovered by the Interim
Servicer pursuant to this Agreement but for the appointment of the successor
servicer.
SECTION 17. Financial Statements. The Seller understands that in
connection with the Purchaser's marketing of the Mortgage Loans, the Purchaser
may make available to prospective purchasers the Seller's and the Interim
Servicer's financial statements for the most recently completed three fiscal
years respecting which such statements are available. The Seller and the Interim
Servicer also shall make available any comparable interim statements to the
extent any such statements have been prepared by the Seller or the Interim
Servicer (and are available upon request to members or stockholders of the
Seller or the public at large). The Seller and the Interim Servicer, if it has
not already done so, agrees to furnish promptly to the Purchaser copies of the
statements specified above. The Interim Servicer also shall make available
information on its servicing performance with respect to mortgage loans serviced
for others, including delinquency ratios.
The Seller and the Interim Servicer also agrees to allow access at
reasonable times, and upon reasonable notice, to knowledgeable financial,
accounting, origination and servicing officers of the Interim Servicer or
Seller, as applicable, for the purpose of answering questions asked by any
prospective purchaser regarding recent developments affecting the Seller or the
Interim Servicer, its loan origination or servicing practices, as applicable, or
the financial statements of the Seller or the Interim Servicer.
<PAGE>
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SECTION 18. Mandatory Delivery: Grant of Security Interest. The sale
and delivery of each Mortgage Loan on or before the related Closing Date is
mandatory from and after the date of the execution of the related Confirmation,
it being specifically understood and agreed that each Mortgage Loan is unique
and identifiable on the date hereof and that an award of money damages would be
insufficient to compensate the Purchaser for the losses and damages incurred by
the Purchaser (including damages to prospective purchasers of the Mortgage
Loans) in the event of the Seller's failure to deliver each of the related
Mortgage Loans or one or more Mortgage Loans otherwise acceptable to the
Purchaser on or before the related Closing Date. The Seller hereby grants to the
Purchaser a lien on and a continuing security interest in each Mortgage Loan and
each document and instrument evidencing each such Mortgage Loan to secure the
performance by the Seller of its obligation hereunder, and the Seller agrees
that it holds such Mortgage Loans in custody for the Purchaser subject to the
Purchaser's (i) right to reject any Mortgage Loan under the terms of this
Agreement and the related Confirmation, and (ii) obligation to pay the related
Initial Purchase Price for the Mortgage Loans. All rights and remedies of the
Purchaser under this Agreement are distinct from, and cumulative with, any other
rights or remedies under this Agreement or afforded by law or equity and all
such rights and remedies may be exercised concurrently, independently or
successively.
SECTION 19. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed, by registered or certified mail, return receipt requested, or, if by
other means, when received by the other party at the address as follows:
(i) if to the Purchaser:
Greenwich Capital Financial Products, Inc.
600 Steamboat Road
Greenwich, Connecticut 06830
Attn: John C. Anderson
with a copy to:
Greenwich Capital Financial Products, Inc.
600 Steamboat Road
Greenwich, Connecticut 06830
Attn: General Counsel
(ii) if to the Seller or the Interim Servicer:
c/o ContiFinancial Corporation
277 Park Avenue
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New York, New York 10172
Attn: Chief Counsel
With a copy to:
ContiMortgage Corporation
One ContiPark
338 South Warminster Road
Hatboro, Pennsylvania 19040
or such other address as may hereafter be furnished to the other party by like
notice. Any such demand, notice or communication hereunder shall be deemed to
have been received on the date delivered to or received at the premises of the
addressee (as evidenced, in the case of registered or certified mail, by the
date noted on the return receipt).
SECTION 20. Severability Clause. Any part, provision, representation
or warranty of this Agreement which is prohibited or which is held to be void or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any part,
provision, representation or warranty of this Agreement which is prohibited or
unenforceable or is held to be void or unenforceable in any jurisdiction shall
be ineffective, as to such jurisdiction, to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction as to any Mortgage Loan
shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereto
waive any provision of law which prohibits or renders void or unenforceable any
provision hereof. If the invalidity of any part, provision, representation or
warranty of this Agreement shall deprive any party of the economic benefit
intended to be conferred by this Agreement, the parties shall negotiate, in
good-faith, to develop a structure the economic effect of which is nearly as
possible the same as the economic effect of this Agreement without regard to
such invalidity.
SECTION 21. Counterparts. This Agreement may be executed
simultaneously in any number of counterparts. Each counterpart shall be deemed
to be an original, and all such counterparts shall constitute one and the same
instrument.
SECTION 22. Governing Law. THE AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY
CONFLICTS OF LAW PROVISIONS AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK, EXCEPT TO THE EXTENT PREEMPTED BY FEDERAL LAW.
SECTION 23. Intention of the Parties. It is the intention of the
parties that the Purchaser is purchasing, and the Seller is selling, the
Mortgage Loans and not a debt instrument of
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the Seller or another security. Accordingly, the parties hereto each intend to
treat the transaction for Federal income tax purposes as a sale by the Seller,
and a purchase by the Purchaser, of the Mortgage Loans. The Purchaser shall have
the right to review the Mortgage Loans and the related Mortgage Loan Files to
determine the characteristics of the Mortgage Loans which shall affect the
Federal income tax consequences of owning the Mortgage Loans and the Seller
shall cooperate with all reasonable requests made by the Purchaser in the course
of such review.
SECTION 24. Successors and Assigns. This Agreement shall bind and
inure to the benefit of and be enforceable by the Seller, the Interim Servicer
and the Purchaser and the respective successors and assigns of the Seller, the
Interim Servicer and the Purchaser. The Purchaser may assign this Agreement
(except the Purchaser's obligation to purchase Mortgage Loans, which may only be
assigned as set forth below) to any Person to whom any Mortgage Loan is
transferred whether pursuant to a sale or financing and to any Person to whom
the servicing or master servicing of any Mortgage Loan is sold or transferred.
Upon any such assignment, the Person to whom such assignment is made shall
succeed to all rights and obligations of the Purchaser under this Agreement to
the extent of the related Mortgage Loan or Mortgage Loans and this Agreement, to
the extent of the related Mortgage Loan or Loans, shall be deemed to be a
separate and distinct Agreement among the Seller, the Interim Servicer and such
Purchaser, and a separate and distinct Agreement between the Seller, the Interim
Servicer and each other Purchaser to the extent of the other related Mortgage
Loan or Loans. In the event that this Agreement is assigned to any Person to
whom the servicing or master servicing of any Mortgage Loan is sold or
transferred, the rights and benefits under this agreement which inure to the
Purchaser shall inure to the benefit of both the Person to whom such Mortgage
Loan is transferred and the Person to whom the servicing or master servicing of
the Mortgage Loan has been transferred; provided that, the right to require a
Mortgage Loan to be repurchased by the Seller pursuant to Subsection 7.03 or
7.04 shall be retained solely by the Purchaser. The obligation of the Purchaser
to purchase Mortgage Loans under this Agreement shall not be assigned by the
Purchaser to a third party without the consent of the Seller; provided, however,
that Seller's consent shall not be required in the case where the assignee of
Purchaser's obligation to purchase Mortgage Loans under this Agreement is an
affiliate of Purchaser. This Agreement shall not be assigned, pledged or
hypothecated by the Seller or the Interim Servicer to a third party without the
consent of the Purchaser.
SECTION 25. Waivers. No term or provision of this Agreement may be
waived or modified unless such waiver or modification is in writing and signed
by the party against whom such waiver or modification is sought to be enforced.
SECTION 26. Exhibits. The exhibits to this Agreement are hereby
incorporated and made a part hereof and are an integral part of this Agreement.
SECTION 27. Nonsolicitation. The Seller and the Interim Servicer
covenants and agrees that it shall not take any action to solicit the
refinancing of any Mortgage Loan following the date hereof or provide
information to any other entity to solicit the refinancing of any Mortgage Loan;
provided that, the foregoing shall not preclude the Seller or the Interim
Servicer from engaging in solicitations to the general public by newspaper,
radio, television or other media which
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are not directed toward the Mortgagors or from refinancing the Mortgage Loan of
any Mortgagor who, without solicitation, contacts the Seller or the Interim
Servicer to request the refinancing of the related Mortgage Loan.
SECTION 28. General Interpretive Principles. For purposes of this
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(a) the terms defined in this Agreement have the meanings assigned
to them in this Agreement and include the plural as well as the singular, and
the use of any gender herein shall be deemed to include the other gender;
(b) accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles;
(c) references herein to "Articles," "Sections," "Subsections,"
"Paragraphs," and other Subdivisions without reference to a document are to
designated Articles, Sections, Subsections, Paragraphs and other subdivisions of
this Agreement;
(d) reference to a Subsection without further reference to a Section
is a reference to such Subsection as contained in the same Section in which the
reference appears, and this rule shall also apply to Paragraphs and other
subdivisions;
(e) the words "herein," "hereof," "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
provision; and
(f) the term "include" or "including" shall mean without limitation
by reason of enumeration.
SECTION 29. Reproduction of Documents. This Agreement and all
documents relating thereto, including, without limitation, (a) consents, waivers
and modifications which may hereafter be executed, (b) documents received by any
party at the closing, and (c) financial statements, certificates and other
information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, micro-card, miniature photographic or
other similar process. The parties agree that any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and whether or not such
reproduction was made by a party in the regular course of business, and that any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
SECTION 30. Further Agreements. The Seller, the Interim Servicer and
the Purchaser each agree to execute and deliver to the other such reasonable and
appropriate additional documents, instruments or agreements as may be necessary
or appropriate to effectuate the purposes of this Agreement.
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IN WITNESS WHEREOF, the Seller, the Interim Servicer and the
Purchaser have caused their names to be signed hereto by their respective
officers thereunto duly authorized as of the date first above written.
CONTIFINANCIAL CORPORATION
(Seller)
By: /s/ Alan Fishman
----------------------------
Name: Alan Fishman
--------------------------
Title: President & CEO
-------------------------
By: /s/ Frank W. Baier
----------------------------
Name: Frank W. Baier
--------------------------
Title: SVP & CEO
-------------------------
CONTIMORTGAGE CORPORATION
(Interim Servicer)
By: /s/ Robert J. Babjak
----------------------------
Name: Robert J. Babjak
--------------------------
Title: Executive Vice President
-------------------------
By: /s/ Margaret M. Curry
----------------------------
Name: Margaret M. Curry
--------------------------
Title: Senior Vice President
-------------------------
GREENWICH CAPITAL FINANCIAL PRODUCTS,
INC.
(Purchaser)
By: /s/ John C. Anderson
----------------------------
Name: John C. Anderson
--------------------------
Title: Senior Vice President
-------------------------
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
<PAGE>
EXHIBIT 1
OFFICER'S CERTIFICATE
I, ________________________, hereby certify that I am the duly
elected ______________ of [SELLER OR INTERIM SERVICER], a ________________ (the
"Seller"), and further certify, on behalf of the Seller as follows:
1. Attached hereto as Attachment I are a true and correct copy of
the Certificate of Incorporation and by-laws of the Seller as are in full
force and effect on the date hereof.
2. Each person who, as an officer or attorney-in-fact of the Seller,
signed (a) the Master Mortgage Loan Purchase Facility (the "Purchase
Agreement"), dated as of _____ 1, 1999, by and among ContiFinancial
Corporation and ContiMortgage Corporation and Greenwich Capital Financial
Products, Inc. (the "Purchaser"); (b) the Confirmation, dated
_____________ 1999, between the Seller and the Purchaser (the
"Confirmation"); (c) the Custodial Agreement, dated as of ____ 1, 1999,
among the Purchaser, ContiFinancial Corporation and ContiMortgage
Corporation and Manufacturers and Traders Trust Company (the "Custodial
Agreement"); and (d) any other document delivered prior hereto or on the
date hereof in connection with the sale and servicing of the Mortgage
Loans in accordance with the Purchase Agreement and the Confirmation was,
at the respective times of such signing and delivery, and is as of the
date hereof, duly elected or appointed, qualified and acting as such
officer or attorney-in-fact, and the signatures of such persons appearing
on such documents are their genuine signatures.
3. Attached hereto as Attachment II is a true and correct copy of
the resolutions duly adopted by the board of directors of the Seller on
________________, 1999 (the "Resolutions") with respect to the
authorization and approval of the sale and servicing of the Mortgage
Loans; said Resolutions have not been amended, modified, annulled or
revoked and are in full force and effect on the date hereof.
4. Attached hereto as Attachment III is a Certificate of Good
Standing of the Seller dated ______________, 1999. No event has occurred
since ___________________, 1999 which has affected the good standing of
the Seller under the laws of the State of ___________.
5. All of the representations and warranties of the Seller contained
in Subsections 7.01 and 7.02 of the Purchase Agreement were true and
correct in all material respects as of the date of the Purchase Agreement
and are true and correct in all material respects as of the date hereof.
Exhibit 1-1
<PAGE>
6. The Seller has performed all of its duties and has satisfied all
the material conditions on its part to be performed or satisfied prior to
the related Closing Date pursuant to the Purchase Agreement and the
related Confirmation.
All capitalized terms used herein and not otherwise defined shall
have the meaning assigned to them in the Purchase Agreement.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed the
seal of the Seller.
Dated:___________
[SELLER OR INTERIM SERVICER]
(Seller)
By: ___________________________
Name:__________________________
Title:
I, _______________________, Secretary of the Seller, hereby certify
that _________________________ is the duly elected, qualified and acting of the
Seller and that the signature appearing above is his genuine signature.
IN WITNESS WHEREOF, I have hereunto signed my name.
Dated:__________
[Seal]
[SELLER OR INTERIM SERVICER]
(Seller)
By:__________________________
Name:________________________
Title: [Assistant] Secretary
Exhibit 1-2
<PAGE>
EXHIBIT 2
[FORM OF OPINION OF COUNSEL TO THE SELLER AND THE INTERIM SERVICER]
------------------------------
(Date)
Greenwich Capital Financial Products, Inc.
600 Steamboat Road
Greenwich, Connecticut 06830
Re: Master Mortgage Loan Purchase Facility, dated as
of ______ 1, 1999
Gentlemen:
I have acted as counsel to ContiFinancial Corporation (the
"Seller"), and ___________ ContiMortgage Corporation, a __________ (the "Interim
Servicer"), in connection with the sale of certain mortgage loans by the Seller
to Greenwich Capital Financial Products, Inc. (the "Purchaser") pursuant to (i)
a Master Mortgage Loan Purchase Facility, dated as of ______ 1, 1999, among the
Seller, the Interim Servicer and the Purchaser (the "Purchase Agreement"), the
Custodial Agreement, dated as of ________ 1, 1999, among the Seller, the
Purchaser, and _________________ (the "Custodial Agreement") [and the
Confirmation, dated __________, 1999, between the Seller and the Purchaser (the
"Confirmation")]. Capitalized terms not otherwise defined herein have the
meanings set forth in the Purchase Agreement.
In connection with rendering this opinion letter, I, or attorneys
working under my direction, have examined, among other things, originals,
certified copies or copies otherwise identified to my satisfaction as being true
copies of the following:
A. The Purchase Agreement;
B. [The Confirmation;]
C. The Custodial Agreement;
D. The Seller's and Interim Servicer's Certificate of
Incorporation and by-laws, as amended to date; and
E. Resolutions adopted by the Board of Directors of the Seller
with specific reference to actions relating to the
transactions covered by this opinion (the "Board
Resolutions").
For the purpose of rendering this opinion, I have made such
documentary, factual and legal examinations as I deemed necessary under the
circumstances. As to factual matters, I have relied upon statements,
certificates and other assurances of public officials and of officers and other
Exhibit 2-1
<PAGE>
representatives of the Seller and the Interim Servicer, and upon such other
certificates as I deemed appropriate, which factual matters have not been
independently established or verified by me. I have also assumed, among other
things, the genuineness of all signatures, the legal capacity of all natural
persons, the authenticity of all documents submitted to me as originals, and the
conformity to original documents of all documents submitted to me as copies and
the authenticity of the originals of such copied documents.
On the basis of and subject to the foregoing examination, and in
reliance thereon, and subject to the assumptions, qualifications, exceptions and
limitations expressed herein, I am of the opinion that:
1. The Seller and the Interim Servicer has been duly incorporated
and is validly existing and in good standing under the laws of the State of
_______ with corporate power and authority to own its properties and conduct its
business as presently conducted by it. The Interim Servicer has the corporate
power and authority to service the Mortgage Loans, and the Seller and the
Interim Servicer has the corporate power and authority to execute, deliver, and
perform its obligations under the Purchase Agreement, the Custodial Agreement
[and the Confirmation] (sometimes collectively, the "Agreements").
2. The Purchase Agreement, the Custodial Agreement [and the
Confirmation] have been duly and validly authorized, executed and delivered by
the Seller and the Interim Servicer.
3. The Purchase Agreement, the Custodial Agreement [and the
Confirmation] constitute valid, legal and binding obligations of the Seller and
the Interim Servicer, enforceable against the Seller and the Interim Servicer in
accordance with their respective terms.
4. No consent, approval, authorization or order of any state or
federal court or government agency or body is required for the execution,
delivery and performance by Seller or the Interim Servicer of the Purchase
Agreement, the Custodial Agreement [and the Confirmation], or the consummation
of the transactions contemplated by the Purchase Agreement, the Custodial
Agreement [and the Confirmation], except for those consents, approvals,
authorizations or orders which previously have been obtained.
5. Neither the servicing of the Mortgage Loans by the Interim
Servicer as provided in the Purchase Agreement [and the Confirmation,] nor the
fulfillment of the terms of or the consummation of any other transactions
contemplated in the Purchase Agreement, the Custodial Agreement [and the
Confirmation] will result in a breach of any term or provision of the
certificate of incorporation or by-laws of the Seller or the Interim Servicer,
or, to the best of my knowledge, will conflict with, result in a breach or
violation of, or constitute a default under, (i) the terms of any material
indenture or other material agreement or instrument known to me to which the
Seller or the Interim Servicer is a party or by which it is bound, (ii) any
State of _______ or federal statute or regulation applicable to the Seller or
the Interim Servicer, or (iii) any order of any State of _______ or federal
court, regulatory body, administrative agency or governmental body having
jurisdiction over the Seller or the Interim Servicer, except in any such case
where the default, breach
Exhibit 2-2
<PAGE>
or violation would not have a material adverse effect on the Seller or the
Interim Servicer or their ability to perform their respective obligations under
the Purchase Agreement and the Custodial Agreement.
6. To the best of my knowledge there is no action, suit, proceeding
or investigation pending or threatened against the Seller or the Interim
Servicer which, in my judgment, either in any one instance or in the aggregate,
would draw into question the validity of the Purchase Agreement or the Custodial
Agreement or which would be likely to impair materially the ability of the
Seller or the Interim Servicer to perform under the terms of the Purchase
Agreement or the Custodial Agreement.
7. The sale of each Mortgage Note and Mortgage as and in the manner
contemplated by the Purchase Agreement is sufficient fully to transfer to the
Purchaser all right, title and interest of the Seller thereto as noteholder and
mortgagee.
8. The Assignments of Mortgage are in recordable form and upon
completion will be acceptable for recording under the laws of the State of
_______. When endorsed, as provided in the Custodial Agreement, the Mortgage
Notes will be duly endorsed under _______ law.
9. Assuming that all other elements necessary to render a Mortgage
Loan legal, valid, binding and enforceable were present in connection with the
execution, delivery and performance of each Mortgage Loan (including completion
of the entire Mortgage Loan fully, accurately and in compliance with all
applicable laws, rules and regulations) and assuming further that no action was
taken in connection with the execution, delivery and performance of each
Mortgage Loan (including in connection with the sale of the related Mortgaged
Property) that would give rise to a defense to the legality, validity, binding
effect and enforceability of such Mortgage Loan, nothing in the forms of such
Mortgage Loans, as attached hereto as Exhibit A, would render such Mortgage
Loans other than legal, valid, binding and enforceable.
10. Assuming their validity, binding effect and enforceability in
all other respects (including completion of the entire Mortgage Loan fully,
accurately and in compliance with all applicable laws, rules and regulations),
the forms of Mortgage Loans attached hereto as Exhibit A are in sufficient
compliance with ________ law and Federal consumer protection laws so as not to
be rendered void or voidable at the election of the Mortgagor thereunder.
The opinions above are subject to the following additional
assumptions, exceptions, qualifications and limitations:
A. I have assumed that all parties to the Agreements other than the
Seller and the Interim Servicer have all requisite power and authority to
execute, deliver and perform their respective obligations under each of the
Agreements, and that the Agreements have been duly authorized by all necessary
corporate action on the part of such parties, have been executed and delivered
by such parties and constitute the legal, valid and binding obligations of such
parties.
Exhibit 2-4
<PAGE>
B. My opinion expressed in paragraphs 3 and 7 above is subject to
the qualifications that (i) the enforceability of the Agreements may be limited
by the effect of laws relating to (1) bankruptcy, reorganization, insolvency,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, including, without limitation, the effect of
statutory or other laws regarding fraudulent conveyances or preferential
transfers, and (2) general principles of equity upon the specific enforceability
of any of the remedies, covenants or other provisions of the Agreements and upon
the availability of injunctive relief or other equitable remedies and the
application of principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law) as such principles relate to,
limit or affect the enforcement of creditors' rights generally and the
discretion of the court before which any proceeding for such enforcement may be
brought; and (ii) I express no opinion herein with respect to the validity,
legality, binding effect or enforceability of (a) provisions for indemnification
in the Agreements to the extent such provisions may be held to be unenforceable
as contrary to public policy or (b) Section 18 of the Purchase Agreement.
C. I have assumed, without independent check or certification, that
there are no agreements or understandings among the Seller, the Interim
Servicer, the Purchaser and any other party which would expand, modify or
otherwise affect the terms of the documents described herein or the respective
rights or obligations of the parties thereunder.
I am admitted to practice in the State of _______, and I render no
opinion herein as to matters involving the laws of any jurisdiction other than
the State of _______ and the Federal laws of the United States of America.
Very truly yours,
Exhibit 2-2
<PAGE>
EXHIBIT 3
SECURITY RELEASE CERTIFICATION
I. Release of Security Interest
___________________________, hereby relinquishes any and all right,
title and interest it may have in and to the Mortgage Loans described in Exhibit
A attached hereto upon purchase thereof by Greenwich Capital Financial Products,
Inc. from the Seller named below pursuant to that certain Master Mortgage Loan
Purchase Facility, dated as of _______ 1, 1999, as of the date and time of
receipt by ______________________________ of $__________ for such Mortgage Loans
(the "Date and Time of Sale"), and certifies that all notes, mortgages,
assignments and other documents in its possession relating to such Mortgage
Loans have been delivered and released to the Seller named below or its
designees as of the Date and Time of Sale.
Name and Address of Financial Institution
(Name)
(Address)
By:________________________
Exhibit 3-1
<PAGE>
II. Certification of Release
The Seller named below hereby certifies to Greenwich Capital
Financial Products, Inc. that, as of the Date and Time of Sale of the above
mentioned Mortgage Loans to Greenwich Capital Financial Products, Inc., the
security interests in the Mortgage Loans released by the above named corporation
comprise all security interests relating to or affecting any and all such
Mortgage Loans. The Seller warrants that, as of such time, there are and will be
no other security interests affecting any or all of such Mortgage Loans.
________________________________________
Seller
By: ____________________________________
Name:___________________________________
Title:__________________________________
By: ____________________________________
Name:___________________________________
Title:__________________________________
Exhibit 3-2
<PAGE>
EXHIBIT 4
ASSIGNMENT AND CONVEYANCE
On this _______ day of ________, 1999, CONTIFINANCIAL CORPORATION
("Seller") as the Seller under that certain Master Mortgage Loan Purchase
Facility, dated as of August 9, 1999 (the "Agreement") does hereby sell,
transfer, assign, set over and convey to Greenwich Capital Financial Products,
Inc. as Purchaser under the Agreement, without recourse, but subject to the
terms of the Agreement, all rights, title and interest of the Seller in and to
the Mortgage Loans listed on the Mortgage Loan Schedule attached hereto,
together with the related Mortgage Files and all rights and obligations arising
under the documents contained therein. Pursuant to Subsection 6.03 of the
Agreement, the Seller has delivered to the Custodian the documents for each
Mortgage Loan to be purchased as set forth in the Custodial Agreement. The
contents of each related Servicing File required to be retained by the Interim
Servicer to service the Mortgage Loans pursuant to the Agreement and thus not
delivered to the Purchaser are and shall be held in trust by the Interim
Servicer for the benefit of the Purchaser as the owner thereof. The Interim
Servicer's possession of any portion of each such Servicing File is at the will
of the Purchaser for the sole purpose of facilitating servicing of the related
Mortgage Loan pursuant to the Agreement, and such retention and possession by
the Seller or the Interim Servicer shall be in a custodial capacity only. The
ownership of each of the Mortgage Loan Documents and the contents of the
Mortgage File and Servicing File is vested in the Purchaser and the ownership of
all records and documents with respect to the related Mortgage Loan prepared by
or which come into the possession of the Seller or the Interim Servicer shall
immediately vest in the Purchaser and shall be retained and maintained, in
trust, by the Seller or the Interim Servicer at the will of the Purchaser in
such custodial capacity only.
The Seller confirms to the Purchaser that the representation and
warranties set forth in Subsections 7.01 and 7.02 of the Agreement are true and
correct as of the date hereof, and that all statements made in the Seller's
Officer's Certificates and all Attachments thereto remain complete, true and
correct in all respects as of the date hereof, and makes the following
additional representations and warranties to the Purchaser, which additional
representations and warranties are hereby incorporated into Subsection 7.02 of
the Agreement:
(1) When measured by aggregate Stated Principal Balance as of the
Cut-off Date, (i) no less than ______________ percent (__%) of
the Mortgage Loans are secured by detached one-family
dwellings or detached one-family dwellings in planned unit
developments, (ii) no more than ____________ percent (__%) of
the Mortgage Loans are secured by attached one-family
dwellings in a planned unit development, (iii) no more than
______ percent (__%) of the Mortgage Loans are secured by
individual condominium units, and (iv) no more than _____
percent (__%) of the Mortgage Loans are secured by detached
two-to-four family dwellings;
Exhibit 4-1
<PAGE>
(2) When measured by aggregate Stated Principal Balance as of the
Cut-off Date, no more than ______ percent (--%) of the
Mortgage Loans had Loan-to-Value Ratio at origination in
excess of %, and the weighted average Loan-to-Value Ratio for
all Mortgage Loans at origination did not exceed __%;
(3) With respect to all of the Mortgage Loans, at the time that
the Mortgage Loan was made, the Mortgagor represented that the
Mortgagor would occupy the Mortgaged Property as Mortgagor's
primary residence;
(4) No Mortgage Loan had a principal balance at origination in
excess of $______ and the average principal balance of the
Mortgage Loans on the Cut-off Date was not in excess of
$______. When measured by the aggregate Stated Principal
Balance as of the Cut-off Date, no more than __% of the
Mortgage Loans had a principal balance at origination in
excess of $_________;
(5) Each Mortgage Loan has a Mortgage Interest Rate of at least
______%. The Mortgage Loans have a weighted average Mortgage
Interest Rate of ______% as of the Cut-off Date and the
Adjustable Rate Mortgage Loans have a weighted average margin
of _____% as of the Cut-off Date;
(6) When measured by aggregate Closing Date Principal Balance as
of the Cut-off Date, no more than five percent (5%) of the
Mortgage Loans are secured by Mortgaged Properties located in
the same United States postal zip code.
Exhibit 4-2
<PAGE>
Capitalized terms used herein and not otherwise defined shall have
the meanings set forth in the Agreement.
CONTIFINANCIAL CORPORATION
(Seller)
By: ____________________________________
Name:___________________________________
Title:__________________________________
By: ____________________________________
Name:___________________________________
Title:__________________________________
CONTIMORTGAGE CORPORATION
(Interim Servicer)
By: ____________________________________
Name:___________________________________
Title:__________________________________
By: ____________________________________
Name:___________________________________
Title:__________________________________
Exhibit 4-3
<PAGE>
EXHIBIT 5
CONTENTS OF EACH MORTGAGE FILE
With respect to each Mortgage Loan, the Mortgage File shall include
each of the following items, which shall be available for inspection by the
Purchaser and which shall be retained by the Interim Servicer or delivered to
the Custodian:
1. Mortgage Loan Documents.
2. Residential loan application.
3. Mortgage Loan closing statement.
4. Verification of employment and income.
5. Verification of acceptable evidence of source and amount of
downpayment.
6. Credit report on Mortgagor.
7. Residential appraisal report.
8. Photograph of the Mortgaged Property.
9. Copy of each instrument necessary to complete identification
of any exception set forth in the exception schedule in the
title policy, i.e., map or plat, restrictions, easements,
sewer agreements, home association declarations, etc.
10. All required disclosure statements and statement of Mortgagor
confirming receipt thereof.
11. If available, termite report, structural engineer's report,
water potability and septic certification.
12. Sales Contract, if applicable.
13. Hazard insurance policy in effect as of the date of
origination of the Mortgage Loan.
14. Tax receipts, insurance premium receipts, ledger sheets,
payment history from date of origination, insurance claim
files, correspondence, current and historical computerized
data files, and all other processing, underwriting and closing
papers and records which are customarily contained in a
mortgage
Exhibit 5-1
<PAGE>
loan file and which are required to document the Mortgage Loan
or to service the Mortgage Loan.
15. Amortization schedule, if available.
16. Payment history for Mortgage Loans that have been closed for
more than 90 days.
17. Recent drive-by appraisal for Mortgage loans with original
principal balance greater than $250,000 (greater than $300,000
for California Mortgage Loans).
18. With respect to each Mortgage Loan which is subject to the
provisions of HOEPA, a copy of a notice to each entity which
was a purchaser or assignee of the Mortgage Loan satisfying
the provisions of HOEPA and the regulations issued thereunder
to the effect that the Mortgage Loan is subject to special
truth-in-lending rules.
Exhibit 5-2
<PAGE>
EXHIBIT 6
CUSTODIAL AGREEMENT
Exhibit 6-1
<PAGE>
EXHIBIT 7
[RESERVED]
Exhibit 7-2
<PAGE>
EXHIBIT 8
ESCROW ACCOUNT LETTER AGREEMENT
______, 1999
To: _____________________
(the "Depository")
As Interim Servicer under the Master Mortgage Loan Purchase
Facility, dated as of ______ 1, 1999, we hereby authorize and request you to
establish an account, as an Escrow Account, to be designated as "CONTIMORTGAGE
CORPORATION in trust for the Purchaser and various Mortgagors, Fixed and
Adjustable Rate Mortgage Loans." All deposits in the account shall be subject to
withdrawal therefrom by order signed by the Interim Servicer. You may refuse any
deposit which would result in violation of the requirement that the account be
fully insured as described below. This letter is submitted to you in duplicate.
Please execute and return one original to us.
CONTIMORTGAGE CORPORATION
(Interim Servicer)
By: ____________________________________
Name:___________________________________
Title:__________________________________
Date:__________________________________
By: ____________________________________
Name:___________________________________
Title:__________________________________
Date:__________________________________
Exhibit 8-1
<PAGE>
The undersigned, as Depository, hereby certifies that the
above-described account has been established under Account Number ___________ at
the office of the Depository indicated above, and agrees to honor withdrawals on
such account as provided above. The full amount deposited at any time in the
account will be insured by the Federal Deposit Insurance Corporation through the
Bank Insurance Fund ("BIF") or the Savings Association Insurance Fund ("SAIF").
_________________________________________
Depository
By: ____________________________________
Name:___________________________________
Title:__________________________________
Date:__________________________________
Exhibit 8-2
<PAGE>
EXHIBIT 9
SERVICING ADDENDUM
Subsection 11.01 Interim Servicer.
The Interim Servicer, as independent contract servicer, shall
interim service and administer the Mortgage Loans in accordance with this
Agreement during the Interim Servicing Period and shall have full power and
authority, acting alone, to do or cause to be done any and all things in
connection with such interim servicing and administration which the Interim
Servicer may deem necessary or desirable and consistent with the terms of this
Agreement.
Consistent with the terms of this Agreement, the Interim Servicer
may waive, modify or vary any term of any Mortgage Loan or consent to the
postponement of strict compliance with any such term or in any manner grant
indulgence to any Mortgagor if in the Interim Servicer's reasonable and prudent
determination such waiver, modification, postponement or indulgence is not
materially adverse to the Purchaser; provided, however, that unless the Interim
Servicer has obtained the prior written consent of the Purchaser, the Interim
Servicer shall not permit any modification with respect to any Mortgage Loan
that would change the Mortgage Interest Rate, defer or forgive the payment
thereof or of any principal or interest payments, reduce the outstanding
principal amount (except for actual payments of principal), make additional
advances of additional principal or extend the final maturity date on such
Mortgage Loan. Without limiting the generality of the foregoing, the Interim
Servicer shall continue, and is hereby authorized and empowered, to execute and
deliver on behalf of itself, and the Purchaser, all instruments of satisfaction
or cancellation, or of partial or full release, discharge and all other
comparable instruments, with respect to the Mortgage Loans and with respect to
the Mortgaged Property. If reasonably required by the Interim Servicer, the
Purchaser shall furnish the Interim Servicer with any powers of attorney at the
Purchaser's option and other documents necessary or appropriate to enable the
Interim Servicer to carry out its interim servicing and administrative duties
under this Agreement.
In interim servicing and administering the Mortgage Loans, the
Interim Servicer shall employ procedures including collection procedures and
exercise the same care that it customarily employs and exercises in servicing
and administering mortgage loans for its own account and mortgage loans which
are securitized by Purchaser in a rated transaction, giving due consideration to
accepted mortgage servicing practices of prudent lending institutions (such
practices, "Accepted Servicing Practices"). If Interim Servicer elects to
utilize a subservicer to perform any or all of Interim Servicer's duties
hereunder, Interim Servicer shall remain liable as though such duties were
performed directly by Interim Servicer and Interim Servicer shall be responsible
for the payment of any and all fees of any such subservicer.
Subsection 11.02 Collection of Mortgage Loan Payments.
Continuously from the date hereof until the principal and interest
on all Mortgage Loans are paid in full, the Interim Servicer shall proceed
diligently to collect all payments due under each
Exhibit 9-1
<PAGE>
Mortgage Loan when the same shall become due and payable and shall, to the
extent such procedures shall be consistent with this Agreement, follow such
collection procedures as it follows with respect to mortgage loans comparable to
the Mortgage Loans and held for its own account. Further, the Interim Servicer
shall take special care in ascertaining and estimating annual ground rents,
taxes, assessments, water rates, fire and hazard insurance premiums and all
other charges that, as provided in the Mortgage, will become due and payable to
the end that the installments payable by the Mortgagors will be sufficient to
pay such charges as and when they become due and payable.
Subsection 11.03 Realization Upon Defaulted Mortgage Loans.
(a) The Interim Servicer shall use its best efforts, consistent with
the procedures that the Interim Servicer would use in servicing loans for its
own account, to foreclose upon or otherwise comparably convert the ownership of
such Mortgaged Properties as come into and continue in default and as to which
no satisfactory arrangements can be made for collection of delinquent payments
pursuant to Subsection 11.01. The Interim Servicer shall use its best efforts to
realize upon defaulted Mortgage Loans in such a manner as will maximize the
receipt of principal and interest by the Purchaser, taking into account, among
other things, the timing of foreclosure proceedings. The foregoing is subject to
the provisions that, in any case in which Mortgaged Property shall have suffered
damage, the Interim Servicer shall not be required to expend its own funds
toward the restoration of such property in excess of $2,000 unless it consults
with the Purchaser with respect to a course of action to be taken and determines
in its discretion (i) that such restoration will increase the proceeds of
liquidation of the related Mortgage Loan to the Purchaser after reimbursement to
itself for such expenses, and (ii) that such expenses will be recoverable by the
Interim Servicer through Insurance Proceeds or Liquidation Proceeds from the
related Mortgaged Property, as contemplated in Subsection 11.05. In the event
that any payment due under any Mortgage Loan is not paid when the same becomes
due and payable, or in the event the Mortgagor fails to perform any other
covenant or obligation under the Mortgage Loan and such failure continues beyond
any applicable grace period, the Interim Servicer shall take such action as it
shall deem to be in the best interest of the Purchaser. In the event that any
payment due under any Mortgage Loan remains delinquent for a period of ninety
(90) days or more, the Interim Servicer shall notify the Purchaser and receive
instruction as to whether to commence foreclosure proceedings in accordance with
Accepted Servicing Practices. The Interim Servicer shall be responsible for all
costs and expenses incurred by it in any such proceedings; provided, however,
that it shall be entitled to reimbursement thereof from the related Mortgaged
Property, as contemplated in Subsection 11.05.
(b) Notwithstanding the foregoing provisions of this Subsection
11.03, with respect to any Mortgage Loan as to which the Interim Servicer has
received actual notice of, or has actual knowledge of, the presence of any toxic
or hazardous substance on the related Mortgaged Property the Interim Servicer
shall not either (i) obtain title to such Mortgaged Property as a result of or
in lieu of foreclosure or otherwise, or (ii) otherwise acquire possession of, or
take any other action, with respect to, such Mortgaged Property if, as a result
of any such action, the Purchaser would be considered to hold title to, to be a
mortgagee-in-possession of, or to be an owner or operator of such Mortgaged
Property within the meaning of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time, or any
Exhibit 9-2
<PAGE>
comparable law, unless the Interim Servicer has immediately consulted with the
Purchaser with respect to a course of action to be taken in accordance with
Accepted Servicing Practices.
The cost of the environmental audit report contemplated by this
Subsection 11.03 shall be advanced by the Interim Servicer, subject to the
Interim Servicer's right to be reimbursed therefor from the Custodial Account as
contemplated in Subsection 11.05.
If the Interim Servicer determines, as described above, that it is
in the best economic interest of the Purchaser to take such actions as are
necessary to bring any such Mortgaged Property into compliance with applicable
environmental laws, or to take such action with respect to the containment,
clean-up or remediation of hazardous substances, hazardous materials, hazardous
wastes, or petroleum-based materials affecting any such Mortgaged Property, then
the Interim Servicer shall take such action as it deems to be in the best
economic interest of the Purchaser. The cost of any such compliance,
containment, cleanup or remediation shall be advanced by the Interim Servicer,
subject to the Interim Servicer's right to be reimbursed therefor from the
Custodial Account as contemplated in Subsection 11.05.
(c) Proceeds received in connection with any Final Recovery
Determination, as well as any recovery resulting from a partial collection of
Insurance Proceeds or Liquidation Proceeds in respect of any Mortgage Loan, will
be applied in the following order of priority: first, to reimburse the Interim
Servicer for any related unreimbursed Servicing Advances; second, to accrued and
unpaid interest on the Mortgage Loan, to the date of the Final Recovery
Determination; and third, as a recovery of principal of the Mortgage Loan.
Subsection 11.04 Establishment of Custodial Accounts; Deposits in
Custodial Accounts.
The Interim Servicer shall segregate and hold all funds collected
and received pursuant to each Mortgage Loan separate and apart from any of its
own funds and general assets.
The Interim Servicer shall deposit in the Custodial Account within
24 hours of receipt, and retain therein the following payments and collections
received by it subsequent to the Cut-off Date, or received by it prior to the
Cut-off Date but allocable to a period subsequent thereto, other than in respect
of principal and interest on the Mortgage Loans due on or before the Cut-off
Date:
(i) all payments on account of principal on the Mortgage Loans
including any Principal Prepayments and any prepayment
penalties or premiums;
(ii) all payments on account of interest on the Mortgage Loans;
(iii) all Liquidation Proceeds;
(iv) all Insurance Proceeds including amounts required to be
deposited pursuant to Subsections 11.10 and 11.11, other than proceeds to be
held in the Escrow Account and applied
Exhibit 9-3
<PAGE>
to the restoration or repair of the Mortgaged Property or released to the
Mortgagor in accordance with the Interim Servicer's normal servicing procedures,
the loan documents or applicable law;
(v) all Condemnation Proceeds affecting any Mortgaged Property which
are not released to the Mortgagor in accordance with the Interim Servicer's
normal servicing procedures, the loan documents or applicable law;
(vi) all proceeds of any Mortgage Loan repurchased in accordance
with Subsections 7.03 and 7.04 and all amounts required to be deposited by the
Seller in connection with shortfalls in principal amount of Qualified Substitute
Mortgage Loans pursuant to Subsection 7.03;
(vii) any amounts required to be deposited by the Interim Servicer
pursuant to Subsection 11.11 in connection with the deductible clause in any
blanket hazard insurance policy. Such deposit shall be made from the Interim
Servicer's own funds, without reimbursement therefor;
(viii) any amounts required to be deposited by the Interim Servicer
in connection with any REO Property pursuant to Subsection 11.13; and
(ix) any amounts required to be deposited in the Custodial Account
pursuant to Subsections 11.19 or 11.20.
The foregoing requirements for deposit in the Custodial Account shall be
exclusive, it being understood and agreed that, without limiting the generality
of the foregoing, payments in the nature of late payment charges, assumption
fees, to the extent permitted by Subsection 11.01, and the Interim Servicing Fee
as permitted by Section 11.21, need not be deposited by the Interim Servicer in
the Custodial Account. Such Custodial Account shall be an Eligible Account. Any
interest or earnings on funds deposited in the Custodial Account by the
depository institution shall accrue to the benefit of the Purchaser. The Interim
Servicer shall give notice to the Purchaser of the location of the Custodial
Account when established and prior to any change thereof.
Subsection 11.05 Permitted Withdrawals From the Custodial Account.
The Purchaser, as owner of the Custodial Account, shall be entitled to
withdraw any and all funds deposited in the Custodial Account as owner thereto.
All withdrawals from the Custodial Account shall be made by the Purchaser and
the Interim Servicer shall have no withdrawal rights with respect thereto.
Simultaneously with the delivery of the Remittance Report, the Interim
Servicer shall deliver an invoice to the Purchaser, along with reasonable
documentation, requesting payment for the following:
(i) to pay the Interim Servicer for unreimbursed Servicing Advances, the
Interim Servicer's right to payment pursuant to this subclause (i) with respect
to any Mortgage Loan being limited to related Liquidation Proceeds, Condemnation
Proceeds, Insurance Proceeds and such other amounts as may be collected by the
Interim Servicer from the Mortgagor or otherwise relating to the
Exhibit 9-4
<PAGE>
Mortgage Loan, it being understood that, in the case of such reimbursement, the
Interim Servicer's right thereto shall be prior to the rights of the Purchaser,
except that, where the Interim Servicer is required to repurchase a Mortgage
Loan, pursuant to Subsection 7.03, the Interim Servicer's right to such payment
shall be subsequent to the payment to the Purchaser of the Repurchase Price
pursuant to Subsection 7.03 and all other amounts required to be paid to the
Purchaser with respect to such Mortgage Loans;
(ii) to pay the Interim Servicer with respect to each Mortgage Loan that
has been repurchased pursuant to Subsection 7.03 all amounts received thereon
and not distributed as of the date on which the related Repurchase Price is
determined; and
(iii) to pay, or to reimburse the Interim Servicer for advances in respect
of, expenses incurred in connection with any Mortgage Loan pursuant to
Subsection 11.03(b), but only to the extent of amounts received in respect of
the Mortgage Loans to which such expense is attributable.
Absent a good faith dispute on the amount set forth on such invoice, the
Purchaser shall remit to the Interim Servicer the amount specified in such
invoice within five (5) Business Days of receipt thereof by the Purchaser.
In the event that any amount is mistakenly deposited into the Custodial
Account by the Interim Servicer, the Purchaser shall withdraw such amount from
the Custodial Account and remit it to the Interim Servicer as quickly as
possible, and if possible on the date the Purchaser receives notification from
the Interim Servicer of such mistaken deposit.
Subsection 11.06 Establishment of Escrow Accounts; Deposits in Escrow
Accounts.
The Interim Servicer shall segregate and hold all funds collected and
received pursuant to each Mortgage Loan which constitute Escrow Payments
separate and apart from any of its own funds and general assets and shall
establish and maintain one or more Escrow Accounts, in the form of time deposit
or demand accounts. The creation of any Escrow Account shall be evidenced by
Escrow Account Letter Agreement in the form of Exhibit 8.
The Interim Servicer shall deposit in the Escrow Account or Accounts
within 24 hours of receipt, and retain therein, (i) all Escrow Payments
collected on account of the Mortgage Loans, for the purpose of effecting timely
payment of any such items as required under the terms of this Agreement, and
(ii) all Insurance Proceeds which are to be applied to the restoration or repair
of any Mortgaged Property. The Interim Servicer shall make withdrawals therefrom
only to effect such payments as are required under this Agreement, and for such
other purposes as shall be as set forth or in accordance with Subsection 11.08.
The Interim Servicer shall be entitled to retain any interest paid on funds
deposited in the Escrow Account by the depository institution other than
interest on escrowed funds required by law to be paid to the Mortgagor and, to
the extent required by law, the Interim Servicer shall pay interest on escrowed
funds to the Mortgagor notwithstanding that the Escrow Account is non-interest
bearing or that interest paid thereon is insufficient for such purposes.
Exhibit 9-5
<PAGE>
Subsection 11.07 Permitted Withdrawals From Escrow Account.
Withdrawals from the Escrow Account may be made by the Interim Servicer
(i) to effect timely payments of ground rents, taxes, assessments, water rates,
hazard insurance premiums and comparable items, (ii) to reimburse the Interim
Servicer for any Servicing Advance made by the Interim Servicer with respect to
a related Mortgage Loan but only from amounts received on the related Mortgage
Loan which represent late payments or collections of Escrow Payments thereunder,
(iii) to refund to the Mortgagor any funds as may be determined to be overages,
(iv) for transfer to the Custodial Account in accordance with the terms of this
Agreement, (v) for application to restoration or repair of the Mortgaged
Property, (vi) to pay to the Interim Servicer, or to the Mortgagor to the extent
required by law, any interest paid on the funds deposited in the Escrow Account,
or (vii) to clear and terminate the Escrow Account on the termination of this
Agreement.
Subsection 11.08 Payment of Taxes, Insurance and Other Charges.
With respect to each Mortgage Loan, the Interim Servicer shall maintain
accurate records reflecting the status of ground rents, taxes, assessments,
water rates and other charges which are or may become a lien upon the Mortgaged
Property and the status of fire and hazard insurance coverage and shall obtain,
from time to time, all bills for the payment of such charges, including
insurance renewal premiums and shall effect payment thereof prior to the
applicable penalty or termination date and at a time appropriate for securing
maximum discounts allowable, employing for such purpose deposits of the
Mortgagor in the Escrow Account which shall have been estimated and accumulated
by the Interim Servicer in amounts sufficient for such purposes, as allowed
under the terms of the Mortgage and applicable law. To the extent that the
Mortgage does not provide for Escrow Payments, the Interim Servicer shall
determine that any such payments are made by the Mortgagor at the time they
first become due. The Interim Servicer assumes full responsibility for the
timely payment of all such bills and shall effect timely payments of all such
bills irrespective of the Mortgagor's faithful performance in the payment of
same or the making of the Escrow Payments and shall make advances from its own
funds to effect such payments.
Upon the termination of the Interim Servicing Period or the transfer of
servicing with respect to any Mortgage Loan, the successor servicer shall
reimburse the Interim Servicer for amounts the Interim Servicer actually
expended as interim servicer pursuant to this Agreement for which the Interim
Servicer would have otherwise been entitled to be reimbursed and which would
otherwise have been recovered by the Interim Servicer pursuant to this Agreement
but for the appointment of the successor servicer.
Subsection 11.09 Transfer of Accounts.
The Interim Servicer may transfer the Custodial Account or the Escrow
Account to a different depository institution from time to time. Such transfer
shall be made only upon obtaining the consent of the Purchaser, which consent
shall not be unreasonably withheld. In any case, the Custodial Account and
Escrow Account shall be Eligible Accounts.
Exhibit 9-6
<PAGE>
Subsection 11.10 Maintenance of Hazard Insurance.
The Interim Servicer shall cause to be maintained for each Mortgage Loan
fire and hazard insurance with extended coverage as is customary in the area
where the Mortgaged Property is located in an amount which is at least equal to
the lesser of (i) the amount necessary to fully compensate for any damage or
loss to the improvements which are a part of such property on a replacement cost
basis or (ii) the outstanding principal balance of the Mortgage Loan, in each
case in an amount not less than such amount as is necessary to prevent the
Mortgagor and/or the Mortgagee from becoming a co-insurer. If the Mortgaged
Property is in an area identified on a Flood Hazard Boundary Map or Flood
Insurance Rate Map issued by the Flood Emergency Management Agency as having
special flood hazards and such flood insurance has been made available, the
Interim Servicer will cause to be maintained a flood insurance policy meeting
the requirements of the current guidelines of the Federal Insurance
Administration with a generally acceptable insurance carrier, in an amount
representing coverage not less than the lesser of (i) the outstanding principal
balance of the Mortgage Loan or (ii) the maximum amount of insurance which is
available under the National Flood Insurance Act of 1968 or the Flood Disaster
Protection Act of 1973, as amended. The Interim Servicer also shall maintain on
any REO Property, fire and hazard insurance with extended coverage in an amount
which is at least equal to the lesser of (i) the maximum insurable value of the
improvements which are a part of such property and (ii) either (A) the
outstanding principal balance of the related Mortgage Loan at the time it became
an REO Property plus accrued interest at the Mortgage Interest Rate and related
Servicing Advances with respect to each First Lien Mortgage Loan or (B) with
respect to each Second Lien Mortgage Loan, the sum of the outstanding principal
balance of the First Lien Mortgage Loan and the outstanding principal balance of
the Second Lien Mortgage Loan plus accrued interest at the Mortgage Interest
Rate and related Servicing Advances, liability insurance and, to the extent
required and available under the National Flood Insurance Act of 1968 or the
Flood Disaster Protection Act of 1973, as amended, flood insurance in an amount
as provided above. Pursuant to Subsection 11.04, any amounts collected by the
Interim Servicer under any such policies other than amounts to be deposited in
the Escrow Account and applied to the restoration or repair of the Mortgaged
Property or REO Property, or released to the Mortgagor in accordance with the
Interim Servicer's normal servicing procedures, shall be deposited in the
Custodial Account. Any cost incurred by the Interim Servicer in maintaining any
such insurance shall not, for the purpose of calculating distributions to the
Purchaser, be added to the unpaid principal balance of the related Mortgage
Loan, notwithstanding that the terms of such Mortgage Loan so permit. It is
understood and agreed that no earthquake or other additional insurance need be
required by the Interim Servicer of the Mortgagor or maintained on property
acquired in respect of the Mortgage Loan, other than pursuant to such applicable
laws and regulations as shall at any time be in force and as shall require such
additional insurance. All such policies shall be endorsed with standard
mortgagee clauses with loss payable to the Interim Servicer, or upon request to
the Purchaser, and shall provide for at least thirty days prior written notice
of any cancellation, reduction in the amount of, or material change in, coverage
to the Interim Servicer. The Interim Servicer shall not interfere with the
Mortgagor's freedom of choice in selecting either his insurance carrier or
agent, provided, however, that the Interim Servicer shall not accept any such
insurance policies from insurance companies unless such
Exhibit 9-7
<PAGE>
companies currently reflect a General Policy Rating of A:VI or better in Best's
Key Rating Guide and are licensed to do business in the state wherein the
property subject to the policy is located.
Subsection 11.11 Maintenance of Mortgage Impairment Insurance Policy.
In the event that the Interim Servicer shall obtain and maintain a
mortgage impairment or blanket policy issued by an insurer that has a Best
rating of A:VI insuring against hazard losses on all of Mortgaged Properties
securing the Mortgage Loans, then, to the extent such policy provides coverage
in an amount equal to the amount required pursuant to Subsection 11.10 and
otherwise complies with all other requirements of Subsection 11.10, the Interim
Servicer shall conclusively be deemed to have satisfied its obligations as set
forth in Subsection 11.10, it being understood and agreed that such policy may
contain a deductible clause, in which case the Interim Servicer shall, in the
event that there shall not have been maintained on the related Mortgaged
Property or REO Property a policy complying with Subsection 11.10, and there
shall have been one or more losses which would have been covered by such policy,
deposit in the Custodial Account the amount not otherwise payable under the
blanket policy because of such deductible clause. In connection with its
activities as servicer of the Mortgage Loans, the Interim Servicer agrees to
prepare and present, on behalf of the Purchaser, claims under any such blanket
policy in a timely fashion in accordance with the terms of such policy. Upon
request of the Purchaser, the Interim Servicer shall cause to be delivered to
the Purchaser a certified true copy of such policy and a statement from the
insurer thereunder that such policy shall in no event be terminated or
materially modified without thirty days prior written notice to the Purchaser.
Subsection 11.12 Fidelity Bond, Errors and Omissions Insurance.
The Interim Servicer shall maintain, at its own expense, a blanket
fidelity bond and an errors and omissions insurance policy, with broad coverage
with responsible companies that would meet the requirements of Fannie Mae or
Freddie Mac on all officers, employees or other persons acting in any capacity
with regard to the Mortgage Loans to handle funds, money, documents and papers
relating to the Mortgage Loans. The fidelity bond and errors and omissions
insurance shall be in the form of the Mortgage Banker's Blanket Bond and shall
protect and insure the Interim Servicer against losses, including forgery,
theft, embezzlement, fraud, errors and omissions and negligent acts of such
persons. Such fidelity bond shall also protect and insure the Interim Servicer
against losses in connection with the failure to maintain any insurance policies
required pursuant to this Agreement and the release or satisfaction of a
Mortgage Loan without having obtained payment in full of the indebtedness
secured thereby. No provision of this Subsection 11.12 requiring the fidelity
bond and errors and omissions insurance shall diminish or relieve the Interim
Servicer from its duties and obligations as set forth in this Agreement. The
minimum coverage under any such bond and insurance policy shall be at least
equal to the corresponding amounts required by Fannie Mae in the Fannie Mae
Servicing Guide or by Freddie Mac in the Freddie Mac Interim Servicers' and
Servicers' Guide. Upon request of the Purchaser, the Interim Servicer shall
cause to be delivered to the Purchaser a certified true copy of the fidelity
bond and insurance policy and a statement from the surety and the insurer that
such fidelity bond or insurance policy shall in no event be terminated or
materially modified without thirty days' prior written notice to the Purchaser.
Exhibit 9-8
<PAGE>
Subsection 11.13 Title, Management and Disposition of REO Property.
In the event that title to the Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be taken in the name of the person designated by the Purchaser, or in the
event such person is not authorized or permitted to hold title to real property
in the state where the REO Property is located, or would be adversely affected
under the "doing business" or tax laws of such state by so holding title, the
deed or certificate of sale shall be taken in the name of such Person or Persons
as shall be consistent with an opinion of counsel obtained by the Interim
Servicer from an attorney duly licensed to practice law in the state where the
REO Property is located. Any Person or Persons holding such title other than the
Purchaser shall acknowledge in writing that such title is being held as nominee
for the benefit of the Purchaser.
The Interim Servicer shall either itself or through an agent selected by
the Interim Servicer, manage, conserve, protect and operate each REO Property
(and may temporarily rent the same) in the same manner that it manages,
conserves, protects and operates other foreclosed property for its own account,
and in the same manner that similar property in the same locality as the REO
Property is managed. The Interim Servicer shall cause each REO Property to be
inspected promptly upon the acquisition of title thereto and shall cause each
REO Property to be inspected at least annually thereafter. The Interim Servicer
shall make or cause to be made a written report of each such inspection. Such
reports shall be retained in the Mortgage File and copies thereof shall be
forwarded by the Interim Servicer to the Purchaser. The Interim Servicer shall
use its best efforts to dispose of the REO Property as soon as possible and
shall sell such REO Property in any event within one year after title has been
taken to such REO Property, unless the Interim Servicer determines, and gives
appropriate notice to the Purchaser, that a longer period is necessary for the
orderly liquidation of such REO Property. If a period longer than one year is
necessary to sell any REO property, (i) the Interim Servicer shall report
monthly to the Purchaser as to the progress being made in selling such REO
Property and (ii) if, with the written consent of the Purchaser, a purchase
money mortgage is taken in connection with such sale, such purchase money
mortgage shall name the Interim Servicer as mortgagee, and a separate servicing
agreement between the Interim Servicer and the Purchaser shall be entered into
with respect to such purchase money mortgage.
The Interim Servicer shall deposit or cause to be deposited, within twenty
four (24) hours of receipt, in the Custodial Account all revenues received with
respect to the related REO Property and shall advance funds necessary for the
proper operation, management and maintenance of the REO Property, including the
cost of maintaining any hazard insurance pursuant to Subsection 11.10 hereof and
the fees of any managing agent acting on behalf of the Interim Servicer. The
Purchaser shall reimburse any such advance pursuant to Subsection 11.05. The
Interim Servicer shall separately account for each REO Property and any amounts
received with respect thereto.
The Interim Servicer shall furnish to the Purchaser on the fifteenth
calendar day of each month or the next following Business Day if such fifteenth
day is not a Business Day, an operating statement for each REO Property covering
the operation of each REO Property for the previous month. Such operating
statement shall be accompanied by such other information as the Purchaser shall
reasonably request.
Exhibit 9-9
<PAGE>
Each REO Disposition shall be carried out by the Interim Servicer at such
price and upon such terms and conditions as the Interim Servicer deems to be in
the best interest of the Purchaser only with the prior written consent of the
Purchaser. If as of the date title to any REO Property was acquired by the
Interim Servicer there were outstanding unreimbursed Servicing Advances with
respect to the REO Property, the Interim Servicer, upon an REO Disposition of
such REO Property, shall be entitled to reimbursement for any related
unreimbursed Servicing Advances from proceeds received in connection with such
REO Disposition. The proceeds from the REO Disposition shall be deposited in the
Custodial Account within twenty four hours of receipt and the Purchaser shall
thereafter reimburse such unreimbursed Servicing Advances to the Interim
Servicer.
Subsection 11.14 [Reserved]
Subsection 11.15 Remittance Reports.
No later than the fifteenth calendar day of each month or the next
following Business Day if such 15th calendar day is not a Business Day, the
Interim Servicer shall furnish to the Purchaser or its designee in electronic
form, and by hard copy, the monthly data for the prior month in form and
substance acceptable to the Purchaser, together with such other information with
respect to the Mortgage Loans as the Purchaser may reasonably require to
allocate distributions made pursuant to this Agreement and provide appropriate
statements with respect to such distributions.
Subsection 11.16 Statements to the Purchaser.
Upon request of the Purchaser, and not later than the fifteenth day of
each month, the Interim Servicer shall forward to the Purchaser or its designee
a statement prepared by the Interim Servicer setting forth the status of the
Custodial Account as of the close of business on such date and showing, for the
period covered by such statement, the aggregate amount of deposits into the
Custodial Account of each category of deposit specified in Subsection 11.04.
Subsection 11.17 Real Estate Owned Reports.
Together with the statement furnished pursuant to Subsection 11.02, with
respect to any REO Property, the Interim Servicer shall furnish to the Purchaser
a statement covering the Interim Servicer's efforts in connection with the sale
of such REO Property and any rental of such REO Property incidental to the sale
thereof for the previous month, together with the operating statement. Such
statement shall be accompanied by such other information as the Purchaser shall
reasonably request.
Subsection 11.18 Liquidation Reports.
Upon the foreclosure sale of any Mortgaged Property or the acquisition
thereof by the Purchaser pursuant to a deed-in-lieu of foreclosure, the Interim
Servicer shall submit to the Purchaser a liquidation report with respect to such
Mortgaged Property.
Exhibit 9-10
<PAGE>
Subsection 11.19 Assumption Agreements.
The Interim Servicer shall, to the extent it has knowledge of any
conveyance or prospective conveyance by any Mortgagor of the Mortgaged Property
(whether by absolute conveyance or by contract of sale, and whether or not the
Mortgagor remains or is to remain liable under the Mortgage Note and/or the
Mortgage), exercise its rights to accelerate the maturity of such Mortgage Loan
under any "due-on-sale" clause applicable thereto; provided, however, that the
Interim Servicer shall not exercise any such rights if prohibited by law from
doing so. If the Interim Servicer reasonably believes it is unable under
applicable law to enforce such "due-on-sale" clause, the Interim Servicer shall
enter into an assumption agreement with the person to whom the Mortgaged
Property has been conveyed or is proposed to be conveyed, pursuant to which such
person becomes liable under the Mortgage Note and, to the extent permitted by
applicable state law, the Mortgagor remains liable thereon. Where an assumption
is allowed pursuant to this Subsection 11.01, the Interim Servicer is authorized
to enter into a substitution of liability agreement with the person to whom the
Mortgaged Property has been conveyed or is proposed to be conveyed pursuant to
which the original Mortgagor is released from liability and such Person is
substituted as Mortgagor and becomes liable under the related Mortgage Note. Any
such substitution of liability agreement shall be in lieu of an assumption
agreement.
In connection with any such assumption or substitution of liability, the
Interim Servicer shall follow the underwriting practices and procedures of
prudent mortgage lenders in the state in which the related Mortgaged Property is
located and Accepted Servicing Practices. With respect to an assumption or
substitution of liability, Mortgage Interest Rate, the amount of the Monthly
Payment, and the final maturity date of such Mortgage Note may not be changed.
The Interim Servicer shall notify the Purchaser that any such substitution of
liability or assumption agreement has been completed by forwarding to the
Purchaser the original of any such substitution of liability or assumption
agreement, which document shall be added to the related Mortgage File and shall,
for all purposes, be considered a part of such Mortgage File to the same extent
as all other documents and instruments constituting a part thereof.
Notwithstanding the foregoing paragraphs of this Subsection or any other
provision of this Agreement, the Interim Servicer shall not be deemed to be in
default, breach or any other violation of its obligations hereunder by reason of
any assumption of a Mortgage Loan by operation of law or any assumption which
the Interim Servicer may be restricted by law from preventing, for any reason
whatsoever. For purposes of this Subsection 11.19, the term "assumption" is
deemed to also include a sale of the Mortgaged Property subject to the Mortgage
that is not accompanied by an assumption or substitution of liability agreement.
Subsection 11.20 Satisfaction of Mortgages and Release of Mortgage Files.
Upon the payment in full of any Mortgage Loan, or the receipt by the
Interim Servicer of a notification that payment in full will be escrowed in a
manner customary for such purposes the Interim Servicer will act in accordance
with Accepted Servicing Practices. In addition, upon the request of the
Purchaser at any time, the Interim Servicer shall notify the Purchaser of any
Mortgage
Exhibit 9-11
<PAGE>
Loans which have been paid in full or as to which the Interim Servicer has
received notification that a payoff in full will be made. Upon request by the
Interim Servicer, the Purchaser, shall promptly release the related mortgage
documents to the Interim Servicer and the Interim Servicer shall prepare and
process any satisfaction or release. No expense incurred in connection with any
instrument of satisfaction or deed of reconveyance shall be chargeable to the
Custodial Account or the Purchaser.
In the event the Interim Servicer satisfies or releases a Mortgage without
having obtained payment in full of the indebtedness secured by the Mortgage or
should it otherwise prejudice any right the Purchaser may have under the
mortgage instruments, the Interim Servicer, upon written demand, shall remit to
the Purchaser the then outstanding principal balance of the related Mortgage
Loan by deposit thereof in the Custodial Account. The Interim Servicer shall
maintain the fidelity bond insuring the Interim Servicer against any loss it may
sustain with respect to any Mortgage Loan not satisfied in accordance with the
procedures set forth herein.
From time to time and as appropriate for the servicing or foreclosure of
the Mortgage Loan the Purchaser shall, upon request of the Interim Servicer and
delivery to the Purchaser of a servicing receipt signed by a Servicing Officer,
release the requested portion of the Mortgage File held by the Purchaser to the
Interim Servicer. Such servicing receipt shall obligate the Interim Servicer to
return the related Mortgage documents to the Purchaser when the need therefor by
the Interim Servicer no longer exists, unless the Mortgage Loan has been
liquidated and the Liquidation Proceeds relating to the Mortgage Loan have been
deposited in the Custodial Account or the Mortgage File or such document has
been delivered to an attorney, or to a public trustee or other public official
as required by law, for purposes of initiating or pursuing legal action or other
proceedings for the foreclosure of the Mortgaged Property either judicially or
non-judicially, and the Interim Servicer has delivered to the Purchaser a
certificate of a Servicing Officer certifying as to the name and address of the
Person to which such Mortgage File or such document was delivered and the
purpose or purposes of such delivery. Upon receipt of a certificate of a
Servicing Officer stating that such Mortgage Loan was liquidated, the servicing
receipt shall be released by the Purchaser to the Interim Servicer.
Subsection 11.21 Servicing Compensation.
As compensation for its services hereunder, the Interim Servicer
shall be entitled to retain from interest payments on the Mortgage Loans the
amounts provided for as the Interim Servicing Fee for such calendar month. The
Interim Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder and shall not be entitled to
reimbursement therefor except as specifically provided for.
Subsection 11.22 Notification of Adjustments.
On each Adjustment Date, the Interim Servicer shall make interest
rate adjustments for each Adjustable Rate Mortgage Loan in compliance with the
requirements of the related Mortgage and Mortgage Note. The Interim Servicer
shall execute and deliver the notices required by each Mortgage and Mortgage
Note regarding interest rate adjustments. The Interim Servicer also shall
provide timely notification to the Purchaser of all applicable data and
information regarding such
Exhibit 9-12
<PAGE>
interest rate adjustments and the Interim Servicer's methods of implementing
such interest rate adjustments. Upon the discovery by the Interim Servicer or
the Purchaser that the Interim Servicer has failed to adjust a Mortgage Interest
Rate or a Monthly Payment pursuant to the terms of the related Mortgage Note and
Mortgage, the Interim Servicer shall immediately deposit in the Custodial
Account from its own funds the amount of any interest loss caused thereby
without reimbursement therefor.
Subsection 11.23 Statement as to Compliance.
The Interim Servicer will deliver to the Purchaser not later than 90
days following the end of each fiscal year of the Interim Servicer, which as of
the Closing Date ends on the last day in December in each calendar year, an
Officers' Certificate stating, as to each signatory thereof, that (i) a review
of the activities of the Interim Servicer during the preceding year and of
performance under this Agreement has been made under such officers' supervision
and (ii) to the best of such officers' knowledge, based on such review, the
Interim Servicer has fulfilled all of its obligations under this Agreement
throughout such year, or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officer and the
nature and status thereof. Copies of such statement shall be provided by the
Purchaser to any Person identified as a prospective purchaser of the Mortgage
Loans.
Subsection 11.24 Independent Public Accountants' Servicing Report.
Not later than 90 days following the end of each fiscal year of the
Interim Servicer, the Interim Servicer at its expense shall cause a firm of
independent public accountants (which may also render other services to the
Interim Servicer) which is a member of the American Institute of Certified
Public Accountants to furnish a statement to the Purchaser or its designee to
the effect that such firm has examined certain documents and records relating to
the servicing of the Mortgage Loans under this Agreement or of mortgage loans
under pooling and servicing agreements (including the Mortgage Loans and this
Agreement) substantially similar one to another (such statement to have attached
thereto a schedule setting forth the pooling and servicing agreements covered
thereby) and that, on the basis of such examination conducted substantially in
compliance with the Uniform Single Attestation Program for Mortgage Bankers,
such firm confirms that such servicing has been conducted in compliance with
such pooling and servicing agreements except for such significant exceptions or
errors in records that, in the opinion of such firm, the Uniform Single
Attestation Program for Mortgage Bankers requires it to report. Copies of such
statement shall be provided by the Purchaser to any Person identified as a
prospective purchaser of the Mortgage Loans.
Subsection 11.25 Access to Certain Documentation.
The Interim Servicer shall provide to the Office of Thrift
Supervision, the FDIC and any other federal or state banking or insurance
regulatory authority that may exercise authority over the Purchaser access to
the documentation regarding the Mortgage Loans serviced by the Interim Servicer
required by applicable laws and regulations. Such access shall be afforded
without charge, but only upon reasonable request and during normal business
hours at the offices of the Interim
Exhibit 9-13
<PAGE>
Servicer. In addition, access to the
documentation will be provided to the Purchaser and any Person identified to the
Interim Servicer by the Purchaser without charge, upon reasonable request during
normal business hours at the offices of the Interim Servicer.
Subsection 11.26 Reports and Returns to be Filed by Interim
Servicer.
The Interim Servicer shall comply with Code rules and regulations
and other applicable laws and prepare and report information, statements or
other filings required to be delivered to any governmental taxing authority or
to any Purchaser pursuant to any applicable law with respect to the Mortgage
Loans and the transactions contemplated hereby in accordance with Accepted
Servicing Practices. In addition, the Interim Servicer shall provide the
Purchaser with such information concerning the Mortgage Loans as is necessary
for the Purchaser to prepare its federal income tax return as any Purchaser may
reasonably request from time to time.
In accordance with Accepted Servicing Practices, the Interim
Servicer shall file information reports with respect to the receipt of mortgage
interest received in a trade or business, reports of foreclosures and
abandonments of any Mortgaged Property and information returns relating to
cancellation of indebtedness income with respect to any Mortgaged Property.
Exhibit 9-14
<PAGE>
EXHIBIT 10
FORM OF CONFIRMATION
Greenwich Capital Financial Products, Inc.
600 Steamboat Road
Greenwich, Connecticut 06830
____ __, 1999
ContiFinancial Corporation
277 Park Avenue
New York, New York 10172
Attention: _____________
Re: Purchase of Fixed and Adjustable Rate Mortgage
Loans by Greenwich Capital Financial Products, Inc.
Ladies and Gentlemen:
Greenwich Capital Financial Products, Inc. ("Greenwich") hereby
confirms our agreement to purchase and your agreement to sell, pursuant to the
terms of that certain Master Mortgage Loan Purchase Facility dated as August 9,
1999 among Contimortgage Corporation, you and Greenwich (the "Agreement") on a
mandatory delivery basis, and without recourse (subject to the express terms of
the Agreement), the fixed and adjustable rate mortgage loans identified on
Exhibit A hereto (the "Mortgage Loans") having an aggregate unpaid principal
balance as of the Settlement Date (herein defined) of $_____________, after
application of principal payments made or due, and whether or not collected, on
or before the Settlement Date. The settlement will occur on or before ____ __,
199_ (the "Settlement Date") and the Cut-off Date shall be _____ __ , 199_ (the
"Cut-off Date"). The terms and provisions of the agreement for the purchase and
sale of the Mortgage Loans are as described below.
1. Terms of this Commitment: The Mortgage Loans are to be sold in a
whole loan format on a servicing-released basis. At the option of and pursuant
to criteria established by Greenwich, the Mortgage Loans may be divided into two
or more groups (each group individually, a "Loan Package") and in such event the
purchase and sale of each Loan Package will be separately documented if
requested by Greenwich. At your expense, and as a condition to the closing on
the Settlement Date, the original mortgage notes properly endorsed, mortgages,
modification, extension and/or assumption agreements, assignments of mortgage,
intervening assignments of mortgage, title insurance policies and mortgage
insurance policies shall be delivered to Manufacturers and Traders Trust Company
(the "Custodian"), at least three (3) business days prior to the Settlement Date
("Delivery Date").
<PAGE>
2. The Mortgage Loans: On the Settlement Date, the Mortgage Loans
shall have a weighted average gross coupon of _________%, and shall comply with
the characteristics described on Exhibit B hereto and in this Section 2. The
Mortgage Loans will be fixed and adjustable rate mortgage loans, payable
monthly.
As of the Closing Date the Mortgage Loans shall comply with the
terms and conditions of the Agreement.
3. Servicing of the Mortgage Loans: The Mortgage Loans will be
interim serviced by you in accordance with the terms and provisions of the
Agreement.
4. Purchase Price: The purchase price for the Mortgage Loans shall
be [as set forth in the Agreement][as set forth in the attached pricing
schedule].
5. Underwriting; Review of the Mortgage Loan Files: With respect to
each Mortgage Loan, you shall make all documents and instruments relating to
each Mortgage Loan (the "Mortgage Files"), available for review in accordance
with the terms of the Agreement.
6. Original Mortgage Loan Documents. For the purpose of expediting
Greenwich's review of the Mortgage Loan legal files, prior to the Closing Date
you will deliver to the Custodian, as bailee, the original mortgage notes,
mortgages/deeds of trust, Assignments, title policies and other loan documents
(the "Loan Documents") required to be delivered pursuant to the Agreement and in
the form required pursuant to the Agreement. Greenwich is under no obligation to
purchase any Mortgage Loan for which there is incomplete or missing
documentation material as to the enforceability of the Mortgage Loan. Upon
payment of the purchase price, the Custodian shall release the Loan Documents to
Greenwich. Subsequent to such release, the Loan Documents shall be retained by
the Custodian for the benefit of Greenwich pursuant to the Custodial Agreement.
7. Mandatory Delivery: The sale and delivery of all of the Mortgage
Loans on the Settlement Date is mandatory, it being specifically understood and
agreed that each Mortgage Loan is unique and identifiable on the date hereof and
that an award of money damages would be insufficient to compensate Greenwich for
the losses and damages incurred by Greenwich (including damages to prospective
purchasers of the Mortgage Loans) in the event of your failure to deliver each
of the Mortgage Loans or one or more Mortgage Loans otherwise acceptable to
Greenwich on or before the Settlement Date.
8. Intention of the Parties. It is the intention of the parties that
Greenwich is purchasing, and you are selling, the Mortgage Loans and not a debt
instrument of you or any other security. Accordingly, each party intends to
treat the transaction for federal income tax purposes as a sale by you, and a
purchase by Greenwich, of the Mortgage Loans and will be held consistent with
the classification of such arrangement as a grantor trust in the event that it
is not found to represent direct ownership of the related Mortgage Loans. Prior
to the Closing Date, Greenwich shall have the right to review the Mortgage Loans
and the related Loan Documents to determine the characteristics of the Mortgage
Loans which will affect the federal income tax consequences
Exhibit 10-2
<PAGE>
of owning the Mortgage Loans. You shall cooperate with all reasonable requests
made by Greenwich in the course of such review.
This letter and the Agreement contains the entire agreement relating
to the subject matter hereof between us and supersedes any prior oral or written
agreement between us. This letter may only be amended by a written document
signed by both of us. This letter shall become part of the Agreement. This
letter shall be governed in accordance with the laws of the state of New York,
without regard to conflict of laws rules.
<PAGE>
Please confirm that the foregoing specifies the terms of our
agreement by signing and returning the enclosed copy of this letter by ____ __,
199__ to Greenwich Capital Financial Products, Inc., 600 Steamboat Road,
Greenwich, Connecticut 06830, Attention: Anthony Palmisano. Greenwich, at its
option, may terminate this transaction and have no further obligations in
connection with the transaction herein described if you have failed to
acknowledge this agreement by such date.
Very truly yours,
GREENWICH CAPITAL FINANCIAL PRODUCTS,
INC.
By:________________________________
Name:______________________________
Title:_____________________________
Confirmed and Agreed to:
CONTIFINANCIAL CORPORATION
By:___________________________
Name:_________________________
Title:________________________
By:___________________________
Name:_________________________
Title:________________________
<PAGE>
EXHIBIT A
Mortgage Loan Schedule
<PAGE>
EXHIBIT B
Mortgage Loan Characteristics
<PAGE>
EXHIBIT 11
BUY-UP/BUY-DOWN SCHEDULE
<PAGE>
EXHIBIT 12
UNDERWRITING GUIDELINES
<PAGE>
EXHIBIT 13
MODIFICATIONS TO UNDERWRITING GUIDELINES
1. No loans to facilitate REO or to rewrite loans delinquent more than 60
days.
2. Homes listed for sale are not eligible for refinancing transactions.
3. Property conditions must be average or better as reported by the appraiser
or as observable from photos in file.
4. No mixed use after 8/31/99.
5. Retention Loans must meet Underwriting Guidelines (as modified) except
that the appraisal may be up to 18 months old.
6. Purchase money transactions require verification of downpayment and
verification of source.
7. No escrow holdbacks for completion or repair of property.
8. If the proposed mortgagor owns the property under a land contract, the
appraised value used to compute the LTV for the proposed loan may not be
higher than the mortgagor's land contract purchase price unless it can be
demonstrated (via utility or tax invoices or otherwise) that the mortgagor
has owned the property for at least 12 months.
9. If credit is to be given for mortgagor payments under a lease option or
land contract, the payments must be independently verified via a source
other than the lessor or the seller under the land contract (e.g.,
cancelled checks).
Exhibit 13-1
<PAGE>
EXHIBIT 14
REPRESENTATIONS AND WARRANTIES
(i) The information with respect to each Mortgage Loan and the information
set forth in the related Mortgage Loans Schedule is true and correct as of the
Cut-off Date;
(ii) The Mortgage Note, the Mortgage, the Assignment of Mortgage and any
other documents required to be delivered with respect to each Mortgage Loan
pursuant to the Custodial Agreement, have been delivered to the Custodian all in
compliance with the specific requirements of the Custodial Agreement. With
respect to each Mortgage Loan, the Seller is in possession of a complete
Mortgage File in compliance with Exhibit 5, except for such documents as have
been delivered to the Custodian and except for the Servicing File, which has
been delivered to the Interim Servicer;
(iii) Each Mortgage Loan is an Eligible Mortgage Loan or an Exception Loan
within the applicable Exception Limit;
(iv) Each Mortgaged Property is improved by a Residential Dwelling. If the
Residential Dwelling on the Mortgaged Property is a condominium unit or a unit
in a planned unit development (other than a de minimis planned unit development)
such condominium or planned unit development project meets the eligibility
requirements of Fannie Mae and Freddie Mac;
(v) No Second Lien Mortgage Loan had a CLTV at origination equal to or
greater than 95%. No Mortgage Loan had a combined LTV (including the amount of
all liens senior to or subordinate to the lien of the related Mortgage) greater
than 100%;
(vi) Each Mortgage Note with respect to the Mortgage Loans will provide
for a schedule of substantially level and equal Monthly Payments which are
sufficient to amortize fully the principal balance of such Mortgage Note on or
before its maturity date. Unless stated on the Mortgage Loan Schedule, no
Mortgage Loan has a balloon payment feature;
(vii) As of the Closing Date, each Mortgage is a valid and subsisting
first lien on the Mortgaged Property with respect to each Mortgage Loan which is
indicated to be a First Lien (as reflected on the related Mortgage Loan
Schedule) or second lien on the Mortgaged Property with respect to each Mortgage
Loan which is indicated to be a Second Lien Mortgage Loan (as reflected on the
related Mortgage Loan Schedule) and subject in all cases to the exceptions to
title set forth in the title insurance policy or attorney's opinion of title
with respect to the related Mortgage Loan, which exceptions are generally
acceptable to banking institutions in connection with their regular mortgage
lending activities, and such other exceptions to which similar properties are
commonly subject and which do not individually, or in the aggregate, materially
and adversely affect the benefits of the security intended to be provided by
such Mortgage;
<PAGE>
(viii) Immediately prior to the transfer and assignment of the Mortgage
Loans, the Seller held good and indefeasible title to, and was the sole owner
of, each Mortgage Loan (including the related Mortgage Note) conveyed by such
Seller subject to no liens, charges, mortgages, encumbrances or rights of others
except as set forth in clause (vii) or other liens which will be released
simultaneously with such transfer and assignment; and immediately upon the
transfer and assignment herein contemplated, the Purchaser will hold good and
indefeasible title to, and be the sole owner of, each Mortgage Loan subject to
no liens, charges, mortgages, encumbrances or rights of others except as set
forth in paragraph (vii) or other liens which will be released simultaneously
with such transfer and assignment;
(ix) No payment required to be made on the Mortgage Loan is more than 29
days delinquent from its contractual Due Date as of the close of business on the
related Closing Date; the Seller has not advanced funds, or induced, solicited
or knowingly received any advance of funds from a party other than the owner of
the related Mortgaged Property, directly or indirectly, for the payment of any
amount required by the Mortgage Note or Mortgage; such Mortgage Loan was
originated no later than 60 days prior to the related Closing Date; and there
has been no delinquency, exclusive of any period of grace, in any payment by the
Mortgagor thereunder since origination;
(x) There is no delinquent tax or assessment lien on any Mortgaged
Property, and each Mortgaged Property is free of substantial damage and is in
good repair;
(xi) There is no valid and enforceable offset, defense or counterclaim to
any Mortgage Note or Mortgage, including the obligation of the related Mortgagor
to pay the unpaid principal of or interest on such Mortgage Note;
(xii) There is no mechanics' lien or claim for work, labor or material
affecting any Mortgaged Property which is or may be a lien prior to, or equal
with, the lien of the related Mortgage except those which are insured against by
any title insurance policy referred to in paragraph (xiv) below;
(xiii) Each Mortgage Loan at the time it was made complied in all material
respects with applicable state and federal laws and regulations, including,
without limitation, the federal Truth-in-Lending Act and other consumer
protection laws, usury, equal credit opportunity, disclosure and recording laws;
(xiv) With respect to each Mortgage Loan either (a) an attorney's opinion
of title has been obtained but no title policy has been obtained, or (b) a
lender's title insurance policy, issued in standard American Land Title
Association form by a title insurance company authorized to transact business in
the state in which the related Mortgaged Property is situated, in an amount at
least equal to the original balance of such Mortgage Loan, insuring the
mortgagee's interest under the related Mortgage Loan as the holder of a valid
first or second mortgage lien of record on the real property described in the
related Mortgage, subject only to exceptions of the character referred to in
paragraph (vii) above, was effective on the date of the origination of such
Mortgage Loan, and, as of the Closing Date, such policy is valid and thereafter
such policy shall continue in full force and effect;
<PAGE>
(xv) The improvements upon each Mortgaged Property are covered by a valid
and existing hazard insurance policy with a generally acceptable carrier that
provides for fire and extended coverage representing coverage not less than the
least of (A) the outstanding principal balance of the related Mortgage Loan
(together, in the case of a Second Lien Mortgage Loan, with the outstanding
principal balance of the Senior Lien), (B) the minimum amount required to
compensate for damage or loss on a replacement cost basis or (C) the full
insurable value of the Mortgaged Property;
(xvi) If any Mortgaged Property is in an area identified in the Federal
Register by the Federal Emergency Management Agency as having special flood
hazards, a flood insurance policy in a form meeting the requirements of the
current guidelines of the Flood Insurance Administration is in effect with
respect to such Mortgaged Property with a generally acceptable carrier in an
amount representing coverage not less than the least of (A) the outstanding
principal balance of the related Mortgage Loan (together, in the case of a
Second Lien Mortgage Loan, with the outstanding principal balance of the Senior
Lien), (B) the minimum amount required to compensate for damage or loss on a
replacement cost basis or (C) the maximum amount of insurance that is available
under the Flood Disaster Protection Act of 1973;
(xvii) Each Mortgage and Mortgage Note is the legal, valid and binding
obligation of the maker thereof and is enforceable in accordance with its terms,
except only as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
considered in a proceeding or action in equity or at law), and all parties to
each Mortgage Loan had full legal capacity to execute all documents relating to
such Mortgage Loan and convey the estate therein purported to be conveyed;
(xviii) The Seller has caused and will cause to be performed any and all
acts required to be performed to preserve the rights and remedies of the
Purchaser in any insurance policies applicable to any Mortgage Loans including,
without limitation, any necessary notifications of insurers, assignments of
policies or interests therein, and establishments of co-insured, joint loss
payee and mortgagee rights in favor of the Purchaser;
(xix) As of the Closing Date, no more than 1.0% of the aggregate Stated
Principal Balance of the Mortgage Loans will be secured by Mortgaged Properties
located within any single zip code area;
(xx) Each original Mortgage was recorded or is in the process of being
recorded, and all subsequent assignments of the original Mortgage have been
delivered for recordation or have been recorded in the appropriate jurisdictions
wherein such recordation is necessary to perfect the lien thereof as against
creditors of or purchasers from the Seller delivering the related Mortgage Loan;
(xxi) The terms of each Mortgage Note and each Mortgage have not been
impaired, altered or modified in any respect, except by a written instrument
which has been recorded, if necessary, to maintain the lien priority of the
Mortgage, and which have been delivered to the Custodian;
<PAGE>
the substance of any such waiver, alteration or modification is reflected on the
related Mortgage Loan Schedule. No instrument of waiver, alteration or
modification has been executed, and no Mortgagor has been released, in whole or
in part, except in connection with an assumption agreement, which assumption
agreement has been delivered to the Custodian and the terms of which are
reflected in the related Mortgage Loan Schedule;
(xxii) The proceeds of each Mortgage Loan have been fully disbursed, and
there is no obligation on the part of the mortgagee to make future advances
thereunder. Any and all requirements as to completion of any onsite or off-site
improvements and as to disbursements of any escrow funds therefor have been
complied with. All costs, fees and expenses incurred in making or closing or
recording such Mortgage Loans were paid;
(xxiii) The related Mortgage Note is not and has not been secured by any
collateral, pledged account or other security except the lien of the
corresponding Mortgage;
(xxiv) No Mortgage Loan was originated under a buydown plan;
(xxv) No Mortgage Loan has a shared appreciation feature, or other
contingent interest feature;
(xxvi) Each Mortgaged Property is located in the state identified in the
respective Schedule of Mortgage Loans and consists of one or more parcels of
real property with a residential dwelling erected thereon;
(xxvii) Each Mortgage contains a provision for the acceleration of the
payment of the unpaid principal balance of the related Mortgage Loan in the
event the related Mortgaged Property is sold without the prior consent of the
mortgagee thereunder;
(xxviii) Any advances made after the date of origination of a Mortgage
Loan but prior to the Cut-off Date have been consolidated with the outstanding
principal amount secured by the related Mortgage, and the secured principal
amount, as consolidated, bears a single interest rate and single repayment term
reflected on the respective Schedule of Mortgage Loans. The consolidated
principal amount does not exceed the original principal amount of the related
Mortgage Loan. No Mortgage Note permits or obligates the Seller to make future
advances to the related Mortgagor at the option of the Mortgagor;
(xxix) There is no proceeding pending or threatened for the total or
partial condemnation of any Mortgaged Property, nor is such a proceeding
currently occurring, and each Mortgaged Property is undamaged by waste, fire,
water, flood, earthquake or earth movement;
(xxx) All of the improvements which were included for the purposes of
determining the Appraised Value of any Mortgaged Property lie wholly within the
boundaries and building restriction lines of such Mortgaged Property, and no
improvements on adjoining properties encroach
<PAGE>
upon such Mortgaged Property, unless any such improvements and are stated in the
title insurance policy and affirmatively insured;
(xxxi) No improvement located on or being part of any Mortgaged Property
is in violation of any applicable zoning law or regulation. All inspections,
licenses and certificates required to be made or issued with respect to all
occupied portions of each Mortgaged Property and, with respect to the use and
occupancy of the same, including but not limited to certificates of occupancy
and fire underwriting certificates, have been made or obtained from the
appropriate authorities and such Mortgaged Property is lawfully occupied under
the applicable law;
(xxxii) With respect to each Mortgage constituting a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in such Mortgage, and no fees or
expenses are or will become payable by the Purchaser to the trustee under the
deed of trust, except in connection with a trustee's sale after default by the
related Mortgagor;
(xxxiii) Each Mortgage contains customary and enforceable provisions which
render the rights and remedies of the holder thereof adequate for the
realization against the related Mortgaged Property of the benefits of the
security, including (A) in the case of a Mortgage designated as a deed of trust,
by trustee's sale and (B) otherwise by judicial foreclosure. There is no
homestead or other exemption available to the related Mortgagor which would
materially interfere with the right to sell the related Mortgaged Property at a
trustee's sale or the right to foreclose the related Mortgage. The Mortgagor has
not notified the Seller and the Seller has no knowledge of any relief requested
or allowed to the Mortgagor under the Soldiers and Sailors Civil Relief Act of
1940;
(xxxiv) There is no default, breach, violation or event of acceleration
existing under any Mortgage or the related Mortgage Note and no event which,
with the passage of time or with notice and the expiration of any grace or cure
period, would constitute a default, breach, violation or event of acceleration;
and the Seller has not waived any default, breach, violation or event of
acceleration. With respect to each Mortgage Loan which is indicated to be a
Second Lien Mortgage Loan (as reflected on the related Mortgage Loan Schedule)
(i) the Mortgage Note is in full force and effect, (ii) there is no default,
breach, violation or event of acceleration existing under such Mortgage Note
mortgage or the related mortgage note, (iii) no event which, with the passage of
time or with notice and the expiration of any grace or cure period, would
constitute a default, breach, violation or event of acceleration thereunder, and
either (A) the Mortgage Note mortgage contains a provision which allows or (B)
applicable law requires, the mortgagee under the second lien Mortgage Loan to
receive notice of, and affords such mortgagee an opportunity to cure any default
by payment in full or otherwise under the Mortgage Note mortgage;
(xxxv) No instrument of release or waiver has been executed in connection
with any Mortgage Loan, and no Mortgagor has been released, in whole or in part,
except in connection with an assumption agreement which has been approved by the
primary mortgage guaranty insurer, if any, and which has been delivered to the
Purchaser;
<PAGE>
(xxxvi) Each Mortgage Loan was originated based upon a full appraisal,
which included an interior inspection of the subject property and was made and
signed, prior to the approval of the Mortgage Loan application, by a qualified
appraiser, duly appointed by the originator, who had no interest, direct or
indirect in the Mortgaged Property or in any loan made on the security thereof,
whose compensation is not affected by the approval or disapproval of the
Mortgage Loan. Each appraisal of the Mortgage Loan was made in accordance with
the relevant provisions of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989;
(xxxvii) The Mortgage Loans were not selected for inclusion in the
related Mortgage Loan Package by the Seller on any basis intended to adversely
affect the Purchaser;
(xxxviii) The Seller has any actual knowledge that there exist any
hazardous substances, hazardous wastes or solid wastes, as such terms are
defined in the Comprehensive Environmental Response Compensation and Liability
Act, the Resource Conservation and Recovery Act of 1976, or other federal, state
or local environmental legislation on any Mortgaged Property;
(xxxix) Seller was properly licensed or otherwise authorized, to the
extent required by applicable law, to originate or purchase each Mortgage Loan;
and the consummation of the transactions herein contemplated, including, without
limitation, the receipt of the ownership of the Mortgage Loans by the Purchaser
will not involve the violation of such laws;
(xl) With respect to each Mortgaged Property subject to a ground lease (i)
the current ground lessor has been identified and all ground rents which have
previously become due and owing have been paid; (ii) the ground lease term
extends, or is automatically renewable, for at least five years beyond the
maturity date of the related Mortgage Loan; (iii) the ground lease has been duly
executed and recorded; (iv) the amount of the ground rent and any increases
therein are clearly identified in the lease and are for predetermined amounts at
predetermined times; (v) the ground rent payment is included in the borrower's
monthly payment as an expense item; (vi) the Purchaser has the right to cure
defaults on the ground lease; and (vii) the terms and conditions of the
leasehold do not prevent the free and absolute marketability of the Mortgaged
Property;
(xli) All taxes, governmental assessments, insurance premiums, water,
sewer and municipal charges, leasehold payments or ground rents which previously
became due and owing have been paid, or an escrow of funds has been established
in an amount sufficient to pay for every such item which remains unpaid and
which has been assessed but is not yet due and payable;
(xlii) As of the Closing Date, neither Seller has received a notice of
default of any Mortgage Loan secured by any Mortgaged Property which has not
been cured by a party other than such Seller;
(xliii) All of the Adjustable Rate Mortgage Loans are in a first lien
position;
(xliv) The Seller shall, at its own expense, cause each Mortgage Loan to
be covered by a Tax Service Contract which is assignable to the Purchaser or its
designee; provided however, that
<PAGE>
if the Seller fails to purchase such Tax Service Contract, the Seller shall be
required to reimburse the Purchaser for all costs and expenses incurred by the
Purchaser in connection with the purchase of any such Tax Service Contract;
(xlv) Each Mortgage Loan was originated by an affiliate of Seller and was
conveyed to Seller pursuant to a legal sale, and if so requested by the
Purchaser, is covered by an opinion of counsel to that effect in form and
substance acceptable to the Purchaser;
(xlvi) In the event that the Mortgage Loan had a principal balance at
origination equal to or greater than (a) $300,000 with respect to each Mortgage
Loan as to which the related Mortgaged Property is located in California, and
(b) $250,000 in all other cases, the Mortgage File contains a drive-by appraisal
performed not more than 30 days prior to the Closing Date which confirms that
the LTV of the Mortgage Loan satisfies the Underwriting Guidelines for the
applicable loan program;
(xlvii) Except to the extent that the Mortgage Loan is an AmGen Mortgage
Loan, the Mortgage Loan has not been previously financed or purchased by any
third party. Following the purchase of such Mortgage Loan, the aggregate unpaid
principal balance of the AmGen Mortgage Loans shall not exceed 10% of the
aggregate unpaid principal balance of all of the Portfolio Mortgage Loans
purchased hereunder;
(xlviii) No Mortgage Loan was made in connection with (a) the construction
or rehabilitation of a Mortgaged Property; (b) facilitating the trade-in or
exchange of a Mortgaged Property; (c) facilitating the sale of an REO property
or (d) the refinancing of a delinquent mortgage loan originated or acquired by
Seller which was more than 60 days delinquent;
(xlix) No Fixed Rate Mortgage Loan has an LTV greater than 100% and no
Adjustable Rate Mortgage Loan has an LTV greater than 90%;
(l) All parties which have had any interest in the Mortgage Loan, whether
as mortgagee, assignee, pledgee or otherwise, are (or, during the period in
which they held and disposed of such interest, were) in compliance with any and
all applicable "doing business" and licensing requirements of the laws of the
state wherein the Mortgaged Property is located;
(li) The Mortgage Loan was originated (within the meaning of the Secondary
Mortgage Market Enhancement Act of 1984) by a savings and loan association, a
savings bank, a commercial bank or similar banking institution which is
supervised and examined by a federal or state authority, or by a mortgagee
approved as such by the Secretary of HUD;
(lii) The origination and collection practices used by the Seller and any
other originator with respect to each Mortgage Note and Mortgage have been in
all respects legal, proper, prudent and customary in the mortgage origination
and servicing industry. The Mortgage Loan has been serviced by the Seller and
any predecessor servicer in accordance with the terms of the Mortgage Note.
[With respect to escrow deposits and Escrow Payments, if any, (other than with
respect to
<PAGE>
each Mortgage Loan which is indicated to be a Second Lien Mortgage Loan and for
which the mortgagee under the Mortgage Note is collecting Escrow Payments), all
such payments are in the possession of, or under the control of, the Seller and
there exist no deficiencies in connection therewith for which customary
arrangements for repayment thereof have not been made.] No escrow deposits or
Escrow Payments or other charges or payments due the Seller have been
capitalized under any Mortgage or the related Mortgage Note and no such escrow
deposits or Escrow Payments are being held by the Seller for any work on a
Mortgaged Property which has not been completed;
(liii) The Mortgage Loan was underwritten in accordance with the
Underwriting Guidelines in effect at the time the Mortgage Loan was originated;
(liv) No error, omission, misrepresentation, negligence, fraud or similar
occurrence with respect to a Mortgage Loan has taken place on the part of any
person, including without limitation the Mortgagor, any appraiser, any builder
or developer, or any other party involved in the origination of the Mortgage
Loan or in the application of any insurance in relation to such Mortgage Loan;
(lv) The Assignment of Mortgage is in recordable form and is acceptable
for recording under the laws of the jurisdiction in which the Mortgaged Property
is located;
(lvi) No Mortgage Loan which is a Cash-out Refinancing was originated in
the State of Texas;
(lvii) With respect to each Mortgage Loan which is a Second Lien, (i) if
the related Mortgage Note provides for negative amortization, the LTV was
calculated at the maximum principal balance of such Mortgage Note that could
result upon application of such negative amortization feature, and (ii) either
no consent for the Mortgage Loan is required by the holder of the Mortgage Note
or such consent has been obtained and is contained in the Mortgage File; and
(lviii) With respect to each Mortgage Loan which is subject to the
provisions of HOEPA, the Mortgage Loan is identified as such on the Mortgage
Loan Schedule, and the related Mortgage File contains a notice from the
originator and a copy of a notice to each entity which was a purchaser or
assignee of the Mortgage Loan satisfying the provisions of HOEPA and the
regulations issued thereunder to the effect that the Mortgage Loan is subject to
special truth-in-lending rules.
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SCHEDULE 2
Seller's Material Subsidiaries
ContiMortgage Corporation
ContiWest Corporation
ContiTrade Services L.L.C.
California Lending Group, Inc.
ContiSecurities Holding Corporation
ContiFunding Corporation
<PAGE>
SCHEDULE 3
INDEBTEDNESS DOCUMENTS
Indenture, dated as of August 15, 1996, relating to the ContiFinancial
Corporation 8 3/8% Senior Notes Due 2003, as amended, supplemented or otherwise
modified from time to time
Credit Agreement, dated as of January 7, 1997, among ContiFinancial Corporation
and Credit Suisse First Boston, as amended, supplemented or otherwise modified
from time to time
Indenture, dated as of March 1, 1997, relating to the ContiFinancial Corporation
7-1/2% Senior Notes Due 2002, as amended, supplemented or otherwise modified
from time to time
Amended and Restated Letter of Credit and Reimbursement Agreement, dated as of
September 9, 1997, among ContiFinancial Corporation, Credit Suisse First Boston,
New York Branch and Dresdner Bank AG, New York Branch, as amended, supplemented
or otherwise modified from time to time
Indenture, dated March 4, 1998, relating to certain securities issuable by
ContiFinancial Corporation, as amended, supplemented or otherwise modified from
time to time
AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT dated August 31,
1999 (this "Agreement"), made by CONTIFINANCIAL CORPORATION (the "Grantor"), in
favor of GREENWICH CAPITAL FINANCIAL PRODUCTS, INC. ("GCFP"), GREENWICH CAPITAL
MARKETS, INC. ("GCM") and each affiliate of GCFP and GCM which is party to any
agreement or document entered into in connection with any of the Facilities (as
defined below) (such affiliates together with GCFP and GCM are collectively,
"Greenwich"), amending and restating that certain Pledge and Security Agreement
dated August 9, 1999 (the "Original Pledge and Security Agreement") made by
Grantor in favor of Greenwich.
W I T N E S S E T H:
WHEREAS, CFC, ContiMortgage Corporation ("CMC") and GCFP are parties
to a Master Mortgage Loan Purchase Facility dated as of August 9, 1999 (such
Agreement, as amended or otherwise modified from time to time, being hereinafter
referred to as the "Purchase Facility");
WHEREAS, CFC and GCFP are parties to a Master Repurchase Agreement
Governing Purchases and Sales of Eligible Assets dated as of December 21, 1998
(such Agreement, as amended or otherwise modified from time to time, together
with any successor purchase facility, being hereinafter referred to as the
"Existing Repurchase Facility");
WHEREAS, CFC, CMC and GCFP are parties to a Master Repurchase
Agreement Governing Purchases and Sales of Assets dated as of August 9, 1999
(such Agreement, as amended or otherwise modified from time to time, being
hereinafter referred to as the "New Repurchase Facility" and together with the
Existing Repurchase Facility, each a "Repurchase Facility" and collectively, the
"Repurchase Facilities");
WHEREAS, pursuant to an engagement letter dated as of August 9, 1999
(such letter, as amended or otherwise modified from time to time, being
hereinafter referred to as the "Engagement Letter"), CFC, CMC, ContiSecurities
Asset Funding Corp. III and ContiSecurities Asset Funding Corp. IV
(collectively, the "Conti Affiliates") have requested GCM, and GCM has agreed,
to act as the sole and exclusive securitization agent and underwriter in
connection with a securitization and/or selling agent in connection with a whole
loan sale of certain mortgage loans;
WHEREAS, in connection with the Purchase Facility, the New
Repurchase Facility and the Engagement Letter, the Conti Affiliates and
Greenwich have entered into a Master Facilities Agreement dated as of August 9,
1999 (such Agreement, as amended or otherwise modified from time to time, being
hereinafter referred to as the "Master Facilities Agreement" and together with
the Purchase Facility, the New Repurchase Facility and the Engagement Letter,
the "New Facilities") pursuant to which the Conti Affiliates have agreed to pay
to Greenwich certain fees and expenses in connection with the New Facilities;
and
WHEREAS, it is a condition precedent to Greenwich maintaining the
New Facilities and the Existing Repurchase Facility (collectively, the
"Facilities") that the Grantor
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shall have executed and delivered to Greenwich this Agreement which amends and
restates the Original Pledge and Security Agreement and provides for the grant
to Greenwich of a security interest in certain personal property of the Grantor;
NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce Greenwich to maintain the Facilities, the Grantor
hereby agrees with Greenwich as follows:
SECTION 1. Definitions. Reference is hereby made to the Facilities
for a statement of the terms thereof. All terms used in this Agreement that are
defined in the Facilities or in Article 8 or Article 9 of the Uniform Commercial
Code (the "Code") currently in effect in the State of New York and that are not
otherwise defined herein shall have the same meanings herein as set forth
therein, and the following terms shall have the following meanings:
"Distributions" has the meaning specified therefor in Section 5(b)
of this Agreement.
"Final Reserve Period" means the period from and after the first day
of the 61st month following the date of this Agreement.
"Initial Reserve Period" means the period beginning on the date of
this Agreement and ending on the last day of the 12th month thereafter.
"Maximum Cumulative Reserve Fund Deposit" means, with respect to the
aggregate amount of Distributions deposited in the Reserve Fund, $25,000,000,
provided that, upon the occurrence of a Trigger Event, the amount shall be
automatically increased to $45,000,000.
"Obligation Payment Event" means (a) the failure to pay an
Obligation when due, (b) the receipt by Greenwich of a claim for repurchase of a
mortgage loan due to a breach of a representation or warranty by any Conti
Affiliate, (c) the receipt by Greenwich of any claim from any third party
servicer or the applicable Monoline Insurance Company to reimburse any such
Person for losses (other than losses resulting solely and directly from (i)
information provided by and related to Greenwich or any of its Affiliates or
(ii) Greenwich's gross negligence or willful misconduct) pursuant to
indemnification or guaranty obligations of Greenwich arising from, related to,
or in connection with any of the Facilities, or (d) the receipt by Greenwich of
a request by the Custodian to pay the Custodian's fees and expenses under the
respective Custodial Agreements.
"Reserve Fund" means the account maintained by Greenwich with the
Custodian for the deposit of Distributions (a) which account and all amounts on
deposit therein shall, pursuant to the terms of a custody agreement between
Greenwich and the Custodian (in form and substance satisfactory to Greenwich),
be held as Collateral for the Obligations and be subject to (i) the sole and
exclusive dominion and control of Greenwich and (ii) the sole right of
withdrawal by Greenwich, and (b) which amounts shall be invested by Greenwich in
investments mutually agreed upon by Greenwich and Grantor, and all investment
earnings relating to such investments
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shall be treated as "Distributions" and retained in the Reserve Fund until the
amount on deposit therein is equal to the Reserve Fund Required Amount.
"Reserve Fund Required Amount" means the aggregate amount of
Distributions, not exceeding the Maximum Cumulative Reserve Fund Deposit, to be
deposited in the Reserve Fund equal to:
(a) during the Initial Reserve Period (i) if no Obligation Payment
Event has occurred since the date of this Agreement, $5,000,000 or (ii) if an
Obligation Payment Event has occurred since the date of this Agreement (whether
or not such Obligation Payment Event ceases to exist), $15,000,000, provided
that (A) upon the occurrence of a Trigger Event (other than as a result of
clause (iv) of the definition of Trigger Event), each of the amounts set forth
in clauses (i) and (ii) of this subparagraph shall be automatically increased by
$5,000,000, and (B) upon the occurrence of a Trigger Event as a result of clause
(iv) of the definition of Trigger Event, the amounts set forth in clauses (i)
and (ii) of this subparagraph shall be automatically increased by $15,000,000
and $5,000,000, respectively,
(b) during the Second Reserve Period (i) if no Obligation Payment
Event has occurred since the date of this Agreement, $10,000,000, or (ii) if an
Obligation Payment Event has occurred since the date of this Agreement (whether
or not such Obligation Payment Event ceases to exist), $15,000,000, provided
that (A) upon the occurrence of a Trigger Event (other than as a result of
clause (iv) of the definition of Trigger Event), each of the amounts set forth
in clauses (i) and (ii) of this subparagraph shall be automatically increased by
$5,000,000, and (B) upon the occurrence of a Trigger Event as a result of clause
(iv) of the definition of Trigger Event, amounts set forth in clauses (i) and
(ii) of this subparagraph shall be automatically increased by $10,000,000 and
$5,000,000, respectively, and
(c) during the Final Reserve Period (i) if no Obligation Payment
Event has occurred since the date of this Agreement, $5,000,000, (ii) if an
Obligation Payment Event has occurred but no longer exists, $7,500,000, or (iii)
if an Obligation Payment Event has occurred and continues to exist, $15,000,000,
provided that (A) in the case of clause (iii) of this subparagraph, if such
Obligation Payment Event ceases to exist then the Reserve Fund Required Amount
shall be reduced to $7,500,000, (B) upon the occurrence of a Trigger Event
(other than as a result of clause (iv) of the definition of Trigger Event), each
of the amounts set forth in clauses (i), (ii) and (iii) of this subparagraph
shall be automatically increased by $5,000,000, and (C) upon the occurrence of a
Trigger Event as a result of clause (iv) of the definition of Trigger Event, the
amounts set forth in clauses (i), (ii) and (iii) of this subparagraph shall be
automatically increased by $15,000,000, $5,000,000 and $5,000,000, respectively.
"Second Reserve Period" means the period beginning on the first day
of the 13th month following the date of this Agreement and ending on the last
day of the 60th month thereafter.
"Trigger Event" means the occurrence of any of the following: (i)
the filing in a court of competent jurisdiction of a motion, pursuant to Rule 23
of the Federal Rules of Civil Procedure or any other comparable state or local
rule of civil procedure relating to the
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maintenance of class actions, seeking authority for a civil action brought by a
representative plaintiff or plaintiffs to be maintained as a class action on
behalf of a class of similarly situated plaintiffs claiming that a Person
improperly excluded certain settlement agent fees (or other similar fees) in the
calculation of the mortgage loan annual percentage rate or closing fees in
connection with the origination of mortgage loans by such Person; (ii) the
rendering by a court of competent jurisdiction of a decision or the entry of an
order approving a settlement agreement, in which a Person is found liable for,
or agrees to pay, monetary damages arising out of claims which include an
allegation that such Person failed to include certain settlement agent fees (or
other similar fees) in the calculation of the mortgage loan annual percentage
rate or closing fees in connection with the origination of mortgage loans by
such Person; (iii) any Governmental Authority issues new regulations, rules,
commentary or interpretations, or amends, supplements or modifies existing
regulations, rules, commentary or interpretations, the effect of which is, among
other things, to require certain settlement agent fees (or other similar fees)
to be included in the calculation of the mortgage loan annual percentage rate or
closing fees in connection with the origination of mortgage loans; or (iv) the
failure by the Grantor to repurchase any mortgage loan required to be
repurchased due to a breach of a representation or warranty by the Grantor as a
result of the failure to include certain settlement agent fees (or other similar
fees) in the calculation of the mortgage loan annual percentage rate or closing
fees in connection with the origination of such mortgage loans.
SECTION 2. Grant of Security Interest. As collateral security for
all of the Obligations (as defined in Section 3 hereof), the Grantor hereby
pledges and collaterally assigns to Greenwich, and grants to Greenwich a
continuing security interest in, all of such Grantor's right, title and interest
in and to the following (the "Collateral"):
(a) all of the Grantor's rights in and to any Deferred Purchase
Price and Purchase Price Adjustment under the terms of the Purchase Facility,
whether now or hereafter existing, including, without limitation, all contract
rights and general intangibles arising from or relating thereto and all proceeds
arising therefrom;
(b) with respect to any Purchased Assets subject to Transactions
under the Repurchase Facilities, all of the Grantor's rights to (i) any such
Purchased Assets, including, without limitation, all contract rights and general
intangibles arising from or related thereto, (ii) all commitments issued by
third parties (other than American General) to purchase such Purchased Assets
from the Grantor and all rights of the Grantor with respect thereto, (iii) all
cash from time to time deposited into any deposit account of the Grantor with
the Custodian in connection with any Repurchase Facilities, and (iv) all other
rights of the Grantor now or hereafter existing in and to all agreements,
documents and instruments securing or otherwise relating to any Repurchase
Facilities;
(c) (i) (A) the Excess Spread Receivable described in Schedule III
hereto (the "Designated ESR"), (B) all Excess Spread Receivables issued by any
securitization trust or other Person formed to securitize mortgage loans in
accordance with the Engagement Letter (the "Engagement ESRs"), and (C) all
Excess Spread Receivables arising from, related to or comprising the Grantor's
Deferred Purchase Price (other than the Excess Spread Receivables described in
the provisos to Subsection 4.02(b)(i)(C) and (D) and Subsection 4.02(b)(ii)(C)
and
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(D) of the Purchase Facility under which the Grantor and Greenwich each have a
parri passu interest in 50% of such Excess Spread Receivables) issued by any
securitization trust or other Person formed to securitize mortgage loans
purchased by Greenwich under the Purchase Facility (the "Deferred Purchase Price
ESRs" and together with the Engagement ESRs and the Designated ESR, the "Pledged
Residuals"), and the instruments or certificates representing such Pledged
Residuals, and (ii) the security (if any) evidencing the amount of all
prepayment penalties relative to the securitization of mortgage loans described
in the Engagement Letter to the extent such prepayment penalties are not
required to reduce the overcollateralization requirements of the applicable
Monoline Insurance Company (the "Prepayment Bond") (the Pledged Residuals and
the Prepayment Bond are collectively referred to herein as, the "Pledged
Assets");
(d) all Investment Property of the Grantor arising from or related
to the foregoing, including without limitation, the Pledged Assets that have
been, or will be, delivered, transferred or assigned to, or deposited or
credited to an account with, or otherwise is in the possession or under the
control or recorded on the books of, Greenwich;
(e) all distributions, cash, Investment Property, instruments,
Financial Assets and other property from time to time received, receivable or
otherwise distributed in respect of, or in exchange for, the Grantor's interest
in the Pledged Assets and delivered or transferred to Greenwich or the Grantor;
and
(f) all proceeds of any and all of the foregoing Collateral
(including, without limitation, all payments under insurance (whether or not
Greenwich is the loss payee thereof), any indemnity, warranty or guaranty,
payable by reason of loss or damage to or otherwise with respect to any of the
foregoing Collateral);
in each case howsoever such Grantor's interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise); provided that,
nothing hereunder constitutes or shall be deemed to constitute the grant of a
security interest in favor of Greenwich in the Grantor's interest in the
Collateral described in paragraph (b) above (hereinafter referred to as
"Excluded Property"), if the granting of a security interest therein by the
Grantor with respect to such Excluded Property to Greenwich is prohibited by the
terms and provisions of, or would constitute a breach or default under, the
Indenture or any other indenture or credit agreement listed on Schedule 3 to the
New Repurchase Facility; provided, however, that if and when the prohibition
which prevents the granting by a Grantor to Greenwich of a security interest in
any Excluded Property is removed or otherwise terminated, Greenwich will be
deemed to have, and at all times to have had, a security interest in such
Excluded Property. Notwithstanding anything set forth herein to the contrary,
Greenwich will be deemed to have, and at all times to have had, a security
interest in the proceeds of such Excluded Property.
SECTION 3. Security for Obligations. The security interest created
hereby in the Collateral constitutes continuing collateral security for all of
the following obligations, whether now existing or hereafter incurred (the
"Obligations"):
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(a) the obligation of the Grantor to cure or repurchase Mortgage
Loans and to substitute Qualified Substitute Mortgage Loans in respect of
Mortgage Loans, in each case in accordance with the terms and conditions set
forth in the Purchase Facility, all obligations of CMC as Interim Servicer under
the Purchase Facility, all indemnification obligations of Grantor under the
Purchase Facility and the Custodial Agreement relating to the Purchase Facility,
and all other obligations of Grantor under the Purchase Facility with respect to
the payment of fees, expense reimbursements, indemnifications and all other
amounts due or to become due under the Purchase Facility;
(b) the prompt payment by Grantor, as and when due and payable, of
all amounts from time to time owing by it in respect of the Repurchase
Facilities, including, without limitation, the payment when due of the
Repurchase Price for all Transactions outstanding under the Repurchase
Facilities (including, without limitation, all interest that accrues after the
commencement of any case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of the Grantor, whether or not a claim for
post-filing interest is allowed in such proceeding), and the payment of all
Additional Costs and Periodic Payments, the performance of Grantor's obligation
to transfer Additional Eligible Assets to Greenwich under the Repurchase
Facilities, all obligations of CMC as Interim Servicer under the Repurchase
Facilities, all indemnification obligations of Grantor under the Repurchase
Facilities and the Custodial Agreement relating to the Repurchase Facilities,
and all obligations of the Grantor under the Repurchase Facilities with respect
to the payment of fees, expense reimbursements, indemnifications and all other
amounts due or to become due under the Repurchase Facilities;
(c) the payment when due of all fees and other amounts payable by
Grantor and its Affiliates under the Master Facilities Agreement;
(d) the due performance and observance by the Grantor and its
Affiliates of all covenants, agreements, obligations and liabilities under the
Facilities, including without limitation, the obligation to securitize and/or
sell mortgage loans in accordance with the terms of the Engagement Letter and
any repurchase obligations of the Grantor (including any reimbursement or
indemnification obligation of the Grantor in favor of Greenwich in connection
with Greenwich incurring such Obligations on behalf of the Grantor or
backstopping any such obligation of the Grantor arising from or in connection
with any securitization and/or whole loan sale of any mortgage loans); and
(e) the due performance and observance by the Grantor and its
Affiliates of all of their other obligations from time to time existing in
respect of the Facilities and the agreements and documents entered into by the
Grantor and/or its Affiliates or Greenwich in connection with any of the
Facilities, including, without limitation, the obligation of the Grantor to
reimburse Greenwich for any amounts paid by it to any third party servicer or
the applicable Monoline Insurance Company pursuant to any indemnification or
guaranty obligations of Greenwich arising from, related to, or in connection
with any of the Facilities.
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<PAGE>
SECTION 4. Representations and Warranties. The Grantor represents
and warrants as follows:
(a) There is no pending or, to its knowledge, threatened action,
suit, proceeding or claim before any court or other Governmental Authority or
any arbitrator, or any order, judgment or award by any court or other
Governmental Authority or arbitrator, that may adversely affect the grant by
such Grantor, or the perfection, of the security interest purported to be
created hereby in the Collateral, or the exercise by Greenwich of any of its
rights or remedies hereunder.
(b) All taxes, assessments and other governmental charges imposed
upon such Grantor or any property of such Grantor (including, without
limitation, all federal income and social security taxes on employees' wages)
and that have become due and payable on or prior to the date hereof have been
paid, except to the extent contested in good faith by proper proceedings that
stay the imposition of any penalty, fine and Lien resulting from the non-payment
thereof and with respect to which adequate reserves in accordance with generally
accepted accounting principles have been established for the payment thereof.
(c) The Grantor's chief place of business and chief executive
office, the place where the Grantor keeps its records concerning the Collateral
are located at the addresses specified therefor in Schedule I hereto, as such
Schedule may be modified in accordance with Section 5(f) hereof.
(d) The Grantor is not prohibited from pledging to Greenwich any
Engagement ESRs, provided that the securitization contemplated by the Engagement
Letter closes by September 30, 1999.
(e) The Grantor is and will be at all times the sole and exclusive
owner of the Collateral free and clear of any Lien, security interest or other
charge or encumbrance except (i) for the security interest created by this
Agreement, and (ii) junior and subordinate Liens on the Collateral consented to
by Greenwich in writing, which Liens shall be subject to a subordination
agreement, in form and substance satisfactory to the Greenwich (the
"Subordination Agreement"). No effective financing statement or other instrument
similar in effect covering all or any part of the Collateral is on file in any
recording or filing office except such as may have been filed in favor of
Greenwich relating to this Agreement.
(f) The terms and provisions of this Agreement, including, without
limitation, the rights and remedies available to Greenwich hereunder, will not
contravene any law or any contractual restriction binding on or otherwise
affecting the Grantor or any of such Grantor's properties and will not result in
or require the creation of any Lien, security interest or other charge or
encumbrance upon or with respect to any of such Grantor's properties other than
any Liens in favor of Greenwich.
(g) No authorization or approval or other action by, and no notice
to or filing with, any Governmental Authority or other regulatory body, or any
other Person, is required for (i) the grant by the Grantor, or the perfection,
of the security interest purported to be created
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hereby in the Collateral or (ii) the exercise by Greenwich of any of its rights
and remedies hereunder, except the filing under the Uniform Commercial Code as
in effect in the applicable jurisdiction of the financing statements described
in Schedule II hereto, all of which financing statements have been duly filed
and are in full force and effect.
(h) This Agreement creates valid security interests in favor of
Greenwich in the Collateral, as security for the Obligations. Greenwich's having
possession of all instruments and cash constituting Collateral from time to
time, and the filing of the financing statements described in Schedule II
hereto, result in the perfection of such security interests to the extent that a
security interest in the Collateral can be perfected under the Code by taking
possession thereof or filing a financing statement with respect thereto. Such
security interests are, or in the case of Collateral in which the Grantor
obtains rights after the date hereof, will be, perfected, first priority
security interests. Such recordings and filings and all other action necessary
or desirable to perfect and protect such security interest have been duly taken,
except for Greenwich's having possession of instruments and cash constituting
Collateral after the date hereof and the other filings and recordations
described in Schedule II hereto.
SECTION 5. Covenants as to the Collateral. So long as any of the
Obligations shall remain outstanding, unless Greenwich shall otherwise consent
in writing:
(a) Further Assurances. The Grantor shall at its expense, at any
time and from time to time, promptly execute and deliver all further instruments
and documents and take all further action that may be reasonably necessary or
desirable or that Greenwich may request in order (i) to perfect and protect the
security interest purported to be created hereby; (ii) to enable Greenwich to
exercise and enforce its rights and remedies hereunder in respect of the
Collateral; or (iii) otherwise to effect the purposes of this Agreement,
including, without limitation: (A) marking conspicuously, at the request of
Greenwich, each of its records pertaining to the Collateral with a legend, in
form and substance satisfactory to Greenwich, indicating that such Collateral is
subject to the security interest created hereby, (B) if any Collateral shall be
evidenced by a promissory note or a certificate, immediately delivering and
pledging to Greenwich hereunder such note or certificate duly endorsed and
accompanied by executed instruments of transfer or assignment, all in form and
substance satisfactory to Greenwich, and (C) executing and filing such financing
or continuation statements, or amendments thereto, as may be necessary or
desirable or that Greenwich may request in order to perfect and preserve the
security interest purported to be created hereby.
(b) Distributions in Respect of the Pledged Assets. Unless and until
an Event of Default shall have occurred and be continuing, all dividends,
interest and other payments or distributions (collectively, the "Distributions")
payable in respect of the Pledged Assets shall be paid and applied as follows in
accordance with the following priorities:
(i) with respect to the Designated ESR,
(A) first, all Distributions shall be deposited in the
Reserve Fund until the amount on deposit therein equals the
applicable Reserve Fund Required Amount,
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(B) second, in the event the aggregate amount of
Distributions deposited in the Reserve Fund equal the Maximum
Cumulative Reserve Fund Deposit, all Distributions shall be
applied to pay all Obligations then due and payable,
including, without limitation, all Obligations of the Grantor
arising from or related to any repurchases by Greenwich of
Mortgage Loans resulting from a breach of a representation or
warranty by the Grantor or Greenwich (or any Affiliate of such
Person) under the Facilities, including all Obligations which
are not then due and payable but are reasonably estimated by
Greenwich to be incurred as a result of such repurchases, and
(C) second, to the Grantor hereof or to such other
Person as may be lawfully entitled to receive such
Distributions,
(ii) with respect to the Engagement ESRs and the Prepayment
Bond (if any):
(A) first, to all Obligations then due and payable,
including, without limitation, all Obligations of the Grantor
arising from or related to any repurchases by Greenwich of
Mortgage Loans resulting from a breach of a representation or
warranty by the Grantor or Greenwich (or any Affiliate of such
Person) under the Facilities, including all Obligations which
are not then due and payable but are reasonably estimated by
Greenwich to be incurred as a result of such repurchases,
(B) second, after all Distributions have been deposited
in the Reserve Fund pursuant to Section 5(b)(i)(A) above, all
Distributions shall be deposited in the Reserve Fund until the
amount on deposit therein equals the Reserve Fund Required
Amount, and
(C) third, to the Grantor or to such other Person as may
be lawfully entitled to receive such Distributions.
(iii) with respect to the Deferred Purchase Price ESRs,
(A) first, to all Obligations then due and payable
including without limitation, all Obligations of the Grantor
arising from or related to any repurchases by Greenwich of
Mortgage Loans resulting from a breach of a representation or
warranty by the Grantor or Greenwich (or any Affiliate of such
Person) under the Facilities, including all Obligations which
are not then due and payable but are reasonably estimated by
Greenwich to be incurred as a result of such repurchases,
(B) second, after all Distributions have been deposited
in the Reserve Fund pursuant to Section 5(b)(i)(A) and Section
5(b)(ii)(B) above, all Distributions shall be deposited in the
Reserve Fund until the amount on deposit therein equals the
Reserve Fund Required Amount, and
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(C) third, to the Grantor or to such other Person as
may be lawfully entitled to receive such Distributions.
Notwithstanding anything to the contrary, no Distributions in
respect of any Pledged Assets shall be paid to the Grantor pursuant to clauses
(ii) or (iii) above to the extent any claim is pending for which Greenwich in
good faith reasonably determines that it may realize a loss as a result of any
repurchase by Greenwich of Mortgage Loans resulting from a breach of a
representation or warranty by the Grantor under the Facilities. Greenwich may
apply any Distributions deposited in the Reserve Fund pursuant to Section
5(b)(i) or paid to it pursuant to Sections 5(b)(ii) and (iii) to satisfy any
Obligations then due and payable by the Grantor, in such order as Greenwich
shall determine in its sole discretion. After applying any amounts on deposit in
the Reserve Fund to pay outstanding Obligations, Distributions (not exceeding
the Maximum Cumulative Reserve Fund Deposit) shall be deposited in the Reserve
Fund to replenish the applicable Reserve Fund Required Amount in accordance with
clauses (i), (ii) and (iii) above. During the Final Reserve Period, Greenwich
shall cause all funds on deposit in the Reserve Fund in excess of the applicable
Reserve Fund Required Amount to be remitted to the Grantor or to such other
Person as may be lawfully entitled to receive such excess funds.
All Distributions which are received by the Grantor contrary
to the provisions of Section 5(b) shall be received in trust for the benefit of
Greenwich, shall be segregated from other property or funds of such Grantor and
shall be forthwith paid over to Greenwich as Collateral in the same form as so
received (with any necessary endorsement).
(d) Taxes, Etc. The Grantor shall pay promptly when due all
property and other taxes, assessments and governmental charges or levies imposed
upon, and all claims (including claims for labor, materials and supplies)
against, any Collateral, except to the extent the validity thereof is being
contested in good faith by proper proceedings that stay the imposition of any
penalty, fine or Lien resulting from the non-payment thereof and with respect to
which adequate reserves have been set aside for the payment thereof.
(e) Excess Spread Receivables.
(i) Grantor shall directly own each Pledged Residual and
shall cause all Pledged Residuals to be pledged to Greenwich free of any
assignment, transfer or registration restrictions other than transfer
requirements consistent with industry custom.
(ii) In the event that the Grantor shall be prohibited
under the terms of any of the documents listed on Schedule 3 to the New
Repurchase Facility from pledging to Greenwich any Engagement ESRs or Deferred
Purchase Price ESRs, Greenwich will execute and deliver to the Grantor such
documents as Grantor shall reasonably request to evidence the release of
Greenwich's Lien on such Engagement ESRs or Deferred Purchase Price ESRs, as the
case may be, provided that the Grantor shall provide Greenwich, and Greenwich
shall accept, an alternative securitization structure or other collateral which
provides Greenwich with substantially equivalent value and is otherwise
reasonably acceptable to Greenwich.
-10-
<PAGE>
(f) Place of Business. The Grantor shall (i) give Greenwich at
least 30 days' prior written notice of any change in such Grantor's name,
identity or organizational structure, and (ii) keep its chief place of business
and chief executive office at the location(s) specified therefor in Schedule I
hereof.
(g) Transfers and Other Liens.
(i) No Grantor shall sell, assign (by operation of law
or otherwise), lease, exchange or otherwise transfer or dispose of any of the
Collateral.
(ii) No Grantor shall create or suffer to exist any
Lien, security interest or other charge or encumbrance upon or with respect to
any Collateral except (A) for the security interests created hereby and (B) any
Lien granted by such Grantor to any Subordinate Lender on such Grantor's
Collateral, subject to the execution and delivery of a Subordination Agreement
described in Section 4(e) hereof.
(h) Inspection and Reporting. The Grantor shall permit
representatives of Greenwich, upon reasonable notice and at any time during
normal business hours, to inspect and make abstracts from its books and records
pertaining to the Collateral, and permit representatives of Greenwich to be
present at such Grantor's place of business to receive copies of all
communications and remittances relating to the Collateral, and to forward copies
of any notices or communications received or made by such Grantor with respect
to the Collateral, all in such manner as Greenwich may require.
SECTION 6. Additional Provisions Concerning the Collateral.
(a) The Grantor hereby authorizes Greenwich to file, without
the signature of such Grantor where permitted by law, one or more financing or
continuation statements, and amendments thereto, relating to the Collateral. A
photocopy or other reproduction of this Agreement or any financing statement
covering the Collateral or any part thereof shall be sufficient as a financing
statement where permitted by law.
(b) The Grantor hereby irrevocably appoints Greenwich the
Grantor's attorney-in-fact and proxy, with full authority in the place and stead
of the Grantor and in the name of the Grantor or otherwise, from time to time in
Greenwich's discretion, to take any action and to execute any instrument which
Greenwich may reasonably deem necessary or advisable to accomplish the purposes
of this Agreement, including, without limitation, (i) to receive, endorse and
collect all instruments made payable to the Grantor representing any dividend or
other distribution in respect of any Collateral and to give full discharge for
the same, (ii) to execute and file such financing or continuation statements, or
amendments thereto, as may be reasonably necessary or desirable or that
Greenwich may reasonably request in order to perfect and preserve the security
interest purported to be created hereby, and (iii) to affix to any certificates
and documents representing the Collateral, the stock or bond powers delivered
with respect thereto, and to transfer or re-register or cause the transfer or
re-registration of the Collateral, or any part thereof, on the books of the
entity issuing such Collateral, to the name of Greenwich or any nominee, and
thereafter to exercise with respect to such Collateral, all the rights, powers
and
-11-
<PAGE>
remedies of an owner. The power of attorney granted pursuant to this Agreement
and all authority hereby conferred are granted and conferred solely to protect
Greenwich's interest in the Collateral and shall not impose any duty upon
Greenwich to exercise any power. This power of attorney shall be irrevocable as
one coupled with an interest until the payment in full in cash of the
Obligations and the termination of all Facilities.
(c) If the Grantor fails to perform any agreement contained
herein, Greenwich may itself perform, or cause performance of, such agreement or
obligation, in the name of such Grantor or Greenwich, and the expenses of
Greenwich incurred in connection therewith shall be payable by such Grantor
pursuant to Section 8 hereof.
(d) Other than the exercise of reasonable care to assure the
safe custody of the Collateral while held hereunder, Greenwich (and the
designated custodians and nominees of Greenwich) shall have no duty or liability
to preserve rights pertaining thereto and shall be relieved of all
responsibility for the Collateral upon surrendering it or tendering surrender of
it to the applicable Grantor. Greenwich (and the designated custodians and
nominees of Greenwich) shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equal to that which such Person accords its
own property, it being understood that neither Greenwich nor any of its
custodians or nominees shall have responsibility for (i) ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relating to any Collateral, whether or not such Person has or is
deemed to have knowledge of such matters, or (ii) taking any necessary steps to
preserve rights against any parties with respect to any Collateral.
(e) Greenwich may at any time in its discretion (i) without
notice to the Grantor, transfer or register in the name of Greenwich or any of
its nominees any or all of the Collateral, and (ii) exchange certificates or
instruments constituting Collateral for certificates or instruments of smaller
or larger denominations.
SECTION 7. Remedies Upon Default. If any Event of Default
shall have occurred and be continuing:
(a) Greenwich may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all of the rights and remedies of a secured party on default under the
Code (whether or not the Code applies to the affected Collateral), and also may
(i) require the Grantor to, and the Grantor hereby agrees that it shall at its
expense and upon request of Greenwich forthwith, assemble all or part of the
Collateral as directed by Greenwich and make it available to Greenwich at a
place or places to be designated by Greenwich that is reasonably convenient to
both parties and (ii) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of Greenwich's offices or elsewhere, for cash, on credit or for future
delivery, and at such price or prices and upon such other terms as Greenwich may
deem commercially reasonable. The Grantor agrees that, to the extent notice of
sale shall be required by law, at least 10 days' notice to such Grantor of the
time and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. Greenwich shall not be
-12-
<PAGE>
obligated to make any sale of Collateral regardless of notice of sale having
been given. Greenwich may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. The
Grantor hereby waives any claims against Greenwich arising by reason of the fact
that the price at which the Collateral may have been sold at a private sale was
less than the price that might have been obtained at a public sale or was less
than the aggregate amount of the Obligations, even if Greenwich accepts the
first offer received and does not offer the Collateral to more than one offeree,
and waives all rights that such Grantor may have to require that all or any part
of the Collateral be marshaled upon any sale (public or private) thereof.
(b) Any cash held by Greenwich as Collateral and all proceeds
received by Greenwich in respect of any sale or collection from, or other
realization upon, all or any part the Collateral may, in the discretion of
Greenwich, be held by Greenwich as collateral for, and/or then or at any time
thereafter applied in whole or in part by Greenwich against, all or any part of
the Obligations as follows:
(i) first, to the payment of the costs and expenses of
such sale, collection or other realization, including the out-of-pocket costs
and expenses of Greenwich and the reasonable fees, costs, expenses and other
client charges of counsel employed in connection therewith, to the payment of
all advances made by Greenwich for the account of the Grantor hereunder and to
the payment of all costs and expenses incurred by Greenwich in connection with
the administration and enforcement of this Agreement;
(ii) second, at the option of Greenwich, to the payment
or other satisfaction of any Liens and other encumbrances upon any of the
Collateral;
(iii) third, to the payment of all other Obligations
then due and payable;
(iv) fourth, to the payment of any other amounts
required by applicable law (including, without limitation, Section 9-504(1)(c)
of the Code or any successor or similar, applicable statutory provision); and
(v) fifth, to any such Grantor that shall be, or to
whomsoever shall be, lawfully entitled to receive the same or as a court of
competent jurisdiction shall direct.
(c) In the event that the proceeds of any such sale,
collection or realization are insufficient to pay all amounts to which Greenwich
are legally entitled, the Grantor shall be liable for the deficiency, together
with interest thereon at the highest rate specified in any applicable Loan
Document for interest on overdue principal thereof or such other rate as shall
be fixed by applicable law, together with the costs of collection and the
reasonable fees, costs, expenses and other client charges of any attorneys
employed by Greenwich to collect such deficiency.
(d) Notwithstanding anything to the contrary, the maximum
aggregate amount of Distributions deposited in the Reserve Fund shall be limited
to the Maximum Cumulative
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<PAGE>
Reserve Fund Deposit, provided that the foregoing limitation shall not apply to
the costs and expenses (including reasonable fees, costs and expenses of counsel
to Greenwich) incurred by Greenwich in connection with any sale of, or
collection from, or other realization upon, the Pledged Assets.
SECTION 8. Indemnity and Expenses.
(a) The Grantor agrees to indemnify and hold Greenwich
harmless from and against any and all claims, damages, losses, liabilities,
obligations, penalties, costs or expenses (including, without limitation, legal
fees, costs, expenses and other client charges) to the extent that they arise
out of or otherwise result from (i) this Agreement (including, without
limitation, enforcement of this Agreement), or (ii) any claim from any third
party servicer or the applicable Monoline Insurance Company to reimburse any
such Person for losses pursuant to indemnification or guaranty obligations of
Greenwich arising from, related to, or in connection with any of the Facilities,
except, in the case of clauses (i) and (ii) above, claims, losses or liabilities
resulting solely and directly from (x) information provided by and related to
Greenwich or any of its Affiliates or (y) Greenwich's gross negligence or
willful misconduct. With respect to any indemnification or guaranty obligations
of Greenwich described in clause (ii) of this Section 8(a), the Grantor shall
have the right to review such obligations prior to definitive documentation of
such obligations being negotiated by Greenwich and the applicable third party
servicer or Monoline Insurance Company, as the case may be, and shall provide
its written consent to such obligations, which consent may be withheld by the
Grantor in its sole discretion.
(b) The Grantor shall upon demand pay to Greenwich (i) the
amount of any and all costs and expenses, including the reasonable fees, costs,
expenses and other client charges of counsel for Greenwich and of any experts
and agents (including, without limitation, any collateral trustee that may act
as agent of Greenwich), that Greenwich may incur in connection with (A) the
preparation, negotiation, execution, delivery, recordation, administration,
amendment, waiver or other modification or termination of this Agreement, or (B)
the custody, preservation, use or operation of, the Collateral and (ii) the
amount of any and all costs and expenses, including the reasonable fees, costs,
expenses and other client charges of counsel for Greenwich and of any experts
and agents (including, without limitation, any collateral trustee that may act
as agent of Greenwich), that Greenwich may incur in connection with (A) the sale
of, collection from, or other realization upon, any Collateral, (B) the exercise
or enforcement of any of the rights of Greenwich hereunder, or (C) the failure
by the Grantor to perform or observe any of the provisions hereof.
SECTION 9. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing and shall be mailed (by certified
mail, postage prepaid and return receipt requested), telecopied or delivered to
the Grantor, at its address set forth in the Purchase Facility; if to Greenwich,
to it at its address set forth in the Purchase Facility; or as to any such
Person, at such other address as shall be designated by such Person in a written
notice to such other Person complying as to delivery with the terms of this
Section 9. All such notices and other communications shall be effective (i) if
mailed, three days after being deposited in the mails, (ii) if telecopied, when
received and (iii) if delivered, upon delivery.
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<PAGE>
SECTION 10. Security Interest Absolute. All rights of
Greenwich, all security interests and all obligations of the Grantor hereunder
shall be absolute and unconditional irrespective of: (i) any lack of validity or
enforceability of any of the Facilities or the Engagement Letter or any other
agreement or instrument relating thereto, (ii) any change in the time, manner or
place of payment of, or in any other term in respect of, all or any of the
Obligations, or any other amendment or waiver of or consent to any departure
from any of the Facilities or the Engagement Letter or any other agreement or
instrument relating thereto, (iii) any exchange or release of, or non-perfection
of any Lien on any Collateral, or any release or amendment or waiver of or
consent to departure from any guaranty, for all or any of the Obligations, or
(iv) any other circumstance which might otherwise constitute a defense available
to, or a discharge of, the Grantor in respect of the Obligations.
SECTION 11. [Intentionally Omitted]
SECTION 12. Miscellaneous.
(a) No amendment of any provision of this Agreement shall be
effective unless it is in writing and signed by the Grantor and Greenwich, and
no waiver of any provision of this Agreement, and no consent to any departure by
the Grantor therefrom, shall be effective unless it is in writing and signed by
Greenwich, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
(b) No failure on the part of Greenwich to exercise, and no
delay in exercising, any right hereunder or under any of the Facilities or the
Engagement Letter shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The rights and remedies of Greenwich
provided herein and in the Facilities and the Engagement Letter are cumulative
and are in addition to, and not exclusive of, any rights or remedies provided by
law. The rights of Greenwich under any of the Facilities or the Engagement
Letter against any party thereto are not conditional or contingent on any
attempt by Greenwich to exercise any of its rights under any of the Facilities
or the Engagement Letter against such party or against any other Person.
(c) Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security interest
in the Collateral and shall (i) remain in full force and effect until the
payment in full or release of the Obligations, and (ii) be binding on the
Grantor and its successors and assigns and shall inure, together with all rights
and remedies of Greenwich hereunder, to the benefit of Greenwich and its
respective permitted successors, transferees and assigns. Without limiting the
generality of clause (ii) of the immediately preceding sentence, without notice
to the Grantor, Greenwich may assign or otherwise transfer its rights under any
of the Facilities to any other Person, and such other Person shall thereupon
become vested with all of the benefits in respect thereof granted to Greenwich
herein or otherwise. None of the rights or obligations of the Grantor hereunder
may be assigned
-15-
<PAGE>
or otherwise transferred without the prior written consent of Greenwich, and any
such assignment or transfer shall be null and void.
(e) Upon the termination of the Facilities and the
satisfaction in full of the Obligations, (i) this Agreement and the security
interests created hereby shall terminate and all rights to the Collateral shall
revert to the Grantor and (ii) Greenwich shall, upon the Grantor's request and
at such Grantor's expense, (A) return to such Grantor such of the Collateral as
shall not have been sold or otherwise disposed of or applied pursuant to the
terms hereof and (B) execute and deliver to such Grantor such documents as such
Grantor shall reasonably request to evidence such termination, all without any
representation, warranty or recourse whatsoever.
(f) This Agreement shall be governed by and construed in
accordance with the law of the State of New York, except as required by
mandatory provisions of law and except to the extent that the validity and
perfection or the perfection and the effect of perfection or non-perfection of
the security interest created hereby, or remedies hereunder, in respect of any
particular Collateral are governed by the law of a jurisdiction other than the
State of New York.
(g) Any legal action or proceeding with respect to this
Agreement or any document related thereto may be brought in the courts of the
State of New York or the United States of America for the Southern District of
New York, and, by execution and delivery of this Agreement, the Grantor hereby
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The Grantor hereby
irrevocably waives any objection, including, without limitation, any objection
to the laying of venue or based on the grounds of forum non conveniens, that it
may now or hereafter have to the bringing of any such action or proceeding in
such respective jurisdictions and consents to the granting of such legal or
equitable relief as is deemed appropriate by the court.
(h) The Grantor irrevocably consents to the service of process
of any of the aforesaid courts in any such action or proceeding by the mailing
of copies thereof by registered or certified mail, postage prepaid, to such
Grantor at its address provided herein, such service to become effective 30 days
after such mailing.
(i) Nothing contained herein shall affect the right of
Greenwich to serve process in any other manner permitted by law or commence
legal proceedings or otherwise proceed against the Grantor or any of such
Grantor's property in any other jurisdiction.
(j) THE GRANTOR AND (BY ITS ACCEPTANCE OF THIS AGREEMENT)
GREENWICH HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL
OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES HERETO.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-16-
<PAGE>
IN WITNESS WHEREOF, the Grantor has caused this Agreement to
be executed and delivered by its officer thereunto duly authorized as of the
date first above written.
CONTIFINANCIAL CORPORATION
By: ________________________________
Name:
Title:
By: ________________________________
Name:
Title:
-17-
<PAGE>
Schedule I
ADDRESSES OF GRANTOR
Chief Place of Business, Chief Executive
Office and Location of Records
277 Park Avenue
38th Floor
New York, New York 10172
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<PAGE>
Schedule II
UCC-1 FINANCING STATEMENTS
Secretary of State of the State of New York
Registrar's Office of the County of New York, New York
<PAGE>
Schedule III
EXCESS SPREAD RECEIVABLE
ContiMortgage Home Equity Loan Trust 1998-4 Home Equity Pass-Through
Certificate, Class R, No. R-2, dated December 7, 1998
ContiFinancial Corporation
Calculation of Earnings Per Share
For the three months ended September 30, 1999
<TABLE>
<CAPTION>
<S> <C>
Basic and Diluted Computation for the three months ended September 30,1999
Weighted average shares outstanding:
Common stock excluding shares relating to employee incentive plans 45,720,925
Vested Restricted Shares Outstanding during the Quarter 746,770
-------------
Weighted Average Shares Outstanding 46,467,695
-------------
Quarter income (loss) ($335,707)
-------------
Basic and Diluted Earnings Per Share ($7.18)
=============
</TABLE>
ContiFinancial Corporation
Ratio of Earnings to Fixed Charges
Exhibit 12.1 of September 30, 1999 Form 10-Q
<TABLE>
<CAPTION>
Six months ended
September 30,
1999 1998 Fiscal 99 Fiscal 98 Fiscal 97 Fiscal 96 Fiscal 95
-------- -------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Summary:
Earnings (418,804) (55,575) (255,696) 385,425 297,677 197,996 77,895
Fixed Charges 80,769 121,522 233,598 165,904 120,636 74,770 29,635
-------- -------- -------- -------- -------- -------- --------
Ratio (5.96)(a) (0.46) (1.09)(b) 2.32 2.47 2.65 2.63
======== ======== ======== ======== ======== ======== ========
Earnings:
Income (loss) before income taxes and
minority interest (561,117) (175,440) (493,615) 224,965 177,041 126,536 56,988
Plus: Interest expense 80,769 121,522 233,598 165,904 120,636 74,770 29,635
Less: Equity income/loss in unconsolidated
subsidiaries (1,456) (1,605) 4,321 (5,444) -- -- --
Less: Minority Interest n/a (52) n/a n/a n/a (3,310) (8,728)
-------- -------- -------- -------- -------- -------- --------
Total "Earnings" (481,804) (55,575) (255,696) 385,425 297,677 197,996 77,895
======== ======== ======== ======== ======== ======== ========
Fixed Charges:
Interest expense 80,769 121,522 233,598 165,904 120,636 74,770 29,635
</TABLE>
(a) The dollar amount of the deficiency at September 30, 1999 was $562,573.
(b) The dollar amount of the deficiency at March 31, 1999 was $489,294.
n/a = Not Applicable
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONTIFINANCIAL CORPORATION CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF
OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> SEP-30-1999
<CASH> 64,278
<SECURITIES> 400,989
<RECEIVABLES> 448,375
<ALLOWANCES> (5,312)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 33,732
<DEPRECIATION> (13,441)
<TOTAL-ASSETS> 978,167
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 477
<OTHER-SE> (363,154)
<TOTAL-LIABILITY-AND-EQUITY> 978,167
<SALES> 0
<TOTAL-REVENUES> (152,919)
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 140,027
<LOSS-PROVISION> 2,605
<INTEREST-EXPENSE> 38,103
<INCOME-PRETAX> (333,654)
<INCOME-TAX> 74
<INCOME-CONTINUING> (333,707)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (333,707)
<EPS-BASIC> (7.18)
<EPS-DILUTED> (7.18)
</TABLE>
