SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (date of earliest event reported): July 12, 1999
SOUTHERN PACIFIC FUNDING CORPORATION
(Exact name of registrant as specified in its charter)
California 1-11785 33-0636924
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<S> <C> <C>
(State or other jurisdiction (Commission File No.) (IRS Employer Identification
of incorporation) No.)
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One Centerpointe Drive, Suite 551
Lake Oswego, Oregon 97035
(Address of principal executive offices) (Zip Code)
(503) 684-6316
(Registrant's telephone number, including area code)
Item 5. Other Events.
As previously reported, Southern Pacific Funding Corporation
("SPFC") filed a voluntary petition with the United States Bankruptcy Court for
the District of Oregon (the "Bankruptcy Court") under Chapter 11 of the United
States Bankruptcy Code, Case No. 298-37613-elp11, on October 1, 1998.
Also as previously reported, on June 3, 1999, following a
hearing on the adequacy of SPFC's Disclosure Statement (the "Disclosure
Statement") regarding its proposed Second Amended Plan of Reorganization (the
"Plan"), the Bankruptcy Court approved the distribution of copies of the Plan
and Disclosure Statement to SPFC's creditors and equity holders in connection
with soliciting votes on the Plan. A copy of the Disclosure Statement, together
with certain of the exhibits thereto (including the Plan as Exhibit 5), was
attached to and incorporated by reference in a Current Report on Form 8-K filed
on June 8, 1999.
On July 12, 1999, the Bankruptcy Court entered an order
confirming the Plan under Chapter 11 of the United States Bankruptcy Court (the
"Confirmation Order"). A copy of the Confirmation Order, together with exhibits
thereto (except for the Plan, which was previously filed as noted above) is
attached as Exhibit 99.1.
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Item 7. Exhibits.
(c) Exhibits:
99.1 Findings of Fact, Conclusions of Law, and Order
Confirming Second Amended Plan as Modified.
SIGNATURE
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.
SOUTHERN PACIFIC FUNDING CORPORATION
Dated: July 16, 1999 By: /s/ Timothy Breedlove
Name: Timothy Breedlove
Title: Chief Financial Officer
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UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF OREGON
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In re
Case No. 398-37613-elp11
SOUTHERN PACIFIC FUNDING CORPORATION,
Chapter 11
Debtor-in-Possession.
FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER
Tax ID No. 33-0636924 CONFIRMING SECOND AMENDED PLAN AS MODIFIED
Hearing Date: July 7, 1999
Hearing Time: 9:00 a.m.
Courtroom: 1
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Southern Pacific Funding Corporation, the debtor and
debtor-in-possession in this case ("SPFC"), filed its Second Amended Plan of
Reorganization dated June 2, 1999 (the "Plan") its Disclosure Statement relating
to the Plan (the "Disclosure Statement") in accordance with the provisions of
chapter 11 of title 11 of the United States Code (the "Bankruptcy Code"). By
orders dated June 3, 1999 (together, the "June 3 Order"), this Court approved
the Disclosure Statement as containing adequate information within the meaning
of section 1125 of the Bankruptcy Code and (i) established and approved
procedures for the solicitation and tabulation of votes to accept or reject the
Plan and the forms of solicitation materials and notices to be forwarded to all
holders of Claims(1) and Interests including the beneficial holders of publicly
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1 All capitalized terms not otherwise defined herein have the meanings set forth
in the Plan.
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Amended Plan as Modified
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traded securities, (ii) established deadlines for voting on and objecting to the
Plan, and (iii) established July 7, 1999, at 9:00 a.m. PDT as the date and time
for commencement of the hearing pursuant to section 1129 of the Bankruptcy Code
to consider confirmation of the Plan (the "Confirmation Hearing"). Copies of the
Plan, the Disclosure Statement, and other related materials were transmitted,
and acceptances and rejections of the Plan were solicited from holders of Claims
and Interests entitled to vote on Plan within the time and in the manner
required by the June 3 Order. The ballots indicating acceptance or rejection of
the Plan were received and tabulated by Poorman-Douglas Corporation, the
Court-authorized balloting agent. Affidavits of service were filed with respect
to the transmittal of solicitation materials and notice of the Confirmation
Hearing. An affidavit of publication has been filed verifying that notice of the
Confirmation Hearing was published in accordance with this Court's ex parte
Order authorizing notice by Publication, entered January 6, 1999. Objections to
confirmation of the Plan (the "Confirmation Objections") were filed by First
Union National Bank, Advanta Mortgage Corp. USA ("Advanta"), Flagstar Bank FSB
("Flagstar"), Spieker Properties, L.P., BOMAC Capital Mortgage, Inc., the United
States of America, by and through the Internal Revenue Service and Oceanmark
Bank, FSB.
At the Confirmation Hearing, the Court also considered (i)
SPFC's Motion to Approve Settlement (the "Norwest Settlement Motion") with
Norwest Bank Minnesota, National Association, and MBIA Insurance Corporation
(the "Norwest Settlement Agreement"), (ii) SPFC's Motion to Approve Plan
Amendments to Reflect Settlement with Norwest Bank Minnesota, National
Association, and MBIA Insurance Corporation (the "Plan Modifications"), and
(iii) the Confirmation Objections not previously withdrawn or settled.
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Amended Plan as Modified
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Based upon the entire record of this Chapter 11 Case,
including, without limitation, the record made at the Confirmation Hearing and
the certification of ballots to accept or reject the Plan, this Court makes the
following findings of fact and conclusions of law.(2)
A. This Court has jurisdiction over the Chapter 11 Case pursuant to 28
U.S.C. Sections 157 and 1334. Venue of the Chapter 11 Case and all proceedings
herein in this District is proper pursuant to 28 U.S.C. Section 1408 and 1409.
Confirmation of the Plan is a core proceeding within the meaning of 28 U.S.C.
Section 157(b), and this Court has jurisdiction to enter a final order with
respect thereto.
B. Due, timely, sufficient, and adequate notice of the Plan, the
Confirmation Hearing, the Norwest Settlement Agreement, the Plan Modifications,
and the deadlines for voting on, and filing objections to, the Plan has been
given to all known holders of Claims and Interests and other parties-in-interest
in accordance with the procedures established by the June 3 Order, the
Bankruptcy Code, the Bankruptcy Rules, the Local Rules of the Court, and all
other applicable laws, rules and regulations.
C. The solicitation by SPFC of votes accepting or rejecting the Plan
was conducted in good faith and complied with sections 1125 and 1126 of the
Bankruptcy Code, Bankruptcy Rules 3017 and 3018, the June 3 Order, the Local
Rules of the Court, and all other applicable provisions of the Bankruptcy Code,
the Bankruptcy Rules and all other applicable laws, rules and regulations.
D. The procedures by which the ballots were distributed to holders of
Claims against and Interests in SPFC and tabulated were fair, properly
conducted, and in accordance with the Bankruptcy Code, the Bankruptcy Rules, the
Local Rules of this Court, the June 3 Order, and all other applicable laws,
rules and regulations.
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2 This Confirmation Order constitutes the Court's findings of the fact and
conclusion of law under Rule 52 of the Federal Rules of Civil Procedure, as made
applicable by Rules 7052 and 9014 of the Federal Rules of Bankruptcy Procedure
(the "Bankruptcy Rules"). Any finding of fact shall constitute a finding of fact
even if it is stated as a conclusion of law, and any conclusion of law shall
constitute a conclusion of law even if it is stated as a finding of fact.
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Amended Plan as Modified
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E. As evidenced by the Declaration of Roxanna Nowparast dated July 6,
1999, certifying the method and results of the ballot tabulation, (i) at least
two-thirds in amount and more than one-half in number of the holders of Claims
in Class 3 (Secured Senior Notes Claims), Class 5 (Senior Notes Claims), Class 6
(Subordinated Notes Claims), Class 7 (Senior Unsecured Claims), and Class 14
(Norwest and MBIA) that timely and properly voted on the Plan accepted the Plan
without including the votes of insiders (the "Plan Vote Certification").
E.1. Depending upon the amount of the claim of BOMAC, Class 8 has
either accepted the plan, or the plan can be confirmed under 31129(b)(2)(B)
notwithstanding the lack of acceptance. See Paragraph X.
F. The treatment of Priority Tax Claims in accordance with clause (b)
of Section 2.2 of the Plan (as modified by paragraph 1.1 below) is consistent
with section 1129(a)(9)(C) of the Bankruptcy Code in that the payment of those
claims with interest at the rate of 8 percent per annum has a value, as of the
Effective Date, equal to the amounts of those claims.
G. Classes 1 (Priority Claims), 2 (Secured Claims), 4 (Administrative
Convenience Claims), and 13 (Bankers Trust Claim) are not impaired under the
Plan and, therefore, such Classes are deemed to have accepted the Plan pursuant
to section 1126(f) of the Bankruptcy Code.
H. Classes 9 (Claims of Securities Plaintiffs Based Upon Notes), 10
(Indemnity Claims of Securities Action Defendants), 11 (Interests of Holders of
Old Common Stock), and 12 (Claims of Security Plaintiffs Not Based on Notes)
will not receive or retain any property under the Plan on account of such Claims
and Interests and, therefore, such Classes are deemed not to have accepted the
Plan pursuant to section 1126(g) of the Bankruptcy Code.
I. As required by section 1129(a)(1) of the Bankruptcy Code, the Plan
complies with all applicable provisions of the Bankruptcy Code.
J. The Classification of Claims against and Interests in SPFC under the
Plan is reasonable, not discriminatory, and is consistent with section 1122(a)
of the Bankruptcy Code. In addition, consistent with section 1122(b), the Plan
contains a convenience class (Class 4) encompassing holders of Allowed Claims in
an amount of $400 or less and each holder of a
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Amended Plan as Modified
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Senior Unsecured Claim and General Unsecured Claim who has elected on its Class
7 or 8 ballot to reduce the Allowed amount of its Claim to $400. The inclusion
of Class 4 in the Plan is reasonable and necessary for administrative
convenience.
K. As required by and in compliance with sections 1123(a)(1), (a)(2),
and (a)(3) of the Bankruptcy Code, the Plan (i) identifies the Classes of Claims
against and Interests in SPFC, (ii) specifies the Classes of Claims and
Interests that are not impaired under the Plan as well as those that are
impaired under the Plan, and (iii) specifies the treatment of each Class of
Claims and Interests under the Plan.
L. Consistent with section 1123(a)(4) of the Bankruptcy Code, the Plan
provides substantially similar treatment for each Claim or Interest in a
particular Class.
M. As required by section 1123(a)(5) of the Bankruptcy Code, the Plan
provides adequate means for its execution and implementation including, but not
limited to (i) the sale of the Acquired Assets pursuant to the Asset Agreement,
(ii) consummation of the Acquisition Agreement and the Acquisition Transaction,
and (iii) the formation of the Liquidating Trust and performance of the
Liquidating Trust Agreement.
N. In compliance with section 1123(a)(6) of the Bankruptcy Code, SPFC's
proposed amendment to its articles of incorporation as filed with this Court
before the Confirmation Hearing will prohibit the issuance of nonvoting equity
securities.
O. Consistent with section 1123(a)(7) of the Bankruptcy Code, the Plan
provides for the manner by which the Liquidating Trustee is to be designated,
the employment by the Liquidating Trust of certain of SPFC's officers and
employees to assist in transitional matters, and the retention by the
Liquidating Trust of attorneys, accountants, and other professionals. This is
consistent with the interests of holders of Claims and Interests and public
policy. As required by section 1129(a)(5) of the Bankruptcy Code, the identity
and affiliations of the person selected by the Official Unsecured Creditors'
Committee to serve as Liquidating Trustee were disclosed before the Confirmation
Hearing. SPFC has disclosed the following identities and
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Amended Plan as Modified
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affiliations of the individuals proposed to serve, after confirmation of the
Plan and through the Closing Date, as directors and officers of SPFC:
The directors of SPFC after the Confirmation Date will continue to be
the current directors, E. James Hedemark, Kevin D. Padrick, and Timothy
Galligan. Messrs. Hedemark and Padrick are presently chief executive
officer and president, respectively, of SPFC, and Mr. Galligan is an
attorney in private practice and management consultant in Burlingame,
California. The senior officers of SPFC after the Confirmation Date
will continue to be Messrs. Hedemark and Padrick; Timothy A. Breedlove,
executive vice president and chief financial officer; and Wendy Beth
Oliver, executive vice president, secretary, and general counsel. In
addition to the four senior officers, the following additional officers
of SPFC will continue after the Effective Date to be officers of SPFC:
Randall P. Maddox and Chris Cornell, Senior Vice Presidents; Robyn
Prickett, Steve Walker, Steven S. Shupe, Earl Martine, Lee Hilbert,
Vice Presidents; and Joe Pino, Scott Shusda, and Lisa Tiedeman,
Assistant Vice Presidents. Each of the current directors and officers
is expected to resign at the Closing Date. In accordance with the Plan,
the Liquidating Trust will employ as consultants Ms. Oliver through
September 1, 1999, and Messrs. Hedemark, Padrick, and Breedlove through
September 15, 1999.
SPFC has been informed that Subscriber expects to elect the following directors
and appoint the following officers of Reorganized SPFC:
Steve T. Mnuchin (director and president of Reorganized SPFC) is a
Managing Director of Buyer (Goldman, Sachs & Co.) and is the head of
its Mortgage Securities Department. Mr. Mnuchin has been with Buyer
since 1985.
Robert J. Christie (director and vice president of Reorganized SPFC) is
a Managing Director of Buyer and is the co-head of its Whole Loan
Trading Group. Mr. Christie has been with Buyer since 1987.
Marvin Kabatznick (vice president of Reorganized SPFC) is a Vice
President of Buyer and has worked in its Mortgage Securities Department
since 1985.
David A Viniar (treasurer of Reorganized SPFC) is the chief financial
officer of Subscriber (The Goldman Sachs Group, Inc.), a publicly
traded financial services firm.
Jay F. Strauss (secretary of Reorganized SPFC) is a Vice
President/Assistant General Counsel of Buyer and a practicing attorney
in the State of New York.
James B. McHugh (assistant secretary of Reorganized SPFC) is a Vice
President/Associate General Counsel of Buyer and a practicing attorney
in the State of New York.
Esta E. Stecher (assistant treasurer of Reorganized SPFC) is a Managing
Director of Buyer and the head of its Tax Department.
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Amended Plan as Modified
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Dan H. Jester (assistant treasurer of Reorganized SPFC) is a Managing
Director of Buyer.
The continuation of SPFC's current directors and officers in their positions
through the Closing Date, the employment of certain current directors and
officers of SPFC by the Liquidating Trust, and the election and appointment of
the preceding directors and officers of Reorganized SPFC is equitable and
consistent with the interests of the creditors and interest holders and with
public policy.
P. Consistent with sections 1123(b)(1) and (b)(2) of the Bankruptcy
Code, the Plan impairs or leaves unimpaired, as the case may be, each Class of
Claims or Interests, and provides for the assumption, assignment or rejection of
each of SPFC's executory contracts and unexpired leases which have not been
previously assumed or rejected pursuant to section 365 of the Bankruptcy Code.
Q. SPFC has complied with section 1129(a)(2) of the Bankruptcy Code as
it has complied with all of the applicable provisions of the Bankruptcy Code
including the disclosure and solicitation requirements of sections 1125 and 1126
of the Bankruptcy Code.
R. As required by section 1129(a)(3), the Plan has been proposed in
good faith and not by any means forbidden by law. SPFC's objectives in proposing
the Plan were to maximize recoveries to all creditors and to utilize the
benefits of chapter 11 of the Bankruptcy Code to effectuate distributions to
creditors in accordance with their legal entitlement to receive those
distributions, or as otherwise agreed among the creditors.
S. The Buyer and the Subscriber have acted in good faith in the Chapter
11 Case, including, without limitation, in relation to the Asset Agreement and
the Acquisition Agreement. SPFC engaged in an intensive effort since early 1999
to market its assets in order to maximize their value. Through the placement
agent retained by SPFC, more than ninety (90) financial institutions and
mortgage industry participants nationwide were contacted in connection with the
effort to market SPFC's assets. SPFC prepared and distributed to approximately
forty-five (45)
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Amended Plan as Modified
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interested parties a private placement memorandum and supplemental information
regarding the assets offered for sale. SPFC conducted a bidding process in two
phases in consultation with the Committee. After Subscriber' bid was selected as
the winning bid, certain additional bidding procedures were approved by this
Court to govern consideration of any further offers to acquire SPFC's assets. In
accordance with those procedures, an auction was held on May 21, 1999, and
Subscriber was the winning bidder at the auction. As a result, Subscriber and
SPFC have entered into the Acquisition Agreement and the Asset Agreement which
provide the principal means for the implementation of the Plan. This Court finds
and concludes that the process leading to the Acquisition Agreement and Asset
Agreement was fair and reasonable, conducted on an arm's-length basis and in the
best interest of all parties-in-interest in the Chapter 11 Case.
T. As required by Section 1129(a)(4) of the Bankruptcy Code, each
payment made or to be made by SPFC for services or for costs and expenses in
connection with the Chapter 11 Case, or in connection with the Plan, other than
those incurred in the ordinary course of business, has been approved by this
Court or is subject to the approval by this Court as being reasonable.
U. No rate changes are provided for in the Plan that would require the
approval of any governmental regulatory commission.
V. As required by section 1129(a)(7) of the Bankruptcy Code, with
respect to each impaired Class of Claims, each holder of a claim of such Class
has accepted the Plan or will receive or retain under the Plan on account of
such Claim property of a value, as of the Effective Date, that is not less than
the amount such holder would receive or retain if SPFC were liquidated on the
Effective Date under chapter 7 of the Bankruptcy Code.
W. As indicated by the Plan Vote Certification, and as established on
the record at the Confirmation Hearing, impaired Classes 3, 5, 6, 7, 8*, and 14
have voted to accept the Plan and accordingly, the requirements of section
1129(a)(8) of the Bankruptcy Code have been met with respect to each such Class,
and impaired Classes 9, 10, 11, and 12 have or are deemed to have
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* Subject to Paragraphs E.1. and X.
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Amended Plan as Modified
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voted, to reject the Plan. SPFC has requested that the Court confirm the Plan
under section 1129(b) of the Bankruptcy Code as to Classes 9, 10, 11, and 12.
X. The Plan does not discriminate unfairly against Class 8, 9, 10, or
12 and the Plan is fair and equitable with respect to the holders of Claims in
those Classes because no Class junior to those Classes will receive or retain
any property under the Plan on account of such junior Claim or Interest.
Accordingly, the requirements of section 1129(b)(2)(B) have been met with
respect to the holders of Claims in Classes 8, 9, 10, and 12.
Y. The Plan does not discriminate unfairly against Class 11 Interests,
and the Plan is fair and equitable with respect to the Holders of Class 11
Interests because there are no Holders of Claims or Interests junior to the
Class 11 Interests.
Z. The Plan provides for the treatment of Allowed Administrative
Expense Claims and Allowed Priority Claims in accordance with section 1129(a)(9)
of the Bankruptcy Code, except to the extent that the holder of a particular
Claim has agreed in writing to a different treatment. Administrative Expense
Claims incurred in the ordinary course of SPFC's business shall be paid or
performed in accordance with the terms and conditions of the parties' agreement.
AA. As required by section 1129(a)(10) of the Bankruptcy Code, at least
one impaired Class of Claims has accepted the Plan, determined without including
any acceptance of the Plan by any insider.
BB. The Plan is feasible and satisfies the requirement of section
1129(a)(11) of the Bankruptcy Code. The Asset Agreement, the Acquisition
Agreement, and the Liquidating Trust Agreement provide the means for
implementing the Plan and distributing the value of SPFC to the holders of
Allowed Claims.
CC. As required by section 1129(a)(12) of the Bankruptcy Code, the Plan
provides that all fees determined by the Court at the Confirmation Hearing to be
payable under 28 U.S.C. Section 1930 shall be paid on or before the Effective
Date.
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Amended Plan as Modified
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DD. Section 1129(a)(13) is inapplicable to the Chapter 11 Case because
SPFC has no obligation in respect of retiree benefits.
EE. The settlement set forth in the Norwest Settlement Agreement is
fair and reasonable and provides substantial benefits to SPFC and its creditors
because, among other things, it results in a substantial reduction of Claims
against SPFC and allows the Asset and Acquisition Agreements to close. The
Norwest Settlement Agreement is in the best interest of creditors and the
holders of the Senior Certificates (as defined in the Norwest Settlement
Motion). The Court approves the execution and performance of the Norwest
Settlement Agreement as a reasonable and prudent exercise of Norwest's fiduciary
obligations and discretion as trustee of the Trusts (as defined in the Norwest
Settlement Motion). Adequate and sufficient notice has been provided to the
holders of the Senior Certificates (as defined in the Norwest Settlement
Agreement) and none has filed an objection to the Norwest Settlement Motion.
FF. The Plan Modifications are necessary to reflect the terms of the
Norwest Settlement Agreement and do not adversely change the treatment of the
holder of any Claim or Interest by comparison to the treatment that would result
from the expected settlement described in the Disclosure Statement and Plan. No
further disclosure or solicitation is necessary.
GG. The agreements and obligations of SPFC and the Liquidating Trust
set forth in the letter agreements (the "Advanta Letter Agreements") dated July
6, 1999, between SPFC and Advanta and among Subscriber, SPFC, and Advanta,
copies of which are annexed hereto as Exhibits "A" and "B", respectively,
constitute adequate assurance of future performance of the assumed pooling and
servicing agreements between SPFC and Advanta. No further disclosure or
solicitation is required.
HH. The transfers of assets by SPFC contemplated by the Plan (i) will
on the date of such transfers, without further act or order of this Court, be
legal, valid and effective transfers of property, (ii) will vest in the
transferees good title to such property free and clear of all Claims,
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Second Amended Plan as Modified
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Interests, liens and encumbrances of every kind and nature, (iii) will not
constitute fraudulent conveyances or fraudulent transfers under any applicable
law, and (iv) will not subject the Buyer, the Subscriber, any of their
affiliates, the Liquidating Trust, or the property so transferred, including,
without limitation, the Acquired Assets and the Excluded Assets, to any
liability by reason of such transfer under applicable law or any theory of law
including, without limitation, any theory of successor or transferee liability,
including without limitation liability under section 6901 of the Internal
Revenue Code, except as may be expressly provided herein or expressly agreed to
by the affected transferee.
II. The Beneficial Interests shall be exempt from registration under
Section 5 of the Securities Act and any state or local law requiring
registration before the offering, issuance, distribution, or sale of securities
to the extent provided by section 1145 of the Bankruptcy Code.
JJ. Confirmation has been requested only with respect to the Plan.
KK. The principal purpose of the Plan is not the avoidance of taxes. No
governmental unit that is a party-in-interest has requested in the Chapter 11
Case that the Court make a finding that the principal purpose of the Plan is the
avoidance of taxes.
LL. The condition to confirmation set forth in section 9.1 of the Plan
(that this Order be acceptable in form and substance to SPFC, Buyer, and
Subscriber) has been satisfied.
MM. The making and delivery of the conveyance documents to implement
the Acquisition Transaction, transfers to the Liquidating Trust, and any other
related instruments contemplated under the Plan constitute "the making or
delivery of an instrument of transfer under a plan confirmed under section 1129"
within the meaning of section 1146(c) of the Bankruptcy Code.
NN. The fourth paragraph of Section 5.3.1(c) of the Plan states, among
other things, that
The term of the Trust Committee shall renew automatically for six-month
periods, but the Trust Committee may, by majority vote of its members
and written notice to the Office of the United States Trustee, the
Liquidating Trustee, and the Special Notice List, agree to dissolve the
Trust Committee.
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Second Amended Plan as Modified
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The fourth paragraph of Section 9.6.8 of the Disclosure Statement is
inconsistent, stating that the Trust Committee will dissolve in six months in
the absence of a Trust Committee vote. In accordance tithe Section 1.2.1 of the
Plan, the terms of the Plan shall control, and no further disclosure or
solicitation is necessary.
OO. Section 7.5 of the Disclosure Statement states, among other things,
that "SPFC does not have any pension plans and is unaware of any pension plan
liability." SPFC supplements that disclosure as follows:
SPFC is the sponsor of a 401(k) plan under which SPFC employees are
participants and Key Trust Company National Association is trustee. In
accordance with the 401(k) plan, SPFC has withheld and matched a
portion of participant contributions to the 401(k) plan, both before
and after the petition was filed. SPFC has made all participant and
sponsor contributions to the 401(k) plan trustee. SPFC will terminate
the 401(k) plan in connection with the closing of the Acquisition
Transaction under the Plan. In connection with termination of the
401(k) plan, SPFC will, among other things, adopt certain 401(k) plan
amendments incorporating tax law changes for qualified retirement plans
and terminating the 401(k) plan, give certain notices to the
participants, and file certain tax returns for the 401(k) plan. Because
the closing of the Acquisition Transaction will occur before the 401(k)
plan termination process is complete, the termination process will be
completed by the Liquidating Trust, which will assume SPFC's
obligations under the 401(k) plan.
No further disclosure or solicitation is required with respect to SPFC's 401(k)
plan. The interests of participants in SPFC's 401(k) plan are not "retiree
benefits" within the meaning of section 1114 of the Bankruptcy Code.
PP. None of the modifications to the Plan set forth herein adversely
changes the treatment of the claim of any creditor or the interest of any equity
security holder. Accordingly, the Plan shall be deemed accepted by all creditors
and equity security holders who have previously accepted the Plan. Fed. R.
Bankr. P. 3019.
QQ. No unpaid fees are due to the clerk.
The Court having found that the Plan as modified by the Plan
Modifications (hereinafter, the "Plan") is confirmable for the foregoing
reasons, IT IS HEREBY ORDERED THAT:
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Second Amended Plan as Modified
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1. Nonmaterial Plan Modifications. The Plan and related documents are
modified in the following particulars (added language is bolded, and deleted
language is bracketed):
1.1. Plan Section 2.2: Priority Tax Claims. The reference in
Section 2.2 of the Plan to "1-3/4 percent per calendar quarter" is deleted and
replaced with "8 percent per annum".
1.2. Plan Section 3.2.3(c): Treatment of Class 3 Senior
Secured Notes Claims. The following sentence is hereby added to Plan Section
3.2.3(c) after the first sentence thereof: "Confirmation of this Plan shall not
affect the extent of BONY's lien in the net proceeds or any claim by SPFC or the
Liquidating Trust for avoidance or recovery of BONY's lien in the SPML
Receivable or any defenses thereto by BONY, nor shall confirmation of this Plan
constitute avoidance of any interest of BONY in collateral."
1.3. Plan Section 3.2.9(b): Treatment of Claims of Securities
Action Plaintiffs Based on Notes. The following sentence is hereby added to Plan
Section 3.2.9(b): "If there remain any Trust Assets (as defined in the
Liquidating Trust Agreement) after all Claims in Classes 5, 6, 7, and 8 have
paid in full together with interest as provided in Section 3.4 and the
Liquidating Trustee has paid all Trust Costs (as defined in the Liquidating
Trust Agreement) and other obligations of the Liquidating Trust, then the
Liquidating Trustee shall move to reopen the Chapter 11 Case to modify this Plan
to make appropriate provision for treatment of the Claims and Interests of
Classes 9, 10, 11, and 12. Any Distribution that becomes available to Class 9
Claims shall be subject to the Subordination Provisions to the extent
applicable."
1.4. Plan Section 3.4: Postpetition Interest. Plan Section
34.is hereby deleted in its entirety and replaced with the following:
3.4 POSTPETITION INTEREST, COSTS, AND ATTORNEY FEES.
Except as otherwise provided in this Plan, no Holder of an
Allowed Unsecured Claim shall be entitled to the accrual of
Postpetition interest, COSTS, OR ATTORNEY FEES or the payment by SPFC,
Reorganized SPFC, or the Liquidating Trust of Postpetition interest,
COSTS, OR ATTORNEY FEES on account of such Claim for any purpose, but
after the Claims in Classes 5, 6, 7, and 8 have been paid in
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Second Amended Plan as Modified
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full in accordance with Sections 3.2.5, 3.2.6, 3.2.7, and 3.2.8, the
Holders of Claims in those Classes shall receive Pro Rata Distributions
of Available Cash until Postpetition interest at the greater of the
contract rate or the legal rate on those Claims, PLUS COSTS AND
ATTORNEY FEES (THE "SOLVENCY CLAIMS"), has been paid in full.
NOTWITHSTANDING THE FOREGOING SENTENCE, IF A COURT OF COMPETENT
JURISDICTION DETERMINES THAT THE SUBORDINATION PROVISIONS APPLY TO
DISTRIBUTIONS ON ACCOUNT OF SOLVENCY CLAIMS, AVAILABLE CASH SHALL BE
DISTRIBUTED FIRST TO PAY THE SOLVENCY CLAIMS OF HOLDERS OF CLAIMS IN
CLASSES 3, 5, AND 7 AND THEREAFTER TO PAY THE SOLVENCY CLAIMS OF THE
HOLDERS OF CLASS 6 CLAIMS. UNLESS THE CHAPTER 11 CASE IS CLOSED, THE
BANKRUPTCY COURT SHALL HAVE EXCLUSIVE JURISDICTION TO DETERMINE WHETHER
THE SUBORDINATION PROVISIONS APPLY TO DISTRIBUTIONS ON ACCOUNT OF
SOLVENCY CLAIMS.
1.5. Plan Section 3.6: Rights of Indenture Trustees Vis-a-Vis
Third Parties. Plan Section 3.6 is hereby deleted in its entirety and replaced
with the following:
3.6 RIGHTS OF INDENTURE TRUSTEES VIS-A-VIS THIRD PARTIES.
Nothing in this Plan shall modify the rights of the Indenture
Trustees with respect to any party to the Senior Indenture or the
Subordinated Indenture, other than SPFC, including without limitation
the Indenture Trustees' rights to obtain liens, indemnity,
compensation, and reimbursement of legal fees, trustee's fees, and
expenses on and from Distributions to the Holders of Notes.
CONFIRMATION OF THIS PLAN SHALL NOT DETERMINE WHETHER HSBC MAY ASSERT
ANY CHARGING LIEN AGAINST THE PORTION OF ANY DISTRIBUTION TO THE
HOLDERS OF CLAIMS IN CLASSES 3, 5, OR 7 THAT WOULD BE PAID TO THE
HOLDERS OF CLASS 6 CLAIMS IN THE ABSENCE OF THE SUBORDINATION
PROVISIONS, WHICH ISSUE SHALL BE DECIDED SEPARATELY BY A COURT OF
COMPETENT JURISDICTION. UNLESS THE CHAPTER 11 CASE IS CLOSED, THE
BANKRUPTCY COURT SHALL HAVE EXCLUSIVE JURISDICTION TO DETERMINE THE
FOREGOING ISSUE. The Indenture Trustees may apply for reimbursement of
legal fees, trustee's fees, and costs under the Bankruptcy Code or any
other applicable law for services rendered and expenses incurred before
or at Confirmation and for services rendered and expenses incurred
after Confirmation in connection with any objection to the proofs of
Claim filed by the Indenture Trustees, ANY FINAL FEE APPLICATIONS FILED
BY PROFESSIONALS, any objection to OR APPEAL OF A DETERMINATION OF this
Plan's treatment of the Subordination Provisions, and with respect to
BONY the dispute regarding the nature and extent of AND ENFORCEMENT OF
BONY's lien treated in Section 3.2.3, as permitted by Section 1.2.3.
The Indenture Trustees shall also be compensated by the Liquidating
Trust for all reasonable post-Confirmation legal fees, trustee's fees,
and expenses incurred in connection actions required to be performed by
the Indenture Trustees to consummate this Plan and implement the
Liquidating Trust.
1.6. Plan Section 5.3.1(a) (second paragraph): Liquidating
Trustee's Section 1123(b) powers. The final sentence of the second paragraph of
Plan Section 5.3.1(a) is deleted in its entirety and replaced with the
following: "The Liquidating Trustee shall also be vested with
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SPFC's attorney-client privilege AND ALL OTHER BENEFITS AND PROTECTIONS TO WHICH
SPFC OR A TRUSTEE APPOINTED IN THE CHAPTER 11 CASE WOULD HAVE BEEN ENTITLED IN
THE ABSENCE OF THIS PLAN, INCLUDING THE BENEFITS AND PROTECTIONS OF SECTION 108
OF THE BANKRUPTCY CODE AND BANKRUPTCY RULE 2004."
1.7. Plan Section 5.3.1(a) (final paragraph): Liquidating
Trustee Bond. The final paragraph of Plan Section5.3.1(a) is hereby deleted in
its entirety and replaced with the following two paragraphs:
Any successor Liquidating Trustee shall be appointed in the
manner set forth above and in the Liquidating Trust Agreement. The
Liquidating Trustee may be removed in the manner set forth in the
Liquidating Trust Agreement.
The Liquidating Trustee shall obtain a bond [in an amount to
be determined by the Committee or the Trust Committee, as appropriate],
the cost of which shall be borne by the Liquidating Trust. THE
BENEFICIARY OF THE BOND SHALL BE THE LIQUIDATING TRUST. THE INITIAL
AMOUNT OF THE BOND SHALL DETERMINED BY THE COMMITTEE OR THE TRUST
COMMITTEE, AS APPROPRIATE, BUT IN NO CASE SHALL THE AMOUNT OF THE BOND
BE AT ANY TIME LESS THAN 125 PERCENT OF THE ANTICIPATED MAXIMUM AMOUNT
OF CASH TO BE HELD BY THE LIQUIDATING TRUST DURING THE TERM OF THE
BOND. NOT LESS THAN 30 DAYS AFTER THE EXPIRATION OF EACH CALENDAR
QUARTER, THE LIQUIDATING TRUSTEE SHALL DELIVER TO A BOND MONITOR A
CERTIFICATE STATING THE MAXIMUM AMOUNT OF CASH HELD BY THE LIQUIDATING
TRUST DURING THE PRIOR CALENDAR QUARTER, THE MAXIMUM AMOUNT OF CASH THE
LIQUIDATING TRUSTEE ESTIMATES WILL BE HELD BY THE LIQUIDATING TRUST
DURING THE CURRENT CALENDAR QUARTER AND THE NEXT CALENDAR QUARTER. THE
BOND SHALL REQUIRE THAT THE ISSUER GIVE THE LIQUIDATING TRUSTEE AND THE
BOND MONITOR NOT LESS THAN 30 DAYS' NOTICE OF EXPIRATION OR NONRENEWAL
OF THE BOND. IF THERE EXISTS ANY DEFAULT UNDER THIS PARAGRAPH THAT IS
NOT PROMPTLY CURED UPON NOTICE TO THE LIQUIDATING TRUSTEE, AND IN ANY
CASE BEFORE EXPIRATION OR NONRENEWAL OF THE BOND, THE BOND MONITOR
SHALL IMMEDIATELY INFORM SO THE UNITED STATES TRUSTEE AND THE TRUST
COMMITTEE (IF IT THEN EXISTS) AND FILE A MOTION FOR INSTRUCTIONS OR
OTHER APPROPRIATE RELIEF. UNTIL THE CHAPTER 11 CASE IS CLOSED, THE
UNITED STATES TRUSTEE SHALL SERVE AS BOND MONITOR. THE CHAPTER 11 CASE
SHALL NOT BE CLOSED UNLESS THE BANKRUPTCY COURT HAS FIRST APPOINTED A
POST-CLOSURE BOND MONITOR OTHER THAN THE UNITED STATES TRUSTEE ON THE
MOTION OF A PARTY IN INTEREST AND UPON NOTICE TO THE SPECIAL NOTICE
LIST ON SUCH TERMS (INCLUDING PROVISION FOR COMPENSATION FOR THE BOND
MONITOR'S SERVICES) AS THE BANKRUPTCY COURT DEEMS APPROPRIATE.
1.8. Plan Section 5.3.1(c): Constitution of the Trust
Committee. The third sentence of Plan Section 5.3.1(c) is hereby deleted in its
entirety and replaced with the following: "To the extent practicable, the Trust
Committee membership shall [represent] REFLECT THE ECONOMIC
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INTERESTS OF the Beneficiaries and shall consist of Holders of Claims of each of
Classes 5, 6, 7, and 8."
1.9. Plan Section 5.3.1(d), second paragraph: Trust Committee
Representation. The second paragraph of Section 5.3.1(d) of the Plan is deleted
in its entirety and replaced with the following:
The Trust Committee may, with Bankruptcy Court approval,
employ Professionals for [specified special purposes] FOR THE PURPOSE
OF ASSISTING THE TRUST COMMITTEE TO PERFORM ITS FUNCTIONS. The
Liquidating Trustee shall pay the fees and expenses of such
Professionals for such services TO THE EXTENT REASONABLY NECESSARY TO
ASSIST THE TRUST COMMITTEE TO PERFORM ITS FUNCTIONS, without Bankruptcy
Court approval, unless the Liquidating TrustEE or ten Beneficiaries
request a Bankruptcy Court hearing on the allowance of such fees and
expenses within ten days after mailing of the request for payment to
the Liquidating Trust and the Special Notice List.
1.10. Plan Section 5.3.1(d), fourth paragraph: Employee
Obligations. The first sentence of the fourth paragraph of Section 5.3.1(d) of
the Plan is hereby deleted in its entirety and replaced with the following:
The Liquidating Trust shall assume and perform SPFC's
obligations to pay to employees all accrued salaries, wages, EXPENSE
REIMBURSEMENTS, AND benefits, INCLUDING PAID TIME OFF, [and other
amounts] that have accrued from the Petition Date through the Effective
Date, including such payments as authorized by the Order Authorizing
Payment of (1) Employee Severance Plan and (2) Retention Plan, as
amended or modified by the Bankruptcy Court ("Severance and Retention
Order"), AND SHALL TAKE ALL NECESSARY STEPS TO TERMINATE SPFC'S 401(K)
PLAN.
1.11. Plan Section 6.3: The following sentence is hereby added
to Plan Section 6.3: "Notwithstanding Section 6.2.2, a Claim arising from the
rejection of any executory contract between SPFC and OMB shall be timely if
Filed within 30 days after the earlier of the date of any actual or deemed
rejection thereof."
1.12. Plan Section 11.3: Limitation of Liability in Connection
with Plan, Disclosure Statement, and Related Documents. The final sentence of
Section 11.3 of the Plan is deleted in its entirety and replaced with the
following:
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This Section 11.3 shall not apply to (A) any person or entity listed in
Schedule I-A, or (B) ANY ACTION COMMENCED (I) AGAINST A PROFESSIONAL BY
THE PROFESSIONAL'S CLIENT OR THE LIQUIDATING TRUSTEE ON BEHALF OF THE
LIQUIDATING TRUST (AND NO OTHER PERSON, WHETHER ACTING IN ITS
INDIVIDUAL CAPACITY OR PURPORTING TO ACT ON BEHALF OF THE
PROFESSIONAL'S CLIENT OR THE LIQUIDATING TRUST), (II) IN THE BANKRUPTCY
COURT (WHICH SHALL HAVE EXCLUSIVE JURISDICTION OVER SUCH ACTION), AND
(III) NOT LATER THAN THE EARLIER OF (X) TWO YEARS AFTER THE EFFECTIVE
DATE OR (Y) THE DATE THE CHAPTER 11 CASE IS CLOSED.
1.13. Plan Section 11.4: Effect of Property Received from
Sources Other Than SPFC or Liquidating Trust. Plan Section 11.4 is hereby
deleted in its entirety and replaced with the following:
11.4 EFFECT OF PROPERTY RECEIVED FROM SOURCES OTHER THAN SPFC OR
LIQUIDATING TRUST.
If and to the extent that the Holder of a Claim or Interest
receives property other than from SPFC or the Liquidating Trust [on
account of the Holder's Claim or Interest,] and if the Holder is
entitled to retain that property as against SPFC, the Estate, and the
Liquidating Trust, then Confirmation shall not determine the rights
among that Holder and other persons with respect to such property[, but
the property shall reduce the amount of the Claim or Interest, except
to the extent that the payor of the property is subrogated to the
rights of the Holder]. CONFIRMATION OF THIS PLAN SHALL NOT DETERMINE
WHETHER RECEIPT OF SUCH PROPERTY REDUCES THE AMOUNT OF THE HOLDER'S
CLAIM OR INTEREST OR MAY BE APPLIED TO ANY OTHER AMOUNT THAT WOULD BE
DUE FROM SPFC TO THE HOLDER IN THE ABSENCE OF THE CHAPTER 11 CASE,
INCLUDING POSTPETITION INTEREST, COSTS, AND ATTORNEY FEES. UNLESS THE
CHAPTER 11 CASE IS CLOSED, THE BANKRUPTCY COURT SHALL HAVE EXCLUSIVE
JURISDICTION TO DETERMINE THE FOREGOING ISSUE. EACH THE HOLDER OF A
CLAIM OR INTEREST THAT RECEIVES PROPERTY OTHER THAN FROM SPFC OR THE
LIQUIDATING TRUST ON ACCOUNT OF THE HOLDER'S CLAIM OR INTEREST SHALL SO
INFORM THE LIQUIDATING TRUSTEE IN WRITING.
1.14. Plan Section 11.5 (new): Effect of Cancellation of
Indentures. The following new Section 11.5 is hereby added to the end of Plan
Article XI:
11.5 RECOVERIES FROM THIRD PARTIES. Notwithstanding any other
term of this Plan or the Liquidating Trust Agreement to the contrary,
cancellation of the Senior Indenture and the Subordinated Indenture and
rejection of them if and to the extent they are executory contracts,
and the discharge of SPFC as provided in this Article XI, shall not
release or discharge any party having any liability under those
indentures other than SPFC, and termination of the Indenture Trustees'
responsibilities under the Senior Indenture and the Subordinated
Indenture with respect to SPFC shall not terminate the Indenture
Trustees' rights as indenture trustees to pursue any claims against
parties other than SPFC; provided that nothing in this Plan shall
affect the right, if any, of SPFC or the
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Liquidating Trust to pursue the same claims and to seek recovery from
the Indenture Trustees or any other persons of amounts received from
third parties.
1.15. Liquidating Trust Agreement Sections 4.3 and 5.7: Voting
Power; Disposition of Certain Assets. The following sentence is hereby added to
the end of each of Sections 4.3 and 5.7 of the Liquidating Trust Agreement: "The
terms of the Bankruptcy Court's order authorizing SPFC's sale of the SPML Stock
and preserving the rights of the Senior Indenture Trustee with respect thereto,
subject to further order of the Bankruptcy Court, are incorporated herein."
1.16. Liquidating Trust Agreement Section 7.2: Distributions
Generally. The following sentence is hereby added after the second sentence of
Section 7.2 of the Liquidating Trust Agreement: "Without limitation, the
Liquidating Trust shall pay to the Indenture Trustees any amounts awarded to
them under Section 2.1.3 or 3.6 of the Plan."
1.17. LIQUIDATING TRUST AGREEMENT (NEW) SECTION 7.3: PAYMENTS
TO INDENTURE TRUSTEES. The following new Section 7.3 is hereby added to the
Liquidating Trust Agreement (and Sections 7.4 through 7.7 are hereby renumbered
accordingly):
7.3 PAYMENTS TO INDENTURE TRUSTEES. The Trustee shall give the
Indenture Trustees not less than 30 days' written notice of each
Distribution. If the Distribution will be made to Beneficiaries holding
Claims in Class 6, but not Classes 3, 5, or 7, the Trustee need give
notice only to HSBC. The notice shall be effective upon faxing, as
evidenced by a fax confirmation, or upon actual receipt. The notice
shall be given to the Indenture Trustees by faxing to the fax numbers
or by mail or delivery to the address or addresses set forth for them
in the Special Notice List. If within 20 days after the effective date
of the notice an Indenture Trustee delivers to the Trustee an affidavit
stating that the Indenture Trustee is entitled by a charging lien (for
any lienable claim, including any claim for indemnity) arising under
the corresponding trust indenture (the Senior Indenture with respect to
the Senior Indenture Trustee, and the Subordinated Indenture with
respect to the Subordinated Indenture Trustee) to receive a stated
amount from a portion of the Distribution otherwise payable to
Beneficiaries holding Claims in Classes 3, 5, 6, or 7, the Trustee
shall pay the amount requested (but not more than the portion of the
Distribution that would otherwise be paid to the corresponding
Beneficiaries) to the requesting Indenture Trustee, and the Trustee
shall deduct the amount so paid from the Distribution to the
corresponding Beneficiaries. Notwithstanding the foregoing sentence,
the Trustee may (but shall not be required to), and any Beneficiary
may, object to the payment requested in the affidavit, which objection
shall be determined by the Bankruptcy Court if the
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Chapter 11 Case remains open or by any court of competent jurisdiction
after the Bankruptcy Case has been closed. The Trustee shall be
entitled to rely on the affidavit without further inquiry, except that
the Trustee shall make no payment to HSBC on account of its charging
lien against the portion of any Distribution to the Holders of Claims
in Classes 3, 5, or 7 that would be paid to the Holders of Class 6
Claims in the absence of the Subordination Provisions unless a court of
competent jurisdiction has determined in accordance with Section 3.6
that HSBC is entitled to do so. For the purpose of determining Pro Rata
Distributions, amounts paid to an Indenture Trustee on account of its
charging lien shall be deemed paid to the Beneficiaries who would have
received the payment in the absence of payment to the Indenture
Trustee.
1.18. Liquidating Trust Agreement Sections 9.2.1 and 9.2.2:
Voting to Change Liquidating Trust Agreement. In Sections 9.2.1. and 9.2.2 of
the Liquidating Trust Agreement, each reference to "a majority of the Beneficial
Interests" is deleted and replaced with "a majority in number of Beneficiaries
and two-thirds in amount of the Beneficial Interests".
1.19. Liquidating Trust Agreement Section 9.6: Relationship of
Liquidating Trust Agreement to Plan. The final sentence of Section 9.6 of the
Liquidating Trust Agreement is deleted in its entirety and replaced with the
following: "If any provisions of this Trust Agreement are found to be
inconsistent with the provisions of the Plan, the provisions of [this Trust
Agreement] THE PLAN shall control."
1.20. Liquidating Trust Agreement Section 9.8: Jury Trial
Waiver. Section 9.8 of the Liquidating Trust Agreement is deleted in its
entirety and replaced with the following:
9.8 WAIVER OF JURY TRIAL. ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION TO INTERPRET OR ENFORCE THIS TRUST AGREEMENT OR TO
RECOVER DAMAGES FROM THE LIQUIDATING TRUSTEE OR THE LITIGATING TRUSTEE
FOR BREACH OF THIS TRUST AGREEMENT OR OTHER NONFEASANCE OR MALFEASANCE
IS HEREBY WAIVED, AND THERE SHALL BE NO RIGHT TO TRIAL BY JURY IN ANY
SUCH ACTIONS OR OTHER LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS TRUST AGREEMENT [OR THE TRANSACTIONS CONTEMPLATED HEREBY]
(COLLECTIVELY, "NON-JURY ACTIONS"). NOTHING IN THIS TRUST AGREEMENT
LIMITS THE RIGHT OF THE LIQUIDATING TRUSTEE OR THE LITIGATING TRUSTEE
TO A TRIAL BY JURY OF ANY ACTION OTHER THAN A NON-JURY ACTION,
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INCLUDING ANY ACTION TO ENFORCE RIGHTS OF ACTION OF SPFC OR THE
LIQUIDATING TRUST AGAINST A BENEFICIARY.
2. Confirmation. Based on these findings of fact and conclusions
of law, the Plan, a copy of which is annexed hereto as Exhibit "C", as modified
herein, be, and the same hereby is, confirmed and the amendments to the Asset
Agreement and the Acquisition Agreement as set forth in Exhibit "D" hereto are
approved in all respects. All Confirmation Objections not withdrawn at or before
the Confirmation Hearing are hereby overruled.
3. Executory Contracts and Unexpired Leases. The assumptions of
executory contracts and unexpired leases listed in Schedule IV to the Plan for
the benefit of Reorganized SPFC and the assumption and assignment to the
Liquidating Trust of the executory contracts and unexpired leases listed in
Schedule V to the Plan are approved pursuant to sections 365 and 1123(b)(2) of
the Bankruptcy Code, as of the Effective Date. In addition, notwithstanding any
other provision of this Plan, Reorganized SPFC and the Liquidating Trust may
assume or assume and assign any executory contract or unexpired lease listed in
Schedule VI to the Plan by motion filed within 60 days after the Effective Date.
In accordance with Section 6.1.2 of the Plan, except as provided otherwise in
the Norwest Settlement Agreement, this Order determines that as of the
Confirmation Date there exist no defaults under any assumed executory contracts
or unexpired leases and SPFC and the Liquidating Trust have provided adequate
assurance of future performance under such contracts or leases, and parties to
assumed executory contracts and unexpired leases are forever barred from
asserting the existence of any defaults or denying the existence of such
adequate assurance.
4. Norwest Settlement. The Norwest Settlement Agreement, a copy,
of which is annexed hereto as Exhibit "E", is approved in all respects. The
Court approves the execution and performance of the Norwest Settlement Agreement
as a reasonable and prudent exercise of Norwest's fiduciary obligations and
discretion as trustee of the Trusts (as defined in the Norwest Settlement
Motion). The holders of the Senior Certificates are estopped from
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Second Amended Plan as Modified
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asserting any claim against Norwest, as the trustee of the Trusts, arising from
Norwest's entry into and performance of the Norwest Settlement Agreement.
5. Advanta Letter Agreements. The Advanta Letter Agreements are
approved. In furtherance of the Letter Agreements, (1) upon demand of Advanta,
the Liquidating Trust shall remit to Advanta any amounts then due thereunder in
immediately available funds, and (2) any funds remaining in the Florida Reserve
established pursuant to Section 2.3.4 of the Acquisition Agreement after the
obligations of Reorganized SPFC under the Florida Case Resolution (as defined in
Section 2.3.4 of the Acquisition Agreement) are fully satisfied, will be paid by
the Liquidating Trust to satisfy any obligations of the Liquidating Trust to
Advanta under the Advanta Letter Agreements then due.
6. Binding Plan and Order. The provisions of the Plan and this
Order, the Asset Agreement, the Acquisition Agreement, the Liquidating Trust
Agreement, and the Norwest Settlement Agreement hereby are made binding upon
SPFC and all holders of Claims and Interests and the holders of the Senior
Certificates (as defined in the Norwest Settlement Motion), whether or not the
Claim or Interest is impaired under the Plan and whether or not any holder of a
Claim or Interest has accepted the Plan.
7. Discharge.
7.1. Except as otherwise provided in the Plan and in paragraph
7.2 below, SPFC and Reorganized SPFC hereby are discharged, effective as of the
Effective Date, of any Claim and any debt (as that term is defined in section
101(12) of the Bankruptcy Code) incurred before confirmation of the Plan and
SPFC's and Reorganized SPFC's liability in respect thereof is extinguished
completely including, without limitation, any liability, debt, or claim of a
kind specified in section 502(g) or 502(i) of the Bankruptcy Code, whether or
not (i) a proof or claim based on such debt or claim was filed or deemed filed
under section 501 of the Bankruptcy Code, (ii) such Claim is allowed under
section 502 of the Code, or (iii) the holder of such Claim has accepted the
Plan.
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7.2. Confirmation of the Plan and the provisions of section
1141 of the Bankruptcy Code shall be without prejudice to (i) any legal or
equitable ownership or constructive trust interest that may be established in
favor of Flagstar based on the allegations in the complaint filed by Flagstar in
Adversary Proceeding No. 99-3223 (the "Flagstar Adversary Proceeding") with
respect to funds in the account maintained with Norwest Bank Minnesota, National
Association, as described in the Flagstar Adversary Proceeding; (ii) any right
or interest of First Union National Bank in and to the escrow in the amount of
approximately $301,000 (the "FUNB Escrow") which is described in the Objection
of First Union National Bank dated June 30, 1999 (the "FUNB Objection"), which
FUNB Escrow shall remain in all respects subject to the terms of the Settlement
Agreement described in the FUNB Objection; and (iii) any setoff rights or legal
or equitable ownership interest in mortgage loans that may be established in
favor of Oceanmark Bank, FSB ("OMB"), based on the allegations in the complaints
filed by OMB in Florida state court styled Oceanmark Bank F.S.B. v. Norwest Bank
Minnesota, N.A. and Advanta Mortgage Corp., U.S.A., Case No. 98-20426, and
Oceanmark Bank F.S.B. v. Bankers Trust Company of California N.A. and Advanta
Mortgage Company, Case No. 98-20427, and the adversary proceeding pending in
this Court styled Southern Pacific Funding Corporation v. Oceanmark Bank,
F.S.B., et al. Adversary Proceeding No. 99-3046-elp.
8. Reorganized SPFC. Upon consummation of the transactions
contemplated by the Acquisition Agreement, the assets and liabilities of
Reorganized SPFC will be as set forth in Schedule 2.1.2 of the Acquisition
Agreement, which is annexed to the Plan as Exhibit "B" thereto, and Reorganized
SPFC will have no liability, contingent or otherwise, for any matter, except for
the liabilities set forth expressly in Schedule 2.1.2 of the Acquisition
Agreement.
9. Taxation. In respect of income taxes, the Liquidating Trustee
shall, on behalf of the Liquidating Trust, comply in all respects with the
provisions of Sections 5.3.3 and 5.4 of the Plan respecting taxes, tax
reporting, filing of returns, and requests for prompt determination of
liabilities under section 505 of the Bankruptcy Code, and Reorganized SPFC is
discharged
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Second Amended Plan as Modified
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from any tax liabilities or obligations except as expressly set forth in the
Plan or the Acquisition Agreement.
10. Obligations Under Plan. Nothing in this Order or the Plan
shall operate as a discharge of SPFC from Claims, obligations or liabilities
expressly required to be paid or performed under the Plan by SPFC.
11. Transfer of Property. The transfer of the Acquired Assets to
the Buyer provided for in the Plan and in the Asset Agreement, which transfer is
necessary to and among the principal means of implementing the Plan: (i) is
conducted and authorized pursuant to sections 363(b), 363(f), 363(m), 365,
1123(a)(5)(d), and 1123(b)(4) of the Bankruptcy Code, and upon consummation of
the Asset Agreement, the Buyer shall have received the Acquired Assets in good
faith pursuant to such sections of the Bankruptcy Code and the Plan and shall be
entitled to the protections of section 363(m) of the Bankruptcy Code; (ii) is a
legal, valid, and effective transfer of property; (iii) is not a preferential
transfer, fraudulent conveyance, or otherwise void or voidable under the
Bankruptcy Code or the laws of the United States or any State; (iv) is an
outright, absolute, irrevocable, and unconditional conveyance by SPFC of all its
right, title, and interest therein; (v) the consideration transferred by the
Buyer in exchange for the Acquired Assets and tile other transfers provided for
in the Plan represents fair consideration and reasonably equivalent value; and
(vi) is not a financing transaction and does not create a joint venture,
partnership, or equitable mortgage or lien. Further, the transfer to the Buyer
of the Acquired Assets and any other transfers contemplated under, and provided
for in the Plan, are free and clear of all liens, Claims, assignments,
encumbrances, and security interests, and other adverse interests of any kind
and nature including, but not limited to: (A) all Claims and Interests in the
Chapter 11 Case and (B) any and all stamp taxes or similar taxes otherwise
required to be paid in connection with a sale of the Acquired Assets. All of the
governmental units which administer and collect the such taxes have been given
due and proper notice of the Chapter 11 Case, the Plan and the proceedings to
confirm the Plan, and the Court expressly
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adjudicates that (x) the transfer of the Acquired Assets to the Buyer is exempt
from such taxes pursuant to section 1146(c) of the Bankruptcy Code and (y) SPFC,
Reorganized SPFC, the Buyer, the Subscriber, and their affiliates shall have no
liability for any such taxes, and expressly are discharged from all liability in
respect of any of such taxes and any penalty, interest, or addition to the tax
relating thereto.
12. Injunctions.
12.1. On and after confirmation of the Plan, as to every
discharged Claim and Interest, every holder of a Claim or Interest is enjoined
from asserting against Reorganized SPFC, the Buyer, the Subscriber, the
Liquidating Trust, and all their affiliates, or their assets or properties,
including the Acquired Assets, any further Claim or Interest based on any
document, instrument, or act, omission, transaction, or other activity of any
kind or nature that occurred before the Confirmation Date, except as set forth
in the Plan.
12.2. The commencement or continuation by or on behalf of any
holder of a Claim, any holder of an Interest, SPFC, each party-in-interest or
any Person, or purporting to act by, through, under or on behalf of any of the
foregoing of any action, the employment of process, or any act to assert a claim
for relief against Reorganized SPFC, the Buyer, the Subscriber, the Liquidating
Trust, or any of their affiliates, advisors, attorneys, agents, employees,
representatives, officers, or directors in respect of (i) any actions taken
during the course of the Chapter 11 Case, (ii) the Plan, (iii) the authorization
for or the formulation, negotiation, confirmation or consummation of the Plan
and the agreements and other documents to implement the Plan, (iv)
distributions, payments or transfers made under the Plan, or (v) acts performed
pursuant to the Plan, and the same hereby are, forever enjoined, except as set
forth in the Plan.
12.3. All governmental units are enjoined from the
commencement or continuation of any act or action to collect from Reorganized
SPFC, the Liquidating Trust, the Buyer, the Subscriber, and their affiliates and
property any stamp taxes or similar taxes from
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which the transfer of such pursuant to the Plan is exempt, as provided in
section 1146(c) of the Bankruptcy Code.
13. Authorizations. SPFC and the Liquidating Trust, and their
agents and attorneys be, and hereby are, authorized, empowered, and directed to
carry out all of the provisions of the Plan, enter into, implement and
consummate the agreements and documents, and to perform such acts as are
necessary, appropriate, or desirable in connection with the Plan, the
Acquisition Transaction and this Order.
14. Claim Objection. All objections to claims shall be filed no
later than 60 days following the Effective Date of the Plan, unless such time is
extended by further Court order.
15. Professionals' Final Fee Applications. Professionals or other
entities requesting compensation or reimbursement of expenses pursuant to
Section 327, 328, 330, 331, 503(b), or 1103 of the Bankruptcy Code or any other
basis (including the Indenture Trustees) for services rendered before the
Confirmation Date shall File and serve notice of their applications for final
allowance of compensation and reimbursement of expenses on the Liquidating
Trust, counsel for the Liquidating Trust, and all other persons entitled to
notice of the applications (the applications themselves to be filed and served
on the Office of the United States Trustee, the Liquidating Trust, and the Trust
Committee) no later than a date to be stated in a notice to be mailed to all
Professionals by counsel for SPFC or the Liquidating Trust on the Effective Date
or as soon thereafter as practicable and which date shall be the 20th day after
the mailing date of the notice, but any Professional who is authorized to
receive compensation or reimbursement of expenses pursuant to the Foreclosure
and Collection Attorneys' Compensation Order without having Filed an application
for compensation or reimbursement of expenses may continue to receive
compensation and reimbursement of expenses for services rendered before the
Effective Date without further Bankruptcy Court review or approval pursuant to
the Foreclosure and Collection Attorneys' Compensation Order. The Liquidating
Trust may contest any such
Page 15 of 29 - Findings of Fact, Conclusions of Law, and Order Confirming
Second Amended Plan as Modified
<PAGE>
applications. Any Administrative Expense for which an application under this
section is not timely Filed shall be forever barred.
16. Employment of Professionals by Liquidating Trustee. The
Liquidating Trustee, in his or her sole discretion, may employ such
Professionals as are necessary to implement the Plan, including the prosecution
of Rights of Action. No applications for employment or compensation for services
rendered to SPFC or the Liquidating Trust after the Confirmation Date (except in
connection with applications for approval of compensation or reimbursement of
expenses accrued before the Confirmation Date) will be necessary.
17. United Pacific Insurance Company. The Stipulated Nonmaterial
Modification to Second Amended Plan of Reorganization (United Pacific Insurance
Company), a copy of which is attached hereto as Exhibit "F", is approved, and
the Plan is modified accordingly.
18. Liquidating Trustee Compensation. Entry of this Order shall
not constitute approval of the compensation of the Liquidating Trustee
previously proposed by the Official Unsecured Creditors' Committee, which shall
be determined by separate motion.
19. Res Judicata Effect of this Order. Notwithstanding any
provision of the Plan or this Order, including Plan Section 3.3.1, the Plan is
not binding with respect to the issues expressly reserved by the Plan or this
Order for later determination.
20. Notice of Order. Within five (5) days after the date of entry
of this Order, pursuant to Rules 2002(f)(7) and 3020(c), SPFC shall mail to all
parties-in-interest a notice of entry of this Order, together with notice of the
last day for filing Administrative Claims, Claims arising from the rejection of
executory contracts, and applications for allowances of compensation and/or
reimbursement of expenses.
21. Retention of Jurisdiction. Notwithstanding the confirmation of
the Plan, the Court shall retain jurisdiction over matters set forth in Article
XII of the Plan.
Page 26 of 29 - Findings of Fact, Conclusions of Law, and Order Confirming
Second Amended Plan as Modified
<PAGE>
22. Substantial Consummation. "Substantial Consummation" of the
Plan shall be deemed to occur on the Effective Date.
23. Final Order. This Order is final and appealable. Under
Bankruptcy Rule 9014, the Court directs that Federal Rule of Civil Procedure
62(a), as incorporated by
Page 27 of 29 - Findings of Fact, Conclusions of Law, and Order Confirming
Second Amended Plan as Modified
<PAGE>
Bankruptcy Rules 7062 and 9014, does not apply to this Order, which shall be
effective and enforceable immediately upon entry, with no stay of execution or
enforcement.
/s/ Elizabeth L. Perris
Elizabeth L. Perris
United States Bankruptcy Judge
Presented by:
/s/ David W. Hercher
David W. Hercher
Oregon State Bar No. 81263
MILLER, NASH, WIENER, HAGER & CARLSEN LLP
3500 U.S. Bancorp Tower
111 S.W. Fifth Avenue
Portland, Oregon 97204-3699
Telephone: (503) 224-5858
Attorneys for Debtor-in-Possession,
Southern Pacific Funding Corporation
cc: Attached Service List
Page 28 of 29 - Findings of Fact, Conclusions of Law, and Order Confirming
Second Amended Plan as Modified
<PAGE>
EXHIBITS
A First Advanta Letter Agreement
B Second Advanta Letter Agreement Norwest Settlement Agreement
C Plan
D Amendments to Asset Agreement and Acquisition Agreement
E Norwest Settlement Agreement
F Stipulated Nonmaterial Modification to Second Amended Plan of
Reorganization (United Pacific Insurance Company),
<PAGE>
ADVANTA MORTGAGE CORP.
[SPFC Letterhead]
July 6, 1999
Mr. William P. Garland
Advanta Mortgage Corp. USA
10790 Rancho Bernardo Road
San Diego, California 92127
Subject: Southern Pacific Funding Corporation
Indemnity Agreement
Dear Mr. Garland:
Advanta Mortgage Corp. USA ("Advanta") has become a party to certain
litigation commenced by Oceanmark Bank, F.S.B. ("Oceanmark") in Florida state
court styled Oceanmark Bank F.S.B. v. Norwest Bank Minnesota, N.A. and Advanta
Mortgage Corp., USA, Case No. 98-20426, and Oceanmark Bank F.S.B. v. Bankers
Trust Company of California N.A. and Advanta Mortgage Corp. USA, Case No.
98-20427 (together with all pending litigation in the United States Bankruptcy
Court for the District of Oregon (the "Bankruptcy Court") related to the same
subject matter, the "Oceanmark Cases"), in which Oceanmark asserts ownership of
and/or entitlement to or encumbrances on certain mortgage loans (collectively
the "Oceanmark Loans") (other terms used herein but not defined have the
meanings given in the Second Amended and Restated Stock Subscription Agreement
described below).
In the event that any of the Oceanmark Loans is determined in a Final
Order issued by a court of competent jurisdiction to be owned or otherwise
encumbered by Oceanmark and (i) such Final Order requires reconveyance to
Oceanmark of any such loan, or (ii) such Final Order awards Oceanmark money
damages against Advanta, the SPFC Liquidating Trust (the "Liquidating Trust")
will pay an amount equal to the amount necessary to permit Advanta to cause any
reconveyance to Oceanmark and/or the amount of damages set forth in the Final
Order against Advanta, provided that, such amount shall not exceed, with respect
to the Oceanmark Loans for which reconveyance and/or damages were awarded, (A)
the aggregate principal balances as of the Cut-off Date (as defined in the
related Pooling and Servicing Agreements) for the Oceanmark Loans to which the
Final Order relates plus any premium as determined from the Final Order, plus
(B) interest calculated for each such loan at the related note rate thereon from
the Cut-off Date to the date of payment pursuant to the Final Order. In addition
and to the extent not paid by the related Securitization Trust, the Liquidating
Trust shall be obligated to reimburse directly all out-of-pocket costs and
expenses (including reasonable attorney's fees and expenses) reimbursable to
Advanta related to the Oceanmark Cases.
SPFC will obtain an order (the "Order") from the Bankruptcy Court
approving the agreements and obligations of SPFC and the Liquidating Trust set
forth in this letter. The Order shall also provide that, upon demand of Advanta,
the Liquidating Trust shall remit to Advanta any amount payable hereunder in
immediately available funds.
Exhibit A - Page 1 of 3
<PAGE>
The Order shall further provide that the Liquidating Trust agrees that
any funds remaining in the Florida Reserve established pursuant to Section
2.3.4. of the Second Amended and Restated Stock Subscription Agreement dated as
of June 30, 1999, between Southern Pacific Funding Corporation and The Goldman
Sachs Group, Inc., after the obligations of Reorganized Company under the
Florida Case Resolution are fully satisfied, will be paid by the Liquidating
Trust to satisfy any obligations of the Liquidating Trust to Advanta hereunder.
For purposes of this letter (the "Indemnity Agreement"), "Final Order"
means an order or judgment entered by a court of competent jurisdiction,
including without limitation the Bankruptcy Court, that (i) has not been
reversed, stayed, modified or amended, (ii) is not the subject of a pending
appeal or motion for review or reconsideration, (iii) has not been and may no
longer be appealed from or otherwise reviewed or reconsidered, and (iv) is final
and non-appealable in accordance with applicable law, including without
limitation Rule 8002 of the Federal Rules of Bankruptcy Procedure.
Advanta agrees to:
1. Consent to amend and execute prior to July 28, 1999, the
certain Pooling and Servicing Agreements as provided in the Settlement
Agreement dated as of June 17, 1999, by and between SPFC, Norwest bank
Minnesota, National Association, solely in its capacity as trustee for
the Securitization Trusts, MBIA Insurance Corporation, and The Goldman
Sachs Group, Inc.;
2. Withdraw its objection to the Second Amended Plan of
Reorganization proposed by SPFC dated June 2, 1999;
3. Agree that this Indemnity Agreement along with the letter
agreement between Advanta, The Goldman Sachs Group, Inc., and SPFC
dated July 6, 1999 (the "Letter Agreement"), relating to payment of
out-of-pocket expenses incurred in curing Non-Critical Exception Loans
(as defined in the Settlement Agreement and the Letter Agreement), are
adequate assurance of future performance of assumed contracts; and
4. Provide a certificate to The Goldman Sachs Group, Inc.
substantially in the form attached as Exhibit A at the closing of its
acquisition of the stock of SPFC.
SOUTHERN PACIFIC FUNDING CORPORATION
By:
----------------------------------------------
Name:
----------------------------------------------
Title:
-----------------------------------------------
ADVANTA MORTGAGE CORP. USA
By:
----------------------------------------------
Name:
----------------------------------------------
Title:
-----------------------------------------------
Exhibit A - Page 2 of 3
<PAGE>
EXHIBIT A
---------
CERTIFICATION OF ADVANTA MORTGAGE CORP. USA
Advanta Mortgage Corp. USA ("Advanta") hereby certifies that
there are no documents or agreements which are material to the rights and
obligations of Advanta in respect of Southern Pacific Funding Corporation
("SPFC") or of any securitization trust sponsored by SPFC other than those
available on the date hereof on the secure web site maintained by SPFC at
http://www.205.139.106.15/secure [or provide a list of all relevant documents],
[with such exceptions set forth below].
Dated: July ---, 1999
ADVANTA MORTGAGE CORP. USA
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
Exhibit A - Page 3 of 3
<PAGE>
[Goldman Letterhead]
July 6, 1999
Mr. William P. Garland
Advanta Mortgage Corp. USA
10790 Rancho Bernardo Road
San Diego, California 92127
Subject: SPFC REMIC Trusts - Noncritical Exception Loans
Dear Mr. Garland:
Advanta Mortgage Corp. USA ("Advanta") as master servicer or
subservicer of certain of Southern Pacific Funding Corporation's Securitization
Trusts, has made and has agreed to continue to make efforts to cure certain
Non-Critical Exception Loans (as defined in the Settlement Agreement dated as of
June 17, 1999, by and between Southern Pacific Funding Corporation ("SPFC"),
Norwest Bank Minnesota, National Association, MBIA Insurance Corporation, and
The Goldman Sachs Group, Inc., or similar defects in securitization trusts in
which Bankers Trust Company of California, N.A. serves as trustee).
For purposes of this Letter, "Non-Critical Exception Loans" shall mean
the described loans in those securitization trusts that Norwest Bank Minnesota,
National Association, or Bankers Trust Company of California, N.A. serves as
trustee.
To the extent such efforts to cure Non-Critical Exception Loans have
resulted in Advanta incurring out-of-pocket expenses, SPFC understands and
Advanta acknowledges that Advanta has been netting those out-of-pocket expenses
against certain amounts payable to SPFC under the Loan Servicing Agreement dated
September 14, 1995, as amended, between SPFC and Advanta, and certain side
letter agreements (the "Side Letter Agreements") between SPFC or its affiliates
and Advanta providing for SPFC to receive 15 basis points of Advanta's 50
basis-point servicing fee relating to Southern Pacific Secured Asset Corp.
Mortgage Loan Asset-Backed Pass-Through Certificates, Series 1996-4, 1997-1,
1997-2 and 1997-3. SPFC agrees that Advanta was entitled to net such expenses
and releases Advanta from liability to SPFC in connection with such netting to
date.
To the extent Advanta cures Non-Critical Exception Loans and incurs
reasonable out-of-pocket expenses payable to third parties as a result, SPFC
agrees that Advanta may continue to net those out-of-pocket expenses (to the
extent not reimbursed by the related securitization trust), against the fee SPFC
receives under the Side Letter Agreements with Advanta.
Exhibit B - Page 1 of 2
<PAGE>
The Goldman Sachs Group, Inc. or an affiliate ("Goldman"), after
consummation of certain transactions between SPFC and Goldman, will be the sole
owner of all of the stock of SPFC (referred to in Goldman's control as
"Reorganized SPFC"). Goldman acknowledges by its signature below, that it agrees
(on its behalf and on behalf of any such affiliate) that such expenses may
continue to be netted against the fee Reorganized SPFC receives under the Side
Letter Agreements to the extent not paid by the related securitization trust.
Advanta agrees to provide to Reorganized SPFC a monthly report
detailing the amount of out-of-pocket expenses on a loan level detail which were
netted from the fee payable to Reorganized SPFC for such month under the Side
Letter Agreements.
THE GOLDMAN SACHS GROUP, INC.
By:
----------------------------------------------
Name:
----------------------------------------------
Title:
-----------------------------------------------
SOUTHERN PACIFIC FUNDING CORPORATION
By:
----------------------------------------------
Name:
----------------------------------------------
Title:
-----------------------------------------------
ADVANTA MORTGAGE CORP. USA
By:
----------------------------------------------
Name:
----------------------------------------------
Title:
-----------------------------------------------
Exhibit B - Page 2 of 2
<PAGE>
NOTE: EXHIBIT D CONTAINS AMENDED DOCUMENTS IN WHICH DELETED TEXT IS SURROUNDED
BY BRACES { } AND ADDED TEXT IS CAPITALIZED AND SURROUNDED BY BRACKETS [ ].
EXECUTION COPY
[SECOND] AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
SOUTHERN PACIFIC FUNDING CORPORATION,
(AS DEBTOR-IN-POSSESSION)
AND
GOLDMAN, SACHS & CO.
AMENDED AND RESTATED AS OF {MAY 21} [JUNE 30], 1999
Exhibit D - Page 1 of 166
<PAGE>
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
This [SECOND] Amended and Restated Asset Purchase Agreement
("Purchase Agreement") dated as of {May 21,1} [JUNE 30,] 1999, by and between
GOLDMAN, SACHS & CO., a Delaware limited partnership ("Asset Company"), and
SOUTHERN PACIFIC FUNDING CORPORATION, a California corporation acting in its
capacity as Debtor-in-Possession ("Seller").
RECITALS
A. On October 1, 1998, Southern Pacific Funding Corporation
(referred to generally as the "Company") filed for bankruptcy under Chapter 11
of the United States Bankruptcy Code in the United States Bankruptcy Court for
the District of Oregon (the "Bankruptcy Case"). The assets of the Company
constitute a bankruptcy estate supervised and managed by Seller as
Debtor-in-Possession for the benefit of the Company's creditors.
B. Seller has filed its Plan of Reorganization, which will be
amended promptly after the parties have signed and delivered this Purchase
Agreement and related agreements, including a Stock Subscription and Purchase
Agreement (all referred to as the "Definitive Agreements"). Seller is seeking
confirmation of such plan, as amended, from the United States Bankruptcy Court
for the District of Oregon or such other court or adjunct thereof that exercises
jurisdiction over the Bankruptcy Case (the "Bankruptcy Court").
C. Pursuant to the Plan of Reorganization (as it may be
amended, and once confirmed by the Confirmation Order), the Company will sell
certain of its assets to Asset Company pursuant to this Purchase Agreement.
D. Seller desires to sell, and Asset Company desires to
purchase, certain of its assets for the consideration, on the terms, and subject
to the conditions set forth in this Purchase Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Purchase Agreement, capitalized terms not
otherwise defined have the meanings given in Appendix I attached to and hereby
incorporated into this Purchase Agreement by reference.
1
Exhibit D - Page 2 of 166
<PAGE>
2. ASSETS PURCHASED; NO LIABILITIES ASSUMED
2.1 ASSETS PURCHASED
Subject to the terms and conditions of this Purchase
Agreement, at Closing Seller agrees to sell to Asset Company and Asset Company
agrees to purchase from Seller the assets listed on Schedule 2.1 (the "Purchased
Assets"). Seller will exclude all other assets of Seller from this sale and
purchase.
2.2 NO LIABILITIES ASSUMED
Asset Company is assuming no liabilities of Seller pursuant to
this Purchase Agreement. All obligations and liabilities of Seller will remain
and be the obligations and liabilities of Seller or of the Liquidating Trust and
will not be assumed by Asset Company.
3. PURCHASE PRICE
3.1 The purchase price (the "Purchase Price") for the Purchased
Assets is the amount consisting of the (i) Base Cash Price
less the Adjustment Amount, and (ii) plus the Asset Cash Flow
Instrument.
3.2 The Base Cash Price is $11,614,768.
3.3 The Adjustment Amount will be equal to 50 percent of (i)
Prepayment Penalty Income, (ii) amounts received with respect
to the IO Certificates (including partnership distributions),
and (iii) all other amounts actually received by Seller
between April 1, 1999, and the Closing Date with respect to
the Purchased Assets. Asset Company will pay the Purchase
Price in immediately available funds at Closing.
4. ASSET CASH FLOW INSTRUMENT
4.1 At Closing, Asset Company will issue to Seller an instrument
in the form of Exhibit 4.1 (the "Asset Cash Flow Instrument").
The Asset Cash Flow Instrument will provide for periodic
payments to Seller of the sum (without duplication) of 50
percent of the following (i.e., 50 percent of the amounts in
clause (a) minus 50 percent of the amounts in clause (b)) with
respect to the Purchased Assets and Purchased Asset Proceeds.
("Purchased Asset Proceeds" means any securities or tangible
non-cash consideration received on a sale or transfer of
Purchased Assets to a non-Related Person of Asset Company, or
any securities retained by Asset Company in connection with
the securitization of any Purchased Assets):
(a) the sum (without duplication) of:
(i) the aggregate of all pre-tax cash flows from each
of the Purchased Assets and Purchased Asset Proceeds from the
Closing Date until the sale (or transfer) or Financing
Transaction with respect to the related Purchased Assets or
2
Exhibit D - Page 3 of 166
<PAGE>
Purchased Asset Proceeds, it being agreed that the cash flows
will continue to be payable to Holder after any sale or
transfer to a Related Person of Asset Company (other than a
sale to a Related Person of Asset Company for the sole purpose
of facilitating a Financing Transaction) or pursuant to a
transaction that has not been found by the board of directors
(or if Asset Company is not a corporation, the comparable
governing body) of Asset Company to be an arms-length
transaction;
(ii) all pre-tax Proceeds from the sale of any
Purchased Asset or Purchased Asset Proceeds or portion of a
Purchased Asset or Purchased Asset Proceeds; and
(iii) all pre-tax Proceeds from any Financing
Transaction entered into by Asset Company with respect to any
of the Purchased Assets or Purchased Asset Proceeds and all
Hedging Gains;
(50% of the sum of the amounts in clause (i), (ii) and (iii) {in} [IS] the
"Asset Purchase Cash Flows"); minus
(b) otherwise unreimbursed Out-of-Pocket Expenses incurred by
Asset Company.
4.2 The periodic payments (each a "Distribution") made with
respect to the Asset Cash Flow Instrument each calendar month,
commencing with the first full calendar month following the
Closing Date (each such month, a "Cash Flow Period") will
equal (i) the Asset Purchase Cash Flows received by Asset
Company during such Cash Flow Period (or from the Closing Date
through the last day of the first Cash Flow Period, in the
case of the first Distribution) minus (ii) 50 percent of the
Out-of-Pocket Expenses not previously applied in reduction of
Asset Purchase Cash Flows.
4.3 Out-of-Pocket Expenses means:
(a) Direct Third Party out-of-pocket expenses reasonably
incurred by the Asset Company or by a Related Person of Asset Company
with respect to the Purchased Asset and Purchased Asset Proceeds, not
otherwise reimbursable from a third party, and directly related to a
sale of Purchased Assets or Purchased Asset Proceeds or Financing
Transaction.
(b) Notwithstanding Section 2.3.3(a), Out-of-Pocket Expenses
specifically include:
(i) Hedging Losses and carrying costs of hedging
transactions;
(ii) principal and interest repaid on any Financing
Transaction;
(iii) otherwise reimbursable Third Party expenses
that Asset Company has determined to be uncollectible; and
(iv) fees and expenses incurred with respect to Asset
Company or a Related Person of Asset Company in connection
with a sale or Financing Transaction,
3
Exhibit D - Page 4 of 166
<PAGE>
but only to the extent such fees are consistent with market
rates and industry standards and are approved by the Holder,
which approval shall not be unreasonably withheld ("Related
Person Expenses"). Related Person Expenses shall be deemed to
be approved if not objected to within 21 days after Holder
received a detailed report from the Asset Company together
with a request for approval.
4.4 The Distribution for a particular month will be paid on or
before the first business day following the end of the related
Cash Flow Period.
4.5 The terms and conditions of this Section 4 reflect the intent
and agreement of the parties. In the case of any conflict
between the terms of this Purchase Agreement and the terms of
the Asset Cash Flow Instrument, however, the terms of this
Agreement will control until Closing, in which case the Asset
Cash Flow Instrument itself will control.
5. ADDITIONAL COVENANTS AGREEMENT
5.1 The Plan of Reorganization will provide for Asset Company to
enter into an agreement with the Liquidating Trust, the
Reorganized Company, and Subscriber in the form of Exhibit
5.1. (the "Additional Covenants Agreement"), with such further
changes as the parties may agree are necessary, desirable or
appropriate. Asset Company agrees to accept any change agreed
to by Subscriber prior to Closing. The Additional Covenants
Agreement will contain all of the substantive provision of
Exhibit 5.1.
6. CLOSING
The completion of the purchase and sale of the Purchased
Assets provided for in this Purchase Agreement (the "Closing") will take place
at the same place as and immediately prior to, the closing of the transactions
contemplated by the Stock Subscription and Purchase Agreement.
7. CLOSING DELIVERIES
7.1 Seller will deliver to Asset Company at Closing:
(a) a certificate signed by Seller in which Seller represents
and warrants to Asset Company that each of Seller's representations and
warranties in this Purchase Agreement was accurate in all respects as
of the date of this Purchase Agreement and is accurate in all respects
as of the Closing Date as if made on the Closing Date (giving full
effect to any supplements to the Disclosure Schedules that were
delivered by Seller to Asset Company prior to the Closing Date in
accordance with Section 10.3);
(b) possession of the Purchased Assets free and clear of all
Encumbrances, including any documents and instruments of transfer
necessary to transfer ownership of the IO Certificates, the Series
1998-H1 Class X Certificate, and Prepayment Penalty Trust
4
Exhibit D - Page 5 of 166
<PAGE>
Certificates and Prepayment Penalty Rights to Asset Company, in each
case in accordance with the applicable Pooling and Servicing Agreement;
(c) a fully executed copy of the Additional Covenants
Agreement; and
(d) a fully executed copy of the Stock Subscription and
Purchase Agreement.
7.2 Asset Company will deliver to Seller at Closing:
(a) The Purchase Price paid on behalf of the Company sent by
wire transfer to Goldman, Sachs & Co. at Account Number ABA#: 021000089
at Citibank, clearance account 87709012600; directed to account 9253549
in partial payment of the amount owing under the DIP Financing
Agreement;
(b) the Asset Cash Flow Instrument;
(c) a certificate signed by Asset Company in which Asset
Company represents and warrants to Seller that each of Asset Company's
representations and warranties in this Purchase Agreement was accurate
in all respects as of the date of this Purchase Agreement and is
accurate in all respects as of the Closing Date as if made on the
Closing Date;
(d) a fully executed copy of the Stock Subscription and
Purchase Agreement; and
(e) a fully executed copy of the Additional Covenants
Agreement.
8. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller (in its capacity both as Seller and as the Company)
represents and warrants to Asset Company as follows:
8.1 ORGANIZATION AND GOOD STANDING
8.1.1 The Company is a corporation duly organized, validly
existing, and in good standing under the laws of California.
8.1.2 Seller has delivered to Asset Company copies of the
Organizational Documents of the Company, as currently in
effect.
8.2 AUTHORITY; NO CONFLICT
8.2.1 Upon approval of the Contemplated Transactions by the
Bankruptcy Court, the Seller Definitive Agreements will
constitute the legal, valid, and binding obligations of
Seller, enforceable against Seller in accordance with its
terms. Subject to the requirement of Bankruptcy Court
approval, Seller has the absolute and unrestricted right,
power, authority, and capacity to execute and deliver this
Purchase Agreement and to perform its obligations under the
Seller Definitive Agreements.
5
Exhibit D - Page 6 of 166
<PAGE>
8.2.2 Except as set forth in Schedule 8.2.2, neither the
execution and delivery of this Purchase Agreement nor the
consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without
notice or lapse of time):
(a) contravene, conflict with, or result in a violation of (i)
any provision of the Organizational Documents of the Seller, or (ii)
any resolution adopted by the board of directors of the Seller;
(b) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any contract; or
(c) result in the imposition or creation of any Encumbrance
upon or with respect to any of the Purchased Assets (except as
expressly approved in this Purchase Agreement).
8.2.3 Except for obtaining appropriate approval from the
Bankruptcy Court, the Company is not and will not be required
to give any notice to or obtain any Consent from any Person in
connection with the execution and delivery of this Purchase
Agreement or the consummation or performance of any of the
Contemplated Transactions.
9. REPRESENTATIONS AND WARRANTIES OF ASSET COMPANY
Asset Company represents and warrants to Seller as follows:
9.1 ORGANIZATION AND GOOD STANDING
Asset Company is a limited partnership duly organized, validly
existing, and in good standing under the laws of the State of Delaware.
9.2 AUTHORITY; NO CONFLICT
9.2.1 The Asset Company Definitive Agreements constitute the
legal, valid, and binding obligations of Asset Company,
enforceable against Asset Company in accordance with its
terms. Asset Company has the absolute and unrestricted right,
power, and authority to execute and deliver the Asset Company
Definitive Agreements and to perform its obligations under the
Asset Company Definitive Agreements.
9.2.2 Except as set forth in Schedule 9.2.2, neither the
execution and delivery of this Purchase Agreement nor the
consummation or performance of any of the Contemplated
Transactions will give any Person the right to prevent, delay,
or otherwise interfere with any of the Contemplated
Transactions pursuant to:
6
Exhibit D - Page 7 of 166
<PAGE>
(a) any provision of Asset Company's Organizational Documents;
(b) any Legal Requirement or Order to which Asset Company may
be subject; or
(c) any Contract to which Asset Company is a party or by which
Asset Company may be bound.
9.2.3 Except as set forth in Schedule 9.2.3, Asset Company is
not and will not be required to obtain any Consent from any
Person in connection with the execution and delivery of this
Purchase Agreement or the consummation or performance of any
of the Contemplated Transactions.
9.3 CERTAIN PROCEEDINGS
Except for matters raised in connection with the Bankruptcy
Case, no pending Proceeding has been commenced against Asset Company that
challenges, or may have the effect of preventing, delaying, making illegal, or
otherwise interfering with, any of the Contemplated Transactions. To Asset
Company's Knowledge, no such Proceeding has been Threatened.
9.4 ABSENCE OF BROKER'S FEE OR COMMISSION
Neither Asset Company nor any of its Representatives has
incurred any liability to pay a broker's fee or commission, in connection with
the signing, delivery or performance of this Purchase Agreement or entering into
the Contemplated Transactions.
9.5 QUALIFIED INSTITUTIONAL BUYER; RESTRICTED SECURITIES
Asset Company is a "qualified institutional buyer" as defined
in Rule 144A under the Securities Act and acknowledges that the IO Certificates
and Prepayment Penalty Certificates have not been registered under the
Securities Act. The I0 Certificates and Prepayments Penalty Certificates may be
deemed to be "restricted securities" subject to restrictions on transferability
and resale and may not be transferred or resold except in accordance with the
requirements of the related Pooling and Servicing Agreements, and except (i) in
a transaction not subject to the registration requirements of the Securities Act
and (ii) pursuant to the requirements of, or an exemption under, applicable
state securities laws.
9.6 DUE DILIGENCE
Asset Company has performed its own thorough due diligence
investigation of the Purchased Assets offered for sale and is not relying on any
representation or warranty, express or implied, of Seller or any of its
Representatives or third-party vendors, other than those expressly contained in
this Purchase Agreement.
10. COVENANTS OF SELLER PRIOR TO CLOSING DATE
7
Exhibit D - Page 8 of 166
<PAGE>
10.1 ACCESS AND INVESTIGATION
Between the date of this Purchase Agreement and the Closing
Date, Seller will, and will cause its Representatives to, afford Asset Company
and its Representatives the same access and information afforded to Subscriber
in Section 5.1 of the Stock Subscription and Purchase Agreement.
10.2 REQUIRED APPROVALS
As promptly as practicable after the date of this Purchase
Agreement and prior to the Closing Date, Seller will make all filings Company is
required to make by Legal Requirements (with the understanding that Asset
Company will pay all filing fees for any HSR Act filing, as provided by
statute). As promptly as practicable after the date of this Agreement and prior
to the Closing Date, Seller will (a) cooperate with the Asset Company with
respect to all filings that Asset Company elects to make or is required by Legal
Requirements to make in connection with the Contemplated Transactions, and (b)
cooperate with Asset Company in obtaining all Consents identified in Schedule
9.2.3 (including taking all actions requested by Asset Company to cause early
termination of any applicable waiting period under the HSR Act).
10.3 NOTIFICATION
Between the date of this Purchase Agreement and the Closing
Date, Seller will promptly notify Asset Company in writing if Seller becomes
aware of any fact or condition that (a) causes or constitutes a Breach of any of
Seller's representations and warranties in this Purchase Agreement as of the
date of this Purchase Agreement, or (b) would cause or constitute a Breach of
any such representation or warranty had such representation or warranty been
made as of the time of occurrence or discovery of such fact or condition. Should
any such fact or condition require any change in the Disclosure Schedules in
order to make the Disclosure Schedules accurate as of Closing, Seller will
promptly deliver to Asset Company a supplement to the Disclosure Schedules
specifying such change.
10.4 BEST EFFORTS
Between the date of this Purchase Agreement and the Closing
Date, Seller will use its Best Efforts to cause the conditions in Section 12 to
be satisfied and to complete Closing no later than June 30, 1999.
11. COVENANTS OF ASSET COMPANY PRIOR TO CLOSING DATE
In addition to the covenants set forth elsewhere in this
Purchase Agreement, Asset Company covenants as follows:
11.1 APPROVALS OF GOVERNMENTAL BODIES
As promptly as practicable after the date of this Purchase
Agreement, Asset Company will, and will cause each of its Related
Persons to, make all filings required by Legal
8
Exhibit D - Page 9 of 166
<PAGE>
Requirements to be made by them to consummate the Contemplated
Transactions (including all filings under the HSR Act) and will use its
Best Efforts to obtain the Consents identified in Schedules 9.2.3.
Between the date of this Purchase Agreement and the Closing Date, Asset
Company will, and will cause each Related Person to, cooperate with
Seller with respect to all filings that Seller are required by Legal
Requirements to make in connection with the Contemplated Transactions,
(including, without limitation, by paying the filing fee under the HSR
Act as provided by statute).
11.2 BEST EFFORTS
Between the date of this Purchase Agreement and the Closing
Date, Asset Company will use its Best Efforts to cause the conditions in Section
13 to be satisfied.
11.3 NOTIFICATION
Between the date of this Purchase Agreement and the Closing
Date, Asset Company will promptly notify Seller in writing if Seller becomes
aware of any fact or condition that (a) causes or constitutes a Breach of any of
Asset Company's representations and warranties in this Purchase Agreement as of
the date of this Purchase Agreement, or (b) would cause or constitute a Breach
of any such representation or warranty had such representation or warranty been
made as of the time of occurrence or discovery of such fact or condition.
12. CONDITIONS PRECEDENT TO ASSET COMPANY'S OBLIGATION TO CLOSE
Asset Company's obligation to purchase the Purchased Assets and to take
the other actions required to be taken by Asset Company at Closing is subject to
the satisfaction, at or prior to Closing, of each of the following conditions
(any of which may be waived by Asset Company, in whole or in part):
12.1 ACCURACY OF REPRESENTATIONS
All of Seller's representations and warranties in this
Purchase Agreement (considered collectively), and each of these representations
and warranties (considered individually), must have been accurate in all
material respects as of the date of this Purchase Agreement, and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date, without regard to any supplement to the Disclosure Schedules.
12.2 SELLER'S PERFORMANCE
12.2.1 All of the covenants and obligations that Seller is
required to perform or to comply with pursuant to this
Purchase Agreement at or prior to Closing (considered
collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and
complied with in all material respects.
12.2.2 Seller must have signed and delivered all documents and
other item required to be delivered by it pursuant to Section
7.1.1, and each such document must be in
9
Exhibit D - Page 10 of 166
<PAGE>
form attached to this Purchase Agreement otherwise in form and
substance satisfactory to the Asset Company.
12.3 NO INJUNCTION
There must not be in effect any Legal Requirement or any
injunction or other Order that prohibits the sale of the Purchased Assets by
Seller to Asset Company.
12.4 BANKRUPTCY MATTERS
12.4.1 The Plan of Reorganization and Disclosure Statement, as
amended and supplemented, must have been filed with the
Bankruptcy Court and must not have been withdrawn.
12.4.2 The Confirmation Order (in form and substance
reasonably satisfactory to Asset Company) must have been
entered by the Bankruptcy Court, must be in effect, final and
nonappealable, and not otherwise subject to any stay, and must
not have been modified in any material respect.
12.4.3 The Confirmation Order will authorize and direct the
Seller to perform its obligations under the Definitive
Agreements.
12.4.4 The Confirmation Order will (a) approve all Definitive
Agreements, including without limitation, the Stock
Subscription and Purchase Agreement; and (b) contain a
provision stating that the Purchased Assets acquired by Asset
Company are acquired free and clear of any and all claims,
obligations, and liabilities.
12.4.5 Asset Company will have (i) received copies of all
relevant material documents regarding the rights and
obligations of the Seller, Advanta Mortgage Corp. USA, MBIA
Insurance Corporation, Norwest Bank Minnesota, NA, and Bankers
Trust in connection with the Purchased Assets; and (ii)
received certification from each such party that there are no
relevant material documents other than those given to Asset
Company and that Seller is in compliance with all terms and
provisions of the relevant documents (unless Seller has
furnished Asset Company with a forbearance agreement in which
the relevant party agrees not to enforce its rights or
remedies against the company and to waive defaults in
connection with any noncompliance.
13. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE
Seller's obligation to sell the Purchased Assets and to take
the other actions required to be taken by Seller at the Closing is subject to
the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by Seller, in whole or in part):
13.1 ACCURACY OF REPRESENTATIONS
10
Exhibit D - Page 11 of 166
<PAGE>
All of Asset Company's representations and warranties in this
Purchase Agreement (considered collectively), and each of these representations
and warranties (considered individually), must have been accurate in all
material respects as of the date of this Purchase Agreement and must be accurate
in all material respects as of the Closing Date as if made on the Closing Date.
13.2 ASSET COMPANY'S PERFORMANCE
13.2.1 All of the covenants and obligations that Asset Company
is required to perform or to comply with pursuant to this
Purchase Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations
(considered individually), must have been performed and
complied with in all material respects.
13.2.2 Asset Company must have paid the Purchase Price and
delivered each of the documents and other items required to be
delivered by Asset Company pursuant to Section 7.2.
13.3 NO INJUNCTION
There must not be in effect any Legal Requirement or any
injunction or other Order that prohibits the sale of the Purchased Assets by
Seller to Asset Company.
13.4 BANKRUPTCY MATTERS
13.4.1 The Plan of Reorganization and Disclosure Statement, as
amended and supplemented, must have been filed with the
Bankruptcy Court and must not have been withdrawn.
13.4.2 The Confirmation Order must have been entered by the
Bankruptcy Court, must be in effect, and must not have been
stayed or modified in any material respect.
13.4.3 The Confirmation Order will approve all Definitive
Agreements and all Definitive agreement (including, without
limitation, the Stock Subscription and Purchase Agreement).
14. TERMINATION
14.1 TERMINATION EVENTS
This Purchase Agreement may not be terminated by either party,
except:
(a) this Purchase Agreement shall terminate automatically upon
any termination of the Stock Subscription and Purchase Agreement,
without notice or further act;
(b) by mutual consent of Asset Company and Seller;
11
Exhibit D - Page 12 of 166
<PAGE>
(c) by either Asset Company or Seller if a material Breach of
any provision of this Agreement has been committed by the other party
and such Breach has not been cured or waived;
(d) by Asset Company if any of the conditions in Section 12
has not been satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than through the
failure of Buyer to comply with its obligations under this Agreement)
and Asset Company has not waived such condition on or before the
Closing Date;
(e) by Seller, if any of the conditions in Section 13 has not
been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of
Seller to comply with their obligations under this Agreement) and
Seller has not waived such condition on or before the Closing Date; and
(f) by Asset Company if Seller enters into a definitive
agreement for the sale of Purchased Assets to a party unrelated to
Subscriber.
14.2 EFFECT OF TERMINATION
Prior to Closing, Asset Company's exclusive remedy for a
Breach by Seller is the exercise of Asset Company's right of termination under
Section 14.1. Seller's right of termination under Section 14.1 is in addition to
any other rights it may have under this Purchase Agreement or otherwise, and the
exercise of its right of termination will not be an election of remedies and
will not impair Seller's right to pursue all legal remedies.
14.3 REINSTATEMENT
If this Purchase Agreement and the Stock Subscription and
Purchase Agreement shall have been terminated for any reason, this Purchase
Agreement shall be automatically reinstated on any reinstatement of the Stock
Subscription and Purchase Agreement, without further notice or act.
15. GENERAL PROVISIONS
15.1 EXPENSES
Each party to this Purchase Agreement will bear its respective
expenses incurred in connection with the preparation, execution, and performance
of this Purchase Agreement and the Contemplated Transactions, including all fees
and expenses of its Representatives. Seller and the Liquidating Trust will pay
all amounts payable to Pentalpha Capital, LLC in connection with this Purchase
Agreement and the Contemplated Transactions.
15.2 NOTICES
All notices, consents, waivers, and other communications under
this Purchase Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand, (b) sent by facsimile (with written
confirmation of receipt), or (c) when received by the
12
Exhibit D - Page 13 of 166
<PAGE>
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):
SELLER:
Southern Pacific Funding Corporation
One Centerpointe Drive, Suite 551
Lake Oswego, Oregon 97035
Attention: Kevin D. Padrick
Facsimile No.: (503) 598-0662
with a copy to:
Miller, Nash, Wiener, Hager & Carlsen LLP
111 S.W. Fifth Avenue
Suite 3500
Portland, Oregon 97204
Attention: David W. Brown
Facsimile No.: (503) 224-0155
ASSET COMPANY:
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: Marvin Kabatznick
Facsimile No.: (212) 346-3568
Attention: Jay Strauss
Facsimile No.: (212) 902-0940
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attention: David C.L. Frauman
Facsimile No.: (212) 504-6666
15.3 JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of,
or based on any right arising out of, this Purchase Agreement may be brought
against any of the parties in the courts of the State of Oregon, County of
Multnomah, and each of the parties consents to the jurisdiction of such court
(and of the appropriate appellate court) in any such action or proceeding and
waives any objection to venue laid therein. Process in any action or proceeding
referred to in the preceding sentence may be served on any party anywhere in the
world. In connection with any such action or proceeding, the prevailing party
(whether prevailing affirmatively or by means of a successful defense
13
Exhibit D - Page 14 of 166
<PAGE>
with respect to the issues having the greatest value or importance) will be
entitled to recover its costs, including reasonable attorney fees at trial and
on any appeal.
15.4 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other
such further information, (b) to execute and deliver to each other such other
documents, and (c) to do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Purchase
Agreement and the other agreements referred to in this Purchase Agreement.
15.5 WAIVER
Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Purchase Agreement or the documents
referred to in this Purchase Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, no party will be deemed to have
waived any of its rights or privileges under this Purchase Agreement or the
documents referred to in this Purchase Agreement unless the waiver is in writing
and no waiver given by a party will be applicable except in the specific
instance for which it is given.
15.6 MODIFICATION
This Purchase Agreement may not be amended except by a written
agreement executed by the party to be charged with the amendment.
15.7 ASSIGNMENTS, SUCCESSORS, AND THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Purchase
Agreement without the prior consent of the other party, other than an assignment
of the rights of Asset Company to a wholly owned (direct or indirect) Related
Person of Asset Company that affirms in writing that it will be bound to the
representations, warranties, and obligation of Asset Company under this Purchase
Agreement as if it signed the Agreement as the original signatory Asset Company
(with such factual changes, such as jurisdiction of organization, as reasonably
may be required). Subject to the preceding sentence, this Purchase Agreement
will apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Purchase Agreement will be construed to give any Person other than
the parties to this Purchase Agreement any legal or equitable right, remedy, or
claim under or with respect to this Purchase Agreement or any provision of this
Purchase Agreement. This Purchase Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Purchase Agreement and their successors and assigns. The Liquidating Trust is an
express beneficiary of the covenants and obligations of the parties to this
Agreement.
14
Exhibit D - Page 15 of 166
<PAGE>
15.8 SEVERABILITY
If any provision of this Purchase Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Purchase Agreement will remain in full force and effect. Any provision of
this Purchase Agreement held invalid or unenforceable only in part or degree
will remain in full force and effect to the extent not held invalid or
unenforceable.
15.9 SECTION HEADINGS; CONSTRUCTION
The headings of Sections in this Purchase Agreement are
provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Purchase Agreement. All words used in
this Purchase Agreement will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the word "including"
does not limit the preceding words or terms.
15.10 TIME OF ESSENCE
With regard to all dates and time periods set forth or
referred to in this Purchase Agreement, time is of the essence.
15.11 GOVERNING LAW
THIS PURCHASE AGREEMENT WILL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
15.12 COUNTERPARTS
This Purchase Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Purchase Agreement and all of which, when taken together, will be deemed to
constitute the and the same agreement.
15
Exhibit D - Page 16 of 166
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered
this Amended and Restated Purchase Agreement as of the date first written above.
ASSET COMPANY SELLER
GOLDMAN, SACHS & CO. SOUTHERN PACIFIC FUNDING CORPORATION
By: --------------------------- By: -------------------------------
Name: --------------------------- Kevin D. Padrick
Title: --------------------------- President
Exhibit D - Page 17 of 166
<PAGE>
APPENDIX I TO
ASSET PURCHASE AGREEMENT
DEFINED TERMS
All references in this Appendix I to Sections are references
to Sections of this Purchase Agreement unless otherwise specified. Unless the
context otherwise requires, capitalized terms used in the Purchase Agreement, if
not otherwise defined, have the following meanings:
"ADDITIONAL COVENANTS AGREEMENT" has the meaning given in
Section 5.1.
"ADJUSTMENT AMOUNT" has the meaning given in Section 3.3.
"AGREEMENT" means, when referring to "this Agreement," the
Amended and Restated Asset Purchase Agreement dated as of May 21, 1999, between
Seller and Asset Company.
"ASSET CASH FLOW INSTRUMENT" has the meaning given in Section
4.
"ASSET COMPANY" means the buyer of assets identified in
paragraph one of this Agreement, or any permitted assignee.
"ASSET COMPANY DEFINITIVE AGREEMENTS" means this Agreement,
the Stock Subscription and Purchase Agreement, Additional Covenants Agreement,
the Settlement Agreement, the Cash Flow Instrument, the Asset Purchase Agreement
Cash Flow Instrument, and the Guarantee.
"ASSET PURCHASE AGREEMENT" or "PURCHASE AGREEMENT" means the
Amended and Restated Asset Purchase Agreement dated as of May 21, 1999, between
Seller and Asset Company.
"ASSET PURCHASE CASH FLOWS" has the meaning given in Section
4.1.
"ASSET CASH FLOW INSTRUMENT" has the meaning given in Section
4.
"BANKRUPTCY CASE" has the meaning given in the Recitals to
this Agreement.
"BANKRUPTCY COURT" has the meaning given in the Recitals to
this Agreement.
"BASE CASH PRICE" has the meaning given in Section 3.2.
"BEST EFFORTS" means the efforts that a prudent Person who
desires to achieve a certain result would use in similar circumstances to
achieve the result as expediently as possible.
"BREACH" means (a) any inaccuracy in or breach of, or any
failure to perform or comply with, a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement, or (b) any claim (by any Person) or other occurrence
or circumstance that is or was inconsistent with a representation, warranty,
covenant, obligation, or other provision of this Agreement or any instrument
delivered pursuant to this Agreement.
17
Exhibit D - Page 18 of 166
<PAGE>
"CASH FLOW PERIOD" has the meaning given in Section 4.2.
"CLOSING" has the meaning given in Section 6.
"CLOSING DATE" means the date and time when Closing actually
takes place.
"COMPANY" has the meaning given in the Recitals to this
Agreement.
"CONFIRMATION ORDER" means the order of the Bankruptcy Court
confirming the Plan of Reorganization.
"CONSENT" means any approval, consent, ratification, waiver,
or other authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" means all of the transactions set
forth in the definition of Contemplated Transactions in the Stock Subscription
and Purchase Agreement.
"CONTRACT" means any agreement, contract, obligation, promise,
or undertaking (whether written or oral and whether express or implied) that is
legally binding.
"DEFINITIVE AGREEMENTS" means this Agreement, the Stock
Subscription and Purchase Agreement and all related agreements or instruments
referred to in this Agreement or in the Stock Subscription and Purchase
Agreement.
"DIP FINANCING AGREEMENT" means the Master Repurchase
Agreement, Annex I to such Master Repurchase Agreement, the Margin Agreement and
the related agreements, annexes and exhibits entered into between Debtor and
Goldman, Sachs & Co., pursuant to which Goldman, Sachs & Co. extended a credit
facility in the appropriate initial principal amount of $33,600,000.
"DISCLOSURE SCHEDULES" means the schedules attached to this
Agreement and delivered by Debtor to Subscriber concurrently with the execution
and delivery of this Agreement.
"DISCLOSURE STATEMENT" means the disclosure statement filed in
Bankruptcy Court with respect to the Plan of Reorganization, as amended.
"DISTRIBUTION" has the meaning given in Section 4.2.
"ENCUMBRANCE" means any charge, claim, community property
interest, condition, equitable interest, lien, option, pledge, security
interest, right of first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income, or exercise of any
other attribute of ownership.
"FINANCING TRANSACTION" means any nonrecourse borrowing or any
borrowing with recourse solely to a bankruptcy remote special purpose entity in
respect of the Reorganized Company or the Asset Company, which borrowing is
secured by, and on which principal and/or interest payments are made primarily
from cash flows on, the related Assets or Purchased Assets and entered
18
Exhibit D - Page 19 of 166
<PAGE>
into primarily for the purpose of distributing Proceeds. Financing Transaction
also includes all incremental borrowings from the reserve funds created for
Trust Series 1995-2, 1996-1 and 1996-3.
"GOVERNMENTAL BODY" means any:
(a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or
entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory,
or taxing authority or power of any nature.
"HEDGING GAINS" means any realized gains of the Asset Company
on hedging transactions.
"HEDGING LOSSES" means any realized losses of the Asset
Company on hedging transactions.
"HOLDER" means the holder of the Asset Cash Flow Instrument.
"HSR ACT" means the Hart-Scott Rodino Antitrust Improvements
Act of 1976 or any successor law, and regulations and rules issued pursuant to
that Act or any successor law.
"IO CERTIFICATE" means each of the certificates included among
the Purchased Assets, representing subordinated interest-only REMIC regular
interests in the related Securitization Trusts (or, in the case of the Series
1998-H1 Securitization Trust, a subordinated non-REMIC equity interest).
"LEGAL REQUIREMENT" means any federal, state, local,
municipal, foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty.
"LIQUIDATING TRUST" means the liquidating trust established
for the benefit of the Company's creditors in the Bankruptcy Case.
"MATERIAL INTEREST" has the meaning given in Appendix 1 of the
Stock Subscription and Purchase Agreement.
19
Exhibit D - Page 20 of 166
<PAGE>
"ORDER" means any award, decision, injunction, judgment,
order, ruling, subpoena, or verdict entered, issued, made, or rendered by any
court, administrative agency, or other Governmental Body or by any arbitrator.
"ORGANIZATIONAL DOCUMENTS" means (a) the articles or
certificate of incorporation and the bylaws of a corporation; (b) the
partnership agreement and any statement of partnership of a general partnership;
(c) the limited partnership agreement and the certificate of limited partnership
of a limited partnership; (d) the operating agreement and articles or
certificate of organization of a limited liability company; (e) any charter or
similar document adopted or filed in connection with the creation, formation, or
organization of a Person; and (f) any amendment to any of the foregoing.
"PERSON" means any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
"PREPAYMENT PENALTY INCOME" means the income from the
Prepayment Penalty Trust Certificates and the Prepayment Penalty Rights.
"PREPAYMENT PENALTY TRUST CERTIFICATES" means the certificates
included among the Purchased Assets representing interests in prepayment penalty
income in respect of the mortgage loans in the Securitization Trusts.
"PREPAYMENT PENALTY RIGHTS" means all rights to prepayments
penalty income from the Securitization Trusts not represented by a Prepayment
Penalty Trust Certificate.
"PROCEEDING" means any action, arbitration, audit, case,
hearing, investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought, conducted, or
heard by or before, or otherwise involving, any Governmental Body or arbitrator.
"PROCEEDS" means the cash amount realized from an arms-length
sale, transfer or Financing Transaction.
"PURCHASE AGREEMENT" or "ASSET PURCHASE AGREEMENT" means the
Amended and Restated Asset Purchase Agreement dated as of May 21, 1999, between
Seller and Asset Company.
"PURCHASE PRICE" has the meaning given in Section 3.1.
"PURCHASED ASSETS" means the assets set forth on Schedule 2.1
of this Agreement.
"PURCHASED ASSET PROCEEDS" has the meaning given in Section
4.1.
"RELATED PERSON" means, with respect to a specified Person
other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly
under common control with such specified Person;
20
Exhibit D - Page 21 of 166
<PAGE>
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar
capacity), and each Person who is married to, resides with, or related
within the second degree to any such director, officer, partner,
executor, trustee, or Person in a similar capacity;
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar capacity);
and
(f) any Related Person of any individual described in clause
(b) or (c).
"REORGANIZED COMPANY" refers to the Company upon the effective
date of the Plan of Reorganization.
"REPRESENTATIVE" means, with respect to a particular Person,
any director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants, and
financial advisors.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"SECURITIZATION TRUST" means the trusts into which pools of
mortgage loans were deposited pursuant to the 13 securitization transactions
entered into by the Company (or one of its Subsidiaries) between 1995 and 1998
and which in turn issued various classes of mortgage securities representing
interests in, or in the case of the Series 1998-H1 Securitization Trust, secured
by, the trust assets.
"SELLER" means the seller of assets identified in paragraph
one of this Purchase Agreement.
"SELLER DEFINITIVE AGREEMENTS" means this Agreement, the
Settlement Agreement, the Liquidating Trust Agreement, the Stock Subscription
and Purchase Agreement and the Additional Covenants Agreement.
"SETTLEMENT AGREEMENT" means the {settlement agreement}
[SETTLEMENT AGREEMENT DATED AS OF JUNE 17, 1999,] among Seller, Norwest Bank
Minnesota, National Association {and}[,] MBIA Insurance Corporation {to be
entered into prior to the Closing Date} [AND THE GOLDMAN SACHS GROUP, INC].
"STOCK SUBSCRIPTION AND PURCHASE AGREEMENT" means the [SECOND]
Amended and Restated Stock Subscription and Purchase Agreement between Seller
and Subscriber dated as of {May 21} [JUNE 30], 1999.
21
Exhibit D - Page 22 of 166
<PAGE>
"SUBSCRIBER" has the meaning given in the first paragraph of
the Stock Subscription and Purchase Agreement.
"THREATENED" means a demand or statement has been made (orally
or in writing) or a notice has been given (orally or in writing), or another
event has occurred or other circumstances exist, that would lead a prudent
Person to conclude that a claim, Proceeding, dispute, action, or other matter is
likely to be asserted, commenced, taken, or otherwise pursued in the future.
22
Exhibit D - Page 23 of 166
<PAGE>
SCHEDULE 2.1
PURCHASED ASSETS
The following Subordinated Interest-Only Interests, Prepayment Penalty
Income, and Partnership Interest:
Securitization Trust Interest(s)
- -------------------- -----------
1995-1 Prepayment Penalty Income
1995-2 S-1, S-2, Prepayment Penalty Income
1996-1 I S-1, I S-2, II
S-1, II S-2, Prepayment Penalty
Income
1996-2 I S, II S, Prepayment Penalty Income
1996-3 I S, II S, Prepayment Penalty Income
1996-4 I S, II S, Prepayment Penalty Income
1997-1 II S, Prepayment Penalty Income
1997-2 S-1A, S-1F, Prepayment Penalty Income
1997-3 Prepayment Penalty Income
1997-4 Prepayment Penalty Income
1998-1 Prepayment Penalty Income
1998-2 Prepayment Penalty Income
1998-H1 Class X(1)
Prepayment Penalty Income
- ----------------
(1) This interest is a partnership interest for tax purposes.
23
Exhibit D - Page 24 of 166
<PAGE>
Exhibit 4.1
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE. NEITHER THIS
CERTIFICATE NOR ANY INTEREST HEREIN MAY BE OFFERED FOR SALE, SOLD OR OTHERWISE
TRANSFERRED UNLESS THE PROSPECTIVE TRANSFEREE PROVIDES THE COMPANY WITH AN
OPINION OF COUNSEL (WHICH SHALL NOT BE AT THE EXPENSE OF THE COMPANY)
SATISFACTORY TO THE COMPANY IN ITS SOLE JUDGMENT THAT SUCH TRANSFER IS BEING
MADE EITHER PURSUANT TO A REGISTRATION STATEMENT THAT HAS BECOME EFFECTIVE UNDER
THE ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT, AND EITHER
DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER ANY STATE SECURITIES LAWS,
OR HAS BEEN SO REGISTERED OR QUALIFIED. THE OPINION SHALL ALSO STATE THAT AS A
RESULT OF SUCH TRANSFER, THE COMPANY IS UNDER NO OBLIGATION TO REGISTER UNDER
THE SECURITIES ACT OF 1934, AS AMENDED, THE INVESTMENT COMPANY ACT OF 1940 OR
ANY OTHER FEDERAL OR STATE SECURITIES LAW.
ASSET CASH FLOW INSTRUMENT
NEW YORK, NEW YORK
-------, 1999
FOR VALUE RECEIVED, the undersigned ----------, ("Asset Company"), a
- ----------- having its principal place of business at
- -----------------------------, promises to pay to the order of SOUTHERN PACIFIC
FUNDING CORPORATION ("Holder") at ------------------------------------- the
amounts as provided herein.
This Asset Cash Flow Instrument (the "Instrument") evidences an
obligation incurred pursuant to the Amended Plan of Reorganization dated May
- ---, 1999, of Southern Pacific Funding Corporation acting in its capacity as
Debtor-in-Possession in its bankruptcy case filed under Chapter 11 of the United
States Bankruptcy Code in the United States Bankruptcy Court for the District of
Oregon.
Capitalized terms used in this Instrument and not otherwise defined
have the meanings given in Appendix I hereto, which is incorporated into this
Instrument by reference.
This Instrument represents a general obligation of Asset Company,
payable from any available funds.
1. ASSET CASH FLOW INSTRUMENT
1.1 The Asset Company shall make periodic payments to Holder (each a
"Distribution") of the sum (without duplication) of 50 percent of the following
(i.e., 50 percent of the amounts in clause (a) minus 50 percent of the amounts
in
Exhibit D - Page 25 of 166
<PAGE>
clause (b)) with respect to the Purchased Assets and Purchased Asset Proceeds.
("Purchased Asset Proceeds" means any securities or tangible non-cash
consideration received on a sale or transfer of Purchased Assets to a
non-Related Person of Asset Company, including any securities retained by Asset
Company in connection with the securitization of any Purchased Assets):
(a) the sum (without duplication) of:
(i) the aggregate of all pre-tax cash flows from each
of the Purchased Assets and Purchased Asset Proceeds from June
---, 1999 until the sale (or transfer) or Financing
Transaction with respect to the related Purchased Assets or
Purchased Asset Proceeds, it being agreed that the cash flows
will continue to be payable to Holder after any sale or
transfer to a Related Person of Asset Company (other than a
sale to a Related Person of Asset Company for the sole purpose
of facilitating a Financing Transaction) or pursuant to a
transaction that has not been found by the board of directors
of Asset Company to be an arms-length transaction;
(ii) all pre-tax Proceeds from the sale of any
Purchased Asset or Purchased Asset Proceeds or any portion of
a Purchased Asset or Purchased Asset Proceeds; and
(iii) all pre-tax Proceeds from any Financing
Transaction entered into by Asset Company with respect to any
of the Purchased Assets or Purchased Asset Proceeds and all
hedging gains;
(50% of the sum of the amounts in clause (i),
(ii) and (iii) are the "Asset Purchase Cash Flows"); minus
(b) otherwise unreimbursed Out-of-Pocket Expenses incurred by
Asset Company.
1.2 The periodic payments (each a "Distribution") made with
respect to this Instrument each calendar month, commencing with the first full
calendar month following June ---, 1999 (each such month, a "Cash Flow Period")
will equal (i) Asset Purchase Cash Flows received by Asset Company during such
Cash Flow Period (or from June ---, 1999 through the last day of the first Cash
Flow Period, in the case of the first Distribution) minus (ii) 50 percent of the
otherwise unreimbursed Out-of-Pocket Expenses not previously applied in
reduction of Asset Purchase Cash Flows.
1.3 Out-of-Pocket Expenses means:
(a) Direct Third Party out-of-pocket expenses reasonably incurred
by the Asset Company or by a Related Person of Asset Company
with respect to the Purchased Assets and Purchased Asset
Proceeds, not otherwise reimbursable from a third party, and
directly
2
Exhibit D - Page 26 of 166
<PAGE>
related to a sale of Purchased Assets or Purchased Asset
Proceeds or Financing Transaction.
(b) Notwithstanding Section 1.3(a), Out-of-Pocket Expenses
specifically include:
(i) hedging losses and carrying costs of hedging
transactions;
(ii) principal and interest repaid on any Financing
Transaction;
(iii) otherwise reimbursable Third Party expenses
that Asset Company has determined to be uncollectible; and
(iv) fees and expenses incurred with respect to The
Goldman Sachs Group {L.P}[, Inc]. or a Related Person of The
Goldman Sachs Group {L.P}[, INC]. in connection with a sale or
Financing Transaction, but only to the extent such fees are
consistent with market rates and industry standards and are
approved by the Holder, which approval shall not be
unreasonably withheld ("Related Person Expenses"). Related
Person Expenses shall be deemed to be approved if not objected
to within 21 days after Holder received a detailed report from
the Asset Company together with a request for approval.
1.4 The Distribution for a particular month will be paid on or before
the first business day following the end of the related Cash Flow Period by wire
transfer to an account specified by Holder.
2. OBLIGATIONS ABSOLUTE
The obligations of Asset Company to pay Distributions under this
Instrument (in accordance with its terms) shall be absolute and unconditional
and shall not be subject to any abatement, reduction, set-off, defense (other
than the defense that the amount due has been paid), counterclaim or recoupment
("Abatements") for any reason whatsoever, including without limitation,
Abatements due to any present or future claims of Asset Company against Holder
under this Instrument or otherwise, or against any other Person for whatever
reason.
It is the express intention of Asset Company and Holder that all
Distributions are, and shall continue to be, payable in all events unless the
obligation to pay such Distributions is terminated pursuant to the express
provisions of this Instrument.
3. REMEDIES
Asset Company and all others who may become liable for the payment of
all or any part of the obligations hereunder do hereby severally waive
presentment and demand for payment, notice of dishonor, protest and notice of
protest and non-payment and all other notices of any kind, except for notices
expressly provided for in this Instrument.
3
Exhibit D - Page 27 of 166
<PAGE>
Upon the occurrence and during the continuance of any breach by the
Asset Company of any of its obligations hereunder, Holder shall have all
remedies available to Holder at law or in equity, including, without limitation
of any other remedies, the right to specifically enforce any of the obligations
or duties owing by Asset Company or any other person and the right to also bring
an action for money damages.
4. VENUE; ATTORNEY FEES; GOVERNING LAW
In any action or proceeding seeking to enforce any provision of, or
based on any right arising out of, this Instrument may be brought against any of
the parties in the courts of the State of Oregon, County of Multnomah, and each
of the parties consents to the jurisdiction of such court (and of the
appropriate appellate court) in any such action or proceeding and waives any
objection to venue laid therein. Process in any action or proceeding referred to
in the preceding sentence may be served on any party anywhere in the world. In
connection with any such action or proceeding, the prevailing party will be
entitled to recover its costs, including reasonable attorney fees at trial and
on any appeal.
4
Exhibit D - Page 28 of 166
<PAGE>
THIS INSTRUMENT, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER, SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICT OF LAWS.
IN WITNESS WHEREOF, this Asset Cash Flow Instrument has been executed
and delivered to the Holder as of the date first specified above.
GOLDMAN, SACHS & CO.
By: -----------------------------
Title: -----------------------------
5
Exhibit D - Page 29 of 166
<PAGE>
APPENDIX I TO
ASSET CASH FLOW INSTRUMENT
DEFINED TERMS
Unless the context otherwise requires, capitalized terms used
in the Asset Cash Flow Instrument, if not otherwise defined, have the following
meanings:
"FINANCING TRANSACTION" means any nonrecourse borrowing or any
borrowing with recourse solely to an bankruptcy remote special purpose entity in
respect of the Asset Company, which borrowing is secured by, and on which
principal and/or interest payments are made primarily from cash flows from, the
Purchased Assets or Purchased Asset Proceeds and entered into primarily for the
purpose of distributing Proceeds. Financing Transaction also includes all
incremental borrowings from the reserve funds created for Trust Series 1995-2,
1996-1 and 1996-3.
"GOVERNMENTAL BODY" means any:
(i) nation, state, county, city, town, village, district,
or other jurisdiction of any nature;
(ii) federal, state, local, municipal, foreign, or other
government;
(iii) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch,
department, official, or entity and any court or
other tribunal);
(iv) multi-national organization or body; or
(v) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative,
police, regulatory, or taxing authority or power of
any nature.
"MATERIAL INTEREST" means, for purposes of the definition of
Related Person, a direct or indirect beneficial ownership (as defined in Rule
13d-3 under the Securities Exchange Act of 1934) of voting securities or other
voting interests representing at least 25% of the outstanding voting power of a
Person or equity securities or other equity interests representing at least 25%
of the outstanding equity securities or equity interest in a Person.
"PERSON" means any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
"PROCEEDS" means the cash amount realized from an arms-length
sale, transfer or Financing Transaction.
6
Exhibit D - Page 30 of 166
<PAGE>
"PURCHASED ASSETS" means the assets set forth on the Schedule
of Assets to this Asset Cash Flow Instrument.
"RELATED PERSON" means, with respect to a specified Person
other than an individual:
(i) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly
or indirectly under common control with such
specified Person;
(ii) any Person that holds a Material Interest in such
specified Person;
(iii) each Person that serves as a director, officer,
partner, executor, or trustee of such specified
Person (or in a similar capacity), and each Person
who is married to, resides with, or related within
the second degree to any such director, officer,
partner, executor, trustee, or Person in a similar
capacity;
(iv) any Person in which such specified Person holds a
Material Interest;
(v) any Person with respect to which such specified
Person serves as a general partner or a trustee (or
in a similar capacity); and
(vi) any Related Person of any individual described in
clause (b) or (c).
"THIRD PARTY" means a Person that is neither The Goldman Sachs
Group {L.P}[, INC]. nor any Related Person of The Goldman Sachs Group {L.P}[,
INC].
7
Exhibit D - Page 31 of 166
<PAGE>
SCHEDULE OF ASSETS
The following Subordinated Interest-Only Interests, Prepayment Penalty
Income, and Partnership Interest:
Securitization Trust Interest(s)
- -------------------- -----------
1995-1 Prepayment Penalty Income
1995-2 S-1, S-2, Prepayment Penalty Income
1996-1 I S-1, I S-2, II
S-1, II S-2,
Prepayment Penalty
Income
1996-2 I S, II S, Prepayment Penalty Income
1996-3 I S, II S, Prepayment Penalty Income
1996-4 I S, II S, Prepayment Penalty Income
1997-1 II S, Prepayment Penalty Income
1997-2 S-1A, S-1F, Prepayment Penalty Income
1997-3 Prepayment Penalty Income
1997-4 Prepayment Penalty Income
1998-1 Prepayment Penalty Income
1998-2 Prepayment Penalty Income
1998-H1 Class X(1)
Prepayment Penalty Income
- ----------------
(1) This interest is a partnership interest for tax purposes.
8
Exhibit D - Page 32 of 166
<PAGE>
EXHIBIT 2.4.1
and
EXHIBIT 5.1
ADDITIONAL COVENANTS AGREEMENT
THIS ADDITIONAL COVENANTS AGREEMENT is entered into as of June
- --, 1999, by and between SOUTHERN PACIFIC FUNDING CORPORATION, a California
corporation ("Company") and the SPFC LIQUIDATING TRUST established for the
benefit of the creditors of Southern Pacific Funding Corporation in connection
with the case filed by the Company under Chapter 11 of the United States
Bankruptcy Code (the "Liquidating Trust") GOLDMAN, SACHS & CO., a Delaware
limited partnership ("Asset Company"), and THE GOLDMAN SACHS GROUP, INC., a
Delaware corporation ("Subscriber").
RECITALS
A. On October 1, 1998, Company filed for bankruptcy under Chapter 11 of
the Bankruptcy Code (the "Bankruptcy Case") in the United States
Bankruptcy Court for the District of Oregon (the "Bankruptcy Court").
B. On May --, 1999, Company filed its amended "Plan of Reorganization"
with the Bankruptcy Court. The Plan of Reorganization was confirmed by
the Bankruptcy Court pursuant to the "Confirmation Order" entered on
{June} [JULY] --, 1999.
C. As of {May 21} [JUNE 30], 1999, Company entered into {an} [A SECOND]
Amended and Restated Asset Purchase Agreement with Goldman, Sachs &
Co., ( "Asset Purchase Agreement").
D. As of {May 21} [JUNE 30], 1999, Company entered into {an} [A SECOND]
Amended and Restated Stock Subscription and Purchase Agreement with The
Goldman Sachs Group, Inc., as Subscriber (the "Stock Subscription and
Purchase Agreement").
E. Pursuant to the Confirmation Order and the Asset Purchase Agreement,
the Purchased Assets were sold by Company to Asset Company.
F. Also pursuant to the Confirmation Order and the Stock Subscription and
Purchase Agreement, Company canceled all of its capital stock
outstanding prior to the effective date of the Plan of Reorganization
and issued 10,000 shares of common stock, constituting all of the
capital stock of Company, to Subscriber (or one of its affiliates).
G. Also pursuant to the Confirmation Order and the Stock Subscription and
Purchase Agreement, certain of the assets and liabilities of the
Company were transferred to the Liquidating Trust. The Stock
Subscription and Purchase Agreement contemplates that
Exhibit D - Page 33 of 166
<PAGE>
Company, the Liquidating Trust and the other parties hereto enter into
this Additional Covenants Agreement.
AGREEMENTS
The Liquidating Trust, Company, Subscriber, and Asset Company
intending to be bound, hereby agree as follows:
1. DEFINITIONS
For purposes of this Agreement, capitalized terms not
otherwise defined have the meanings given in Appendix I, attached hereto and
incorporated herein.
2. PAYMENTS FROM PROCEEDINGS
Company will distribute to the Liquidating Trust any payments
it has received or receives as a result of Company prevailing in any Proceeding
against third parties for activities occurring prior to the closing of the Stock
Subscription and Purchase Agreement, except that Company will retain any
payments received with respect to any Proceeding that (a) is related to one or
more particular mortgage loans held in the Securitization Trusts on the Closing
Date, (b) affects the interests or performance of the master servicer of such
loans, such as a claim that Company, as master servicer, may bring on behalf of
a Securitization Trust, or (c) is related to failure by the trustee under any
Securitization Trust or any Prepayment Penalty Trust Certificates to properly
calculate the cash flows to the certificate holders from any such Trust or
Certificate.
3. BOOKS AND RECORDS
The Liquidating Trust will provide Company access to the books
and records of Company, and the opportunity to make copies at its expense. Upon
dissolution of the Liquidating Trust, all such books and records shall be
delivered by the Liquidating Trust to Company.
4. THE FLORIDA RESERVE
Company will deposit the Distributions for each month (after
any payments required to be made to Subscriber as a result of an unpaid
Preferred Return, or unpaid Company Tax Adjustment Amount, or payments on Holder
Expense Loans) into a segregated reserve account (the "Florida Reserve") for a
period of time. The funds deposited in the Florida Reserve will be invested at
the direction of Company only in Eligible Investments for the benefit of Holder
(Holder shall be responsible to report such investment income and pay income
taxes thereon) and may be used (together with any income on Eligible
Investments) by Company to {purchase each and every mortgage loan out of
Securitization Trusts in the amount and as specified in the settlement or
finding referred to below (including accrued interest and other} [PAY ANY]
amounts required to be paid {under the applicable Pooling and Servicing
Agreement) pursuant to the requirements of a binding settlement or a finding
that any such mortgage loans are owned by or encumbered in favor of Oceanmark
Bank F.S.B. in a final, unappealable judgment entered by a court of competent
jurisdiction} [BY THE COMPANY PURSUANT TO SECTION 5(B) OF THE SETTLEMENT
AGREEMENT] with
2
Exhibit D - Page 34 of 166
<PAGE>
respect to the Florida {Case (such settlement or judgment,} [CASES (]the
"Florida Case Resolution"). When the obligations of the Company under the
Florida Case Resolution are fully satisfied, Company will immediately release
all remaining funds in the Florida Reserve to Holder.
5. SUBSCRIBER CONTRIBUTION
[SUBJECT TO THE FOLLOWING PROVISO,] Subscriber agrees to make
a Subscriber Contribution to the extent necessary to satisfy {Reorganized}
Company's obligations to {purchase each and every mortgage loan out of
Securitization Trusts as specified in the settlement or finding referred to
below (including accrued interest and other amounts required to be paid under
the applicable Pooling and Servicing Agreement) pursuant} [MAKE PAYMENTS
REQUIRED PURSUANT TO SECTION 5(B) OF THE SETTLEMENT AGREEMENT WITH RESPECT] to
the Florida Case Resolution to the extent the funds contained in the Florida
Reserve established pursuant to this Agreement (plus any funds provided by or on
behalf of the Liquidating Trust, in each case in its sole and absolute
discretion) are insufficient to satisfy such obligations at the time such
obligations are due[; PROVIDED, HOWEVER, THAT IN NO EVENT SHALL SUBSCRIBER BE
OBLIGATED TO (ALTHOUGH SUBSCRIBER MAY, IN ITS SOLE DISCRETION) MAKE A SUBSCRIBER
CONTRIBUTION WITH RESPECT TO ANY SUCH AMOUNT WHICH IS NOT GUARANTEED PURSUANT TO
SECTION 6(A) OF THE SETTLEMENT AGREEMENT]. Within 30 days of making a Subscriber
Contribution, Subscriber must elect by delivering written notice to Holder of
its election not to receive a Preferred Return (the "Subscriber Election"). If
no election is made, Subscriber will be deemed to have elected to receive a
Preferred Return.
6. REQUIRED CAPITAL CONTRIBUTIONS
Subscriber agrees to make capital contributions to Company
each month in cash to the extent the Residual Cash Flows remaining after payment
of Distributions together with the proceeds of any Holder Expense Loan made
during such month are insufficient to pay all expenses and liabilities of
Company together with the requirement to fund the Reserve pursuant to the Cash
Flow Instrument (such contributions, the "Required Capital Contributions"),
subject to the limitation that Required Capital Contributions to pay an unpaid
Holder Tax Adjustment Amount may be limited during any month to an amount equal
to all pre-tax cash flows and other amounts, if any, paid or payable in respect
of the Asset Cash Flow Instrument minus the Out-of-Pocket Expenses plus the
Holder-Allocated Expenses for the month.
Required Capital Contributions are not entitled to a preferred
return of any kind and no portion of the Required Capital Contributions shall be
eligible for treatment as Out-of-Pocket Expenses.
7. INFORMATION; REPORTS; COOPERATION
Company and Asset Company will provide Holder the following
information and reports:
(a) All reports pertaining to the Assets and the Purchased Assets
received by Company from Asset Company or Third Parties,
including without limitation, any master
3
Exhibit D - Page 35 of 166
<PAGE>
servicer or subservicer (each, a "Third Party Report").
Company and Asset Company will provide Third Party Reports to
Holder monthly.
(b) Annual investor level reports ("Investor Reports") containing
information in reasonable detail on the Assets and the
Purchased Assets, a description of the management activities
and decisions related to the Assets and the Purchased Assets,
financial statements (including balance sheet, income
statement, and cash flow statements), and proposed management
plans for the next year. Each Investor Report shall contain
information that a reasonably prudent investor would be
interested in receiving with respect to its investment.
(c) Meetings, upon reasonable request by Holder, with a person
designated by the Holder and a person designated by Company or
Asset Company (with knowledge of the management activities
respecting the Assets and the Purchased Assets) to discuss the
management of the Assets and the Purchased Assets, receive
comments from the person designated by the Holder, and prompt
responses to such designated person (which may be oral or
written) to questions or requests (including loan data tapes)
for information that a reasonably prudent investor would be
interested in receiving with respect to its investment.
In the event Holder desires to sell all or a portion of its
interest, Company and Asset Company will cooperate with Holder and will promptly
provide all necessary information reasonably requested by Holder to facilitate
the sale.
8. ASSET MANAGEMENT; STANDARDS
Company and Asset Company will manage the Assets and the
Purchased Assets in accordance with the following standards:
(a) All loan servicing activities will be managed in a manner
consistent with industry standards, including industry
servicing standards related to the subprime credit mortgage
market; provided that to the extent that such standards
conflict with the applicable Pooling and Servicing Agreements
such agreements shall govern.
(b) The Assets and the Purchased Assets will be managed with the
same care and diligence and in a manner consistent with the
manner in which other similar assets of the Subscriber and
Related Persons of Subscriber are managed;
(c) The Assets and the Purchased Assets will be managed in a
manner consistent with the economic interests of both Holder
and Company;
(d) No repurchase agreement will be entered into with respect to
the Assets or the Purchased Assets; and
(e) The Assets and the Purchased Assets will not be used as
collateral or security for any transaction other than a
Financing Transaction.
4
Exhibit D - Page 36 of 166
<PAGE>
Company shall affix any Certificates created after the date of
this agreement with the legend that appears on the top of the Cash Flow
Instrument.
5
Exhibit D - Page 37 of 166
<PAGE>
9. NO MANAGEMENT FEE
Neither Subscriber, Company, Asset Company nor Related Persons
of any of the foregoing will be entitled to a management fee in connection with
the management of the Assets or the Purchased Assets.
10. EQUITY
Subscriber or a Related Person of Subscriber shall at all
times maintain ownership of at least 80% of the capital stock of Company, after
giving effect to any capital stock issued after Closing; provided that the
foregoing shall not be deemed to preclude the liquidation or merger of the
Company into Subscriber. Company shall not pledge or otherwise encumber the
capital stock of Company, except as collateral for a financing that is recourse
to Subscriber. Company shall not accept capital contributions except in cash and
except as may be required in connection with the Subscriber Contribution or as
Required Capital Contributions.
11. INDEBTEDNESS
(a) Unless Subscriber has delivered to Holder its Guarantee of
all obligations of Company to Holder, including without limitation, the
performance by Company of its obligation to make Distributions under
the Cash Flow Instrument, Company will not incur indebtedness other
than:
(i) indebtedness necessary to pay Out-of-Pocket Expenses;
(ii) indebtedness incurred to finance advances under the Pooling
and Servicing Agreements; and
(iii) Financing Transactions.
(b) Unless Subscriber has delivered to Holder its Guarantee of
all obligations of Asset Company to Company, including without
limitation, the obligation of Asset Company to make distributions under
the Asset Cash Flow Instrument, Asset Company will not incur
indebtedness other than Financing Transactions.
12. SERVICES BY LIQUIDATING TRUST
(a) From the Closing Date to the end of the month in which the
Closing Date occurs, the Liquidating Trust will be allowed to retain
the servicing income for such period and will, at its expense, hire and
utilize former employees of company to provide loan servicing services
to company for such period. [ALL OTHER COSTS OF PROVIDING LOAN
SERVICING DURING SUCH PERIOD ON BEHALF OF THE COMPANY SHALL BE PAID BY
THE LIQUIDATING TRUST.] Liquidating Trust will use its reasonable best
efforts to maintain the quality of servicing after the Closing Date to
a level comparable to the period prior to the Closing Date.
6
Exhibit D - Page 38 of 166
<PAGE>
(b) From July 31, 1999 to August 31, 1999 (or as soon
thereafter as practicable), Liquidating Trust will utilize former
employees of company and otherwise use its reasonable best efforts to
assure a smooth transfer of servicing responsibilities, records and
files to the new servicer or servicers as directed by company. Company
shall pay liquidating trust $480,000 as compensation for such services.
All other usual and customary costs of servicing transfer (such as
servicing transfer fees by the new subservicer, and other costs)[,
EXCEPT AS OTHERWISE SPECIFIED IN THE STOCK SUBSCRIPTION AND PURCHASE
AGREEMENT,] shall either be paid by the new servicer or servicers or by
company (it being understood that the liquidating trust is not entitled
to charge any additional fee).
13. SERVICING TRANSFER
Company shall not transfer the Master Servicing Rights unless
the prior consent of Holder shall have been obtained; provided that Master
Servicing Rights may be transferred without consent in connection with the sale
of the related residual certificate.
14. ASSET TRANSFERS
(a) Unless Subscriber has delivered to Holder its Guarantee of
all obligations of Company to Holder, including without limitation, the
performance by Company of its obligation to make Distributions under
the Cash Flow Instrument, Company will not transfer any Assets to an
entity other than a special purpose bankruptcy remote entity with
Organizational Documents that prohibit the transferee from incurring
indebtedness other than:
(i) indebtedness to pay Out-of-Pocket Expenses;
(ii) indebtedness incurred to finance servicer
advances under the Pooling and Servicing Agreements; and
(iii) Financing Transactions.
(b) Unless Subscriber has delivered to Holder its Guarantee of
all obligations of Asset Company to Company, including without
limitation, the obligation of Asset Company to make distributions under
the Asset Cash Flow Instrument, Asset Company will not transfer any
Assets to an entity other than a special purpose bankruptcy remote
entity with Organizational Documents that prohibit the transferee from
incurring indebtedness other than:
(i) indebtedness to pay Out-of-Pocket Expenses;
(ii) indebtedness incurred to finance servicer
advances under the Pooling and Servicing Agreements; and
(iii) Financing Transactions.
Company and Asset Company will not acquire any additional assets (other than
cash), by purchase, capital contribution (except for a Subscriber Contribution)
or otherwise, other than Asset Proceeds and Purchased Asset Proceeds.
7
Exhibit D - Page 39 of 166
<PAGE>
15. GUARANTEE
Subscriber agrees that its guaranty, if required to be given,
shall be substantially in the form attached as Appendix II hereto.
16. THIRD PARTY BENEFICIARIES
This Additional Covenants Agreement is entered into for the
benefit of the parties hereto and for the benefit of the Holder or Holders of
the Cash Flow Instrument, which Holder or Holders are expressly acknowledged to
be a third party beneficiary or third party beneficiaries of this Additional
Covenants Agreement.
17. VENUE; ATTORNEY FEES; GOVERNING LAW
In any action or proceeding seeking to enforce any provision
of, or based on any right arising out of, this Additional Covenants Agreement
may be brought against any of the parties in the courts of the State of Oregon,
county of Multnomah, and each of the parties consents to the jurisdiction of
such court (and of the appropriate appellate court) in any such action or
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding referred to in the preceding sentence may be served on any party
anywhere in the world. In connection with any such action or proceeding, the
prevailing party will be entitled to recover its costs, including reasonable
attorney fees at trial and on any appeal.
18. NOTICES
All notices, consents, waivers, and other communications under
this Agreement must be in writing and will be deemed to have been duly given
when (a) delivered by hand, (b) sent by facsimile (with written confirmation of
receipt), or (c) when received by the addressee, if sent by a nationally
recognized overnight delivery service (receipt requested), in each case to the
appropriate addresses and facsimile numbers set forth below (or to such other
addresses and facsimile numbers as a party may designate by notice to the other
parties):
8
Exhibit D - Page 40 of 166
<PAGE>
<TABLE>
Liquidating Trust: Asset Company:
- ------------------ --------------
<S> <C>
SPFC Liquidating Trust Goldman, Sachs & Co.
One Centerpointe Drive 85 Broad Street
Suite 551 New York, New York 10004
Lake Oswego, Oregon 97035
Attention: Marvin Kabatznick
Attention: Kevin D. Padrick Facsimile No.: (212) 346-3568
Facsimile No.: (503) 598-0662 Attention: Jay Strauss
Facsimile No.: (212) 902-0940
with a copy to:
with a copy to:
Miller, Nash, Wiener, Hager & Carlsen LLP
111 S.W. Fifth Avenue Cadwalader, Wickersham & Taft
Suite 3500 100 Maiden Lane
Portland, Oregon 97204 New York, New York 10038
Attention: David W. Brown Attention: David C.L. Frauman
Facsimile No.: (503) 224-0155 Facsimile No.: (212) 504-6666
Subscriber: Company:
- ----------- --------
The Goldman Sachs Group, Inc. Southern Pacific Funding Corporation
85 Broad Street One Centerpointe Drive
New York, New York 10004 Suite 551
Lake Oswego, Oregon 97035
Attention: Marvin Kabatznick
Facsimile No.: (212) 346-3568 Attention: Kevin D. Padrick
Facsimile No.: (503) 598-0662
Attention: Jay Strauss
Facsimile No.: (212) 902-0940 with a copy to:
with a copy to: Miller, Nash, Wiener, Hager & Carlsen LLP
111 S.W. Fifth Avenue
Cadwalader, Wickersham & Taft Suite 3500
100 Maiden Lane Portland, Oregon 97204
New York, New York 10038
Attention: David W. Brown
Attention: David C.L. Frauman Facsimile No.: (503) 224-0155
Facsimile No.: (212) 504-6666
</TABLE>
9
Exhibit D - Page 41 of 166
<PAGE>
19. JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of,
or based on any right arising out of, this Agreement may be brought against any
of the parties in the courts of the State of Oregon, County of Multnomah, or, if
it has or can acquire jurisdiction, in the United States District Court or the
United States Bankruptcy Court for the District of Oregon, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world. In
connection with any such action or proceeding, the prevailing party (whether
prevailing affirmatively or by means of a successful defense with respect to the
issues having the greatest value or importance) will be entitled to recover its
costs, including reasonable attorney fees at trial and on any appeal.
20. FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other
such further information, (b) to execute and deliver to each other such other
documents, and (c) to do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the other agreements referred to in this Agreement.
21. WAIVER
Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement or the documents referred to
in this Agreement will operate as a waiver of such right, power, or privilege,
and no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, no party will be deemed to have waived any of its
rights or privileges under this Agreement or the documents referred to in this
Agreement unless the waiver is in writing and no waiver given by a party will be
applicable except in the specific instance for which it is given.
22. SEVERABILITY
If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
23. SECTION HEADINGS; CONSTRUCTION
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation. All
references to "Section" or "Sections" refer to the corresponding Section or
Sections of this Agreement. All words used in this Agreement will be construed
to be of such gender or number as the circumstances require. Unless otherwise
expressly provided, the word "including" does not limit the preceding words or
terms.
10
Exhibit D - Page 42 of 166
<PAGE>
24. TIME OF ESSENCE
With regard to all dates and time periods set forth or
referred to in this Agreement, time is of the essence.
{23} [25]. NO PARTNERSHIP
None of the parties to the Subscriber Definitive Agreements
intend that any provision of any Subscriber Definitive Agreement shall be
construed as creating a partnership between or among any of the parties thereto.
Each party to any of the Subscriber Definitive Agreements agrees that it shall
not treat any agreement, arrangement or right thereunder as a partnership for
Tax reporting purposes or for the purpose of determining any Tax liability.
{24} [26]. GOVERNING LAW
THIS ADDITIONAL COVENANTS AGREEMENT, AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER, SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICT OF LAWS.
{25} [27]. COUNTERPARTS
This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties have executed this Additional Covenants
Agreement to be effective as of the date set forth above.
SOUTHERN PACIFIC FUNDING THE GOLDMAN SACHS GROUP, INC.
CORPORATION
By: -------------------------- By: -----------------------------
Title: -------------------------- Title: -----------------------------
SPFC LIQUIDATING TRUST GOLDMAN, SACHS & CO.
By: -------------------------- By: -----------------------------
Trustee
Title: -----------------------------
11
Exhibit D - Page 43 of 166
<PAGE>
APPENDIX I TO
ADDITIONAL COVENANTS AGREEMENT
DEFINED TERMS
All references in this Appendix I to Sections are references
to Sections of this Additional Covenants Agreement unless otherwise specified.
Unless the context otherwise requires, capitalized terms used in the Additional
Covenants Agreement, if not otherwise defined, have the following meanings:
"ADDITIONAL COVENANTS AGREEMENT" and "AGREEMENT" means, when
referring to "this Agreement," the Additional Covenants Agreement dated as of
June ---, 1999, between Company, Liquidating Trust, Asset Company and
Subscriber.
"ASSETS" has the meaning given in Schedule 2.1.2 of the Stock
Subscription and Purchase Agreement.
"ASSET CASH FLOW INSTRUMENT" has the meaning given in Section
4.1 of the Asset Purchase Agreement.
"ASSET COMPANY" means the buyer of assets identified in the
first paragraph of the Asset Purchase Agreement or any permitted assignee
thereof.
"ASSET PURCHASE AGREEMENT" or "PURCHASE AGREEMENT" means the
Amended and Restated Asset Purchase Agreement dated as of May 21, 1999, between
Debtor and Asset Company.
"ASSET PURCHASE CASH FLOWS" has the meaning given in Section
2.3.1(a)(i) of the Stock Subscription and Purchase Agreement.
"BANKRUPTCY CASE" has the meaning given in the Recitals to
this Agreement.
"BANKRUPTCY CODE" means Title 11 of the United States Code.
"BANKRUPTCY COURT" has the meaning given in the Recitals to
this Agreement.
"CASH FLOW INSTRUMENT" has the meaning given in Section 2.3.1
of the Stock Subscription and Purchase Agreement.
"CERTIFICATES" means any certificates by Company to represent
a beneficial interest in the Cash Flow Instrument.
"CLOSING" has the meaning given in Section 2.5 of the Stock
Subscription and Purchase Agreement.
"CLOSING DATE" means the date and time when Closing actually
takes place.
1
Exhibit D - Page 44 of 166
<PAGE>
"COMPANY" has the meaning given in the first paragraph of this
Agreement.
"COMPANY TAX ADJUSTMENT AMOUNT" means, in the event the
Reorganized Company Tax Attributes are less than $77,000,000, the Tax Adjustment
Amount; otherwise zero.
"CONFIRMATION ORDER" means the order of the Bankruptcy Court
confirming the Plan of Reorganization.
"DIP FINANCING AGREEMENT" means the Master Repurchase
Agreement, Annex I to such Master Repurchase Agreement, the Margin Agreement and
the related agreements, annexes and exhibits entered into between {Debtor} [THE
COMPANY] and Goldman, Sachs & Co., pursuant to which Goldman, Sachs & Co.
extended a credit facility in the approximate initial principal amount of
$33,600,000.
"DISTRIBUTION" shall have the meaning given in Section 2.3.2
of the Stock Subscription and Purchase Agreement.
"ELIGIBLE INVESTMENTS" means the following:
(1) direct general obligations of, or obligations fully
and unconditionally guaranteed as to the timely
payment of principal and interest by, the United
States or any agency or instrumentality thereof,
provided such obligations are backed by the full
faith and credit of the United States;
(2) federal funds and certificates of deposit, time and
demand deposits and banker's acceptances issued by
any bank or trust company incorporated under the laws
of the United States or any state thereof and subject
to supervision and examination by federal or state
banking authorities, provided that at the time of
such investment or contractual commitment providing
for such investment the short-term debt obligations
of such bank or trust company at the date of
acquisition thereof have been rated in its highest
rating by a nationally recognized statistical rating
organization;
(3) commercial paper (having original maturities of not
more than 30 days) rated in its highest rating by a
nationally recognized statistical rating
organization; and
(4) investments in money market funds rated in its
highest rating by a nationally recognized statistical
rating organization.
"FINANCING TRANSACTION" means any nonrecourse borrowing or any
borrowing with recourse solely to a bankruptcy remote special purpose entity in
respect of the Reorganized Company or the Asset Company, which borrowing is
secured by, and on which principal and/or interest payments are made primarily
from cash flows on, the related Assets or Purchased Assets and entered into
primarily for the purpose of distributing Proceeds. Financing Transaction also
includes all incremental borrowings from the reserve funds created for Trust
Series 1995-2, 1996-1, and 1996-3.
2
Exhibit D - Page 45 of 166
<PAGE>
"FLORIDA {CASE} [CASES]" means Oceanmark Bank F.S.B. v.
Norwest Bank Minnesota, N.A. and Advanta Mortgage Corp., USA, {a lawsuit} [AND
OCEANMARK BANK F.S.B. V. BANKERS TRUST COMPANY OF CALIFORNIA, N.A. AND ADVANTA
MORTGAGE COMPANY, LAWSUITS] filed in the state of Florida by Oceanmark Bank,
F.S.B., and all related litigation in the Bankruptcy Court.
"FLORIDA CASE RESOLUTION" has the meaning given in Section 4.
"FLORIDA RESERVE" has the meaning given in Section 4.
"GOVERNMENTAL BODY" means any:
(a) nation, state, county, city, town, village,
district, or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or
other government;
(c) governmental or quasi-governmental authority of
any nature (including any governmental agency, branch,
department, official, or entity and any court or other
tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature.
"GUARANTEE" means a guarantee to be delivered in accordance
with Section 13 and the terms of the Cash Flow Instrument.
"HOLDER" means the holder of the Cash Flow Instrument.
"HOLDER-ALLOCATED EXPENSES" has the meaning given in Section
2.3.1 of the Stock Subscription and Purchase Agreement.
"HOLDER TAX ADJUSTMENT AMOUNT" means, in the event the
Reorganized Company Tax Attributes are more than $81,000,000, the lesser of the
Tax Adjustment Amount and $1,500,000; otherwise zero.
"INVESTOR REPORTS" has the meaning given in Section 7(b).
"LIQUIDATING TRUST" has the meaning given in the first
paragraph of this Agreement.
"MASTER SERVICING RIGHTS" means master loan servicing rights
under the Pooling ans Servicing Agreements relating to Series 1997-4, 1998-1,
1998-2, and 1998-H1 Securitization Trusts.
3
Exhibit D - Page 46 of 166
<PAGE>
"MATERIAL INTEREST" means, for purposes of the definition of
Related Person, a direct or indirect beneficial ownership (as defined in Rule
13d-3 under the Securities Exchange Act of 1934) of voting securities or other
voting interests representing at least 25% of the outstanding voting power of a
Person or equity securities or other equity interests representing at least 25%
of the outstanding equity securities or equity interests in a Person.
"ORGANIZATIONAL DOCUMENTS" means (a) the articles or
certificate of incorporation and the bylaws of a corporation; (b) the
partnership agreement and any statement of partnership of a general partnership;
(c) the limited partnership agreement and the certificate of limited partnership
of a limited partnership; (d) the operating agreement and articles or
certificate of organization of a limited liability company; (e) any charter or
similar document adopted or filed in connection with the creation, formation, or
organization of a Person; and (f) any amendment to any of the foregoing.
"OUT-OF-POCKET EXPENSES" has the meaning given in Section
2.3.3 of the Stock Subscription and Purchase Agreement.
"PERSON" means any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
"PLAN OF REORGANIZATION" is the plan of reorganization filed
by the Company in the Bankruptcy Case, as may be amended or supplemented.
"POOLING AND SERVICING AGREEMENTS" means the Pooling and
Servicing Agreements (or the {Trust Agreement and Indenture and} Servicing
Agreement with respect to the Series 1998-H1 Securitization Trust) entered into
by the Company (or one of its Subsidiaries) with respect to each of the
securitization transactions engaged in by the Company (or one of its
Subsidiaries) between 1995 and 1998.
"PREFERRED RETURN" means, after a Subscriber Contribution
shall have been made and unless the Subscriber elects not to receive a Preferred
Return, the return of cash in an amount equal to the Subscriber Contribution
plus 15% per annum of the unpaid balance of the Subscriber Contribution until
the Subscriber Contribution shall have been returned in full.
"PREPAYMENT PENALTY TRUST CERTIFICATES" means the certificates
included among the Purchased Assets representing interests in prepayment penalty
income in respect of the mortgage loans in the Securitization Trusts.
"PROCEEDING" means any action, arbitration, audit, case,
hearing, investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought, conducted, or
heard by or before, or otherwise involving, any Governmental Body or arbitrator.
"PROCEEDS" means the cash amount realized from an arms-length
sale, transfer or Financing Transaction, net of direct Out-of-Pocket Expenses.
4
Exhibit D - Page 47 of 166
<PAGE>
"PURCHASED ASSETS" has the meaning given in Section 2.1 of the
Asset Purchase Agreement.
"RELATED PERSON" means, with respect to a specified Person
other than an individual:
(a) any Person that directly or indirectly controls,
is directly or indirectly controlled by, or is directly or
indirectly under common control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer,
partner, executor, or trustee of such specified Person (or in
a similar capacity), and each Person who is married to,
resides with, or related within the second degree to any such
director, officer, partner, executor, trustee, or Person in a
similar capacity;
(d) any Person in which such specified Person holds a
Material Interest;
(e) any Person with respect to which such specified
Person serves as a general partner or a trustee (or in a
similar capacity); and
(f) any Related Person of any individual described in
clause (b) or (c).
"REORGANIZED COMPANY" has the meaning given in the Recitals to
the Stock Subscription and Purchase Agreement.
"REORGANIZED COMPANY TAX ATTRIBUTES" means the sum of the
Reorganized Company's net operating losses plus the excess of the tax basis of
its assets over their fair market value in the agreed amount of $79,000,000, to
be calculated as of the end of the Short Year as: (a) total capital contributed
by the Company's shareholders, (b) minus any distributions to Company
shareholders or other payments that were not deductible or for which the Company
did not receive full basis for federal income tax purposes, (c) plus retained
after-tax income for the period prior to the Company's initial public offering
as reported for federal income tax purposes, and (d) plus the Company's excess
inclusion income for federal income tax purposes for the taxable periods after
the Company's initial public offering through Closing less Taxes paid, as such
amount may be adjusted on any Tax Attribute Determination Date.
"REQUIRED CAPITAL CONTRIBUTIONS" has the meaning given in
Section 6.
"RESERVE" means a funded account equal to an amount reasonably
calculated by Subscriber to be sufficient to cover any Out-of Pocket Expenses
estimated to occur during the following twelve months, but in no event more than
$100,000.
"RESIDUAL CASH FLOWS" has the meaning given in Section
2.3.1(a)(ii) of the Stock Subscription and Purchase Agreement.
5
Exhibit D - Page 48 of 166
<PAGE>
"SECURITIZATION TRUST" means the trusts into which pools of
mortgage loans were deposited pursuant to the 13 securitization transactions
entered into by the Company (or one of its Subsidiaries) between 1995 and 1998
and which in turn issued various classes of mortgage securities representing
interests in, or in the case of the Series 1998-H1 Securitization Trust, secured
by, the trust assets.
["SETTLEMENT AGREEMENT" MEANS THE SETTLEMENT AGREEMENT DATED
AS OF JUNE 17, 1999, AMONG SOUTHERN PACIFIC FUNDING CORPORATION, NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, MBIA INSURANCE CORPORATION AND THE GOLDMAN
SACHS GROUP, INC.]
"SHORT YEAR" has the meaning given in Section 3.5.2(a) of the
Stock Subscription and Purchase Agreement.
"STOCK SUBSCRIPTION AND PURCHASE AGREEMENT" has the meaning
given in the Recitals to this Agreement.
"SUBSCRIBER" has the meaning given in the first paragraph of
this Agreement.
"SUBSCRIBER CONTRIBUTION" means the amount of any funds
contributed to the Reorganized Company by Subscriber in order to purchase
mortgage loans out of certain Securitization Trusts (including accrued interest
and other amounts required to be paid under the applicable Pooling and Servicing
Agreements) with respect to loans pursuant to the resolution of the Florida Case
if the amount of the Florida Reserve is insufficient to make all of the required
purchases.
"SUBSCRIBER DEFINITIVE AGREEMENTS" means this Agreement, the
Asset Purchase Agreement, Additional Covenants Agreement, the Settlement
Agreement, the Cash-Flow Instrument, the [Asset Purchase Agreement Cash-Flow
Instrument], the Subservicing Agreement, and the Guarantee.
"SUBSCRIBER ELECTION" has the meaning given in Section 5.
"TAX" and "TAXES" mean all taxes, levies, imposts, duties,
charges or withholdings, together with any penalties, fines or interest thereon
or other additions thereto imposed by any Governmental Body.
"TAX ADJUSTMENT AMOUNT" means the amount calculated as of a
Tax Attribute Determination Date in accordance with the following formula
(without duplication of adjustments made on any earlier Tax Attribute
Determination Date), plus interest accrued at a per annum rate of 10 percent
from the Closing Date paid:
If Reorganized Company Tax Attributes exceed $81
million, the Tax Adjustment Amount shall be 15.19 percent of
such excess. If Reorganized Tax Attributes are less than $77
million, the Tax Adjustment Amount shall be 15.19 percent of
such shortfall.
"TAX ATTRIBUTE DETERMINATION DATE" is a date on which the
expected Reorganized Company Tax Attributes are determined to be different than
$79,000,000 as a result of (a) a final
6
Exhibit D - Page 49 of 166
<PAGE>
determination by or settlement with the Internal Revenue Service, (b) a mutual
determination of the Liquidating Trust and Subscriber, or (c) the issuance of a
written opinion from the Tax Expert with respect to those elements of
Reorganized Company Tax Attributes not determined by the procedures set forth in
clause (a) or (b).
"TAX EXPERT" has the meaning given in Section 3.5.7 of the
Stock Subscription and Purchase Agreement.
"THIRD PARTY" means a Person that is neither the Subscriber
nor any Related Person of Subscriber.
"THIRD PARTY REPORT" has the meaning given in Section 7(a).
Exhibit D - Page 50 of 166
<PAGE>
APPENDIX II
, 1999
Southern Pacific Funding Corporation
ADDRESS
Attention:
Ladies and Gentlemen:
For value received, The Goldman Sachs Group, Inc. (the "Guarantor"), a
corporation duly organized under the laws of the State of Delaware, hereby
unconditionally guarantees the prompt and complete payment and performance when
due, whether by acceleration or otherwise, of all obligations and liabilities,
whether now in existence or hereafter arising, of [Goldman Entity], a subsidiary
of the Guarantor and a [describe entity] (the "Company"), to SOUTHERN PACIFIC
FUNDING CORPORATION AND HOLDER (the "Counterparty") arising out of the
assumptions of the obligations of the Guarantor under the Additional Covenants
Agreement among the Guarantor, Goldman, Sachs & Co. and the Counterparty dated
as of [ ], 1999 (the "Agreement"). This Guaranty is one of payment and not of
collection.
The Guarantor hereby waives notice of acceptance of this Guaranty and notice of
any obligation or liability to which it may apply, and waives presentment,
demand for payment, protest, notice of dishonor or non-payment of any such
obligation or liability, suit or the taking of other action by Counterparty
against, and any other notice to, the Company, the Guarantor or others.
Counterparty may at any time and from time to time without notice to or consent
of the Guarantor and without impairing or releasing the obligations of the
Guarantor hereunder: (1) make any change in the terms of any obligation or
liability of the Company to Counterparty, (2) take or fail to take any action of
any kind in respect of any security for any obligation or liability of the
Company to Counterparty, (3) exercise or refrain from exercising any rights
against the Company or others, or (4) compromise or subordinate any obligation
or liability of the Company to Counterparty including any security therefor. Any
other suretyship defenses are hereby waived by the Guarantor.
The Guarantor will not exercise any rights which it may acquire by way of
subrogation until all due and unpaid obligations to Counterparty shall have been
paid in full. Any amount paid to the Guarantor in violation of the preceding
sentence shall be held by Guarantor for the benefit of the Counterparty and
shall forthwith be paid to the Counterparty to be credited and applied to the
due and unpaid obligations. Subject to the foregoing, upon payment of all such
due and unpaid obligations, the Guarantor shall be subrogated to the rights of
the Counterparty against the Company with respect to such obligations, and the
Counterparty agrees to take at the Guarantor's expense such steps as the
Guarantor may reasonably request to implement such subrogation.
2
Exhibit D - Page 51 of 166
<PAGE>
Southern Pacific Funding Corporation
, 1999
Page 3
The Guarantor agrees to pay all reasonable out-of-pocket expenses (including the
reasonable fees and expenses of counsel) incurred in the enforcement or
protection of the rights of the Counterparty in connection with a breach of the
Agreement by the Company or, to the extent incurred after demand under the
Guaranty has been made and not timely honored, a breach of this Guaranty by the
Guarantor.
The Guarantor may not assign its rights nor delegate its obligations under this
Guaranty, in whole or in part, without prior written consent of the
Counterparty, and any purported assignment or delegation absent such consent is
void, except for an assignment and delegation of all of the Guarantor's rights
and obligations hereunder in whatever form the Guarantor determines may be
appropriate to a partnership, corporation, trust or other organization in
whatever form that succeeds to all or substantially all of the Guarantor's
assets and business and that assumes such obligations by contract, operation of
law or otherwise. Upon any such delegation and assumption of obligations, the
Guarantor shall be relieved of and fully discharged from all obligations
hereunder, whether such obligations arose before or after such delegation and
assumption, in addition, the Counterparty will have the right to assign its
rights under the Guaranty in connection with the assignment of the cash flow
instrument issued in connection with the Agreement, provided, however, that
unless the Guarantor shall have received written notice of any such assignment,
it shall be entitled to treat the Counterparty as the beneficiary of this
Guaranty for all purposes and shall have no liability to any such assignee.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS
OF LAW. GUARANTOR AND COUNTERPARTY AGREE TO THE EXCLUSIVE JURISDICTION OF COURTS
LOCATED IN THE STATE OF NEW YORK, UNITED STATES OF AMERICA, OVER ANY DISPUTES
ARISING UNDER OR RELATING TO THIS GUARANTY.
Very truly yours,
THE GOLDMAN SACHS GROUP, INC.
By:---------------------------
Authorized Officer
3
Exhibit D - Page 52 of 166
<PAGE>
EXECUTION COPY
[SECOND] AMENDED AND RESTATED
STOCK SUBSCRIPTION AND PURCHASE AGREEMENT
BETWEEN
SOUTHERN PACIFIC FUNDING CORPORATION
AND
THE GOLDMAN SACHS GROUP, INC.
AMENDED AND RESTATED AS OF {MAY 21} [JUNE 30], 1999
Exhibit D - Page 53 of 166
<PAGE>
[SECOND] AMENDED AND RESTATED
STOCK SUBSCRIPTION AND PURCHASE AGREEMENT
This [SECOND] Amended and Restated Stock Subscription and
Purchase Agreement ("Agreement") is dated as of {May 21} [JUNE 30], 1999, by and
between SOUTHERN PACIFIC FUNDING CORPORATION, a California corporation, acting
in its capacity as Debtor-in-Possession (in such capacity, referred to as the
"Debtor"), and THE GOLDMAN SACHS GROUP, INC., a Delaware corporation
("Subscriber").
RECITALS
A. On October 1, 1998, Southern Pacific Funding Corporation, a
California corporation (referred to generally as the "Company") filed for
bankruptcy under Chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court for the District of Oregon (the "Bankruptcy Case"). The assets
of the Company constitute a bankruptcy estate supervised and managed by the
Company as Debtor-in-Possession for the benefit of the Company's creditors.
B. Debtor has filed its Plan of Reorganization, which will be
amended promptly after the parties have signed and delivered this Agreement.
Debtor is seeking confirmation of such plan, as amended, from the United States
Bankruptcy Court for the District of Oregon or such other court or adjunct
thereof that exercises jurisdiction over the Bankruptcy Case (the "Bankruptcy
Court").
C. Pursuant to the Plan of Reorganization (after entry of the
Confirmation Order and as of the effective date of the Plan of Reorganization
(such event, the "Effective Date"), all of the capital stock of the Company
outstanding prior to the Effective Date will be canceled and 10,000 shares of
common stock of the Company (the "Shares") will be issued to Subscriber as
provided in this Agreement. The Company, upon the Effective Date is referred to
as the "Reorganized Company". The Shares will constitute all of the capital
stock of the Reorganized Company on and after the Effective Date.
D. Prior to the Closing, the Company will create the Cash-Flow
Instrument described in this Agreement, representing a right to receive a
percentage of the cash flows from the assets reflected on Schedule 2.1.2 for the
benefit of its creditors. At the Closing, but prior to issuance of the Shares,
the Reorganized Company will distribute to the Liquidating Trust the Cash-Flow
Instrument described in this Agreement. All Company assets (other than those
listed in Schedule 2.1.2) either (1) will be sold by the Company pursuant to the
Asset Purchase Agreement immediately prior to Closing in exchange for a cash
purchase price and a right to receive 50 percent of the cash flows from the
assets sold (as set forth in the Asset Purchase Agreement), or (2) will be
distributed to the Liquidating Trust prior to Closing.
-1-
Exhibit D - Page 54 of 166
<PAGE>
E. Debtor desires to cause the Reorganized Company to issue,
and Subscriber desires to purchase, all of the Shares for the consideration and
on the terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, capitalized terms not
otherwise defined have the meanings given in Appendix I attached to and hereby
incorporated into this Agreement by reference.
2. SUBSCRIPTION, SALE AND TRANSFER OF SHARES; PURCHASE PRICE AND
CONTINGENT OBLIGATION; CLOSING
2.1 SHARES; ASSETS; EXCLUDED ASSETS
2.1.1. Subject to the terms and conditions of this Agreement,
the Reorganized Company will direct its officers to take all
actions necessary to issue, sell and transfer the Shares to
Subscriber at Closing, and Subscriber will subscribe for and
purchase the Shares from the Reorganized Company. Upon
Closing, the Subscriber will pay the Purchase Price in
accordance with Sections 2.6.2(a) and 2.6.2(b).
2.1.2. At Closing, upon acquisition of the Shares by
Subscriber, the Reorganized Company's assets and liabilities
will consist of all of the assets and liabilities listed on
Schedule 2.1.2 (the "Assets" and "Liabilities," respectively,
together with the Asset Cash Flow Instrument, which is
excluded from the defined term "Assets") and no other
liabilities. At Closing but immediately prior to issuance of
the Shares, Debtor will transfer all other assets and
liabilities not set forth on Schedule 2.1.2 to the Liquidating
Trust or pursuant to the Asset Purchase Agreement.
2.2 PURCHASE PRICE
The subscription and purchase price (the "Purchase Price") for
the Shares is $26,885,232 minus the Cash Price Adjustment Amount. The Cash Price
Adjustment Amount will be equal to 50 percent of the cash distributions received
by the Company between April 1, 1999, and the Closing Date with respect to the
Residual Certificates. Subscriber will pay the Purchase Price in immediately
available funds at Closing.
2.3 CASH FLOW INSTRUMENT
-2-
Exhibit D - Page 55 of 166
<PAGE>
2.3.1. At Closing, the Reorganized Company (immediately prior
to issuing the Shares to Subscriber) will distribute to the
Liquidating Trust an instrument in the form of Exhibit 2.3.1
(the "Cash-Flow Instrument"). Subject to the payment
provisions of Section 2.3.5(a), the Cash-Flow Instrument will
provide for periodic payments to the Holder of the following:
(a) the sum (without duplication) of:
(i) the Applicable Percentage of all pre-tax
cash flows and other amounts, if any, paid or payable
in respect of the "Asset Cash Flow Instrument" as
defined in the Asset Purchase Agreement (the "Asset
Purchase Cash Flows"); and
(ii) the Applicable Percentage of each of
the following (referred to collectively before
application of the Applicable Percentage as the
"Residual Cash Flows") with respect to the Assets and
Asset Proceeds. ("Asset Proceeds" means any
securities or tangible consideration received on a
sale or transfer of Assets to a non-Related Person of
Subscriber, or any securities retained by the
Reorganized Company in connection with the
securitization of any Assets.):
(A) the aggregate of all pre-tax cash
flows from each of the Assets and
Asset Proceeds from the Closing Date
until a sale (or transfer) or
Financing Transaction with respect
to the related Assets or Asset
Proceeds, it being agreed that the
cash flows will continue to be
payable to Holder after any sale or
transfer to a Related Person of the
Subscriber (other than a sale or
transfer to a Related Person of
Subscriber for the sole purpose of
facilitating a Financing
Transaction) or pursuant to a
transaction that has not been found
by the board of directors of
Reorganized Company to be an
arms-length transaction; plus
(B) all pre-tax Proceeds from any sales
or transfers of any Asset or Asset
Proceeds or portion of an Asset or
Asset Proceeds; plus
(C) all pre-tax Proceeds from any
Financing Transactions entered into
by the Reorganized Company with
respect to any of the Assets or
Asset Proceeds and all Hedging
Gains;
(the Applicable Percentage of Asset Purchase Cash
Flows plus the Applicable Percentage of Residual Cash
Flows are the "Total Cash Flows.");
-3-
Exhibit D - Page 56 of 166
<PAGE>
(b) minus the Applicable Percentage of otherwise
unreimbursed Out-of-Pocket Expenses incurred by Reorganized
Company (such amounts, the "Holder-Allocated Expenses"); plus
(c) any Holder Tax Adjustment Amount.
2.3.2. The periodic payment (each a "Distribution") made with
respect to the Cash Flow Instrument each month, for a period
commencing on the fifth day of a calendar month and ending on
the fourth day of the next calendar month, commencing with the
first full such period following the Closing Date (each such
period, a "Cash Flow Period") will equal (i) the sum of (a)
Total Cash Flows received by the Reorganized Company during
such Cash Flow Period (or from the Closing Date through the
last day of the first Cash Flow Period, in the case of the
first Distribution) plus (b) any previously unpaid Holder Tax
Adjustment Amount minus (ii) Holder-Allocated Expenses not
previously applied in reduction of Total Cash Flows.
2.3.3. Out-of-Pocket Expenses means:
(a) Direct Third Party out-of-pocket expenses
reasonably incurred by the Company or by Subscriber or a
Related Person of Subscriber directly on behalf of the Company
with respect to the Assets and Asset Proceeds, not otherwise
reimbursable from a third party and directly related to the
ownership, servicing (including without limitation, any
transfer of servicing, engagement of sub-servicers, or
financing of corporate (i.e., non-principal and {interst}
[INTEREST)] servicer advances), maintenance, collection from,
realization of value from, evaluation of, protection,
financing and sale of Assets and Asset Proceeds, all in the
Ordinary Course of Business or with respect to a sale or
Financing Transaction.
(b) For purposes of servicing fees as described in
Section 2.3.3(a) (including primary and special servicing),
Out-of-Pocket Expenses means 35 basis points (except with
respect to Securitization Trust 1998-H1, for which
Out-of-Pocket Expenses means 75 basis points), together with
ancillary fees and investment income on collection accounts.
(c) Notwithstanding Section 2.3.3(a), Out-of-Pocket
Expenses specifically include:
(i) Hedging Losses and carrying costs of
hedging transactions;
(ii) transfer fees or other costs charged by
the existing servicer or sub-servicer in connection
with the transfer of servicing operations as set
forth in Section 2.7.1;
-4-
Exhibit D - Page 57 of 166
<PAGE>
(iii) principal and interest repaid on any
Financing Transaction;
(iv) interest expense incurred in connection
with financing corporate (i.e., non-principal and
interest) servicer advances with a Related Person of
Subscriber at a market rate of interest for a loan of
comparable credit risk;
(v) fees and expenses incurred with respect
to Subscriber or a Related Person of Subscriber in
connection with a sale or Financing Transaction, but
only to the extent such fees are consistent with
market rates and industry standards and are approved
by the Holder, which approval shall not be
unreasonably withheld ("Related Person Expenses").
Related Person Expenses shall be deemed to be
approved if not objected to within 21 days after
Holder receives a detailed report from the Company
together with a request for approval;
(vi) expenses incurred with respect to the
Liabilities of the Company other than with respect to
the Cash Flow Instrument;
(vii) any otherwise reimbursable Third Party
expense that the Reorganized Company has determined
to be uncollectible; and
(viii) the payments, if any, made by the
Reorganized Company with respect to severance
payments to employees of the Liquidating Trust.
(d) Notwithstanding Section 2.3.3(a), Out-of-Pocket
Expenses specifically exclude:
(i) amounts payable by Reorganized Company
to the Reserve pursuant to Section 2.3.7;
(ii) any management fees with respect to the
Assets; and
(iii) overhead, salaries and similar
expenses of Subscriber or any Related Person of
Subscriber, except as permitted under Section
2.3.3(c)(iv).
2.3.4. The Reorganized Company will deposit the Distributions
for each month after payments required to be made to
Subscriber pursuant to Sections 2.3.5(a)(i), (ii) or (iii)
into a segregated reserve account (the "Florida Reserve") for
a period of time. The funds deposited in the Florida Reserve
will be invested at the direction of the Reorganized Company
only in Eligible Investments for the benefit of Holder (and
Holder shall be responsible to report such investment income
and pay income taxes thereon), and may be used (together with
any income on Eligible Investments) by the
-5-
Exhibit D - Page 58 of 166
<PAGE>
Reorganized Company only to {repurchase each and every
mortgage loan out of the Securitization Trusts in the amount
and as specified in the settlement or finding referred to
below (including accrued interest and other} [PAY ANY] amounts
required to be paid {under the applicable Pooling and
Servicing Agreement) pursuant to the requirements of a binding
settlement or a finding that any such mortgage loans are owned
by or encumbered in favor of Oceanmark Bank F.S.B. in a final,
unappealable judgment entered by a court of competent
jurisdiction} [BY THE REORGANIZED COMPANY PURSUANT TO SECTION
5(B) OF THE SETTLEMENT AGREEMENT] with respect to the Florida
{Case (such settlement or judgment,} [CASES (]the "Florida
Case Resolution"). When the obligations of the Reorganized
Company under the Florida Case Resolution are fully satisfied
the Reorganized Company will immediately release all remaining
funds in the Florida Reserve to Holder.
2.3.5. [(A)] The terms of the Cash-Flow Instrument will
provide that amounts payable as Distributions from Asset
Purchase Cash Flows and Residual Cash Flows shall be applied
in the following order:
{(a)}(i) first, to payment to Subscriber of
any unpaid Preferred Return;
(ii) second, to the payment to Subscriber on
behalf of the Company of any unpaid Company Tax
Adjustment Amount;
(iii) third, to the payment of principal and
interest on Holder Expense Loans;
(iv) fourth, to the funding of the Florida
Reserve, if still applicable;
(v) fifth, to the funding of Holder's share
(i.e., 50 percent times the Factor) of the Reserve);
and
(vi) finally, to Holder.
(b) The Distribution for a particular month will be
paid on or before the third business day following the end of
the related Cash Flow Period, provided that if the amount to
be paid to Holder is less than $100,000, the Reorganized
Company may defer payment (at its option) until the following
month (or such later time as the amount to be paid equals or
exceeds $100,000).
(c) The Cash Flow Instrument shall also provide (i)
the Cash Flow Instrument will be evidenced by certificates;
(ii) the Company will keep an appropriate register of the
certificates; (iii) transfers of certificates shall be
prohibited unless an appropriate opinion of counsel
satisfactory to the Company with respect to securities
-6-
Exhibit D - Page 59 of 166
<PAGE>
laws matters has been first obtained; (iv) procedures to
approve action by multiple Holders; and (v) other provisions,
all as more fully in Exhibit 2.3.1.
2.3.6. Reorganized Company agrees:
(a) to make monthly deposits of its share of the
Reserve (i.e., 100 percent minus Holder's share of the
Reserve), which amounts shall not constitute an Out-of-Pocket
Expense, and
(b) that it will not sell or transfer any interest in
and will not engage in a Financing Transaction with respect to
the Asset Cash Flow Instrument.
2.3.7. Subscriber agrees to make capital contributions to
Company each month in cash to the extent the Residual Cash
Flows remaining after payment of Distributions together with
the proceeds of any Holder Expense Loan made during such month
are insufficient to pay all expenses and liabilities of the
Company together with the requirement to fund the Reserve
pursuant to Section 2.3.6(a) (such contributions, the
"Required Capital Contributions"), subject to the limitation
that Required Capital Contributions to pay an unpaid Holder
Tax Adjustment Amount may be limited during any month to an
amount equal to all pre-tax cash flows and other amounts, if
any, paid or payable in respect of the Asset Cash Flow
Instrument minus the Out-of-Pocket Expenses plus the
Holder-Allocated Expenses for the month.
Required Capital Contributions are not entitled to a preferred
return of any kind and no portion of the Required Capital
Contributions shall be eligible for treatment as Out-of-Pocket
Expenses.
2.3.8. The terms and conditions of this Section 2.3 reflect
the intent and agreement of the parties. In the case of any
conflict between the terms of this Agreement and the terms of
the Cash-Flow Instrument, however, the terms of the Cash-Flow
Instrument control.
2.4 ADDITIONAL COVENANTS AGREEMENT; LIQUIDATING TRUST
2.4.1. The Plan of Reorganization will provide for Subscriber
and Reorganized Company to enter into an agreement with the
Liquidating Trust and Asset Company in the form of Exhibit
2.4.1 (the "Additional Covenants Agreement"), with such
further changes as the parties may agree are necessary,
desirable, or appropriate; provided that nothing contained
herein shall be construed to require Subscriber or Asset
Company to agree to any such change. The Additional Covenants
Agreement will contain all of the substantive provisions of
Exhibit 2.4.1, including a provision requiring Reorganized
Company to distribute to the Liquidating Trust any payments
received before or after Closing as a result of the Debtor,
Liquidating Trust, or
-7-
Exhibit D - Page 60 of 166
<PAGE>
Reorganized Company prevailing in any Proceeding against a
third party for activities occurring prior to Closing, except
that Reorganized Company will retain any payments received
with respect to Proceedings that (i) are related to one or
more particular mortgage loans held in the Securitization
Trusts on the Closing Date, (ii) affect the interests or
performance of the master servicer of such loans, such as
claims that the Company, as master servicer, may bring on
behalf of a Securitization Trust; or (iii) are related to
failure by the {Trustee} [TRUSTEE] under any Securitization
Trust or any Prepayment Penalty Trust Certificates to properly
calculate the cash flows to the certificate holders from any
such Trust or Certificate.
The Additional Covenants Agreement will also provide that the
Liquidating Trust will provide Reorganized Company access to
the books and records of the Company and the opportunity to
make copies at its expense, and that, upon dissolution of the
Liquidating Trust, all such books and records shall be
delivered by the Liquidating Trust to the Reorganized Company.
2.4.2. Debtor covenants that the Liquidating Trust Agreement
will not obligate the Reorganized Company to any material
obligation or impose any material liability or expense on the
Reorganized Company effective or imposed after the Closing
Date (except as expressly provided herein) without the consent
of Subscriber.
2.5 CLOSING
The completion of the subscription, issuance, purchase and
sale of the Shares provided for in this Agreement (the
"Closing") will take place at the offices of Thacher Proffitt
& Wood, at Two World Trade Center, New York, New York 10048,
at 11:00 am Eastern Daylight Time on the later of (a) the date
that is two business days after the Confirmation Order becomes
final and nonappealable, and not otherwise subject to a stay,
and (b) the date that is two business days following the
termination of the applicable waiting period under the HSR
Act, or at such other time and place as the parties may agree.
Subject to the provisions of Section 9, this Agreement will
not terminate and no party will be relieved of any obligation
under this Agreement if the subscription, issuance, purchase
and sale of the Shares contemplated by this Agreement is not
completed on the date and time and at the place determined
pursuant to this Section 2.5.
2.6 DELIVERIES
At Closing (unless otherwise specified below):
2.6.1. The Reorganized Company will deliver to Subscriber at
Closing (except as specified in clause (c) below):
-8-
Exhibit D - Page 61 of 166
<PAGE>
(a) certificates representing the Shares, duly
endorsed (or accompanied by duly executed stock powers) for
transfer to Subscriber;
(b) a certificate signed on behalf of the Reorganized
Company in which the Reorganized Company represents and
warrants to Subscriber that each of Debtor's representations
and warranties in this Agreement was accurate in all respects
as of the date of this Agreement and is accurate in all
respects as of the Closing Date as if made by the Reorganized
Company on the Closing Date (giving full effect to any
supplements to the Disclosure Schedules that were delivered to
Subscriber prior to the Closing Date in accordance with
Section 5.4);
(c) at least ten calendar days prior to the Closing,
to the extent not previously provided, copies of all relevant
material documents regarding the rights and obligations of the
Company, Advanta Mortgage Corp., USA, MBIA Insurance
Corporation, Norwest Bank Minnesota, National Association, and
Bankers Trust in connection with the Assets and the Purchased
Assets (the "Material Documents");
(d) certification from the Reorganized Company,
Advanta Mortgage Corp., USA, MBIA Insurance Corporation,
Norwest Bank Minnesota, National Association, and Bankers
Trust that there are no relevant material documents other than
the Material Documents given to Subscriber;
(e) certificates signed by each of Company, Norwest
Bank Minnesota, National Association, and MBIA Insurance
Corporation stating that the Company is in compliance with all
terms and provisions of the Material Documents to which the
signer is a party, unless (other than in the case of the
Reorganized Company) the Company has furnished Subscriber with
a forbearance agreement (which may, in the case of Norwest
Bank Minnesota, National Association, and MBIA Insurance
Corporation, be the Settlement Agreement) in which the
relevant party agrees not to enforce its rights or remedies
against the Company or to waive defaults in connection with
any noncompliance.
(f) a fully executed copy of a settlement agreement
among Debtor, Norwest Bank Minnesota, National Association
{and}[,] MBIA Insurance Corporation [AND THE GOLDMAN SACHS
GROUP, INC.] (the "Settlement Agreement") {with substantially
those terms set forth in }[IN THE FORM OF] Exhibit 2.6.1(f),
with such changes thereto as have been consented to by
Subscriber in writing;
(g) a certificate signed by Norwest Bank Minnesota,
National Association to the effect that the Debtor has prior
to the Closing Date (i) fully performed its obligation under
the Settlement Agreement to repurchase Critical Exception
Loans (as defined in the Settlement Agreement) from the
related Securitization Trusts and (ii) repurchased all Phantom
Loans (as defined in the Settlement Agreement) at par
-9-
Exhibit D - Page 62 of 166
<PAGE>
plus accrued and unpaid interest and all unreimbursed Advances
from the related Securitization Trusts;
(h) an opinion or opinions of counsel with respect to
such matters as Subscriber may reasonably request as to the
matters specified in Exhibit 2.6.1(h);
(i) fully executed copies of each of the Liquidating
Trust Agreement and the Additional Covenants Agreement; {and}
(j) all original servicing files and base files with
respect to the Company Master Servicer Trusts, at Debtor's
expense[; AND
(K) A CERTIFICATE OR CERTIFICATES DATED THE CLOSING
DATE SIGNED BY NORWEST BANK, NATIONAL ASSOCIATION AND MBIA
INSURANCE CORPORATION TO THE EFFECT THAT ALL CONDITIONS
PRECEDENT TO THE EFFECTIVENESS OF THE SETTLEMENT AGREEMENT
HAVE BEEN SATISFIED.]
2.6.2. Subscriber will deliver to or for the account of
Reorganized Company at Closing:
(a) a portion of the Purchase Price equal to the
amount owing on the DIP Financing Agreement after application
of the proceeds payable pursuant to the Asset Purchase
Agreement sent by wire transfer to Account Number ABA#:
021000089 at Citibank, clearance account 87709012600; directed
to account 9253549 in the name of Goldman, Sachs & Co.;
(b) the remaining balance of the Purchase Price sent
by wire transfer to the account in the name of the Reorganized
Company (designated for immediate distribution by wire
transfer to an account in the name of the Liquidating Trust)
designated at least two business days before Closing;
(c) a certificate signed by Subscriber in which
Subscriber represents and warrants to Reorganized Company that
each of Subscriber's representations and warranties in this
Agreement was accurate in all respects as of the date of this
Agreement and is accurate in all respects as if made on the
Closing Date; and
(d) an opinion of counsel of Subscriber (which may be
in-house counsel), dated the Closing Date, with respect to the
due authorization, execution and delivery by, and
enforceability (subject to customary exceptions) against,
Subscriber of this Agreement.
-10-
Exhibit D - Page 63 of 166
<PAGE>
2.6.3. The Liquidating Trust will deliver to the Reorganized
Company at Closing the Additional Covenants Agreement and an
income tax Form W-9.
2.6.4. Immediately prior to issuing the Shares to Subscriber,
Debtor will issue the Cash-Flow Instrument to the Liquidating
Trust in accordance with Section 2.3 in a transaction exempt
from registration under the Securities Act and any applicable
state securities laws.
2.6.5. Prior to Closing, Debtor, and the trustees of the
Liquidating Trust will enter into the Liquidating Trust
Agreement.
2.6.6. Prior to Closing, Reorganized Company, Subscriber and
the Liquidating Trust will enter into the Additional Covenants
Agreement.
2.7 TRANSFER OF SERVICING
Debtor agrees, if requested by Subscriber, to use its Best Efforts to
enter into an agreement with a subservicer to assure the proper
servicing of the mortgage loans in the Securitization Trusts subsequent
to Closing in accordance with the Pooling and Servicing Agreements, on
an interim basis prior to a transfer of the servicing to a subservicer
selected by the Reorganized Company subsequent to Closing (such
agreement, the "Subservicing Agreement"). Debtor agrees that, if
notified by Subscriber on or prior to May 31 that the Subscriber wishes
to engage employees of the Liquidating Trust to fulfill the Reorganized
Company's servicing obligations following the Closing Date, the Debtor
will use its Best Efforts to cause the Liquidating Trust to enter into
an agreement pursuant to which it will provide for a mutually
acceptable fee specified therein, the services of its employees to the
Reorganized Company for a period expiring on the date specified by
Subscriber, not later than August 31, 1999.
2.7.1. Subscriber and Debtor agree that the servicing transfer
fees and other costs charged by the existing servicer or
sub-servicer in connection with the transfer of servicing
operations shall constitute Out-of-Pocket Expenses.
2.7.2. Subscriber and Debtor agree that Reorganized Company
must deliver to the Liquidating Trust the amount of all
advances properly made by the Company in accordance with the
terms of the Pooling and Servicing Agreement ("Advances") and
outstanding with respect to the Securitization Trusts for
which Reorganized Company holds Master Servicing ("Company
Master Servicer Trusts") on the date of the transfer of the
related servicing operations. Subscriber intends that the
Subservicing Agreement will provide that the new sub-servicer
will reimburse the Liquidating Trust for all such Advances
made by the Company with respect to the Company Master
Servicer Trusts and will assume responsibility for all
servicer advances after such date of transfer. If any Advances
are not reimbursed at the time of servicing transfer under
-11-
Exhibit D - Page 64 of 166
<PAGE>
the Subservicing Agreement or if there is no servicing
transfer by July 31, 1999,{,} all unreimbursed Advances will
be paid by Reorganized Company to the Liquidating Trust within
10 days thereafter.
2.8 BREAK-UP FEE
2.8.1. It is the understanding of the parties that, by order
of the Bankruptcy Court entered April 15, 1999 (as applied to
Subscriber), Debtor obtained the authority to pay Subscriber
$2,000,000 (the "Break-Up Fee") if:
(a) on or before April 30, 1999 (which Debtor, in the
exercise of its discretion, has extended through May 6, 1999),
Subscriber (or any Related Person) enters into the Subscriber
Definitive Agreements;
(b) the Subscriber Definitive Agreements contain the
same or better economic terms as contained in the letter of
intent signed by Debtor and a Related Person of Subscriber on
April 26, 1999;
(c) no material breach (including an anticipatory
breach) by Subscriber (or any Related Person) of the
agreements contained in the Subscriber Definitive Agreements
has occurred and is continuing; and
(d) Debtor sells the capital stock of the Company or
substantially all of its assets to someone other than
Subscriber or a Related Person.
2.8.2. Debtor agrees that Subscriber satisfies conditions (a)
and (b) set forth in Section 2.8.1. Debtor will use its Best
Efforts to obtain an Order from the Bankruptcy Court that
provides in substance: (i) that Subscriber is entitled to the
Break-Up Fee from the proceeds of a sale if the conditions set
forth in (c) and (d) of Section 2.8.1 are satisfied and
Subscriber and Asset Company are otherwise ready, willing and
able to complete Closing of all Contemplated Transactions in
accordance with the terms of the Subscriber Definitive
Agreements (or are unwilling to complete Closing only because
of a willful Breach by Debtor); and (ii) that Subscriber is
entitled to the Break-Up Fee under certain circumstances after
a willful breach by Debtor, as provided in Sections 9.2 and
9.3.
2.8.3. The provisions of this Section 2.8 shall survive any
termination of this Agreement.
-12-
Exhibit D - Page 65 of 166
<PAGE>
2.9 ASSIGNMENT TO RELATED PERSON
Subscriber agrees that, in the event it assigns its rights and
obligations under this Agreement to an assignee (who must be a wholly-owned
Related Person), Subscriber will remain liable for all obligations under this
Agreement to be performed by the Subscriber at or before Closing. Subscriber
agrees that in the event that its assignee fails to perform its obligation to
make a Subscriber Contribution pursuant to Section 6.4, Subscriber will make the
required Subscriber Contribution on its behalf.
2.10 OVERBID PROCEDURES
Debtor agrees to use its Best Efforts to obtain an Order of the
Bankruptcy Court substantially in the form of Exhibit 2.10, and Debtor agrees to
abide by and comply with the procedures set forth therein.
3. REPRESENTATIONS AND WARRANTIES OF DEBTOR
Debtor represents and warrants to Subscriber as follows:
3.1 ORGANIZATION AND GOOD STANDING
3.1.1. The Company is a corporation duly organized, validly
existing, and in good standing under the laws of California.
Subject to the jurisdiction and powers of the Bankruptcy Court
over the Company, the Company has full corporate power and
authority and, except as set forth on Schedule 3.1.1, has all
necessary licenses, permits and approvals to conduct its
business as it is now being conducted, to own or use the
properties and assets that it purports to own or use, and to
perform all its obligations under Assumed Contracts identified
in Schedule 3.7.
3.1.2. Debtor has delivered to Subscriber copies of the
Organizational Documents of the Company, as currently in
effect.
3.2 AUTHORITY; NO CONFLICT
3.2.1. Upon approval of the Contemplated Transactions by the
Bankruptcy Court, the Debtor Definitive Agreements will
constitute the legal, valid, and binding obligations of
Debtor, enforceable against Debtor in accordance with their
respective terms. Subject to the requirement of Bankruptcy
Court approval, Debtor has the absolute and unrestricted
right, power, authority, and capacity to execute and deliver
the Debtor Definitive Agreements and to perform its
obligations under the Debtor Definitive Agreements.
-13-
Exhibit D - Page 66 of 166
<PAGE>
3.2.2. Except as set forth in Schedule 3.2.2, neither the
execution and delivery of this Agreement nor the consummation
or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of
time):
(a) contravene, conflict with, or result in a
violation of (i) any provision of the Organizational Documents
of the Company, or (ii) any currently effective resolution
adopted by the board of directors of the Company;
(b) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person
the right to declare a default or exercise any remedy under,
or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Assumed Contract; or
(c) result in the imposition or creation of any
Encumbrance upon or with respect to any of the Assets (except
as expressly approved in this Agreement).
3.2.3. Except for procedures and requirements of the
Bankruptcy Court, the Company is not and will not be required
to give any notice to or obtain any Consent from any Person in
connection with the execution and delivery of this Agreement
or the consummation or performance of any of the Contemplated
Transactions.
3.3 CAPITALIZATION
As of Closing, the authorized equity securities of Reorganized
Company will consist of 10,000 shares of common stock, with no par value,
constituting the Shares to be newly issued to Subscriber. Upon issuance to
Subscriber, the Shares will be free and clear of all Encumbrances.
3.4 BOOKS AND RECORDS
After Closing, the books and records of the Company in
existence as of the Closing Date will remain in the custody and control of the
Liquidating Trust, as provided in the Additional Covenants Agreement.
3.5 TAXES
3.5.1. The Company has filed or will file before Closing all
Tax Returns for the 1998 taxable year and all earlier taxable
years that are or were required pursuant to applicable Legal
Requirements. Subscriber will have a reasonable opportunity to
review and provide comments with respect to all Tax Returns
filed after the date of this Agreement and before the Closing
Date. Debtor has made available to Subscriber copies of, and
Schedule 3.5.1 contains, a complete and accurate list of, all
such Tax Returns relating to income or franchise taxes filed
for the short tax year beginning June 14, 1996 and ending
December 31, 1996, and subsequent tax years through the
-14-
Exhibit D - Page 67 of 166
<PAGE>
1998 taxable year.
3.5.2. The Plan of Reorganization will provide that for the
1999 taxable year:
(a) Unless advised otherwise by Subscriber before
Closing, the Reorganized Company will become a member of a
group of corporations filing a consolidated federal income tax
return effective upon or immediately after the Closing Date
(or under federal and any applicable State income tax laws
Debtor's taxable year will end on the Closing Date with
respect to such taxing jurisdictions) and:
(i) the taxable income of Debtor for the
period from January 1, 1999, through and including
the Closing Date (the "Short Year") will be referred
to as the "Short-Year Income";
(ii) the Liquidating Trust will, on behalf
of the Debtor, timely file (including any applicable
extensions) all Tax Returns for a taxable year of the
Debtor that ends on the Closing Date (the "Short-Year
Returns") and the Liquidating Trust will make
reasonable efforts to file these returns by November
1, 1999, even if not legally required to do so. The
Reorganized Company will have a reasonable
opportunity to review and provide comments on the
federal, California and Oregon Short-Year Returns
before they are filed;
(iii) the Liquidating Trust will be liable
for paying the Tax on the Short-Year Income in each
jurisdiction for which a Short-Year Return is to be
filed (the "Short-Year Tax"), and its liability for
the Short-Year Tax will be an allowed claim against
Debtor's bankruptcy estate in the Plan of
Reorganization and will be treated as a first
priority claim (i.e., an administrative expense); and
(iv) the Reorganized Company will be
discharged from any obligation to pay the Short-Year
Tax.
(b) If the Reorganized Company is not a member of a
consolidated (or equivalent) tax filing group effective upon
or immediately after the Closing Date in any applicable taxing
jurisdiction, or if the Closing Date is not the last day of
the Debtor's taxable year for Tax purposes, then the
Reorganized Company agrees to prepare and file its 1999 Tax
Returns in a timely fashion (taking into account extensions),
will be responsible to pay taxes due for such taxable year to
the extent provided in this paragraph, and will provide the
Liquidating Trust with notice of such filing. In such event,
the Liquidating Trust's liability for paying the Tax in
respect of the 1999 taxable year will be limited to the amount
of the Reorganized Company's incremental additional Tax
liability for the 1999 taxable year over the Tax liability
that
-15-
Exhibit D - Page 68 of 166
<PAGE>
would have resulted had the Closing Date been the last day of
a Short Year (the "Deemed Short Year") taking into account for
federal income tax purposes only the extent to which the
Reorganized Company's Tax Attributes are affected (adversely
or otherwise) by taxable income in respect of the Deemed Short
Year. Accordingly, for avoidance of doubt, if the Reorganized
Company's Tax liability is not greater for taxable year 1999
than it would have been had the Deemed Short Year been a Short
Year and the Reorganized Company's Tax Attributes are not
adversely affected in respect of Deemed Short Year income,
then the Liquidating Trust shall not have any liability for
the Reorganized Company's 1999 taxable income. For state (and
local) income tax purposes, the liability of the Liquidating
Trust for Taxes in any jurisdiction under this paragraph (b)
shall not exceed the liability for Taxes that would have been
owing if the Deemed Short Year had actually been a separate
taxable year of Debtor.
3.5.3. The Plan of Reorganization will require the Liquidating
Trust to request a prompt determination of the state and
federal Prepetition Tax Liabilities of the Company pursuant to
Section 505(a) of the Bankruptcy Code for any tax year ending
after June 15, 1996 (the day after the effective date of the
Company's initial public offering). The Plan of Reorganization
will also provide that (i) the Liquidating Trust will pay (on
behalf of the Company) any Tax that the Company must pay as a
result of any such determinations, and (ii) the Reorganized
Company will pay to the Liquidating Trust any Tax refunds it
receives as a result of any such determinations.
3.5.4. The Plan of Reorganization will require the Liquidating
Trust, pursuant to Section 505(b) of the Bankruptcy Code, to
request a prompt determination of any unpaid liability of the
Debtor for any Tax incurred during the administration of the
Bankruptcy Case with respect to its 1998 taxable year and (if
applicable) the Short Year and the Liquidating Trust shall be
liable to pay any Taxes with respect to such taxable year..
3.5.5. The Reorganized Company and the Liquidating Trust may
both participate in all material aspects of the federal income
tax audits with respect to the Company and the Assets for any
taxable year beginning after June 14, 1996 (the effective date
of the Company's initial public offering) and ending on or
before December 31, 1998 (except that the Liquidating Trust
will have no right to participate in any audit of a tax year
unless it is responsible to pay a portion of the Tax due with
respect to such Tax year[)] and each will provide the other
with contemporaneous notice of any communication with the
relevant tax authorities (as set forth in the Additional
Covenants Agreement). As further provided in the Additional
Covenants Agreement, the Liquidating Trust will consult with
the Reorganized Company before making or accepting any
proposed settlement with respect to the Assets in connection
with taxable years beginning before the Closing that
reasonably would affect the Reorganized Company.
Notwithstanding the foregoing, the Liquidating Trust will make
final decisions with respect to Tax settlements for taxable
years ending on or
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Exhibit D - Page 69 of 166
<PAGE>
before the Closing Date and the Reorganized Company will make
the final decisions with respect to Tax settlements for
taxable years ending after the Closing Date.
3.5.6. The Plan of Reorganization will provide for the
Liquidating Trust to assume any and all liability for Taxes
payable by the Company in connection with the Company's
operations and subsidiaries located outside of the United
States prior to and including the Closing Date, including,
without limitation, any Tax liability in excess of amounts
reported on the Company's Tax Returns, and the Reorganized
Company will be discharged from any such liability.
3.5.7. The Plan of Reorganization will provide that a
nationally-recognized accounting firm selected by Subscriber
and reasonably acceptable to the Liquidating Trust (the "Tax
Expert") will finally decide all disputes and controversies
with respect to this Section 3.5 by submission of a reasonably
detailed written decision, and that the Tax Expert, before
reaching any such decision, must allow the Liquidating Trust
and Subscriber a reasonable opportunity to provide information
and respond to issues.
3.6 COMPLIANCE WITH LEGAL REQUIREMENTS; BOARD AND GOVERNMENTAL
AUTHORIZATIONS
The Company has complied in all material respects with the
terms of all orders of the Bankruptcy Court applicable to it. The board of
directors of the Company has approved the Debtor Definitive Agreements. Schedule
3.6 contains a complete and accurate list of each Governmental Authorization
held by the Company or that otherwise relates to the business of the Company or
to any of the Assets.
3.7 CONTRACTS
Schedule 3.7 contains a complete and accurate list, and Debtor
has delivered to Subscriber true and complete copies, of:
(a) each Assumed Contract;
(b) each power of attorney that is currently
effective and outstanding;
(c) each written warranty, guaranty, and or other
similar undertaking with respect to contractual performance of
any Assumed Contract extended by the Company other than in the
Ordinary Course of Business; and
(d) each amendment, supplement, and modification in
respect of any of the foregoing.
3.8 MORTGAGE LOAN LITIGATION
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Exhibit D - Page 70 of 166
<PAGE>
Schedule 3.8 contains a complete and accurate description of
all pending or, to the Debtor's Knowledge, Threatened Proceedings relating to
the Securitization Trusts, or related to any mortgage loans contained in the
Securitization Trusts, including, without limitation, any matter in which any
improper lending practice or violation of the Truth in Lending Act (including
the Home Owner's Equity Protection Act) or other federal or state lending or
consumer protection law is alleged, provided however, such Schedule does not
include mortgage loans in the following categories: (1) noncontested judicial
foreclosure actions, (2) nonjudicial foreclosures, (3) bankruptcy cases
(including adversary proceedings) involving borrowers, (4) judicial foreclosure
actions by prior lienholders, or (5) routine title-related litigation (including
mechanics' lien, condemnation, and forfeiture actions) in which a defense is
being provided by a title company or in which there is no reasonable likelihood
of material impairment of the lender's lien.
4. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER
Subscriber represents and warrants to Debtor as follows:
4.1 ORGANIZATION AND GOOD STANDING
Subscriber is a limited partnership duly organized, validly
existing, and in good standing under the laws of the State of Delaware.
4.2 AUTHORITY; NO CONFLICT
4.2.1. The Subscriber Definitive Agreements constitute the
legal, valid, and binding obligations of Subscriber,
enforceable against Subscriber in accordance with their
respective terms. Subscriber has the partnership right, power,
and authority to execute and deliver the Subscriber Definitive
Agreements and to perform its obligations under each
Subscriber Definitive Agreement.
4.2.2. Except as set forth in Schedule 4.2.2, neither the
execution and delivery of this Agreement nor the consummation
or performance of any of the Contemplated Transactions will
give any Person the right to prevent, delay, or otherwise
interfere with any of the Contemplated Transactions pursuant
to:
(a) any provision of Subscriber's Organizational
Documents;
(b) any resolution adopted by the board of directors
or the stockholders of Subscriber;
(c) any Legal Requirement or Order to which
Subscriber may be subject; or
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Exhibit D - Page 71 of 166
<PAGE>
(d) any Contract to which Subscriber is a party or by
which Subscriber may be bound.
4.2.3. Except as set forth in Schedule 4.2.3, Subscriber is
not and will not be required to obtain any Consent from any
Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the
Contemplated Transactions.
4.3 INVESTMENT INTENT; INVESTMENT COMPANY
Subscriber is acquiring the Shares for its own account and not
with a view to their distribution within the meaning of Section 2(11) of the
Securities Act. Subject to the express provisions of this Agreement, the
disposition of the Shares will at all times be within the control of Subscriber.
Subscriber agrees that it will sell or transfer the Shares only if such sale or
transfer is made pursuant to an effective registration under the Securities Act
or pursuant to an exemption from the Securities Act. Subscriber is not an
Investment Company within the meaning of the Investment Company Act of 1940.
4.4 CERTAIN PROCEEDINGS
Except for matters raised in connection with the Bankruptcy
Case, no pending Proceeding has been commenced against Subscriber that
challenges, or may have the effect of preventing, delaying, making illegal, or
otherwise interfering with, any of the Contemplated Transactions. To
Subscriber's Knowledge, no such Proceeding has been Threatened.
4.5 ABSENCE OF BROKER'S FEE OR COMMISSION
Neither Subscriber nor any of its Representatives has incurred
any liability to pay a broker's fee or commission, in connection with the
signing, delivery or performance of this Agreement or entering into the
Contemplated Transactions.
4.6 QUALIFIED INSTITUTIONAL BUYER
Subscriber is a "qualified institutional buyer" as defined in
Rule 144A of the Securities Act and acknowledges that the Shares have not been
registered under the Securities Act.
4.7 DUE DILIGENCE
Subscriber or a Related Person has performed its own thorough
due diligence investigation of the Company and the Assets offered for sale and
is not relying on any representation or warranty, express or implied, of Debtor
or any of its Representatives or third-party vendors, other than those expressly
contained in this Agreement.
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Exhibit D - Page 72 of 166
<PAGE>
5. COVENANTS OF DEBTOR
In addition to the covenants set forth in Section 2 and
elsewhere in this Agreement, Debtor covenants as follows:
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date,
Debtor will, and will cause its Representatives to:
(a) afford Subscriber and its Representatives
(collectively, "Subscriber's Advisors") full and free access
to the Company's personnel, properties, Contracts, books and
records, and other documents and data and to the Company's
sub-servicers, if any, to the extent the Company itself has
the right to grant such access (provided that under all
circumstances, Subscriber's Advisors will coordinate all
visits and communications with management of Debtor upon
reasonable notice),
(b) furnish Subscriber and Subscriber's Advisors with
copies of all such Contracts, books and records, and other
existing documents and data as Subscriber may reasonably
request,
(c) furnish Subscriber and Subscriber's Advisors with
such additional financial, operating, and other data and
information as Subscriber may reasonably request and
(d) furnish to Subscriber copies of all Pooling and
Servicing Agreements, Trust Agreements, Indentures, and other
documents relating to the formation and operation of the
Securitization Trusts and the offering of the related
securities and remittance reports relating to the
Securitization Trusts and all data files relating to the
administration of the Securitization Trusts or the Servicing
of the underlying mortgage loans prior to Closing.
5.2 OPERATION OF THE COMPANY'S BUSINESS
Between the date of this Agreement and the Closing Date,
Debtor will:
(a) conduct the business of the Company (including
the current servicing operations and relationships with
sub-servicers) only in the Ordinary Course of Business,
subject to the limitations and restrictions imposed by the
Bankruptcy Code and Bankruptcy Court;
(b) use Best Efforts to preserve intact the current
business organization of the Company, keep available the
services of the current officers, employees, and
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Exhibit D - Page 73 of 166
<PAGE>
agents of the Company, and maintain the relations with
suppliers, customers, landlords, creditors, employees, agents,
and others having business relationships with the Company;
(c) confer with Subscriber concerning operational
matters of a material nature;
(d) otherwise report weekly to Subscriber concerning
the status of the business, operations, and finances of the
Company; and
(e) not sell or encumber any Assets, amend any
Pooling and Servicing Agreement, or enter into any new
subservicer agreements or amend any existing subservicer
agreements without Subscriber's Consent;
(f) not make any new loans to any borrower;
(g) not purchase mortgage loans from the
Securitization Trusts except as expressly required by the
Settlement Agreement, change collection or REO procedures, or
change or modify procedures with respect to amending the terms
of any mortgage loan without giving prior reasonable notice to
Subscriber and two business days for Subscriber to respond;
provided, however, that Debtor's notice shall not be deemed to
waive any rights of Subscriber under this Agreement in respect
of any Breach by Debtor; and
(h) within seven days after execution of this
Agreement provide a master servicing data tape to Subscriber.
5.3 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement
and prior to the Closing Date, Debtor will make all filings Company is required
to make by Legal Requirements (with the understanding that Subscriber will pay
all filing fees for any HSR Act filing, as provided by statute). As promptly as
practicable after the date of this Agreement and prior to the Closing Date,
Debtor will (a) cooperate with Subscriber with respect to all filings that
Subscriber elects to make or is required by Legal Requirements to make in
connection with the Contemplated Transactions, and (b) cooperate with Subscriber
in obtaining all Consents identified in Schedule 4.2.3 (including taking all
actions requested by Subscriber to cause early termination of any applicable
waiting period under the HSR Act).
5.4 NOTIFICATION
Between the date of this Agreement and the Closing Date,
Debtor will promptly notify Subscriber in writing if Debtor becomes aware of any
fact or condition that (a) causes or constitutes
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Exhibit D - Page 74 of 166
<PAGE>
a Breach of any of Debtor's representations and warranties in this Agreement as
of the date of this Agreement, or (b) would cause or constitute a Breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition. Should any
such fact or condition require any change in the Disclosure Schedules in order
to make the Disclosure Schedules accurate as of Closing, Debtor will promptly
deliver to Subscriber a supplement to the Disclosure Schedules specifying such
change.
5.5 BEST EFFORTS
Between the date of this Agreement and the Closing Date,
Debtor will use its Best Efforts to cause the conditions in Section 7 to be
satisfied and to complete Closing no later than June 30, 1999. Debtor agrees
that any willful breach by it of the Asset Purchase Agreement shall constitute a
willful breach of this Agreement.
5.6 NO SOLICITATION
Debtor agrees that until Bankruptcy Court approval (or
rejection) of the Break-Up Fee Order described in Section 9.2, Debtor will not,
and will not authorize or permit any of its Representatives, directly or
indirectly, (a) to solicit, initiate, participate in or encourage any inquiries,
negotiations, or discussions with, or provide any information to, any person or
group (other than the Subscriber and its Representatives and affiliates)
concerning, or encourage the making of any proposal with respect to, any
acquisition transaction involving, directly or indirectly, the Company or its
securities or assets (other than the assets to be transferred to the Liquidating
Trust), or (b) to enter into any agreement, arrangement, or understanding
requiring it to abandon, terminate, or fail to consummate this Agreement or any
other transactions contemplated by this Agreement (each event described in (a)
and (b) above, an "Acquisition Proposal"). Debtor will immediately cease any
existing activities, discussions, or negotiations with any parties other than
the Subscriber and its Representatives and affiliates conducted prior to the
date of this Agreement with respect to any of the activities described in (a)
and (b) above. Debtor will immediately (and in any event within 24 hours)
communicate to Subscriber the terms of any proposal, discussion, negotiation, or
inquiry relating to an Acquisition Proposal (and will disclose all written
materials received by Debtor in connection with any such Acquisition Proposal)
and the identity of the party making such proposal or inquiry which it may
receive in respect of any Acquisition Proposal.
6. COVENANTS OF SUBSCRIBER
In addition to the covenants set forth in Section 2 and
elsewhere in this Agreement, Subscriber covenants as follows:
6.1 APPROVALS OF GOVERNMENTAL BODIES
As promptly as practicable after the date of this Agreement
and prior to the Closing Date, Subscriber will, and will cause each of its
Related Persons to, make all filings required by Legal
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Exhibit D - Page 75 of 166
<PAGE>
Requirements to be made by them to consummate the Contemplated Transactions
(including all filings under the HSR Act) and will use its Best Efforts to
obtain the Consents identified in Schedule 4.2.3. Between the date of this
Agreement and the Closing Date, Subscriber will, and will cause each Related
Person to cooperate with Debtor with respect to all filings that Debtor is
required by Legal Requirements to make in connection with the Contemplated
Transactions (including, without limitation, by paying the filing fee for any
filing under the HSR Act as provided by statute).
6.2 BEST EFFORTS
Between the date of this Agreement and the Closing Date,
Subscriber will use its Best Efforts to cause the conditions in Section 7 to be
satisfied and to complete Closing no later than June 30, 1999.
6.3 NOTIFICATION
Between the date of this Agreement and the Closing Date,
Subscriber will promptly notify Debtor in writing if Subscriber becomes aware of
any fact or condition that (a) causes or constitutes a Breach of any of
Subscriber's representations and warranties in this Agreement as of the date of
this Agreement, or (b) would cause or constitute a Breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition.
6.4 SUBSCRIBER CONTRIBUTION
[SUBJECT TO THE FOLLOWING PROVISO,] Subscriber agrees to make
a Subscriber Contribution to the extent necessary to satisfy Reorganized
Company's obligations to {purchase each and every mortgage loan out of the
Securitization Trusts (including accrued interest and amounts required to be
paid under the applicable Pooling and Servicing Agreement) pursuant} [MAKE
PAYMENTS REQUIRED PURSUANT TO SECTION 5(B) OF THE SETTLEMENT AGREEMENT WITH
RESPECT] to the Florida Case Resolution to the extent the funds contained in the
Florida Reserve established pursuant to this Agreement (plus any funds provided
by or on behalf of the Liquidating Trust, in each case in its sole and absolute
discretion) are insufficient to satisfy such obligations at the time such
obligations are due[; PROVIDED, HOWEVER, THAT IN NO EVENT SHALL SUBSCRIBER BE
OBLIGATED TO (ALTHOUGH SUBSCRIBER MAY, IN ITS SOLE DISCRETION) MAKE A SUBSCRIBER
CONTRIBUTION WITH RESPECT TO ANY SUCH AMOUNT WHICH IS NOT GUARANTEED PURSUANT TO
SECTION 6(A) OF THE SETTLEMENT AGREEMENT]. Subscriber also agrees that any funds
remaining in the Florida Reserve will be released to the Liquidating Trust
immediately after all obligations under the Florida Case Resolution are
satisfied. Within 30 days of making a Subscriber Contribution, Subscriber must
elect by delivering written notice to Holder of its election not to receive a
Preferred Return (the "Subscriber Election"). If no election is made, Subscriber
will be deemed to have elected to receive a Preferred Return.
7. CONDITIONS PRECEDENT TO SUBSCRIBER'S OBLIGATION TO CLOSE
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Exhibit D - Page 76 of 166
<PAGE>
Subscriber's obligation to purchase the Shares and to take the
other actions required to be taken by Subscriber at Closing is subject to the
satisfaction, at or prior to Closing, of each of the following conditions (any
of which may be waived by Subscriber, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
All of Debtor's representations and warranties in this
Agreement (considered collectively), and each of these representations and
warranties (considered individually), must have been accurate in all material
respects as of the date of this Agreement, and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date, without regard
to any supplement to the Disclosure Schedules.
7.2 DEBTOR'S PERFORMANCE
7.2.1. All of the covenants and obligations that Debtor is
required to perform or to comply with pursuant to this
Agreement and the Asset Purchase Agreement at or prior to
Closing (considered collectively), and each of these covenants
and obligations (considered individually), must have been duly
performed and complied with in all material respects.
7.2.2. Debtor must have signed and delivered the Asset
Purchase Agreement and delivered each document and other item
required to be delivered by it pursuant to Section {2.7}
[2.6], and each such document must be in the form attached to
this Agreement or otherwise in form and substance satisfactory
to Subscriber.
7.3 CONSENTS
Each of the Consents identified in Schedule 4.2.3 must have
been obtained and must be in full force and effect.
7.4 NO INJUNCTION
There must not be in effect any Legal Requirement or any
injunction or other Order that prohibits the sale of the Shares by Reorganized
Company to Subscriber.
7.5 BANKRUPTCY MATTERS
7.5.1. The Plan of Reorganization and Disclosure Statement, as
amended and supplemented (in form and substance reasonably
satisfactory to Subscriber and containing the provisions
described in Section 3.5), must have been filed with the
Bankruptcy Court and must not have been withdrawn.
7.5.2. The Confirmation Order (in form and substance
reasonably satisfactory to
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Exhibit D - Page 77 of 166
<PAGE>
Subscriber and containing satisfactory findings with regard to
claims of Bankers Trust, Norwest Bank Minnesota, National
Association and MBIA Insurance Corporation) must have been
entered by the Bankruptcy Court, must be in effect, final and
unappealable, and otherwise must not have been stayed or
modified in any material respect adverse to Subscriber or
Reorganized Company.
7.5.3. The Confirmation Order, as entered by the Bankruptcy
Court, will contain a provision to the effect that the assets
and liabilities of Reorganized Company, upon confirmation and
consummation of the Contemplated Transactions, will be as set
forth in Schedule 2.1.2.
7.5.4. The Confirmation Order will contain a provision stating
that Reorganized Company, upon confirmation and consummation
of the Contemplated Transactions, will have no liability,
contingent or otherwise, for any matter, except for the
Liabilities set forth in Schedule 2.1.2.
7.5.5. The Confirmation Order will authorize and direct
Reorganized Company to perform the obligations of the Debtor
under the Debtor Definitive Agreements.
7.5.6. The Confirmation Order will contain a provision
substantially similar to the provisions of Sections 3.5.2,
3.5.3, 3.5.4, 3.5.6 and 3.5.7.
7.6 ASSET PURCHASE
The closing of the transactions contemplated by the Asset
Purchase Agreement must have occurred.
7.7 DIP FINANCING
All amounts owed by Debtor under the DIP Financing Agreement
shall have been paid.
[7.8 COMPLETION OF SETTLEMENT AGREEMENT
MBIA INSURANCE CORPORATION SHALL HAVE DELIVERED EXHIBIT A TO
THE SETTLEMENT AGREEMENT TO SUBSCRIBER AND SUCH EXHIBIT SHALL BE SATISFACTORY IN
FORM AND SUBSTANCE TO SUBSCRIBER; PROVIDED THAT SUCH EXHIBIT SHALL BE DEEMED TO
BE SATISFACTORY TO SUBSCRIBER UNLESS SUBSCRIBER OBJECTS THERETO IN WRITING NOT
LATER THAN THREE BUSINESS DAYS FOLLOWING DELIVERY THEREOF BY MBIA INSURANCE
CORPORATION TO SUBSCRIBER.]
8. CONDITIONS PRECEDENT TO DEBTOR'S OBLIGATION TO CLOSE
Reorganized Company's obligation to sell the Shares and to
take the other actions
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Exhibit D - Page 78 of 166
<PAGE>
required to be taken by Debtor at Closing is subject to the satisfaction, at or
prior to Closing, of each of the following conditions (any of which may be
waived by Debtor or Reorganized Company, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Subscriber's representations and warranties in this
Agreement (considered collectively), and each of these representations and
warranties (considered individually), must have been accurate in all material
respects as of the date of this Agreement and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date.
8.2 SUBSCRIBER'S PERFORMANCE
8.2.1. All of the covenants and obligations that Subscriber is
required to perform or to comply with pursuant to this
Agreement and the Asset Purchase Agreement at or prior to
Closing (considered collectively), and each of these covenants
and obligations (considered individually), must have been
performed and complied with in all material respects.
8.2.2. A Related Person with respect to Subscriber must have
signed and delivered the Asset Purchase Agreement and
delivered each of the documents and other items required to be
delivered by Subscriber pursuant to Section 2.6 and must have
made the cash payments required to be made by Subscriber
pursuant to Sections 2.6.2(a) and 2.6.2(b).
8.3 NO INJUNCTION
There must not be in effect any Legal Requirement or any
injunction or other Order that prohibits the sale of the Shares by Reorganized
Company to Subscriber.
8.4 BANKRUPTCY MATTERS
8.4.1. The Plan of Reorganization and Disclosure Statement, as
amended and supplemented, must have been filed with the
Bankruptcy Court and must not have been withdrawn.
8.4.2. The Confirmation Order must have been entered by the
Bankruptcy Court, must be in effect, and must not have been
stayed or modified in any material respect adverse to Debtor.
8.4.3. The Confirmation Order will approve all Debtor
Definitive Agreements and all Subscriber Definitive Agreements
(including, without limitation, the Asset Purchase Agreement).
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Exhibit D - Page 79 of 166
<PAGE>
8.5 ASSET PURCHASE
The closing of the transactions contemplated by the Asset
Purchase Agreement must have occurred.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at Closing, be
terminated:
(a) by either Subscriber or Debtor if a material
Breach of any provision of this Agreement has been committed
by the other party and such Breach has not been cured or
waived;
(b) by Subscriber if any of the conditions in Section
7 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible
(other than through the failure of Subscriber to comply with
its obligations under this Agreement) and Subscriber has not
waived such condition on or before the Closing Date;
(c) by Debtor, if any of the conditions in Section 8
has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible
(other than through the failure of Debtor to comply with their
obligations under this Agreement) and Debtor has not waived
such condition on or before the Closing Date;
(d) by mutual consent of Subscriber and Debtor;
(e) by either Subscriber or Debtor if Closing has not
occurred (other than through the failure of any party seeking
to terminate this Agreement to comply fully with its
obligations under this Agreement) on or before July 31, 1999,
or such later date as the parties may agree upon;
(f) by Debtor upon the expiration of three business
days after notice is given by Debtor of its intent to accept
another offer to purchase the Company's stock or Assets,
subject to payment of the Break-Up Fee in accordance with
Section 2.8;
(g) by Subscriber if the Order described in Section
2.8.2 is not granted and Subscriber gives notice of
termination to Debtor within three business days after the
Bankruptcy Court refuses to enter the order in the form
described in Section 2.8.2;
(h) by Subscriber if a letter of intent for the sale
of Assets or Debtor's stock is signed with a party unrelated
to Subscriber and 20 days have lapsed without definitive
agreements being signed, unless Debtor has notified Subscriber
within such
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Exhibit D - Page 80 of 166
<PAGE>
20 day period that such letter of intent has been terminated;
(i) by Subscriber if Debtor enters into a definitive
agreement for the sale of Assets or Debtor's stock to a party
unrelated to Subscriber; or
(j) this Agreement shall terminate automatically upon
any termination of the Asset Purchase Agreement, without
notice or further act.
.
9.2 EFFECT OF TERMINATION
Prior to Closing, Subscriber's exclusive remedy for a Breach
by Debtor is the exercise of Subscriber's right of termination under Section 9.1
and, where applicable as set forth in Section 2.8 and the related Bankruptcy
Court Order, the collection of the Break-Up Fee; provided however, if Debtor
willfully breaches its obligations hereunder Subscriber shall be entitled to the
Break-Up Fee as permitted pursuant to the related Bankruptcy Court Order.
Debtor's right of termination under Section 9.1 is in addition to any other
rights it may have under this Agreement or otherwise, and the exercise of its
right of termination will not be an election of remedies and will not impair
Debtor's right to pursue all legal remedies. Except as set forth in the
preceding sentence, if this Agreement is terminated pursuant to Section 9.1, all
further obligations of the parties under this Agreement will terminate.
9.3 REVISED DISCLOSURE SCHEDULES
If Debtor has provided Subscriber with notice of a Breach
pursuant to Section 5.4, any time after the date of this Agreement through the
Closing Date, Subscriber's sole options, in its sole discretion, are to complete
Closing as scheduled notwithstanding such Breach (in which case the Breach is
deemed to have been waived) or to terminate the Agreement pursuant to Section
9.1 by the earlier of five business days from the date Subscriber learned of the
Breach or the Closing Date (but under no circumstances will Debtor be liable to
Subscriber in connection with any such Breach arising prior to Closing except
that, in the case of Debtor's willful breach, Subscriber will be entitled to the
Break-Up Fee to the extent provided in the related Order of the Bankruptcy
Court).
9.4 REINSTATEMENT
In the event Subscriber terminates this Agreement pursuant to Section
9.1(h) or 9.1(i) and the transactions set forth in the definitive agreement
described in 9.1(i) or the letter of intent described in Section 9.1(h) are not
consummated, Debtor shall immediately give Subscriber notice of such event.
Notwithstanding any other provision contained herein, for a period of 15
business days following receipt of such notice, Subscriber shall have the right
to reinstate this Agreement without amendment except (i) as may be necessary and
appropriate to reflect the passage of time and (ii) except that the date set
forth in Section 9.1(e) of July 31, 1999 will be extended 70 days.
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Exhibit D - Page 81 of 166
<PAGE>
10. GENERAL PROVISIONS
10.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each
party to this Agreement will bear its respective expenses incurred in connection
with the preparation, execution, and performance of this Agreement and the
Contemplated Transactions, including all fees and expenses of its
Representatives. Debtor and the Liquidating Trust will pay all amounts payable
to Pentalpha Capital, LLC in connection with this Agreement and the Contemplated
Transactions.
10.2 NOTICES
All notices, consents, waivers, and other communications under
this Agreement must be in writing and will be deemed to have been duly given
when (a) delivered by hand, (b) sent by facsimile (with written confirmation of
receipt), or (c) when received by the addressee, if sent by a nationally
recognized overnight delivery service (receipt requested), in each case to the
appropriate addresses and facsimile numbers set forth below (or to such other
addresses and facsimile numbers as a party may designate by notice to the other
parties):
Debtor or the Liquidating Trust:
- --------------------------------
Southern Pacific Funding Corporation
One Centerpointe Drive, Suite 551
Lake Oswego, Oregon 97035
Attention: Kevin D. Padrick
Facsimile No.: (503) 598-0662
with a copy to:
Miller, Nash, Wiener, Hager & Carlsen LLP
111 S.W. Fifth Avenue
Suite 3500
Portland, Oregon 97204
Attention: David W. Brown
Facsimile No.: (503) 224-0155
Subscriber:
- -----------
The Goldman Sachs Group, {L.P} [INC].
85 Broad Street
New York, New York 10004
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Exhibit D - Page 82 of 166
<PAGE>
Attention: Marvin Kabatznick
Facsimile No.: (212) 346-3568
Attention: Jay Strauss
Facsimile No.: (212) 902-3876
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attention: David C.L. Frauman
Facsimile No.: (212) 504-6666
10.3 JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of,
or based on any right arising out of, this Agreement may be brought against any
of the parties in the courts of the State of Oregon, County of Multnomah, or, if
it has or can acquire jurisdiction, in the United States District Court or the
United States Bankruptcy Court for the District of Oregon, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world. In
connection with any such action or proceeding, the prevailing party (whether
prevailing affirmatively or by means of a successful defense with respect to the
issues having the greatest value or importance) will be entitled to recover its
costs, including reasonable attorney fees at trial and on any appeal.
10.4 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other
such further information, (b) to execute and deliver to each other such other
documents, and (c) to do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the other agreements referred to in this Agreement.
10.5 WAIVER
Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement or the documents referred to
in this Agreement will operate as a waiver of such right, power, or privilege,
and no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, no party will be deemed to have waived any of its
rights or privileges under this Agreement or
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Exhibit D - Page 83 of 166
<PAGE>
the documents referred to in this Agreement unless the waiver is in writing and
no waiver given by a party will be applicable except in the specific instance
for which it is given.
10.6 ENTIRE AGREEMENT AND MODIFICATION
The parties agree that their respective obligations under this
Agreement are deemed to arise as of the date of this Agreement. This Agreement
supersedes all prior agreements between the parties and all representations or
warranties made by the parties with respect to its subject matter and
constitutes (along with the other agreements and documents referred to in this
Agreement, including, without limitation, the Plan of Reorganization and
Confirmation Order) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. In the event
of any inconsistency between the substantive provisions of this Agreement and
the substantive provisions of the Plan of Reorganization and Confirmation Order,
the substantive provisions of Plan of Reorganization and Confirmation Order will
control. This Agreement may not be amended except by a written agreement
executed by each of the parties hereto.
10.7 ASSIGNMENTS, SUCCESSORS, AND THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this
Agreement without the prior consent of the other party, other than an assignment
of the rights of Subscriber to a wholly-owned (direct or indirect) Related
Person of Subscriber that affirms in writing that it will be bound to the
representations, warranties, and obligations of Subscriber under the Subscriber
Definitive Agreements as if it signed the Agreements as the original signatory
Subscriber (with such factual changes, such as jurisdiction of organization and
type of entity, as reasonably may be required). Subject to the preceding
sentence, the Subscriber Definitive Agreements will apply to, be binding in all
respects upon, and inure to the benefit of the successors and permitted assigns
of the parties. Nothing expressed or referred to in this Agreement will be
construed to give any Person other than the parties to this Agreement any legal
or equitable right, remedy, or claim under or with respect to this Agreement or
any provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns. The Liquidating Trust is an express
beneficiary of the covenants and obligations of the parties to this Agreement.
10.8 SEVERABILITY
If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
10.9 SECTION HEADINGS; CONSTRUCTION
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation. All
references to "Section" or "Sections" refer to the
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Exhibit D - Page 84 of 166
<PAGE>
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
10.10 TIME OF ESSENCE
With regard to all dates and time periods set forth or
referred to in this Agreement, time is of the essence.
10.11 GOVERNING LAW
THIS AGREEMENT WILL BE GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
10.12 COUNTERPARTS
This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same
agreement.
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Exhibit D - Page 85 of 166
<PAGE>
The undersigned parties, each acting through its duly
authorized representative, have signed and delivered this Amended and Restated
Stock Subscription and Purchase Agreement as of the date first written above.
Subscriber: Debtor:
SOUTHERN PACIFIC FUNDING CORPORATION
THE GOLDMAN SACHS GROUP, INC.
By: -------------------------------- By: --------------------------------
Name: -------------------------------- Kevin D. Padrick
Title: -------------------------------- President
Exhibit D - Page 86 of 166
<PAGE>
APPENDIX I TO
STOCK SUBSCRIPTION AND PURCHASE AGREEMENT
DEFINED TERMS
All references in this Appendix I to Sections are references
to Sections of this Stock Subscription and Purchase Agreement unless otherwise
specified. Unless the context otherwise requires, capitalized terms used in the
Stock Subscription and Purchase Agreement, if not otherwise defined, have the
following meanings:
"ACQUISITION PROPOSAL" has the meaning given in Section 5.6.
"ADDITIONAL COVENANTS AGREEMENT" has the meaning given in
Section 2.4.1.
"ADVANCES" has the meaning given in Section 2.7.2.
"AGREEMENT" means, when referring to "this Agreement," the
[SECOND] Amended and Restated Stock Subscription and Purchase Agreement dated as
of {May 21} [JUNE 30], 1999, between Debtor and Subscriber.
"APPLICABLE PERCENTAGE" means, in the case of Asset Purchase
Cash Flows, 100% times the Factor and, in the case of Residual Cash Flows and
Out-of-Pocket Expenses, 50% times the Factor.
"ASSET CASH FLOW INSTRUMENT" has the meaning given in Section
4.1 of the Asset Purchase Agreement.
"ASSET COMPANY" means the buyer of assets identified in the
first paragraph of the Asset Purchase Agreement or any permitted assignee
thereof.
"ASSET PROCEEDS" has the meaning given in Section
2.3.1(a)(ii).
"ASSET PURCHASE AGREEMENT" or "PURCHASE AGREEMENT" means the
[SECOND] Amended and Restated Asset Purchase Agreement dated as of {May 21,}
[JUNE 30] 1999, between Debtor and Asset Company.
"ASSET PURCHASE CASH FLOWS" has the meaning given in Section
2.3.1(a)(i).
"ASSETS" has the meaning given in Schedule 2.1.2.
"ASSUMED CONTRACT", when used in this Agreement, means any
Contract entered into by the Company that is (a) included among the contracts to
be assumed by the Reorganized Company
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pursuant to the Plan of Reorganization and (b) identified on Schedule 3.7.
"BANKRUPTCY CASE" has the meaning given in the Recitals to
this Agreement.
"BANKRUPTCY CODE" means Title 11 of the United States Code.
"BANKRUPTCY COURT" has the meaning given in the Recitals to
this Agreement.
"BEST EFFORTS" means the efforts that a prudent Person who
desires to achieve a certain result would use in similar circumstances to
achieve the result as expediently as possible.
"BREAK-UP FEE" has the meaning given in Section 2.8.1.
"BREACH" means (a) any inaccuracy in or breach of, or any
failure to perform or comply with, a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement, or (b) any claim (by any Person) or other occurrence
or circumstance that is or was inconsistent with a representation, warranty,
covenant, obligation, or other provision of this Agreement or any instrument
delivered pursuant to this Agreement.
"CASH-FLOW INSTRUMENT" has the meaning given in Section 2.3.1.
"CASH FLOW PERIOD" has the meaning given in Section 2.3.2.
"CASH PRICE ADJUSTMENT AMOUNT" has the meaning given in
Section 2.2.
"CLOSING" has the meaning given in Section 2.5.
"CLOSING DATE" means the date and time when Closing actually
takes place.
"COMPANY" has the meaning given in the Recitals to this
Agreement.
"COMPANY MASTER SERVICER TRUSTS" means those Securitization
Trusts for which the Company acts as master servicer prior to Closing, namely
Series 1997-4, 1998-1, 1998-2, and 1998-H1.
"COMPANY TAX ADJUSTMENT AMOUNT" means, in the event the
Reorganized Company Tax Attributes are less than $77,000,000, the Tax Adjustment
Amount; otherwise zero.
"CONFIRMATION ORDER" means the order of the Bankruptcy Court
confirming the Plan of Reorganization.
"CONSENT" means any approval, consent, ratification, waiver,
or other authorization
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Exhibit D - Page 88 of 166
<PAGE>
(including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" means all of the transactions
contemplated by this Agreement and the Asset Purchase Agreement, including, but
not limited to:
(a) the sale of the Shares by Reorganized Company to
Subscriber;
(b) the execution, delivery, and performance of the
Cash Flow Instrument;
(c) the execution, delivery, and performance of the
Settlement Agreement;
(d) the execution, delivery, and performance of the
Liquidating Trust Agreement;
(e) the execution, delivery, and performance of the
Additional Covenants Agreement;
(f) the execution, delivery, and performance of the
Asset Purchase Agreement;
(g) the performance by Subscriber, Debtor and the
Reorganized Company of their respective covenants and
obligations under this Agreement;
(h) Asset Company's acquisition of the Purchased
Assets; and
(i) Subscriber's acquisition and ownership of the
Shares and assumption of control over the Reorganized Company.
"CONTRACT" means any agreement, contract, obligation, promise,
or undertaking (whether written or oral and whether express or implied) that is
legally binding.
"DEBTOR" has the meaning given in the first paragraph of this
Agreement.
"DEBTOR DEFINITIVE AGREEMENTS" means this Agreement, the
Settlement Agreement, the Liquidating Trust Agreement, the Asset Purchase
Agreement and the Additional Covenants Agreement.
"DEBTOR-IN-POSSESSION" means a debtor in a case filed under
Chapter 11 of the Bankruptcy Code that retains possession of the assets
constituting the bankruptcy estate and manages the estate for the benefit of the
debtor's creditors under the powers and supervision of the Bankruptcy Court.
"DEEMED SHORT YEAR" has the meaning given in Section 3.5.2(b).
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Exhibit D - Page 89 of 166
<PAGE>
"DIP FINANCING AGREEMENT" means the Master Repurchase
Agreement, Annex I to such Master Repurchase Agreement, the Margin Agreement and
the related agreements, annexes and exhibits entered into between Debtor and
Goldman, Sachs & Co., pursuant to which Goldman, Sachs & Co. extended a credit
facility in the approximate initial principal amount of $33,600,000.
"DISCLOSURE SCHEDULES" means the schedules attached to this
Agreement and delivered by Debtor to Subscriber concurrently with the execution
and delivery of this Agreement.
"DISCLOSURE STATEMENT" means the disclosure statement filed in
Bankruptcy Court with respect to the Plan of Reorganization, as amended.
"DISTRIBUTION" shall have the meaning given in Section 2.3.2.
"ELIGIBLE INVESTMENTS" means the following:
(1) direct general obligations of, or obligations fully
and unconditionally guaranteed as to the timely
payment of principal and interest by, the United
States or any agency or instrumentality thereof,
provided such obligations are backed by the full
faith and credit of the United States;
(2) federal funds and certificates of deposit, time and
demand deposits and banker's acceptances issued by
any bank or trust company incorporated under the laws
of the United States or any state thereof and subject
to supervision and examination by federal or state
banking authorities, provided that at the time of
such investment or contractual commitment providing
for such investment the short-term debt obligations
of such bank or trust company at the date of
acquisition thereof have been rated in its highest
rating by a nationally recognized statistical rating
organization;
(3) commercial paper (having original maturities of not
more than 30 days) rated in its highest rating by a
nationally recognized statistical rating
organization; and
(4) investments in money market funds rated in its
highest rating by a nationally recognized statistical
rating organization.
"ENCUMBRANCE" means any charge, claim, community property
interest, condition, equitable interest, lien, option, pledge, security
interest, right of first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income, or exercise of any
other attribute of ownership.
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Exhibit D - Page 90 of 166
<PAGE>
"FACTOR" means one, if the Subscriber Election is not made and
otherwise means (i) $38,500,000 minus the aggregate amount of any Subscriber
Contributions, divided by (ii) $38,500,000.
"FINANCING TRANSACTION" means any nonrecourse borrowing or any
borrowing with recourse solely to a bankruptcy remote special purpose entity in
respect of the Reorganized Company or the Asset Company, which borrowing is
secured by, and on which principal and/or interest payments are made primarily
from cash flows on, the related Assets or Purchased Assets and entered into
primarily for the purpose of distributing Proceeds. Financing Transaction also
includes all incremental borrowings from the reserve funds created for Trust
Series 1995-2, 1996-1, and 1996-3.
"FLORIDA {CASE} [CASES]" means Oceanmark Bank F.S.B. v.
Norwest Bank Minnesota, N.A. and Advanta Mortgage Corp., USA, {a lawsuit} [AND
OCEANMARK BANK F.S.B. V. BANKERS TRUST COMPANY OF CALIFORNIA N.A. AND ADVANTA
MORTGAGE COMPANY, LAWSUITS] filed in the state of Florida by Oceanmark Bank,
F.S.B., and all related litigation in the Bankruptcy Court.
"FLORIDA CASE RESOLUTION" has the meaning given in Section
2.3.4.
"FLORIDA RESERVE" has the meaning given in Section 2.3.4.
"GOVERNMENTAL AUTHORIZATION" means any approval, consent,
license, permit, waiver, or other authorization issued, granted, given, or
otherwise made available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement.
"GOVERNMENTAL BODY" means any:
(a) nation, state, county, city, town, village,
district, or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or
other government;
(c) governmental or quasi-governmental authority of
any nature (including any governmental agency, branch,
department, official, or entity and any court or other
tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature.
"HEDGING GAINS" means any realized gains of the Reorganized
Company on hedging transactions.
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Exhibit D - Page 91 of 166
<PAGE>
"HEDGING LOSSES" means any realized losses of the Reorganized
Company on hedging transactions.
"HOLDER" means the holder of the Cash-Flow Instrument.
"HOLDER-ALLOCATED EXPENSES" has the meaning given in Section
2.3.1.
"HOLDER EXPENSE LOAN" means a loan by Subscriber or a Related
Person of Subscriber to Holder solely for the purpose of funding Holder
Allocated Expenses to the extent the Reserve is insufficient; Holder Expense
Loan to bear interest at a per annum rate equal to LIBOR plus 350 basis points
(calculated on an actual 360-day basis).
"HOLDER TAX ADJUSTMENT AMOUNT" means, in the event the
Reorganized Company Tax Attributes are more than $81,000,000, the lesser of the
Tax Adjustment Amount and $1,500,000; otherwise zero.
"HSR ACT" means the Hart-Scott Rodino Antitrust Improvements
Act of 1976 or any successor law, and regulations and rules issued pursuant to
that Act or any successor law.
"IO CERTIFICATE" means each of the certificates included among
the Purchased Assets, representing subordinated interest-only REMIC regular
interests in the related Securitization Trusts (or, in the case of the Series
1998-H1 Securitization Trust, a subordinated non-REMIC equity interest).
"KNOWLEDGE" of a Person (other than an individual) exists with
respect to a particular fact or other matter if any individual who is, or was, a
director, officer, partner, executor, or trustee (or held a position of similar
status) of such Person has Knowledge of such fact or matter, and Knowledge of an
individual exists with respect to a particular fact or other matter where:
(a) the individual has actual awareness of the fact or matter;
or
(b) a prudent individual could reasonably be expected to
discover or otherwise become aware of the fact or matter in the course
of conducting a reasonably comprehensive investigation concerning the
existence of such fact or matter.
"LEGAL REQUIREMENT" means any federal, state, local,
municipal, foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty.
"LIABILITIES" has the meaning given in Section 2.1.2.
"LIBOR" means the rate for United States dollar deposits for
one month which appears on the Dow Jones Telerate Screen page 3750 (or such
other page as may replace page 3750
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Exhibit D - Page 92 of 166
<PAGE>
on that service for the purpose of displaying London interbank offered rates of
major bonds), at 11:00 a.m., London time, on the relevant date.
"LIQUIDATING TRUST" means the liquidating trust established
for the benefit of the Company's creditors in the Bankruptcy Case.
"LIQUIDATING TRUST AGREEMENT" means the trust agreement
establishing the Liquidating Trust by and between the Company acting for the
benefit of the respective creditors entitled to the trust assets and the trust's
initial trustees.
"MASTER SERVICING" means master loan servicing rights under
the Pooling and Servicing Agreements.
"MATERIAL DOCUMENTS" has the meaning given in Section
2.6.1(c).
"MATERIAL INTEREST" means, for purposes of the definition of
Related Person, a direct or indirect beneficial ownership (as defined in Rule
13d-3 under the Securities Exchange Act of 1934) of voting securities or other
voting interests representing at least 25% of the outstanding voting power of a
Person or equity securities or other equity interests representing at least 25%
of the outstanding equity securities or equity interests in a Person.
"ORDER" means any award, decision, injunction, judgment,
order, ruling, subpoena, or verdict entered, issued, made, or rendered by any
court, administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" means an action taken by a
Person if:
(a) such action is consistent with the past practices
of such Person and is taken in the ordinary course of the
normal day-to-day operations of such Person;
(b) such action is not required to be authorized by
the board of directors of such Person (or by any Person or
group of Persons exercising similar authority) and is not
required to be specifically authorized by the parent company
(if any) of such Person; and
(c) such action is similar in nature, standard of
quality, and magnitude to actions customarily taken, without
any authorization by the board of directors (or by any Person
or group of Persons exercising similar authority), in the
ordinary course of the normal day-to-day operations of other
Persons that are in the same line of business as such Person.
"ORGANIZATIONAL DOCUMENTS" means (a) the articles or
certificate of incorporation and the bylaws of a corporation; (b) the
partnership agreement and any statement of partnership of a general partnership;
(c) the limited partnership agreement and the certificate of limited partnership
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Exhibit D - Page 93 of 166
<PAGE>
of a limited partnership; (d) the operating agreement and articles or
certificate of organization of a limited liability company; (e) any charter or
similar document adopted or filed in connection with the creation, formation, or
organization of a Person; and (f) any amendment to any of the foregoing.
"OUT-OF-POCKET EXPENSES" has the meaning given in Section
2.3.3.
"PERSON" means any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
"PLAN OF REORGANIZATION" is the plan of reorganization filed
by the Company in the Bankruptcy Case, as may be amended or supplemented.
"POOLING AND SERVICING AGREEMENTS" means the Pooling and
Servicing Agreements (or the {Trust Agreement and Indenture and} Servicing
Agreement with respect to the Series 1998-H1 Securitization Trust) entered into
by the Company (or one of its Subsidiaries) with respect to each of the
securitization transactions engaged in by the Company (or one of its
Subsidiaries) between 1995 and 1998.
"PREFERRED RETURN" means, after a Subscriber Contribution
shall have been made and unless the Subscriber elects not to receive a Preferred
Return, the return of cash in an amount equal to the Subscriber Contribution
plus 15% per annum of the unpaid balance of the Subscriber Contribution until
the Subscriber Contribution shall have been returned in full.
"PREPETITION TAX LIABILITIES" means the Tax liabilities of
Company arising prior to October 1, 1998.
"PROCEEDING" means any action, arbitration, audit, case,
hearing, investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought, conducted, or
heard by or before, or otherwise involving, any Governmental Body or arbitrator.
"PROCEEDS" means the cash amount realized from an arms-length
sale, transfer or Financing Transaction, net of direct Out-of-Pocket Expenses.
"PURCHASE AGREEMENT" or "ASSET PURCHASE AGREEMENT" means the
Asset Purchase Agreement dated as of May 5, 1999, between Debtor and Asset
Company.
"PURCHASE PRICE", has the meaning given in Section 2.2.
"PURCHASED ASSETS" has the meaning given in Section 2.1 of the
Asset Purchase Agreement.
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Exhibit D - Page 94 of 166
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"RELATED PERSON" means, with respect to a specified Person
other than an individual:
(a) any Person that directly or indirectly controls,
is directly or indirectly controlled by, or is directly or
indirectly under common control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer,
partner, executor, or trustee of such specified Person (or in
a similar capacity), and each Person who is married to,
resides with, or related within the second degree to any such
director, officer, partner, executor, trustee, or Person in a
similar capacity;
(d) any Person in which such specified Person holds a
Material Interest;
(e) any Person with respect to which such specified
Person serves as a general partner or a trustee (or in a
similar capacity); and
(f) any Related Person of any individual described in
clause (b) or (c).
"RELATED PERSON EXPENSES" has the meaning given in Section
2.3.3(b)(iv).
"REMIC" means a real estate mortgage investment conduit within
the meaning of Section 860D of the Internal Revenue Code of 1986, as amended.
"REO" means real estate held for sale by the Company as master
servicer for the Company Master Servicer Trusts for the benefit of the related
Securitization Trust.
"REORGANIZED COMPANY" has the meaning given in the Recitals to
this Agreement.
"REORGANIZED COMPANY TAX ATTRIBUTES" means the sum of the
Reorganized Company's net operating losses plus the excess of the tax basis of
its assets over their fair market value in the agreed amount of $79,000,000, to
be calculated as of the end of the Short Year or Deemed Short Year as: (a) total
capital contributed by the Company's shareholders, (b) minus any distributions
to Company shareholders or other payments that were not deductible or for which
the Company did not receive full basis for federal income tax purposes, (c) plus
retained after-tax income for the period prior to the Company's initial public
offering as reported for federal income tax purposes, and (d) plus the Company's
excess inclusion income for federal income tax purposes for the taxable periods
after the Company's initial public offering through Closing less Taxes paid, as
such amount may be adjusted on any Tax Attribute Determination Date.
"REPRESENTATIVE" means, with respect to a particular Person,
any director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants, and
financial advisors.
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Exhibit D - Page 95 of 166
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"REQUIRED CAPITAL CONTRIBUTIONS" has the meaning given in
Section 2.3.7.
"RESERVE" means a funded account equal to an amount reasonably
calculated by Subscriber to be sufficient to cover any Out-of Pocket Expenses
estimated to occur during the following twelve months, but in no event more than
$100,000.
"RESIDUAL CASH FLOWS" has the meaning given in Section
2.3.1(a)(ii).
"RESIDUAL CERTIFICATE" means each of the certificates included
among the Assets, representing the REMIC residual interests in certain
Securitization Trusts.
"SECURITIES ACT" means the Securities Act of 1933 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"SECURITIZATION TRUST" means the trusts into which pools of
mortgage loans were deposited pursuant to the 13 securitization transactions
entered into by the Company (or one of its Subsidiaries) between 1995 and 1998
and which in turn issued various classes of mortgage securities representing
interests in, or in the case of the Series 1998-H1 Securitization Trust, secured
by, the trust assets.
"SERIES 1998-H1" means the Series 1998-H1 Securitization Trust
and related Master Servicing, Servicing Agreement, IO Certificates and equity
interest certificates, and rights to receive prepayment penalty income with
respect to such trust.
"SETTLEMENT AGREEMENT" has the meaning given in Section
{2.6.1(e)} [2.6.1(F)].
"SHARES" has the meaning given in the Recitals to this
Agreement.
"SHORT YEAR" has the meaning given in Section 3.5.2(a).
"SHORT-YEAR INCOME" has the meaning given in Section 3.5.2(a).
"SHORT-YEAR RETURNS" has the meaning given in Section
3.5.3(a).
"SHORT-YEAR TAX" has the meaning given in Section 3.5.2(a).
"SUBSCRIBER" has the meaning given in the first paragraph of
this Agreement.
"SUBSCRIBER'S ADVISORS" has the meaning given in Section 5.1.
"SUBSCRIBER CONTRIBUTION" means the amount of any funds
contributed to the Reorganized Company by Subscriber {in order to purchase
mortgage loans out of certain Securitization Trusts (including accrued interest
and other amounts required to be paid under the
-43-
Exhibit D - Page 96 of 166
<PAGE>
applicable Pooling and Servicing Agreements) with respect to loans pursuant to
the resolution of the Florida Case }[PURSUANT TO SECTION 6.4 IN ORDER TO PERMIT
THE REORGANIZED COMPANY TO MAKE PAYMENTS REQUIRED TO BE MADE BY IT PURSUANT TO
SECTION 5(B) OF THE SETTLEMENT AGREEMENT WITH RESPECT TO THE FLORIDA CASE
RESOLUTION] if the amount of the Florida Reserve is insufficient {to make all of
the required purchases} [THEREFOR].
"SUBSCRIBER DEFINITIVE AGREEMENTS" means this Agreement, the
Asset Purchase Agreement, Additional Covenants Agreement, the Settlement
Agreement, the Cash-Flow Instrument, the [Asset Purchase Agreement Cash-Flow
Instrument], the Subservicing Agreement, and the Guarantee.
"SUBSCRIBER ELECTION" has the meaning given in Section 6.4.
"SUBSERVICING AGREEMENT" has the meaning given in Section 2.7.
"SUBSIDIARY" means, with respect to any Person (the "Owner"),
any corporation or other Person of which the Owner or one or more of its
Subsidiaries holds securities or other interests having the power to elect a
majority of that Person's board of directors or similar governing body, or
otherwise having the power to direct that Person's business and policies (other
than securities or other interests having such power only upon the happening of
a contingency that has not occurred).
"TAX" and "TAXES" mean all taxes, levies, imposts, duties,
charges or withholdings, together with any penalties, fines or interest thereon
or other additions thereto imposed by any Governmental Body.
"TAX ADJUSTMENT AMOUNT" means the amount calculated as of a
Tax Attribute Determination Date in accordance with the following formula
(without duplication of adjustments made on any earlier Tax Attribute
Determination Date), plus interest accrued at a per annum rate of 10 percent
from the Closing Date paid:
If Reorganized Company Tax Attributes exceed $81
million, the Tax Adjustment Amount shall be 15.19 percent of
such excess. If Reorganized Tax Attributes are less than $77
million, the Tax Adjustment Amount shall be 15.19 percent of
such shortfall.
"TAX ATTRIBUTE DETERMINATION DATE" is a date on which the
expected Reorganized Company Tax Attributes are determined to be different than
$79,000,000 as a result of (a) a final determination by or settlement with the
Internal Revenue Service, (b) a mutual determination of the Liquidating Trust
and Subscriber, or (c) the issuance of a written opinion from the Tax Expert
with respect to those elements of Reorganized Company Tax Attributes not
determined by the procedures set forth in clause (a) or (b).
"TAX EXPERT" has the meaning given in Section 3.5.7.
-44-
Exhibit D - Page 97 of 166
<PAGE>
"TAX RETURN" means any return (including any information
return), report, statement, schedule, notice, form, or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection, or payment of any Tax or in connection with the
administration, implementation, or enforcement of or compliance with any Legal
Requirement relating to any Tax.
"THIRD PARTY" means a Person that is neither the Subscriber
nor any Related Person of Subscriber.
"THREATENED" means a demand or statement has been made (orally
or in writing) or a notice has been given (orally or in writing), or another
event has occurred or other circumstances exist, that would lead a prudent
Person to conclude that a claim, Proceeding, dispute, action, or other matter is
likely to be asserted, commenced, taken, or otherwise pursued in the future.
"TOTAL CASH FLOWS" has the meaning given in Section 2.3.1(a).
-45-
Exhibit D - Page 98 of 166
<PAGE>
SCHEDULE 2.1.2
ASSETS AND LIABILITIES
The Assets and Liabilities are all of the assets and liabilities of the
Reorganized Company as of the Closing Date, and consist of the following:
ASSETS
- ------
Residual Certificates, namely:
Series 1995-1, Class R (61.27%)
Series 1995-2, Classes R-I (18.26%) and R-II
Series 1996-1, Class R
Series 1996-2, Class R
Series 1996-3, Class R
Series 1996-4, Class R
Series 1997-1, Classes R-I and R-II
Series 1997-2, Classes R-I, R-II, and R-III
Series 1997-3, Classes R-I and R-II
Series 1997-4, Classes R-I and R-II
Series 1998-1, Classes R-I and R-II
Series 1998-2, Classes R-I and R-II
Servicing Rights for the following Securitization Trusts (master servicing
rights for Series 1995-1, 1996-1, 1996-2, 1996-3, 1996-4, 1997-1, 1997-2 and
1997-3 are held by Advanta Mortgage Corp., U.S.A.):
Series 1995-1
Series 1996-1
Series 1996-2
Series 1996-3
Series 1996-4
Series 1997-1
Series 1997-2
Series 1997-3
Series 1997-4
Series 1998-1
Series 1998-2
Series 1998-H1
but in each case excluding all rights to servicer advances and all rights with
respect to Mortgage Loans not remaining in any Securitization Trust on the
Closing Date.
Exhibit D - Page 99 of 166
<PAGE>
ASSETS CON'T.
- -------------
All of the rights Company has under the Pooling and Servicing Agreements (in any
capacity) with respect to the following Secunitization Trusts, including where
applicable, without limitation, (a) the call rights to purchase mortgage loans
from certain Securitization Trusts when the principal balance of the related
mortgage loans is less than 10% of the aggregate principal balances of the
related mortgage loans on the cut-off date established pursuant to the related
Pooling and Servicing Agreement, (b) the rights to purchase loans out of the
Securitization Trusts in certain circumstances and (c) the mortgage loans and
other proceeds of the exercise of the call rights or subsequent sale of mortgage
loans:
Series 1995-1
Series 1995-2
Series 1996-1
Series 1996-2
Series 1996-3
Series 1996-4
Series 1997-1
Series 1997-2
Series 1997-3
Series 1997-4
Series 1998-1
Series 1998-2
The rights Company has (in any capacity) under the Servicing Agreement for the
Series 1998-H1 Securitization Trust to purchase mortgage loans out of the
Securitization Trust in certain circumstances.
All of the rights Company has under the Assumed Contracts listed in Schedule
3.7.
All of the Company's rights to borrow funds from the reserve accounts associated
with the Series 1995-2, 1996-1, and 1996-3 Securitization Trusts in exchange for
the issuance of Company notes to Bankers Trust, as trustee of such
Securitization Trusts.
{Servicing Platform equipment, furniture, improvements and software located in
Santa Rosa, California (leasehold interest) if and only if Subscriber has
notified Debtor by May 31, 1999 and the parties have reached an agreement
acceptable to them before Closing providing the terms and conditions of such
transfer, including price and assumption of liabilities.
Capital stock of Southern Pacific Secured Asset Corp., a special purpose
subsidiary of debtor, including its shelf registration statement, if and only if
Subscriber has notified Debtor by May 31, 1999, and the parties have reached an
agreement acceptable to them by June 8, 1999 providing the terms and conditions
of such transfer, including price.}
All of the Company's licenses to service mortgage loans.
Exhibit D - Page 100 of 166
<PAGE>
LIABILITIES
- -----------
Cash Flow Instrument, dated as of {June} [July] --, 1999, issued by the Company
pursuant to its Plan of Reorganization.
Liabilities of the Reorganized Company under the Settlement Agreement.
Liability to repay the promissory notes issued to the Company to Bankers trust
as trustee of the reserve accounts associated with the Series 1995-2, 1996-1,
and 1996-3 Securitization Trusts (the funds of which may be invested in the
Company's short-term debt obligations.
Liabilities of the Company under the Assumed Contracts listed on
Schedule 3.7.
Exhibit D - Page 101 of 166
<PAGE>
[EXHIBIT 2.3.1]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE. NEITHER THIS
CERTIFICATE NOR ANY INTEREST HEREIN MAY BE OFFERED FOR SALE, SOLD OR OTHERWISE
TRANSFERRED UNLESS THE PROSPECTIVE TRANSFEREE PROVIDES THE COMPANY WITH AN
OPINION OF COUNSEL (WHICH SHALL NOT BE AT THE EXPENSE OF THE COMPANY)
SATISFACTORY TO THE COMPANY IN ITS SOLE JUDGMENT THAT SUCH TRANSFER IS BEING
MADE EITHER PURSUANT TO A REGISTRATION STATEMENT THAT HAS BECOME EFFECTIVE UNDER
THE ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT, AND EITHER
DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER ANY STATE SECURITIES LAWS,
OR HAS BEEN SO REGISTERED OR QUALIFIED. THE OPINION SHALL ALSO STATE THAT AS A
RESULT OF SUCH TRANSFER, THE COMPANY IS UNDER NO OBLIGATION TO REGISTER UNDER
THE SECURITIES ACT OF 1934, AS AMENDED, THE INVESTMENT COMPANY ACT OF 1940 OR
ANY OTHER FEDERAL OR STATE SECURITIES LAW.
CASH FLOW INSTRUMENT
NEW YORK, NEW YORK
-------, 1999
FOR VALUE RECEIVED, the undersigned, SOUTHERN PACIFIC FUNDING
CORPORATION ("Company"), a California corporation having its principal place of
business at -----------------------------, promises to pay to the order of SPFC
LIQUIDATING TRUST ("Holder") at ------------------------------------- the
amounts as provided herein.
This Cash Flow Instrument (the "Instrument") evidences an obligation
incurred pursuant to the Amended Plan of Reorganization (the "Plan") dated May
- ---, 1999, of Southern Pacific Funding Corporation acting in its capacity as
Debtor-in-Possession in its bankruptcy case filed under Chapter 11 of the United
States Bankruptcy Code in the United States Bankruptcy Court for the District of
Oregon (the "Bankruptcy Case").
Capitalized terms used in this Instrument and not otherwise defined
have the meanings given in Appendix I hereto, which is incorporated into this
Instrument by reference.
This Instrument represents a general obligation of Company, payable
from any available funds.
1. DISTRIBUTIONS
1.1 Subject to the payment provisions of Section 2.2, Company shall
make periodic payments to the Holder of the following:
Exhibit D - Page 102 of 166
<PAGE>
(a) the sum (without duplication) of:
(i) the Applicable Percentage (initially 100 percent) of
all pre-tax cash flows and other amounts, if any,
paid or payable in respect of the Asset Cash Flow
Instrument (the "Asset Purchase Cash Flows"); and
(ii) the Applicable Percentage (initially 50 percent) of
each of the following (referred to collectively
before application of the Applicable Percentage as
the "Residual Cash Flows") with respect to the
Assets:
(A) the aggregate of all pre-tax cash flows from
each of the Assets until a sale (or
transfer) or Financing Transaction with
respect to the related Asset, it being
agreed that the cash flows will continue to
be payable to Holder after any sale or
transfer to a Related Person of Subscriber
(other than a sale or transfer to a Related
Person of Subscriber for the sole purpose of
facilitating a Financing Transaction) or
pursuant to a transaction that has not been
found by the board of directors of the
Company to be an arms-length transaction;
plus
(B) all pre-tax Proceeds from any sales or
transfers of any Asset or portion of an
Asset; plus
(C) all pre-tax Proceeds from any Financing
Transaction entered into by the Company with
respect to any of the Assets and all Hedging
Gains;
(the Applicable Percentage of Asset Purchase Cash Flows plus the
Applicable Percentage of Residual Cash Flows are the "Total Cash
Flows");
(b) minus the Applicable Percentage (initially 50 percent) of
otherwise unreimbursed Out-of-Pocket Expenses incurred by the
Company (such amounts, the "Holder-Allocated Expenses"); plus
(c) any Holder Tax Adjustment Amount.
1.2 The periodic payment (each a "Distribution") to be made with
respect to this Instrument each month for a period commencing on the fifth day
of a calendar month and ending on the fourth day of the next calendar month,
commencing with ------------- (each such month, a "Cash Flow Period") will equal
(i) the sum of (a) Total Cash Flows received by Company during such Cash Flow
Period (or from ---------, 1999, through the last day of the first Cash Flow
Period in the case of the first Distribution), plus (b) any previously unpaid
Holder Tax Adjustment Amount, minus (ii) Holder-Allocated Expenses not
previously applied in reduction of Total Cash Flows.
2
Exhibit D - Page 103 of 166
<PAGE>
2. OUT-OF-POCKET EXPENSES
2.1.1 Out-of-Pocket Expenses means direct, Third Party
out-of-pocket expenses reasonably incurred by the Company or by
Subscriber or a Related Person of Subscriber directly on behalf of the
Company with respect to the Assets not otherwise reimbursable from a
third party and directly related to the ownership, servicing (including
without limitation, any transfer of servicing, engagement of
sub-servicers, or financing of corporate (i.e., non-principal and
interest[)] servicer advances), maintenance, collection from,
realization of value from, evaluation of, protection, financing and
sale of Assets, all in the Ordinary Course of Business or with respect
to a sale or Financing Transaction.
2.1.2 For purposes of servicing fees as described in Section
2.1.1. (including primary and special servicing), Out-of-Pocket
Expenses means 35 basis points (except with respect to Securitization
Trust 1998-H1, for which Out-of-Pocket Expenses means 75 basis points),
together with ancillary fees and investment income on collection
accounts.
2.1.3 Notwithstanding Section 2.1.1, Out-of-Pocket Expenses
specifically include:
(i) Hedging Losses and carrying costs of hedging
transactions;
(ii) transfer fees or other costs charged by the existing
servicer or sub-servicer in connection with the
transfer of servicing operations;
(iii) principal and interest repaid on any Financing
Transaction;
(iv) fees and expenses incurred with respect to Subscriber
or a Related Person of Subscriber in connection with
a sale or Financing Transaction, but only to the
extent such fees are consistent with market rates and
industry standards and are approved by the Holder,
which approval shall not be unreasonably withheld
("Related Person Expenses"). Related Person Expenses
shall be deemed to be approved if not objected to
within 21 days after Holder receives a detailed
report from the Company together with a request for
approval;
(v) expenses incurred with respect to the Liabilities of
the Company;
(vi) any otherwise reimbursable Third Party expense that
the Company has determined to be uncollectible; and
(vii) the payments, if any, made by the Company with
respect to severance payments to employees of the
Liquidating Trust.
2.1.4 Notwithstanding Section 2.1.1, Out-of-Pocket Expenses
specifically exclude:
3
Exhibit D - Page 104 of 166
<PAGE>
(i) amounts payable by Company to the Reserve pursuant to
this Instrument;
(ii) any management fees with respect to the Assets; and
(iii) overhead, salaries and similar expenses of Subscriber
or any Related Person of Subscriber, except as
permitted pursuant to clause (iv) above.
2.2 Amounts payable as Distributions from Asset Purchase Cash
Flows and Residual Cash Flows shall be applied in the following order:
(i) first, to payment to Subscriber of any unpaid
Preferred Return;
(ii) second, to the payment to Subscriber on behalf of the
Company of any unpaid Company Tax Adjustment Amount;
(iii) third, to the payment of principal and interest on
Holder Expense Loans;
(iv) fourth, to the funding of the Florida Reserve, if
still applicable;
(v) fifth, to the funding of Holder's share (i.e., 50
percent times the Factor) of the Reserve; and
(vi) finally, to Holder, in accordance with the payment
instructions set forth in Section 8.
2.3 The Distribution for a particular month will be paid on or before
the third business day following the end of the related Cash Flow Period,
provided that if the amount to be paid to Holder is less than $100,000, the
Company may defer payment (at its option) until the following month (or such
later time as the amount to be paid equals or exceeds $100,000).
2.4 Company agrees to make monthly deposits of its share of the Reserve
(i.e., 100 percent minus Holder's share of the Reserve), which amounts shall not
constitute an Out-of-Pocket Expense.
2.5 Company may not sell or transfer any interest in and will not
engage in a Financing Transaction with respect to the Asset Cash Flow
Instrument.
3. OBLIGATIONS ABSOLUTE
The obligations of Company to pay Distributions under this Instrument
(in accordance with its terms) shall be absolute and unconditional and shall not
be subject to any abatement, reduction, set-off, defense (other than the defense
that the amount due has been paid), counterclaim or recoupment ("Abatements")
for any reason whatsoever, including without limitation, Abatements due
4
Exhibit D - Page 105 of 166
<PAGE>
to any present or future claims of Company against Holder under this Instrument
or otherwise, or against any other Person for whatever reason.
It is the express intention of Company and Holder that all
Distributions are, and shall continue to be, payable in all events unless the
obligation to pay such Distributions is terminated pursuant to the express
provisions of this Instrument.
4. CERTIFICATES
This Instrument shall be evidenced by one or more certificates (each a
"Certificate") issued in fully-registered definitive form. Each Certificate
shall set forth on its face the percentage interest that it evidences (its
"Percentage Interest") in the amount of each Distribution to be made to Holders.
The aggregate Percentage Interest of the Certificates shall at all times equal
100%. The Company shall distribute to the Holders, in accordance with their
respective Percentage Interests as reflected in the Certificates, all
Distributions with respect to this Instrument. The Certificates shall be
executed by manual or facsimile signature on behalf of Company by the president
or any vice president and the secretary or any assistant secretary thereof.
Certificates bearing the manual or facsimile signatures of individuals who were
at any time the proper officers of Company shall bind Company notwithstanding
that such individuals or any of them have ceased to hold such offices prior to
the authentication and delivery of such Certificates or did not hold such
offices at the date of such Certificates. No Certificate shall be entitled to
any benefit under this Instrument, or be valid for any purpose, unless manually
countersigned by the president, any vice president, the secretary or any
assistant secretary of Company. All Certificates shall be dated the date of
their countersignature.
5. REGISTRATION; TRANSFER
Company shall cause to be kept at its principal office a certificate
register (the "Certificate Register") in which the Company shall provide for the
registration of Certificates and of transfers and exchanges of Certificates as
herein provided. Company shall register Certificates and transfers and exchanges
of Certificates as herein provided. Upon surrender for registration of transfer
of any Certificate to Company (and subject to the provisions of this Instrument)
Company shall execute, and shall date, countersign and deliver, in the name of
the designated transferee or transferees, one or more new Certificates of a like
aggregate Percentage Interest.
At the option of any Holder, Certificates may be exchanged for other
Certificates of a like aggregate Percentage Interest upon surrender of the
Certificates to be exchanged to the Company. Whenever any Certificates are so
surrendered for exchange, the Company shall execute, and shall date, countersign
and deliver, the Certificates which the Holder making the exchange is entitled
to receive. Every Certificate presented or surrendered for transfer or exchange
shall (if so required by the Company) be duly endorsed by, or be accompanied by
a written instrument of transfer in form satisfactory to the Company, duly
executed by the Holder thereof or his attorney duly authorized in writing.
5
Exhibit D - Page 106 of 166
<PAGE>
No service charge shall be made for any transfer or exchange of
Certificates, but the Company may require payment of a sum sufficient to cover
any tax or governmental charge that may be imposed in connection with any
transfer or exchange of Certificates.
All Certificates surrendered for transfer and exchange shall be
canceled by Company.
No transfer of a Certificate or any interest therein shall be made
unless the prospective transferee provides Company with an opinion of counsel
(which shall not be at the expense of Company) satisfactory to Company in its
sole judgment that such transfer is being made either pursuant to a registration
statement that has become effective under the Securities Act or pursuant to an
exemption from registration under the Act, and either does not require
registration or qualification under any State securities laws, or has been so
registered or qualified. The opinion shall also state that as a result of such
transfer, the Company is under no obligation to register under the Securities
Act of 1934, as amended, the Investment Company Act of 1940 or any other federal
or state securities law. The Certificates shall bear a legend referring to the
foregoing restrictions contained in this paragraph.
Prior to the due presentation of a Certificate for registration of
transfer, the Company and any agent of the Company may treat the Person in whose
name any Certificate is registered as the owner of such Certificate for the
purpose of receiving Distributions, and for all other purposes whatsoever, and
neither the Company nor any agent of Company shall be affected by notice to the
contrary. All Distributions shall be made to Holders of record on the last day
of the month preceding the month in which made.
6. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES
If (i) any mutilated Certificate is surrendered to the Company, or the
Company receives evidence to its satisfaction of the destruction, loss or theft
of any Certificate, and (ii) there is delivered to the Company such security or
indemnity as may be required by it to hold it harmless, then, in the absence of
notice to the Company that such Certificate has been acquired by a bona fide
purchaser, the Company shall execute and countersign and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a
new Certificate of like tenor and Percentage Interest. Upon the issuance of any
new Certificate under this Section, the Company may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expense (including the fees and expenses of the
Company) in connection therewith. Any duplicate Certificate issued pursuant to
this paragraph shall constitute complete and indefeasible evidence of the
corresponding Percentage Interest in Distributions, as if originally issued,
whether or not the lost, stolen, or destroyed Certificate shall be found at any
time.
6
Exhibit D - Page 107 of 166
<PAGE>
7. NOTICES TO HOLDERS; ACTION
Whenever notice or other communication to the Holders is required under
this Instrument, the Company shall mail all such notices and communications
specified herein to Holders as set forth in the Company's books and records.
Any action required or permitted to be taken under this Instrument by
the Holder of the Cash Flow Instrument may be taken only by the Holders of 51%
(fifty-one percent) or more of the aggregate Percentage Interests.
8. PAYMENT INSTRUCTIONS
Company will pay the Distribution for each Cash Flow Period by wire
transfer to:
NAME-------------------------------
BANK-------------------------------
BRANCH-----------------------------
ACCT.------------------------------
Special Instructions:
9. REMEDIES
Company and all others who may become liable for the payment of all or
any part of the obligations hereunder do hereby severally waive presentment and
demand for payment, notice of dishonor, protest and notice of protest and
non-payment and all other notices of any kind, except for notices expressly
provided for in this Instrument.
Upon the occurrence and during the continuance of any breach by Company
of any of its obligations hereunder, Holder shall have all remedies available to
Holder at law or in equity, including, without limitation of any other remedies,
the right to specifically enforce any of the obligations or duties owing by
Company or any other person and the right to also bring an action for money
damages.
10. VENUE; ATTORNEY FEES; GOVERNING LAW
In any action or proceeding seeking to enforce any provision of, or
based on any right arising out of, this Instrument may be brought against any of
the parties in the courts of the State of Oregon, County of Multnomah, and each
of the parties consents to the jurisdiction of such court (and of the
appropriate appellate court) in any such action or proceeding and waives any
objection to venue laid therein. Process in any action or proceeding referred to
in the preceding sentence may be served on any party anywhere in the world. In
connection with any such action or proceeding, the prevailing party will be
entitled to recover its costs, including reasonable attorney fees at trial and
on any appeal.
7
Exhibit D - Page 108 of 166
<PAGE>
THIS INSTRUMENT, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER, SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICT OF LAWS.
SOUTHERN PACIFIC FUNDING CORPORATION
By: -----------------------------
Title: -----------------------------
8
Exhibit D - Page 109 of 166
<PAGE>
APPENDIX I TO
CASH FLOW INSTRUMENT
DEFINED TERMS
Unless the context otherwise requires, capitalized terms used
in the Cash Flow Instrument, if not otherwise defined, have the following
meanings:
"APPLICABLE PERCENTAGE" means, in the case of Asset Purchase
Cash Flows, 100% times the Factor and, in the case of Residual Cash Flows and
Out-of-Pocket Expenses, 50% times the Factor.
"ASSET CASH FLOW INSTRUMENT" means the Asset Cash Flow
Instrument issued by Asset Company to Company and dated June , 1999.
"ASSET COMPANY" means Goldman, Sachs & Co., a Delaware limited
partnership, or its permitted assignees.
"ASSETS" means the assets and interests set forth on the
Schedule of Assets.
"ASSUMED CONTRACTS" means any contract entered into by the
Company that is (a) included among the contracts to be assumed by the Company
upon the effective date of the Plan of Reorganization and (b) identified on
Schedule of Assumed Contracts.
"BANKRUPTCY CODE" means Title 11 of the United States Code.
"BANKRUPTCY COURT" means the United States Bankruptcy Court
for the District of Oregon or such other court or adjunct thereof that exercises
jurisdiction over the Bankruptcy Case.
"COMPANY TAX ADJUSTMENT AMOUNT" means, in the event the
Reorganized Company Tax Attributes are less than $77,000,000, the Tax Adjustment
Amount; otherwise zero.
"DEBTOR-IN-POSSESSION" means a debtor in a case filed under
Chapter 11 of the Bankruptcy Code that retains possession of the assets
constituting the bankruptcy estate and manages the estate for the benefit of the
debtor's creditors under the powers and supervision of the Bankruptcy Court.
"ELIGIBLE INVESTMENTS" means the following:
(1) direct general obligations of, or obligations fully
and unconditionally guaranteed as to the timely
payment of principal and interest by, the United
States or any agency or instrumentality thereof,
provided such obligations are backed by the full
faith and credit of the United States;
9
Exhibit D - Page 110 of 166
<PAGE>
(2) federal funds and certificates of deposit, time and
demand deposits and banker's acceptances issued by
any bank or trust company incorporated under the laws
of the United States or any state thereof and subject
to supervision and examination by federal or state
banking authorities, provided that at the time of
such investment or contractual commitment providing
for such investment the short-term debt obligations
of such bank or trust company at the date of
acquisition thereof have been rated in its highest
rating by a nationally recognized statistical rating
organization;
(3) commercial paper (having original maturities of not
more than 30 days) rated in its highest rating by a
nationally recognized statistical rating
organization; and
(4) investments in money market funds rated in its
highest rating by a nationally recognized statistical
rating organization.
"FACTOR" means one, if the Subscriber Election is not made and
otherwise means (i) $38,500,000 minus the aggregate amount of any Subscriber
Contributions, divided by (ii) $38,500,000.
"FINANCING TRANSACTION" means any nonrecourse borrowing or any
borrowing with recourse solely to a bankruptcy remote special purpose entity in
respect of the Company or the Asset Company, which borrowing is secured by, and
on which principal and/or interest payments are made primarily from cash flows
on, the related Assets and entered into primarily for the purpose of
distributing Proceeds. Financing Transaction also includes an incremental
borrowings from the reserve funds created for Trust Series 1995-2, 1996-1 and
1996-3.
"FLORIDA CASE [RESOLUTION" HAS THE MEANING GIVEN IN SECTION
2.3.4 OF THE STOCK SUBSCRIPTION AND PURCHASE AGREEMENT.
"FLORIDA CASES]" means Oceanmark Bank F.S.B. v. Norwest Bank
Minnesota, N.A. and Advanta Mortgage Corp., USA, {a lawsuit} [AND OCEANMARK BANK
F.S.B. V. BANKERS TRUST COMPANY OF CALIFORNIA, N.A. AND ADVANTA MORTGAGE CORP.
USA, LAWSUITS] filed in the state of Florida by Oceanmark Bank, F.S.B., and all
related litigation in the Bankruptcy Court.
["FLORIDA RESERVE HAS THE MEANING GIVEN IN SECTION 2.3.4 OF
THE STOCK SUBSCRIPTION AND PURCHASE AGREEMENT.]
"GOVERNMENTAL BODY" means any:
(a) nation, state, county, city, town, village,
district, or other jurisdiction of any nature;
10
Exhibit D - Page 111 of 166
<PAGE>
(b) federal, state, local, municipal, foreign, or
other government;
(c) governmental or quasi-governmental authority of
any nature (including any governmental agency, branch,
department, official, or entity and any court or other
tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature.
"HEDGING GAINS" means any realized gains of the Company on
hedging transactions.
"HEDGING LOSSES" means any realized losses of the Company on
hedging transactions.
"HOLDER EXPENSE LOANS" means a loan by Subservicer or a
Related Person of Subscriber to Holder solely for the purpose of funding Holder
allocated Expenses to the extent the Reserve is insufficient; Holder Expense
Loans to bear interest at a per annum rate equal to LIBOR plus 350 basis points
(calculated on an actual 360-day basis).
"HOLDER TAX ADJUSTMENT AMOUNT" means, in the event the
Reorganized Company Tax Attributes are more than $81,000,000, the lesser of the
Tax Adjustment Amount and $1,500,000; otherwise zero.
"KNOWLEDGE" of a Person (other than an individual) exists with
respect to a particular fact or other matter if any individual who is, or was, a
director, officer, partner, executor, or trustee (or held a position of similar
status) of such Person has Knowledge of such fact or matter, and Knowledge of an
individual exists with respect to a particular fact or other matter where:
(a) the individual has actual awareness of the fact or
matter; or
(b) a prudent individual could reasonably be expected to
discover or otherwise become aware of the fact or matter in the course
of conducting a reasonably comprehensive investigation concerning the
existence of such fact or matter.
"LIABILITIES" means the liabilities set forth on the Schedule
of Liabilities.
"LIBOR" means the rate for United States dollar deposits for
one month which appears on the Dow Jones Telerate Screen page 3750 (or such
other page as may replace page 3750 on that service for the purpose of
displaying London interbank offered rates of major bonds), at 11:00 a.m. London
time, on the relevant date.
11
Exhibit D - Page 112 of 166
<PAGE>
"LIQUIDATING TRUST" means the liquidating trust established
for the benefit of the Company's creditors in the Bankruptcy Case.
"MATERIAL INTEREST" means, for purposes of the definition of
Related Person, a direct or indirect beneficial ownership (as defined in Rule
13d-3 under the Securities Exchange Act of 1934) of voting securities or other
voting interests representing at least 25% of the outstanding voting power of a
Person or equity securities or other equity interests representing at least 25%
of the outstanding equity securities or equity interests in a Person.
"ORDER" means any award, decision, injunction, judgment,
order, ruling, subpoena, or verdict entered, issued, made, or rendered by any
court, administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" means an action taken by a
Person if:
(a) such action is consistent with the past practices
of such Person and is taken in the ordinary course of the
normal day-to-day operations of such Person;
(b) such action is not required to be authorized by
the board of directors of such Person (or by any Person or
group of Persons exercising similar authority) and is not
required to be specifically authorized by the parent company
(if any) of such Person; and
(c) such action is similar in nature, standard of
quality, and magnitude to actions customarily taken, without
any authorization by the board of directors (or by any Person
or group of Persons exercising similar authority), in the
ordinary course of the normal day-to-day operations of other
Persons that are in the same line of business as such Person.
"ORGANIZATIONAL DOCUMENTS" means: (a) the articles or
certificate of incorporation and the bylaws of a corporation; (b) the
partnership agreement and any statement of partnership of a general partnership;
(c) the limited partnership agreement and the certificate of limited partnership
of a limited partnership; (d) the operating agreement and articles or
certificate of organization of a limited liability company; (e) any charter or
similar document adopted or filed in connection with the creation, formation, or
organization of a Person; and (f) any amendment to any of the foregoing.
"PERSON" means any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
"PLAN OF REORGANIZATION" is the plan of reorganization filed
by the Company in the Bankruptcy Case, as may be amended or supplemented.
12
Exhibit D - Page 113 of 166
<PAGE>
"POOLING AND SERVICING AGREEMENTS" means the Pooling and
Servicing Agreements (or the {Trust Agreement and Indenture and} Servicing
Agreement with respect to the Series 1998-H1 Securitization Trust) entered into
by the Company (or one of its Subsidiaries) with respect to each of the
securitization transactions engaged in by the Company (or one of its
Subsidiaries) between 1995 and 1998.
"PREFERRED RETURN" means, after a Subscriber Contribution
shall have been made and unless the Subscriber elects not to receive a Preferred
Return, the return of cash in an amount equal to the Subscriber Contribution
plus 15% per annum of the unpaid balance of the Subscriber Contribution until
the Subscriber Contribution shall have been returned in full.
"PROCEEDING" means any action, arbitration, audit, case,
hearing, investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought, conducted, or
heard by or before, or otherwise involving, any Governmental Body or arbitrator.
"PROCEEDS" means the cash amount realized from an arms-length
sale, transfer or Financing Transaction, net of direct Out-of-Pocket Expenses.
"RELATED PERSON" means, with respect to a specified Person
other than an individual:
(a) any Person that directly or indirectly controls,
is directly or indirectly controlled by, or is directly or
indirectly under common control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer,
partner, executor, or trustee of such specified Person (or in
a similar capacity), and each Person who is married to,
resides with, or related within the second degree to any such
director, officer, partner, executor, trustee, or Person in a
similar capacity;
(d) any Person in which such specified Person holds a
Material Interest;
(e) any Person with respect to which such specified
Person serves as a general partner or a trustee (or in a
similar capacity); and
(f) any Related Person of any individual described in
clause (b) or (c).
"REORGANIZED COMPANY" means the Seller after the effective
date of the Plan.
"REORGANIZED COMPANY TAX ATTRIBUTES" means the sum of the
Reorganized Company's net operating losses plus the excess of the tax basis of
its assets over their fair market
13
Exhibit D - Page 114 of 166
<PAGE>
value in the agreed amount of $79,000,000, to be calculated as of the end of the
Short Year as: (a) total capital contributed by the Company's shareholders, (b)
minus any distributions to Company shareholders or other payments that were not
deductible or for which the Company did not receive full basis for federal
income tax purposes, (c) plus retained after-tax income for the period prior to
the Company's initial public offering as reported for federal income tax
purposes, and (d) plus the Company's excess inclusion income for federal income
tax purposes for the taxable periods after the Company's initial public offering
through Closing less Taxes paid, as such amount may be adjusted on any Tax
Attribute Determination Date.
"RESERVE" means a funded account equal to an amount reasonably
calculated by Subscriber to be sufficient to cover any Out-of Pocket Expenses
estimated to occur during the following twelve months, but in no event more than
$100,000.
"SECURITIES ACT" or "ACT" means the Securities Act of 1933 or
any successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"SECURITIZATION TRUST" means the trusts into which pools of
mortgage loans were deposited pursuant to the 13 securitization transactions
entered into by the Company (or one of its Subsidiaries) between 1995 and 1998
and which in turn issued various classes of mortgage securities representing
interests in, or in the case of the Series 1998-H1 Securitization Trust, secured
by, the trust assets.
["SETTLEMENT AGREEMENT" MEANS THE SETTLEMENT AGREEMENT DATED
AS OF JUNE 17, 1999, AMONG SOUTHERN PACIFIC FUNDING CORPORATION, NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, MBIA INSURANCE CORPORATION, AND THE GOLDMAN
SACHS GROUP, INC.]
"SHORT YEAR" has the meaning given in Section 3.5.2(a).
["STOCK SUBSCRIPTION AND PURCHASE AGREEMENT" MEANS THE SECOND
AMENDED AND RESTATED STOCK SUBSCRIPTION AND PURCHASE AGREEMENT DATED AS OF JUNE
30, 1999, BETWEEN SOUTHERN PACIFIC FUNDING CORPORATION AND SUBSCRIBER.]
"SUBSCRIBER" means The Goldman Sachs Group Inc.
"SUBSCRIBER CONTRIBUTION" means the amount of any funds
contributed to the Reorganized Company by Subscriber in order to {purchase
mortgage loans out of certain Securitization Trusts (including accrued interest
and other amounts required to be paid under the applicable Pooling and Servicing
Agreements)} [PERMIT THE REORGANIZED COMPANY TO MAKE PAYMENTS REQUIRED TO BE
MADE BY IT PURSUANT TO SECTION 5(B) OF THE SETTLEMENT AGREEMENT] with respect to
the {loans pursuant to the resolution of the Florida Case if the amount of the
Florida Reserve is insufficient to make all of the required purchases.} [FLORIDA
CASE RESOLUTION.]
14
Exhibit D - Page 115 of 166
<PAGE>
"SUBSCRIBER ELECTION" means the election made by Subscriber by
written notice to Holder not to receive a Preferred Return in connection with a
Subscriber {Constriubtion} [CONTRIBUTION].
"SUBSIDIARY" means, with respect to any Person (the "Owner"),
any corporation or other Person of which the Owner or one or more of its
Subsidiaries holds securities or other interests having the power to elect a
majority of that Person's board of directors or similar governing body, or
otherwise having the power to direct that Person's business and policies (other
than securities or other interests having such power only upon the happening of
a contingency that has not occurred).
"TAX" and "TAXES" mean all taxes, levies, imposts, duties,
charges or withholdings, together with any penalties, fines or interest thereon
or other additions thereto imposed by any Governmental Body.
"TAX ADJUSTMENT AMOUNT" means the amount calculated as of a
Tax Attribute Determination Date in accordance with the following formula
(without duplication of adjustments made on any earlier Tax Attribute
Determination Date), plus interest accrued at a per annum rate of 10 percent
from the Closing Date paid:
If Reorganized Company Tax Attributes exceed $81
million, the Tax Adjustment Amount shall be 15.19 percent of
such excess. If Reorganized Company Tax Attributes are less
than $77 million, the Tax Adjustment Amount shall be 15.19
percent of such shortfall.
"TAX ATTRIBUTE DETERMINATION DATE" is a date on which the
expected Reorganized Company Tax Attributes are determined to be different than
$79,000,000 as a result of (a) a final determination by or settlement with the
Internal Revenue Service, (b) a mutual determination of the Liquidating Trust
and Subscriber, or (c) the issuance of a written opinion from the Tax Expert
with respect to those elements of Reorganized Company Tax Attributes not
determined by the procedures set forth in clause (a) or (b).
"THIRD PARTY" means a Person that is neither the Subscriber
nor any Related Person of Subscriber.
15
Exhibit D - Page 116 of 166
<PAGE>
SCHEDULE OF ASSETS
Residual Certificates, namely:
Series 1995-1, Class R (61.27%)
Series 1995-2, Classes R-I (18.26%) and R-II
Series 1996-1, Class R
Series 1996-2, Class R
Series 1996-3, Class R
Series 1996-4, Class R
Series 1997-1, Classes R-I and R-II
Series 1997-2, Classes R-I, R-II, and R-III
Series 1997-3, Classes R-I and R-II
Series 1997-4, Classes R-I and R-II
Series 1998-1, Classes R-I and R-II
Series 1998-2, Classes R-I and R-II
Servicing Rights for the following Securitization Trusts (master servicing
rights for Series 1995-1, 1996-1, 1996-3, 1996-4, 1997-1, 1997-2 and 1997-3 are
held by Advanta Mortgage Corp., U.S.A.):
Series 1995-1
Series 1996-1
Series 1996-2
Series 1996-3
Series 1996-4
Series 1997-1
Series 1997-2
Series 1997-3
Series 1997-4
Series 1998-1
Series 1998-2
Series 1998-H1
but in each case excluding all rights to servicer advances and all rights with
respect to Mortgage Loans not remaining in any Securitization Trust on the
Closing Date.
16
Exhibit D - Page 117 of 166
<PAGE>
ASSETS (CONTINUED)
- ------------------
All of the rights Company has under the Pooling and Servicing Agreements (in any
capacity) with respect to the following Securitization Trusts, including where
applicable, without limitation, (a) the call rights to purchase mortgage loans
from certain Securitization Trusts when the principal balance of the related
mortgage loans is less than 10% of the aggregate principal balances of the
related mortgage loans on the cut-off date established pursuant to the related
Pooling and Servicing Agreement, (b) the rights to purchase loans out of the
Securitization Trusts in certain circumstances and (c) the mortgage loans and
other proceeds of the exercise of the call rights or subsequent sale of mortgage
loans:
Series 1995-1
Series 1995-2
Series 1996-1
Series 1996-2
Series 1996-3
Series 1996-4
Series 1997-1
Series 1997-2
Series 1997-3
Series 1997-4
Series 1998-1
Series 1998-2
The rights Company has (in any capacity) under the Servicing Agreement for the
Series 1998-H1 Securitization Trust to purchase mortgage loans out of the
Securitization Trust in certain circumstances.
All of the rights Company has under the Assumed Contracts listed in the attached
Schedule of Assumed Contracts..
All of the Company's rights to borrow funds from the reserve accounts associated
with the Series 1995-2, 1996-1, and 1996-3 Securitization Trusts in exchange for
the issuance of Company notes to Bankers Trust, as trustee of such
Securitization Trusts.
{Servicing Platform equipment, furniture, improvements and software located in
Santa Rosa, California (leasehold interest) if and only if Subscriber has
notified Debtor by May 31, 1999 and the parties have reached an agreement
acceptable to them before Closing providing the terms and conditions of such
transfer, including price and assumption of liabilities.}
The Holder's interest in the Reserve created pursuant to the Cash Flow
Instrument.
17
Exhibit D - Page 118 of 166
<PAGE>
{The right to a portion of the servicing fee as provided by letter agreement
dated as of August 17, 1996, between Company and Advanta Mortgage Corp, U.S.A.
ASSETS (Continued)} [ALL OF THE COMPANY'S LICENSES TO SERVICE MORTGAGE LOANS.]
Any securities and tangible non-cash consideration received in a sale or
transfer of any Assets to a non-Related Person of {the} [THE] Goldman Sachs
Group, Inc., ("Subscriber"), including any securities retained by the Company in
connection with the Securitization of any Assets.
18
Exhibit D - Page 119 of 166
<PAGE>
SCHEDULE OF LIABILITIES
Liabilities of the Company under the Settlement Agreement.
Liability to repay the promissory notes issued to the Company to Bankers Trust
as trustee of the reserve accounts associated with the Series 1995-2, 1996-1,
and 1996-3 Securitization Trusts (the funds of which may be invested in the
Company's short-term debt obligations.
Liabilities of the Company under the Assumed Contracts listed on Schedule of
Assumed Contracts.
19
Exhibit D - Page 120 of 166
<PAGE>
SCHEDULE OF ASSUMED CONTRACTS
The following Contracts are Assumed Contracts and are included in the
Liabilities:
The Pooling and Servicing Agreements including all amendments and
supplements thereto, with respect to the following Securitization
Trusts:
Series 1995-1
Series 1995-2
Series 1996-1
Series 1996-2
Series 1996-3
Series 1996-4
Series 1997-1
Series 1997-2
Series 1997-3
Series 1997-4
Series 1998-1
Series 1998-2
Series 1998-H1
Letter agreement with Advanta Mortgage Corp., USA, providing for the
Company to receive 15 basis points of Advanta Mortgage Corp., USA's 50
basis-point servicing fee.
{Life-of-Loan real estate} [LETTER AGREEMENT WITH ADVANTA MORTGAGE
CORP., USA, DATED JANUARY 22, 1999 GIVING THE COMPANY THE OPTION TO
TERMINATE ADVANTA MORTGAGE CORP., USA AS MASTER SERVICER OF CERTAIN
SECURITIZATION TRUSTS.
LIFE-OF-LOAN REAL ESTATE] Tax Monitoring Agreement with Transamerica
Corporation.
20
Exhibit D - Page 121 of 166
<PAGE>
EXHIBIT 2.4.1
and
EXHIBIT 5.1
ADDITIONAL COVENANTS AGREEMENT
THIS ADDITIONAL COVENANTS AGREEMENT is entered into as of June
- --, 1999, by and between SOUTHERN PACIFIC FUNDING CORPORATION, a California
corporation ("Company") and the SPFC LIQUIDATING TRUST established for the
benefit of the creditors of Southern Pacific Funding Corporation in connection
with the case filed by the Company under Chapter 11 of the United States
Bankruptcy Code (the "Liquidating Trust") GOLDMAN, SACHS & CO., a Delaware
limited partnership ("Asset Company"), and THE GOLDMAN SACHS GROUP, INC., a
Delaware corporation ("Subscriber").
RECITALS
A. On October 1, 1998, Company filed for bankruptcy under Chapter 11 of
the Bankruptcy Code (the "Bankruptcy Case") in the United States
Bankruptcy Court for the District of Oregon (the "Bankruptcy Court").
B. On May --, 1999, Company filed its amended "Plan of Reorganization"
with the Bankruptcy Court. The Plan of Reorganization was confirmed by
the Bankruptcy Court pursuant to the "Confirmation Order" entered on
{June} [JULY] --, 1999.
C. As of {May 21} [JUNE 30], 1999, Company entered into {an} [A SECOND]
Amended and Restated Asset Purchase Agreement with Goldman, Sachs &
Co., ( "Asset Purchase Agreement").
D. As of {May 21} [JUNE 30], 1999, Company entered into {an} [A SECOND]
Amended and Restated Stock Subscription and Purchase Agreement with The
Goldman Sachs Group, Inc., as Subscriber (the "Stock Subscription and
Purchase Agreement").
E. Pursuant to the Confirmation Order and the Asset Purchase Agreement,
the Purchased Assets were sold by Company to Asset Company.
F. Also pursuant to the Confirmation Order and the Stock Subscription and
Purchase Agreement, Company canceled all of its capital stock
outstanding prior to the effective date of the Plan of Reorganization
and issued 10,000 shares of common stock, constituting all of the
capital stock of Company, to Subscriber (or one of its affiliates).
G. Also pursuant to the Confirmation Order and the Stock Subscription and
Purchase Agreement, certain of the assets and liabilities of the
Company were transferred to the Liquidating Trust. The Stock
Subscription and Purchase Agreement contemplates that
Exhibit D - Page 122 of 166
<PAGE>
Company, the Liquidating Trust and the other parties hereto enter into
this Additional Covenants Agreement.
AGREEMENTS
The Liquidating Trust, Company, Subscriber, and Asset Company
intending to be bound, hereby agree as follows:
1. DEFINITIONS
For purposes of this Agreement, capitalized terms not
otherwise defined have the meanings given in Appendix I, attached hereto and
incorporated herein.
2. PAYMENTS FROM PROCEEDINGS
Company will distribute to the Liquidating Trust any payments
it has received or receives as a result of Company prevailing in any Proceeding
against third parties for activities occurring prior to the closing of the Stock
Subscription and Purchase Agreement, except that Company will retain any
payments received with respect to any Proceeding that (a) is related to one or
more particular mortgage loans held in the Securitization Trusts on the Closing
Date, (b) affects the interests or performance of the master servicer of such
loans, such as a claim that Company, as master servicer, may bring on behalf of
a Securitization Trust, or (c) is related to failure by the trustee under any
Securitization Trust or any Prepayment Penalty Trust Certificates to properly
calculate the cash flows to the certificate holders from any such Trust or
Certificate.
3. BOOKS AND RECORDS
The Liquidating Trust will provide Company access to the books
and records of Company, and the opportunity to make copies at its expense. Upon
dissolution of the Liquidating Trust, all such books and records shall be
delivered by the Liquidating Trust to Company.
4. THE FLORIDA RESERVE
Company will deposit the Distributions for each month (after
any payments required to be made to Subscriber as a result of an unpaid
Preferred Return, or unpaid Company Tax Adjustment Amount, or payments on Holder
Expense Loans) into a segregated reserve account (the "Florida Reserve") for a
period of time. The funds deposited in the Florida Reserve will be invested at
the direction of Company only in Eligible Investments for the benefit of Holder
(Holder shall be responsible to report such investment income and pay income
taxes thereon) and may be used (together with any income on Eligible
Investments) by Company to {purchase each and every mortgage loan out of
Securitization Trusts in the amount and as specified in the settlement or
finding referred to below (including accrued interest and other} [PAY ANY]
amounts required to be paid {under the applicable Pooling and Servicing
Agreement) pursuant to the requirements of a binding settlement or a finding
that any such mortgage loans are owned by or encumbered in favor of Oceanmark
Bank F.S.B. in a final, unappealable judgment entered by a court of competent
jurisdiction} [BY THE COMPANY PURSUANT TO SECTION 5(B) OF THE SETTLEMENT
AGREEMENT] with
2
Exhibit D - Page 123 of 166
<PAGE>
respect to the Florida {Case (such settlement or judgment,} [CASES (]the
"Florida Case Resolution"). When the obligations of the Company under the
Florida Case Resolution are fully satisfied, Company will immediately release
all remaining funds in the Florida Reserve to Holder.
5. SUBSCRIBER CONTRIBUTION
[SUBJECT TO THE FOLLOWING PROVISO,] Subscriber agrees to make
a Subscriber Contribution to the extent necessary to satisfy {Reorganized}
Company's obligations to {purchase each and every mortgage loan out of
Securitization Trusts as specified in the settlement or finding referred to
below (including accrued interest and other amounts required to be paid under
the applicable Pooling and Servicing Agreement) pursuant} [MAKE PAYMENTS
REQUIRED PURSUANT TO SECTION 5(B) OF THE SETTLEMENT AGREEMENT WITH RESPECT] to
the Florida Case Resolution to the extent the funds contained in the Florida
Reserve established pursuant to this Agreement (plus any funds provided by or on
behalf of the Liquidating Trust, in each case in its sole and absolute
discretion) are insufficient to satisfy such obligations at the time such
obligations are due[; PROVIDED, HOWEVER, THAT IN NO EVENT SHALL SUBSCRIBER BE
OBLIGATED TO (ALTHOUGH SUBSCRIBER MAY, IN ITS SOLE DISCRETION) MAKE A SUBSCRIBER
CONTRIBUTION WITH RESPECT TO ANY SUCH AMOUNT WHICH IS NOT GUARANTEED PURSUANT TO
SECTION 6(A) OF THE SETTLEMENT AGREEMENT]. Within 30 days of making a Subscriber
Contribution, Subscriber must elect by delivering written notice to Holder of
its election not to receive a Preferred Return (the "Subscriber Election"). If
no election is made, Subscriber will be deemed to have elected to receive a
Preferred Return.
6. REQUIRED CAPITAL CONTRIBUTIONS
Subscriber agrees to make capital contributions to Company
each month in cash to the extent the Residual Cash Flows remaining after payment
of Distributions together with the proceeds of any Holder Expense Loan made
during such month are insufficient to pay all expenses and liabilities of
Company together with the requirement to fund the Reserve pursuant to the Cash
Flow Instrument (such contributions, the "Required Capital Contributions"),
subject to the limitation that Required Capital Contributions to pay an unpaid
Holder Tax Adjustment Amount may be limited during any month to an amount equal
to all pre-tax cash flows and other amounts, if any, paid or payable in respect
of the Asset Cash Flow Instrument minus the Out-of-Pocket Expenses plus the
Holder-Allocated Expenses for the month.
Required Capital Contributions are not entitled to a preferred
return of any kind and no portion of the Required Capital Contributions shall be
eligible for treatment as Out-of-Pocket Expenses.
7. INFORMATION; REPORTS; COOPERATION
Company and Asset Company will provide Holder the following
information and reports:
(a) All reports pertaining to the Assets and the Purchased Assets
received by Company from Asset Company or Third Parties,
including without limitation, any master
3
Exhibit D - Page 124 of 166
<PAGE>
servicer or subservicer (each, a "Third Party Report").
Company and Asset Company will provide Third Party Reports to
Holder monthly.
(b) Annual investor level reports ("Investor Reports") containing
information in reasonable detail on the Assets and the
Purchased Assets, a description of the management activities
and decisions related to the Assets and the Purchased Assets,
financial statements (including balance sheet, income
statement, and cash flow statements), and proposed management
plans for the next year. Each Investor Report shall contain
information that a reasonably prudent investor would be
interested in receiving with respect to its investment.
(c) Meetings, upon reasonable request by Holder, with a person
designated by the Holder and a person designated by Company or
Asset Company (with knowledge of the management activities
respecting the Assets and the Purchased Assets) to discuss the
management of the Assets and the Purchased Assets, receive
comments from the person designated by the Holder, and prompt
responses to such designated person (which may be oral or
written) to questions or requests (including loan data tapes)
for information that a reasonably prudent investor would be
interested in receiving with respect to its investment.
In the event Holder desires to sell all or a portion of its
interest, Company and Asset Company will cooperate with Holder and will promptly
provide all necessary information reasonably requested by Holder to facilitate
the sale.
8. ASSET MANAGEMENT; STANDARDS
Company and Asset Company will manage the Assets and the
Purchased Assets in accordance with the following standards:
(a) All loan servicing activities will be managed in a manner
consistent with industry standards, including industry
servicing standards related to the subprime credit mortgage
market; provided that to the extent that such standards
conflict with the applicable Pooling and Servicing Agreements
such agreements shall govern.
(b) The Assets and the Purchased Assets will be managed with the
same care and diligence and in a manner consistent with the
manner in which other similar assets of the Subscriber and
Related Persons of Subscriber are managed;
(c) The Assets and the Purchased Assets will be managed in a
manner consistent with the economic interests of both Holder
and Company;
(d) No repurchase agreement will be entered into with respect to
the Assets or the Purchased Assets; and
(e) The Assets and the Purchased Assets will not be used as
collateral or security for any transaction other than a
Financing Transaction.
4
Exhibit D - Page 125 of 166
<PAGE>
Company shall affix any Certificates created after the date of
this agreement with the legend that appears on the top of the Cash Flow
Instrument.
5
Exhibit D - Page 126 of 166
<PAGE>
9. NO MANAGEMENT FEE
Neither Subscriber, Company, Asset Company nor Related Persons
of any of the foregoing will be entitled to a management fee in connection with
the management of the Assets or the Purchased Assets.
10. EQUITY
Subscriber or a Related Person of Subscriber shall at all
times maintain ownership of at least 80% of the capital stock of Company, after
giving effect to any capital stock issued after Closing; provided that the
foregoing shall not be deemed to preclude the liquidation or merger of the
Company into Subscriber. Company shall not pledge or otherwise encumber the
capital stock of Company, except as collateral for a financing that is recourse
to Subscriber. Company shall not accept capital contributions except in cash and
except as may be required in connection with the Subscriber Contribution or as
Required Capital Contributions.
11. INDEBTEDNESS
(a) Unless Subscriber has delivered to Holder its Guarantee of
all obligations of Company to Holder, including without limitation, the
performance by Company of its obligation to make Distributions under
the Cash Flow Instrument, Company will not incur indebtedness other
than:
(i) indebtedness necessary to pay Out-of-Pocket Expenses;
(ii) indebtedness incurred to finance advances under the Pooling
and Servicing Agreements; and
(iii) Financing Transactions.
(b) Unless Subscriber has delivered to Holder its Guarantee of
all obligations of Asset Company to Company, including without
limitation, the obligation of Asset Company to make distributions under
the Asset Cash Flow Instrument, Asset Company will not incur
indebtedness other than Financing Transactions.
12. SERVICES BY LIQUIDATING TRUST
(a) From the Closing Date to the end of the month in which the
Closing Date occurs, the Liquidating Trust will be allowed to retain
the servicing income for such period and will, at its expense, hire and
utilize former employees of company to provide loan servicing services
to company for such period. [ALL OTHER COSTS OF PROVIDING LOAN
SERVICING DURING SUCH PERIOD ON BEHALF OF THE COMPANY SHALL BE PAID BY
THE LIQUIDATING TRUST.] Liquidating Trust will use its reasonable best
efforts to maintain the quality of servicing after the Closing Date to
a level comparable to the period prior to the Closing Date.
6
Exhibit D - Page 127 of 166
<PAGE>
(b) From July 31, 1999 to August 31, 1999 (or as soon
thereafter as practicable), Liquidating Trust will utilize former
employees of company and otherwise use its reasonable best efforts to
assure a smooth transfer of servicing responsibilities, records and
files to the new servicer or servicers as directed by company. Company
shall pay liquidating trust $480,000 as compensation for such services.
All other usual and customary costs of servicing transfer (such as
servicing transfer fees by the new subservicer, and other costs)[,
EXCEPT AS OTHERWISE SPECIFIED IN THE STOCK SUBSCRIPTION AND PURCHASE
AGREEMENT,] shall either be paid by the new servicer or servicers or by
company (it being understood that the liquidating trust is not entitled
to charge any additional fee).
13. SERVICING TRANSFER
Company shall not transfer the Master Servicing Rights unless
the prior consent of Holder shall have been obtained; provided that Master
Servicing Rights may be transferred without consent in connection with the sale
of the related residual certificate.
14. ASSET TRANSFERS
(a) Unless Subscriber has delivered to Holder its Guarantee of
all obligations of Company to Holder, including without limitation, the
performance by Company of its obligation to make Distributions under
the Cash Flow Instrument, Company will not transfer any Assets to an
entity other than a special purpose bankruptcy remote entity with
Organizational Documents that prohibit the transferee from incurring
indebtedness other than:
(i) indebtedness to pay Out-of-Pocket Expenses;
(ii) indebtedness incurred to finance servicer
advances under the Pooling and Servicing Agreements; and
(iii) Financing Transactions.
(b) Unless Subscriber has delivered to Holder its Guarantee of
all obligations of Asset Company to Company, including without
limitation, the obligation of Asset Company to make distributions under
the Asset Cash Flow Instrument, Asset Company will not transfer any
Assets to an entity other than a special purpose bankruptcy remote
entity with Organizational Documents that prohibit the transferee from
incurring indebtedness other than:
(i) indebtedness to pay Out-of-Pocket Expenses;
(ii) indebtedness incurred to finance servicer
advances under the Pooling and Servicing Agreements; and
(iii) Financing Transactions.
Company and Asset Company will not acquire any additional assets (other than
cash), by purchase, capital contribution (except for a Subscriber Contribution)
or otherwise, other than Asset Proceeds and Purchased Asset Proceeds.
7
Exhibit D - Page 128 of 166
<PAGE>
15. GUARANTEE
Subscriber agrees that its guaranty, if required to be given,
shall be substantially in the form attached as Appendix II hereto.
16. THIRD PARTY BENEFICIARIES
This Additional Covenants Agreement is entered into for the
benefit of the parties hereto and for the benefit of the Holder or Holders of
the Cash Flow Instrument, which Holder or Holders are expressly acknowledged to
be a third party beneficiary or third party beneficiaries of this Additional
Covenants Agreement.
17. VENUE; ATTORNEY FEES; GOVERNING LAW
In any action or proceeding seeking to enforce any provision
of, or based on any right arising out of, this Additional Covenants Agreement
may be brought against any of the parties in the courts of the State of Oregon,
county of Multnomah, and each of the parties consents to the jurisdiction of
such court (and of the appropriate appellate court) in any such action or
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding referred to in the preceding sentence may be served on any party
anywhere in the world. In connection with any such action or proceeding, the
prevailing party will be entitled to recover its costs, including reasonable
attorney fees at trial and on any appeal.
18. NOTICES
All notices, consents, waivers, and other communications under
this Agreement must be in writing and will be deemed to have been duly given
when (a) delivered by hand, (b) sent by facsimile (with written confirmation of
receipt), or (c) when received by the addressee, if sent by a nationally
recognized overnight delivery service (receipt requested), in each case to the
appropriate addresses and facsimile numbers set forth below (or to such other
addresses and facsimile numbers as a party may designate by notice to the other
parties):
8
Exhibit D - Page 129 of 166
<PAGE>
<TABLE>
Liquidating Trust: Asset Company:
- ------------------ --------------
<S> <C>
SPFC Liquidating Trust Goldman, Sachs & Co.
One Centerpointe Drive 85 Broad Street
Suite 551 New York, New York 10004
Lake Oswego, Oregon 97035
Attention: Marvin Kabatznick
Attention: Kevin D. Padrick Facsimile No.: (212) 346-3568
Facsimile No.: (503) 598-0662 Attention: Jay Strauss
Facsimile No.: (212) 902-0940
with a copy to:
with a copy to:
Miller, Nash, Wiener, Hager & Carlsen LLP
111 S.W. Fifth Avenue Cadwalader, Wickersham & Taft
Suite 3500 100 Maiden Lane
Portland, Oregon 97204 New York, New York 10038
Attention: David W. Brown Attention: David C.L. Frauman
Facsimile No.: (503) 224-0155 Facsimile No.: (212) 504-6666
Subscriber: Company:
- ----------- --------
The Goldman Sachs Group, Inc. Southern Pacific Funding Corporation
85 Broad Street One Centerpointe Drive
New York, New York 10004 Suite 551
Lake Oswego, Oregon 97035
Attention: Marvin Kabatznick
Facsimile No.: (212) 346-3568 Attention: Kevin D. Padrick
Facsimile No.: (503) 598-0662
Attention: Jay Strauss
Facsimile No.: (212) 902-0940 with a copy to:
with a copy to: Miller, Nash, Wiener, Hager & Carlsen LLP
111 S.W. Fifth Avenue
Cadwalader, Wickersham & Taft Suite 3500
100 Maiden Lane Portland, Oregon 97204
New York, New York 10038
Attention: David W. Brown
Attention: David C.L. Frauman Facsimile No.: (503) 224-0155
Facsimile No.: (212) 504-6666
</TABLE>
9
Exhibit D - Page 130 of 166
<PAGE>
19. JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of,
or based on any right arising out of, this Agreement may be brought against any
of the parties in the courts of the State of Oregon, County of Multnomah, or, if
it has or can acquire jurisdiction, in the United States District Court or the
United States Bankruptcy Court for the District of Oregon, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world. In
connection with any such action or proceeding, the prevailing party (whether
prevailing affirmatively or by means of a successful defense with respect to the
issues having the greatest value or importance) will be entitled to recover its
costs, including reasonable attorney fees at trial and on any appeal.
20. FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other
such further information, (b) to execute and deliver to each other such other
documents, and (c) to do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the other agreements referred to in this Agreement.
21. WAIVER
Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement or the documents referred to
in this Agreement will operate as a waiver of such right, power, or privilege,
and no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, no party will be deemed to have waived any of its
rights or privileges under this Agreement or the documents referred to in this
Agreement unless the waiver is in writing and no waiver given by a party will be
applicable except in the specific instance for which it is given.
22. SEVERABILITY
If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
23. SECTION HEADINGS; CONSTRUCTION
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation. All
references to "Section" or "Sections" refer to the corresponding Section or
Sections of this Agreement. All words used in this Agreement will be construed
to be of such gender or number as the circumstances require. Unless otherwise
expressly provided, the word "including" does not limit the preceding words or
terms.
10
Exhibit D - Page 131 of 166
<PAGE>
24. TIME OF ESSENCE
With regard to all dates and time periods set forth or
referred to in this Agreement, time is of the essence.
{23} [25]. NO PARTNERSHIP
None of the parties to the Subscriber Definitive Agreements
intend that any provision of any Subscriber Definitive Agreement shall be
construed as creating a partnership between or among any of the parties thereto.
Each party to any of the Subscriber Definitive Agreements agrees that it shall
not treat any agreement, arrangement or right thereunder as a partnership for
Tax reporting purposes or for the purpose of determining any Tax liability.
{24} [26]. GOVERNING LAW
THIS ADDITIONAL COVENANTS AGREEMENT, AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER, SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICT OF LAWS.
{25} [27]. COUNTERPARTS
This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties have executed this Additional Covenants
Agreement to be effective as of the date set forth above.
SOUTHERN PACIFIC FUNDING THE GOLDMAN SACHS GROUP, INC.
CORPORATION
By: -------------------------- By: -----------------------------
Title: -------------------------- Title: -----------------------------
SPFC LIQUIDATING TRUST GOLDMAN, SACHS & CO.
By: -------------------------- By: -----------------------------
Trustee
Title: -----------------------------
11
Exhibit D - Page 132 of 166
<PAGE>
APPENDIX I TO
ADDITIONAL COVENANTS AGREEMENT
DEFINED TERMS
All references in this Appendix I to Sections are references
to Sections of this Additional Covenants Agreement unless otherwise specified.
Unless the context otherwise requires, capitalized terms used in the Additional
Covenants Agreement, if not otherwise defined, have the following meanings:
"ADDITIONAL COVENANTS AGREEMENT" and "AGREEMENT" means, when
referring to "this Agreement," the Additional Covenants Agreement dated as of
June ---, 1999, between Company, Liquidating Trust, Asset Company and
Subscriber.
"ASSETS" has the meaning given in Schedule 2.1.2 of the Stock
Subscription and Purchase Agreement.
"ASSET CASH FLOW INSTRUMENT" has the meaning given in Section
4.1 of the Asset Purchase Agreement.
"ASSET COMPANY" means the buyer of assets identified in the
first paragraph of the Asset Purchase Agreement or any permitted assignee
thereof.
"ASSET PURCHASE AGREEMENT" or "PURCHASE AGREEMENT" means the
Amended and Restated Asset Purchase Agreement dated as of May 21, 1999, between
Debtor and Asset Company.
"ASSET PURCHASE CASH FLOWS" has the meaning given in Section
2.3.1(a)(i) of the Stock Subscription and Purchase Agreement.
"BANKRUPTCY CASE" has the meaning given in the Recitals to
this Agreement.
"BANKRUPTCY CODE" means Title 11 of the United States Code.
"BANKRUPTCY COURT" has the meaning given in the Recitals to
this Agreement.
"CASH FLOW INSTRUMENT" has the meaning given in Section 2.3.1
of the Stock Subscription and Purchase Agreement.
"CERTIFICATES" means any certificates by Company to represent
a beneficial interest in the Cash Flow Instrument.
"CLOSING" has the meaning given in Section 2.5 of the Stock
Subscription and Purchase Agreement.
"CLOSING DATE" means the date and time when Closing actually
takes place.
1
Exhibit D - Page 133 of 166
<PAGE>
"COMPANY" has the meaning given in the first paragraph of this
Agreement.
"COMPANY TAX ADJUSTMENT AMOUNT" means, in the event the
Reorganized Company Tax Attributes are less than $77,000,000, the Tax Adjustment
Amount; otherwise zero.
"CONFIRMATION ORDER" means the order of the Bankruptcy Court
confirming the Plan of Reorganization.
"DIP FINANCING AGREEMENT" means the Master Repurchase
Agreement, Annex I to such Master Repurchase Agreement, the Margin Agreement and
the related agreements, annexes and exhibits entered into between {Debtor} [THE
COMPANY] and Goldman, Sachs & Co., pursuant to which Goldman, Sachs & Co.
extended a credit facility in the approximate initial principal amount of
$33,600,000.
"DISTRIBUTION" shall have the meaning given in Section 2.3.2
of the Stock Subscription and Purchase Agreement.
"ELIGIBLE INVESTMENTS" means the following:
(1) direct general obligations of, or obligations fully
and unconditionally guaranteed as to the timely
payment of principal and interest by, the United
States or any agency or instrumentality thereof,
provided such obligations are backed by the full
faith and credit of the United States;
(2) federal funds and certificates of deposit, time and
demand deposits and banker's acceptances issued by
any bank or trust company incorporated under the laws
of the United States or any state thereof and subject
to supervision and examination by federal or state
banking authorities, provided that at the time of
such investment or contractual commitment providing
for such investment the short-term debt obligations
of such bank or trust company at the date of
acquisition thereof have been rated in its highest
rating by a nationally recognized statistical rating
organization;
(3) commercial paper (having original maturities of not
more than 30 days) rated in its highest rating by a
nationally recognized statistical rating
organization; and
(4) investments in money market funds rated in its
highest rating by a nationally recognized statistical
rating organization.
"FINANCING TRANSACTION" means any nonrecourse borrowing or any
borrowing with recourse solely to a bankruptcy remote special purpose entity in
respect of the Reorganized Company or the Asset Company, which borrowing is
secured by, and on which principal and/or interest payments are made primarily
from cash flows on, the related Assets or Purchased Assets and entered into
primarily for the purpose of distributing Proceeds. Financing Transaction also
includes all incremental borrowings from the reserve funds created for Trust
Series 1995-2, 1996-1, and 1996-3.
2
Exhibit D - Page 134 of 166
<PAGE>
"FLORIDA {CASE} [CASES]" means Oceanmark Bank F.S.B. v.
Norwest Bank Minnesota, N.A. and Advanta Mortgage Corp., USA, {a lawsuit} [AND
OCEANMARK BANK F.S.B. V. BANKERS TRUST COMPANY OF CALIFORNIA, N.A. AND ADVANTA
MORTGAGE COMPANY, LAWSUITS] filed in the state of Florida by Oceanmark Bank,
F.S.B., and all related litigation in the Bankruptcy Court.
"FLORIDA CASE RESOLUTION" has the meaning given in Section 4.
"FLORIDA RESERVE" has the meaning given in Section 4.
"GOVERNMENTAL BODY" means any:
(a) nation, state, county, city, town, village,
district, or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or
other government;
(c) governmental or quasi-governmental authority of
any nature (including any governmental agency, branch,
department, official, or entity and any court or other
tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature.
"GUARANTEE" means a guarantee to be delivered in accordance
with Section 13 and the terms of the Cash Flow Instrument.
"HOLDER" means the holder of the Cash Flow Instrument.
"HOLDER-ALLOCATED EXPENSES" has the meaning given in Section
2.3.1 of the Stock Subscription and Purchase Agreement.
"HOLDER TAX ADJUSTMENT AMOUNT" means, in the event the
Reorganized Company Tax Attributes are more than $81,000,000, the lesser of the
Tax Adjustment Amount and $1,500,000; otherwise zero.
"INVESTOR REPORTS" has the meaning given in Section 7(b).
"LIQUIDATING TRUST" has the meaning given in the first
paragraph of this Agreement.
"MASTER SERVICING RIGHTS" means master loan servicing rights
under the Pooling ans Servicing Agreements relating to Series 1997-4, 1998-1,
1998-2, and 1998-H1 Securitization Trusts.
3
Exhibit D - Page 135 of 166
<PAGE>
"MATERIAL INTEREST" means, for purposes of the definition of
Related Person, a direct or indirect beneficial ownership (as defined in Rule
13d-3 under the Securities Exchange Act of 1934) of voting securities or other
voting interests representing at least 25% of the outstanding voting power of a
Person or equity securities or other equity interests representing at least 25%
of the outstanding equity securities or equity interests in a Person.
"ORGANIZATIONAL DOCUMENTS" means (a) the articles or
certificate of incorporation and the bylaws of a corporation; (b) the
partnership agreement and any statement of partnership of a general partnership;
(c) the limited partnership agreement and the certificate of limited partnership
of a limited partnership; (d) the operating agreement and articles or
certificate of organization of a limited liability company; (e) any charter or
similar document adopted or filed in connection with the creation, formation, or
organization of a Person; and (f) any amendment to any of the foregoing.
"OUT-OF-POCKET EXPENSES" has the meaning given in Section
2.3.3 of the Stock Subscription and Purchase Agreement.
"PERSON" means any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
"PLAN OF REORGANIZATION" is the plan of reorganization filed
by the Company in the Bankruptcy Case, as may be amended or supplemented.
"POOLING AND SERVICING AGREEMENTS" means the Pooling and
Servicing Agreements (or the {Trust Agreement and Indenture and} Servicing
Agreement with respect to the Series 1998-H1 Securitization Trust) entered into
by the Company (or one of its Subsidiaries) with respect to each of the
securitization transactions engaged in by the Company (or one of its
Subsidiaries) between 1995 and 1998.
"PREFERRED RETURN" means, after a Subscriber Contribution
shall have been made and unless the Subscriber elects not to receive a Preferred
Return, the return of cash in an amount equal to the Subscriber Contribution
plus 15% per annum of the unpaid balance of the Subscriber Contribution until
the Subscriber Contribution shall have been returned in full.
"PREPAYMENT PENALTY TRUST CERTIFICATES" means the certificates
included among the Purchased Assets representing interests in prepayment penalty
income in respect of the mortgage loans in the Securitization Trusts.
"PROCEEDING" means any action, arbitration, audit, case,
hearing, investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought, conducted, or
heard by or before, or otherwise involving, any Governmental Body or arbitrator.
"PROCEEDS" means the cash amount realized from an arms-length
sale, transfer or Financing Transaction, net of direct Out-of-Pocket Expenses.
4
Exhibit D - Page 136 of 166
<PAGE>
"PURCHASED ASSETS" has the meaning given in Section 2.1 of the
Asset Purchase Agreement.
"RELATED PERSON" means, with respect to a specified Person
other than an individual:
(a) any Person that directly or indirectly controls,
is directly or indirectly controlled by, or is directly or
indirectly under common control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer,
partner, executor, or trustee of such specified Person (or in
a similar capacity), and each Person who is married to,
resides with, or related within the second degree to any such
director, officer, partner, executor, trustee, or Person in a
similar capacity;
(d) any Person in which such specified Person holds a
Material Interest;
(e) any Person with respect to which such specified
Person serves as a general partner or a trustee (or in a
similar capacity); and
(f) any Related Person of any individual described in
clause (b) or (c).
"REORGANIZED COMPANY" has the meaning given in the Recitals to
the Stock Subscription and Purchase Agreement.
"REORGANIZED COMPANY TAX ATTRIBUTES" means the sum of the
Reorganized Company's net operating losses plus the excess of the tax basis of
its assets over their fair market value in the agreed amount of $79,000,000, to
be calculated as of the end of the Short Year as: (a) total capital contributed
by the Company's shareholders, (b) minus any distributions to Company
shareholders or other payments that were not deductible or for which the Company
did not receive full basis for federal income tax purposes, (c) plus retained
after-tax income for the period prior to the Company's initial public offering
as reported for federal income tax purposes, and (d) plus the Company's excess
inclusion income for federal income tax purposes for the taxable periods after
the Company's initial public offering through Closing less Taxes paid, as such
amount may be adjusted on any Tax Attribute Determination Date.
"REQUIRED CAPITAL CONTRIBUTIONS" has the meaning given in
Section 6.
"RESERVE" means a funded account equal to an amount reasonably
calculated by Subscriber to be sufficient to cover any Out-of Pocket Expenses
estimated to occur during the following twelve months, but in no event more than
$100,000.
"RESIDUAL CASH FLOWS" has the meaning given in Section
2.3.1(a)(ii) of the Stock Subscription and Purchase Agreement.
5
Exhibit D - Page 137 of 166
<PAGE>
"SECURITIZATION TRUST" means the trusts into which pools of
mortgage loans were deposited pursuant to the 13 securitization transactions
entered into by the Company (or one of its Subsidiaries) between 1995 and 1998
and which in turn issued various classes of mortgage securities representing
interests in, or in the case of the Series 1998-H1 Securitization Trust, secured
by, the trust assets.
["SETTLEMENT AGREEMENT" MEANS THE SETTLEMENT AGREEMENT DATED
AS OF JUNE 17, 1999, AMONG SOUTHERN PACIFIC FUNDING CORPORATION, NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, MBIA INSURANCE CORPORATION AND THE GOLDMAN
SACHS GROUP, INC.]
"SHORT YEAR" has the meaning given in Section 3.5.2(a) of the
Stock Subscription and Purchase Agreement.
"STOCK SUBSCRIPTION AND PURCHASE AGREEMENT" has the meaning
given in the Recitals to this Agreement.
"SUBSCRIBER" has the meaning given in the first paragraph of
this Agreement.
"SUBSCRIBER CONTRIBUTION" means the amount of any funds
contributed to the Reorganized Company by Subscriber in order to purchase
mortgage loans out of certain Securitization Trusts (including accrued interest
and other amounts required to be paid under the applicable Pooling and Servicing
Agreements) with respect to loans pursuant to the resolution of the Florida Case
if the amount of the Florida Reserve is insufficient to make all of the required
purchases.
"SUBSCRIBER DEFINITIVE AGREEMENTS" means this Agreement, the
Asset Purchase Agreement, Additional Covenants Agreement, the Settlement
Agreement, the Cash-Flow Instrument, the [Asset Purchase Agreement Cash-Flow
Instrument], the Subservicing Agreement, and the Guarantee.
"SUBSCRIBER ELECTION" has the meaning given in Section 5.
"TAX" and "TAXES" mean all taxes, levies, imposts, duties,
charges or withholdings, together with any penalties, fines or interest thereon
or other additions thereto imposed by any Governmental Body.
"TAX ADJUSTMENT AMOUNT" means the amount calculated as of a
Tax Attribute Determination Date in accordance with the following formula
(without duplication of adjustments made on any earlier Tax Attribute
Determination Date), plus interest accrued at a per annum rate of 10 percent
from the Closing Date paid:
If Reorganized Company Tax Attributes exceed $81
million, the Tax Adjustment Amount shall be 15.19 percent of
such excess. If Reorganized Tax Attributes are less than $77
million, the Tax Adjustment Amount shall be 15.19 percent of
such shortfall.
"TAX ATTRIBUTE DETERMINATION DATE" is a date on which the
expected Reorganized Company Tax Attributes are determined to be different than
$79,000,000 as a result of (a) a final
6
Exhibit D - Page 138 of 166
<PAGE>
determination by or settlement with the Internal Revenue Service, (b) a mutual
determination of the Liquidating Trust and Subscriber, or (c) the issuance of a
written opinion from the Tax Expert with respect to those elements of
Reorganized Company Tax Attributes not determined by the procedures set forth in
clause (a) or (b).
"TAX EXPERT" has the meaning given in Section 3.5.7 of the
Stock Subscription and Purchase Agreement.
"THIRD PARTY" means a Person that is neither the Subscriber
nor any Related Person of Subscriber.
"THIRD PARTY REPORT" has the meaning given in Section 7(a).
Exhibit D - Page 139 of 166
<PAGE>
APPENDIX II
, 1999
Southern Pacific Funding Corporation
ADDRESS
Attention:
Ladies and Gentlemen:
For value received, The Goldman Sachs Group, Inc. (the "Guarantor"), a
corporation duly organized under the laws of the State of Delaware, hereby
unconditionally guarantees the prompt and complete payment and performance when
due, whether by acceleration or otherwise, of all obligations and liabilities,
whether now in existence or hereafter arising, of [Goldman Entity], a subsidiary
of the Guarantor and a [describe entity] (the "Company"), to SOUTHERN PACIFIC
FUNDING CORPORATION AND HOLDER (the "Counterparty") arising out of the
assumptions of the obligations of the Guarantor under the Additional Covenants
Agreement among the Guarantor, Goldman, Sachs & Co. and the Counterparty dated
as of [ ], 1999 (the "Agreement"). This Guaranty is one of payment and not of
collection.
The Guarantor hereby waives notice of acceptance of this Guaranty and notice of
any obligation or liability to which it may apply, and waives presentment,
demand for payment, protest, notice of dishonor or non-payment of any such
obligation or liability, suit or the taking of other action by Counterparty
against, and any other notice to, the Company, the Guarantor or others.
Counterparty may at any time and from time to time without notice to or consent
of the Guarantor and without impairing or releasing the obligations of the
Guarantor hereunder: (1) make any change in the terms of any obligation or
liability of the Company to Counterparty, (2) take or fail to take any action of
any kind in respect of any security for any obligation or liability of the
Company to Counterparty, (3) exercise or refrain from exercising any rights
against the Company or others, or (4) compromise or subordinate any obligation
or liability of the Company to Counterparty including any security therefor. Any
other suretyship defenses are hereby waived by the Guarantor.
The Guarantor will not exercise any rights which it may acquire by way of
subrogation until all due and unpaid obligations to Counterparty shall have been
paid in full. Any amount paid to the Guarantor in violation of the preceding
sentence shall be held by Guarantor for the benefit of the Counterparty and
shall forthwith be paid to the Counterparty to be credited and applied to the
due and unpaid obligations. Subject to the foregoing, upon payment of all such
due and unpaid obligations, the Guarantor shall be subrogated to the rights of
the Counterparty against the Company with respect to such obligations, and the
Counterparty agrees to take at the Guarantor's expense such steps as the
Guarantor may reasonably request to implement such subrogation.
2
Exhibit D - Page 140 of 166
<PAGE>
Southern Pacific Funding Corporation
, 1999
Page 3
The Guarantor agrees to pay all reasonable out-of-pocket expenses (including the
reasonable fees and expenses of counsel) incurred in the enforcement or
protection of the rights of the Counterparty in connection with a breach of the
Agreement by the Company or, to the extent incurred after demand under the
Guaranty has been made and not timely honored, a breach of this Guaranty by the
Guarantor.
The Guarantor may not assign its rights nor delegate its obligations under this
Guaranty, in whole or in part, without prior written consent of the
Counterparty, and any purported assignment or delegation absent such consent is
void, except for an assignment and delegation of all of the Guarantor's rights
and obligations hereunder in whatever form the Guarantor determines may be
appropriate to a partnership, corporation, trust or other organization in
whatever form that succeeds to all or substantially all of the Guarantor's
assets and business and that assumes such obligations by contract, operation of
law or otherwise. Upon any such delegation and assumption of obligations, the
Guarantor shall be relieved of and fully discharged from all obligations
hereunder, whether such obligations arose before or after such delegation and
assumption, in addition, the Counterparty will have the right to assign its
rights under the Guaranty in connection with the assignment of the cash flow
instrument issued in connection with the Agreement, provided, however, that
unless the Guarantor shall have received written notice of any such assignment,
it shall be entitled to treat the Counterparty as the beneficiary of this
Guaranty for all purposes and shall have no liability to any such assignee.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS
OF LAW. GUARANTOR AND COUNTERPARTY AGREE TO THE EXCLUSIVE JURISDICTION OF COURTS
LOCATED IN THE STATE OF NEW YORK, UNITED STATES OF AMERICA, OVER ANY DISPUTES
ARISING UNDER OR RELATING TO THIS GUARANTY.
Very truly yours,
THE GOLDMAN SACHS GROUP, INC.
By:---------------------------
Authorized Officer
3
Exhibit D - Page 141 of 166
<PAGE>
Exhibit 2.6.1 (f)
NORWEST/MBIA SETTLEMENT AGREEMENT
OUTLINE OF MATERIAL TERMS
1. Critical Exceptions. Mortgage Loans identified by the Trustee
underlying the Securitizations with critical document deficiencies that
cannot be cured will be repurchased by SPFC, including accrued interest
and amounts required to be paid under the applicable Pooling and
Servicing Agreement.
2. Document Delivery Amendment. The Pooling and Servicing Agreements will
be amended, as necessary, (i) to permit delivery of a copy of a
Mortgage Note with a lost note affidavit and (ii) to allow, in lieu of
requiring recording assignments to the Trust, the delivery of an
opinion of counsel that such recordation is not necessary where
allowable.
3. Non-Critical Mortgage Loans. Reorganized SPFC will be required to cover
losses on certain of the Mortgage Loans that are incurred due to the
Master Servicer's inability to foreclose thereon due to document
deficiencies to the extent that such losses are not otherwise covered
by the related credit support provided by excess cash flow or
over-collateralization. Such obligation is limited to an aggregate
amount of $5,000,000 with respect to Series 1996-4, Series 1997-1,
Series 1997-3, Series 1997-4, Series 1998-1 and Series 1998-2 and an
aggregate amount of $1,700,000 with respect to Series 1997-2 and Series
1998-HI.
4. Phantom Loans. Certain of the Mortgage Loans were inadequately
transferred to the Trustee. SPFC will "repurchase" such mortgage loans
at an amount equal to the related unpaid principal balances and accrued
and unpaid interest thereon (together, without duplication, any related
unreimbursed advances which will, in turn, be reimbursed to SPFC).
5. Florida Cases. An affiliate of the Subscriber whose long term debt is
rated at least "A" by a nationally recognized statistical rating agency
will be obligated to repurchase any Mortgage Loan that is determined in
a final unappealable order to be owned or otherwise encumbered by
Oceanmark Bank, FSB, at the price set forth in such order. A letter of
credit from any entity with the foregoing debt rating in the amount of
$10,000,000 to over the foregoing obligation would also be acceptable.
6. Events of Default for Successor Master Servicer. MBIA will agree to not
enforce the loss and delinquency level Events of Default in the Pooling
and Servicing Agreements against SPFC prior to September 30, 1999.
Thereafter, MBIA will continue such forbearance should the financial
condition of an approved and appointed subservicer meet certain
specified standards and such subservicer perform its duties in
accordance with its guide as audited by MBIA. In the event Advanta is
terminated by MBIA as Master Servicer under any Securitization, the
holder of the related Residual Certificates will have the right to
appoint a successor thereto subject to the approval of MBIA.
Exhibit D - Page 142 of 166
<PAGE>
7. Releases. SPFC will waive and release all claims against the Trustee
that either (i) arise out of or in any way relate to the subject matter
of the Settlement Agreement or (ii) are related to the tax
administration by Norwest. Any future holder of the residuals will be
required to agree to the foregoing release. The Trustee and MBIA will
waive and release all claims against SPFC due to the rejection of
certain agreements or, with respect to the Trustee, to the extent that
claims could have been asserted in its proof of claim. The Trustee and
MBIA will be estopped from asserting any Pooling and Servicing
Agreement defaults with respect to matters arising as of or prior to
the date of assumption thereof.
8. Bankruptcy Considerations. The Settlement Agreement is subject to
certain Bankruptcy Court approvals.
As used herein, "Mortgage Loans" means mortgage loans contained in the
Securitization Trust.
-2-
Exhibit D - Page 143 of 166
<PAGE>
Exhibit 2.6.1 (h)
OPINIONS OF COUNSEL
TO BE DELIVERED BY DEBTOR
The due authorization, execution and delivery by each party thereto of
each of (i) the Settlement Agreement, (ii) the Additional Covenants Agreement,
and (iii) the Liquidating Trust Agreement, of such agreement and the
enforceability of such agreement against such party.
Exhibit D - Page 144 of 166
<PAGE>
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF OREGON
In re
Case No. 398-37613-elp11
SOUTHERN PACIFIC FUNDING
CORPORATION, Chapter 11
Debtor-in-Possession. ORDER ESTABLISHING PROCEDURES FOR
CONSIDERATION OF COMPETING PROPOSALS FOR
ACQUISITION OF DEBTOR
This matter having come before the court on the motion of Southern
Pacific Funding Corporation, debtor and debtor-in-possession ("SPFC"), for an
Order Establishing Procedures for Consideration of Competing Proposals for
Acquisition of Debtor (the "Motion"), and finding that such notice and
opportunity for hearing as required under the circumstances has been given and
that good cause exists therefore, it is hereby
ORDERED that the following procedures shall govern competing bids to
purchase SPFC's stock or a material portion of its assets (the "Alternative
Acquisition Transactions"):
Page 1 Order Establishing Procedures for Consideration of Competing Proposals
for Acquisition of Debtor
Exhibit D - Page 145 of 166
<PAGE>
1. Proposed Alternative Acquisition Transactions must be in writing in
the form of an executable letter of intent and, together with sufficient
financial information to enable SPFC to determine such party's financial
capacity, be submitted to SPFC, the Official Creditors' Committee (the
"Committee"), and Goldman, Sachs & Co. ("Goldman") by facsimile (with execution
copy by overnight delivery) on or before 5:00 p.m. (PDT) on May 17, 1999.
2. Proposed Alternative Acquisition Transactions must not be subject to
the following contingencies: due diligence, financing, or approval by bidder's
board of directors (or if the bidder is not a corporation, its managing members
or partners, as applicable). Other contingencies will be evaluated as part of
the overall economic benefits to SPFC of the Alternative Acquisition
Transaction.
3. Proposed Alternative Acquisition Transactions must include an
agreement to deliver to SPFC a deposit of Two Million Dollars ($2,000,000) by
wire transfer within one (1) day of such party's letter of intent being signed
and accepted by SPFC (the "Deposit"). The Deposit shall be (a) applied against
the purchase price upon consummation of the transaction described by the Final
Proposal (as defined below), (b) retained by SPFC if the failure to close the
transaction described by the Final Proposal is because of a default or failure
by the maker of the Final Proposal or an affiliate (other than a failure of an
agreed condition precedent; retention of the Deposit shall not limit any of
SPFC's other remedies as provided in any letter of intent or other documentation
entered into with the maker of the Final Proposal), or (c) returned to the maker
of the Final Proposal if the failure to close the transaction described in the
Final Proposal is because of a default or failure by SPFC or the failure of an
agreed condition precedent that has not been waived.
4. On or before May 19, 1999, SPFC (after consent of the Committee)
shall advise Goldman whether it deems any of the proposed Alternative
Acquisition Transactions to provide overall economic benefits to SPFC that are
materially greater than the overall economic benefits of the acquisition
agreement between SPFC and Goldman regarding the
Page 2 Order Establishing Procedures for Consideration of Competing
Proposals for Acquisition of Debtor
Exhibit D - Page 146 of 166
<PAGE>
purchase of SPFC and a material portion of its assets (the "Goldman Acquisition
Transaction") and, if so, that it intends to accept one of the Alternate
Acquisition Transactions.
5. In determining the value of a proposed Alternative Acquisition
Transaction, consideration of the right of Goldman to receive the Break-Up Fee
and the total economic value, including the non-cash components of the Goldman
Acquisition Transaction, shall be considered.
6. On or before May 20, 1999, Goldman shall advise SPFC and the
Committee whether it desires to make a new proposal for an acquisition
transaction (the "New Goldman Acquisition Transaction") and, if so, the terms of
such transaction. If Goldman elects not to make a New Goldman Acquisition
Transaction and if SPFC (after consent of the Committee) determines that only
one proposed Alternative Acquisition Transaction provides overall economic
benefits to SPFC that are materially greater than the Goldman Acquisition
Transaction, then such Alternative Acquisition Proposal shall become the "Final
Proposal" and SPFC shall execute the applicable letter of intent within one
business day thereafter.
7. The New Goldman Acquisition Transaction may be on the same or
different terms as the Goldman Acquisition Transaction, but taken as a whole
shall provide economic benefits (including the value of noncash components and
the right of Goldman to receive the Break-Up Fee) to SPFC at least as favorable
to SPFC as those contained in the Alternative Acquisition Transaction.
8. The New Goldman Acquisition Transaction shall not relieve Goldman of
its obligations under the Goldman Acquisition Transaction, except as provided in
the Goldman Acquisition Transaction.
9. If Goldman proposes a New Goldman Acquisition Transaction, or if
SPFC receives two or more proposed Alternative Acquisition Transactions that are
determined to provide overall economic benefits to SPFC that are materially
greater than the overall economic benefits of the Goldman Acquisition
Transaction, then an auction (the "Auction") shall take
Page 3 Order Establishing Procedures for Consideration of Competing
Proposals for Acquisition of Debtor
Exhibit D - Page 147 of 166
<PAGE>
place at the New York offices of Thacher, Proffitt & Wood, on May 21, 1999, at
10:00 a.m. EDT.
10. Any proposal made at the Auction shall be on substantially the same
terms and conditions and use the same acquisition structure as any of (i) the
Goldman Acquisition Transaction, (ii) the Alternative Acquisition Transactions
and (iii) the New Goldman Acquisition Transaction (except that the economic
terms and conditions of any of the foregoing alternatives may be improved).
11. At the conclusion of the Auction, SPFC (with the consent of the
Committee) shall determine which proposal (the "Final Proposal") provides the
greatest economic benefits to SPFC and execute the applicable letter of intent
(as modified to reflect the terms of the Final Proposal) within one business day
after the conclusion of the Auction.
12. As soon as practicable following SPFC's determination of the Final
Proposal, SPFC and the party making the Final Proposal shall proceed to
negotiate and execute definitive agreements.
-------------------------------------------------
Elizabeth L. Perris
United States Bankruptcy Judge
Page 4 Order Establishing Procedures for Consideration of Competing Proposals
for Acquisition of Debtor
Exhibit D - Page 148 of 166
<PAGE>
Presented by:
John Casey Mills
Oregon State Bar No. 84417
Miller, Nash, Wiener, Hager & Carlsen LLP
3500 U.S. Bancorp Tower
111 S.W. Fifth Avenue
Portland, Oregon 97204-3699
Telephone: (503) 224-5858
Attorneys for Debtor
Southern Pacific Funding Corporation
cc: Mr. John H. Durkheimer
Mr. Thomas B. Walper
Ms. M. Vivienne Popperl
Mr. Barry Dichter
Mr. James Bromley
Mr. David A. Foraker
Mr. James Peck
Mr. Richard C. Josephson
Mr. Gregg D. Johnson
Mr. John Casey Mills
Page 5 Order Establishing Procedures for Consideration of
Competing Proposals for Acquisition of Debtor
Exhibit D - Page 149 of 166
<PAGE>
I hereby certify that I served the foregoing Order Establishing
Procedures for Consideration of Competing Proposals for Acquisition of Debtor
on:
John Durkheimer M. Vivienne Popperl
Lane Powell Spears Lubersky Office of the United States Trustee
Suite 800 851 S.W. Sixth Avenue, Suite 1300
520 S.W. Yamhill Portland, Oregon 97204
Portland, Oregon 97204 Fax: 503-326-7658
Fax: 503-224-0388
David A. Foraker
Thomas B. Walper Greene & Markley, P.C.
Munger, Tolles & Olson Suite 600
355 South Grand Avenue 1515 S.W. Fifth Avenue
35th Floor Portland, Oregon 97201
Los Angeles, California 90071-1560 Fax: 503-224-8434
Fax: 213-687-3702
Barry Dichter
Attorneys for The Official Cadwalader, Wickersham & Taft
Creditors' Committee 100 Maiden Lane
New York, New York 10038
James Bromley Fax: 212-504-6666
Cleary, Gottleib, Steen & Hamilton
One Liberty Plaza Attorneys for Bear Stearns
New York, New York 10006-1470 International
Fax: 212-225-3999
Gregg D. Johnson
David C. L. Frauman Ater Wynne Hewitt Dodson & Skerritt
Cadwalader, Wickersham & Taft Suite 1800
100 Maiden Lane 222 S.W. Columbia Street
New York, New York 10038 Portland, Oregon 97201-6618
Fax: 212-504-6666 Fax: 503-226-0079
Richard C. Josephson Attorneys for The Bank of
Stoel Rives LLP New York as Indenture
2300 Standard Insurance Center Trustee
900 S.W. Fifth Avenue
Portland, Oregon 97204-1268
Fax: 503-220-2480
Attorneys for Goldman, Sachs
& Co.
Page 1 - Certificate of Service
Exhibit D - Page 150 of 166
<PAGE>
James Peck
Schulte, Ross & Zabel
900 Third Avenue
New York, New York 10022
Fax: 212-593-5955
Attorneys for Credit-Based
Asset Servicing and
Securitization LLC
by the following indicated method or methods:
|X| by FAXING full, true, and correct copies thereof to the
attorneys at the fax numbers shown above, which are the
last-known fax numbers for the attorneys' offices, on the date
set forth below. The receiving fax machines were operating at
the time of service and the transmissions were properly
completed, according to the attached confirmation reports.
DATED this ---- day of May 1999.
-----------------------------------------
John Casey Mills
Of Attorneys for Southern Pacific
Funding Corporation
Page 2 - Certificate of Service
Exhibit D - Page 151 of 166
<PAGE>
JOHN CASEY MILLS
[email protected]
(503) 205-2636 direct line
May 14, 1999
SOUTHERN PACIFIC FUNDING CORPORATION
BIDDING PROCEDURES
Southern Pacific Funding Corporation ("SPFC"), with the consent of the
Official Creditors' Committee (the "Committee"), has established the following
bidding procedures pursuant to the terms of the Order Approving Motion
Establishing Procedures for Consideration of Competing Proposals for Acquisition
of Debtor (the "Order"):
1. All bids timely received on May 17, 1999 and in conformance with the
Order will be considered by SPFC. Although the order requires an executable
letter of intent, SPFC suggests that bidders attach either proposed definitive
documentation or a letter of intent that contains all significant terms. One of
the factors used to evaluate bids will be the likelihood of closure and the more
complete the proposed documentation, the more likely a bid will be selected as
an overbid.
2. SPFC reserves the right to discuss with any party making an overbid
the terms and conditions of such overbid. As a result of such discussions, there
may be modifications to the bid (some of which may be substantial).
3. If SPFC determines that one or more overbids meet the conditions of
Paragraphs 4 and 5 of the Order (after consent of the Committee), SPFC shall
notify Goldman (all terms not otherwise defined herein have the meanings set
forth in the Order) as provided in the Order.
4. If Goldman submits a New Goldman Acquisition Transaction as provided
in the Order, then the Auction shall be held.
5. The Auction will commence at 10:00 a.m. EDT on May 21, 1999, in the
law offices of Thatcher, Proffitt & Wood. During the Auction, all communications
between SPFC and the bidders will be in the presence of all other bidders
remaining in the Auction. The bidders shall not discuss any substantive matter
with any other bidder.
6. The first matter to be determined is whether the New Goldman
Acquisition Transaction is superior to the Alternative Acquisition Transaction.
If SPFC determines (with the consent of the Committee) that the New Goldman
Acquisition Transaction is not superior to the Alternative Acquisition
Transaction, then either SPFC shall select the
Exhibit D - Page 152 of 166
<PAGE>
Alternative Acquisition Transaction as the Final Proposal (or in the event there
is more than one Alternative Acquisition Transaction hold the Auction between or
among such Alternative Acquisition Transactions), or in SPFC's discretion
provide Goldman one or more opportunities to improve its bid.
7. For an entity to bid at the Auction, such entity must have qualified
and provided an earlier bid qualified under the terms of the Order.
8. In the event the New Goldman Acquisition Transaction is determined
by SPFC (with the consent of the Committee) to be superior, the Auction shall
commence.
9. SPFC shall announce each round of bidding. If in any round of
bidding a bidder fails to respond with a bid superior to the opening bid for
such round (in the discretion of SPFC, more than one opportunity to better a bid
during any round of bidding may be provided to a bidder), then such bidder will
be out of the bidding and at SPFC's request shall leave the bidding room.
Although there will not be a minimum amount by which an overbid must be superior
to the opening bid for any such round, SPFC reserves the right to reject any
bids that are not materially superior to the opening bid for such bidding round.
10. With the assistance of the Committee, SPFC will endeavor to provide
bidders with SPFC's concept of how a bid could be improved to make it superior
to the opening bid for such round of bidding. However, SPFC shall not be
required to provide such bidding advice.
11. The determination as to whether any new bid has greater value to
the estate than any other bid will be made by SPFC (with the consent of the
Committee) and any such determination shall be final.
12. The Auction shall continue until SPFC (with the consent of the
Committee) determines that a Final Proposal has been reached. Although SPFC does
not believe it will be necessary, SPFC may adjourn the Auction from time to time
in its discretion.
13. SPFC reserves the right to modify the bidding procedures in its
discretion, provided that all bidders remaining in such round of bidding are
informed of the modifications.
14. Bidders are reminded that bidder collusion is actionable and will
not be tolerated in any form. Section 363(n) of the United States Bankruptcy
Code provides as follows:
"The trustee may avoid a sale under this section if the sale price
was controlled by an agreement among potential bidders at such sale, or may
recover from a party to such agreement any amount by which the value of the
property sold exceeds the price at which the sale was consummated, and may
recover any costs, attorneys' fees, or expenses incurred in avoiding such
sale or
Exhibit D - Page 153 of 166
<PAGE>
recovering such amount. In addition to any recovery under the preceding
sentence, the court may grant judgment for punitive damages in favor of the
estate and against any such party that entered into such an agreement and
willful disregard of this subsection."
If anyone has any questions, they should telephone Kevin Padrick at
(503) 539-1533, Jim Callahan at (203) 629-8900, or the undersigned.
Exhibit D - Page 154 of 166
<PAGE>
EXHIBIT 3.1.1
EXCEPTIONS TO LICENSES, PERMITS AND APPROVALS
TYPE OF AUTHORIZATION JURISDICTION COMMENT
Qualification to do business Alabama Application Pending
Maryland Application Pending
Massachusetts Application Pending
New York
North Carolina
Ohio
Pennsylvania
South Carolina
Texas
Washington
License to service loans Arkansas
District of Columbia
Georgia
Hawaii
Illinois
Kentucky
Michigan
Missouri
Nebraska
Tennessee
Wisconsin
Utah
Louisiana
Maine
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
North Dakota
Oklahoma
Oregon
Rhode Island
Utah
Vermont
Virginia
West Virginia
Wisconsin
Wyoming
Exhibit D - Page 155 of 166
<PAGE>
SCHEDULE 3.2.2
CONFLICTS WITH ORGANIZATIONAL DOCUMENTS, LAWS, ASSUMED CONTRACTS -
DEBTOR
None.
Exhibit D - Page 156 of 166
<PAGE>
SCHEDULE 3.5.1 TAX RETURNS
1998 Tax Returns
----------------
1999 Texas Corporation Initial Franchise Tax Return (Home America Financial
for the period 10/24/97 - 12/31/99)
1998 U. S. Corporation Income Tax Return
1998 Forms 5471 (5) Information With Respect to Certain Foreign Corporations
1997 Tax Returns
----------------
1997 U. S. Corporation Income Tax Return
1997 Arkansas Corporation and Limited Liability Company Franchise Tax Report
1997 California Franchise Income Tax Return
1997 Cincinnati Income Tax Return
1997 Colorado State Corporation Income Tax Return (Southern Pacific Funding)
1997 Colorado State Corporation Income Tax Return (Oceanmark)
1997 Connecticut Corporation Tax Return (Southern Pacific Funding)
1997 Connecticut Corporation Tax Return (Oceanmark)
1997 Amended Delaware Annual Franchise Tax Report (Home America)
1997 Florida Corporation Income and Emergency Excise
Tax Return (Southern Pacific Funding)
1997 Florida Corporation Income and Emergency Excise Tax Return (Oceanmark)
1997 Georgia Corporation Income Tax Return (Southern Pacific Funding)
1997 Georgia Corporation Income Tax Return (Oceanmark)
1997 Initial Georgia Corporation Net Worth Return (Southern Pacific Funding)
1997 Initial Georgia Corporation Net Worth Return (Oceanmark)
1997 Hawaii Corporation Income Tax Report
1997 Illinois Corporation Income and Replacement Tax Return
1997 Indiana Financial Institution Franchise Tax Return
1997 Massachusetts Combined Foreign Business Corporation Excise Tax Return
1997 Mississippi Corporate Income Tax Return
1997 New Jersey Corporation Business Tax Return
1997 Ohio Franchise Tax Report
1997 Oklahoma Annual Franchise Tax Return
1997 Oklahoma Corporation Income Tax Return
1997 Oregon Corporation Excise Tax Return
1997 Pennsylvania Corporate Tax Report (Southern Pacific Funding)
1997 Pennsylvania Corporate Tax Report (Home America Financial Services)
1997 South Carolina Corporation Return
1997 Tennessee Franchise and Excise Tax Return
1998 Texas Corporation Franchise Tax Return
1997 Utah Corporation Income Tax Return
1997 Virginia Corporation Income Tax Return
1997 Forms 5471 (3) Information With Respect to Certain Foreign Corporations
Exhibit D - Page 157 of 166
<PAGE>
1996 Tax Returns
----------------
1996 U. S. Corporation Income Tax Return
1996 Arkansas Corporation and Limited Liability Company Franchise Tax Report
1996 California Franchise/Income Tax Return
1996 Amended California Franchise/Income Tax Return
1996 Connecticut Corporation Tax Return
1996 Colorado State Corporation Income Tax Return
1996 Florida Corporation and Emergency Excise Tax Return
1996 Georgia Corporation Income Tax and New Worth Tax Return (National
Capital Funding)
1996 Illinois Corporation Income and Replacement Tax Return
1996 Massachusetts Foreign Business Corporation Excise Tax Return
1996 Mississippi Corporate Income and Franchise Tax Return
1996 New Jersey Corporation Business Tax Return
1997 Ohio Corporation Franchise Tax Report (based on 1996)
1996 Ohio Corporation Franchise Tax Report (based on 1995)
1996 Oklahoma Annual Franchise Tax Return
1996 Oklahoma Corporation Income Tax Return
1996 Oklahoma Minimum/Maximum Franchise Tax Return
1996 Oregon Corporation Excise Tax Return
1996 South Carolina Corporate Tax Return
1996 Tennessee Franchise and Excise Tax Return
1996 Initial Texas Franchise Report and Public Information Report (7/25/95 -
12/31/96)
1997 Texas Corporation Franchise Tax Report
1996 Utah Corporation Franchise Tax Report
1996 Virginia Corporation Income Tax Return
Exhibit D - Page 158 of 166
<PAGE>
SCHEDULE 3.6
GOVERNMENTAL AUTHORIZATIONS - ISSUER
JURISDICTION GOVERNMENTAL ISSUED EXPIRES
AUTHORIZATION
California California Finance Lender License 12/12/97 12/31/99
Florida Mortgage Lender License 09/01/98 08/31/00
Iowa Mortgage Banker License 07/01/98 06/30/99
Massachusetts Collection Agency License 09/22/98 09/30/99
New Hampshire First Mortgage Banker License Renewal 12/31/99
Pending
City of Lake
Oswego, Oregon Business License 02/03/99 12/31/99
Exhibit D - Page 159 of 166
<PAGE>
SCHEDULE 3.6
GOVERNMENTAL AUTHORIZATIONS - ISSUER
GOVERNMENTAL JURISDICTION ISSUED EXPIRES
AUTHORIZATION
California Finance California 12/12/97 12/31/99
Leader License
Mortgage Leader Florida 09/01/98 08/31/00
License
Mortgage Banker Iowa 07/01/98 06/30/99
License
Collection Agency Massachusetts 09/22/98 09/30/99
License
First Mortgage Banker New Hampshire Renewal 12/31/99
License Pending
Business License City of Lake 02/03/99 12/31/99
Oswego, Oregon
================================================================================
GOVERNMENTAL JURISDICTION
AUTHORIZATION
Qualification to do Alaska
Business Arizona
Arkansas
California
Colorado
Connecticut
Delaware
Washington. D.C.
Florida
Georgia
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Exhibit D - Page 160 of 166
<PAGE>
SCHEDULE 3.7
ASSUMED CONTRACTS
The following Contracts are Assumed Contracts and are included in the Assets:
o The Pooling and Servicing Agreements, including all amendments
and supplements thereto, with respect to the following Securitization
Trusts:
Series 1995-1
Series 1995-2
Series 1996-1
Series 1996-2
Series 1996-3
Series 1996-4
Series 1997-1
Series 1997-2
Series 1997-3
Series 1997-4
Series 1998-1
Series 1998-2
Series 1998-H1
o Letter agreement with Advanta Mortgage Corp., USA, providing for
the Company to receive 15 basis points of Advanta Mortgage Corp., USA's 50
basis-point servicing fee, unless Subscriber gives notice to Debtor prior
to May 31, 1999 to reject this agreement, in which case such letter
agreement will not be an Asset.
o Letter agreement with Advanta Mortgage Corp., USA, dated January
22, 1999 giving the Company the option to terminate Advanta Mortgage Corp.,
USA, as master servicer of certain Securitization Trusts.
o Life-of-Loan Real Estate Tax Monitoring Agreement with
Transamerica Corporation.
Exhibit D - Page 161 of 166
<PAGE>
SCHEDULE 3.8
<TABLE>
PENDING AND THREATENED PROCEEDINGS
CASE NAME AND NUMBER COURT AND CASE NUMBER LOAN NUMBER(S) NATURE
- -------------------- --------------------- -------------- ------
<S> <C> <C> <C>
Bomac Capital Mortgage v. SPFC U.S. Bank. Ct., D. Ore., Adv. Various Action seeking declaration that Bomac owns
No. 99-03140-elp interests in certain residuals and
prepayment penalties
Bush v. Tri-Star Los Angeles (California) Superior, 0500601808 Rescission based upon allegation that
TC010353 borrower did not receive "cash out"
as promised
Loehr No Action Pending 1600000828 and Rescission/damage claim based upon alleged
1600000829 fraud of seller of property
McLaren v. SPFC U.S. Dist. Ct., D. Hawaii, 98 00072 0500601704 Rescission based upon allegation that
ACK borrower did not receive "cash out"
as promised
Norwest Bank v. Isaac Circuit Court, Hillsborough County 6210821541 Rescission based upon alleged TILA
(Florida), 98-00356 violations
Norwest Bank v. Ford Court of Common Pleas 1800000275 Contested foreclosure
(Pennsylvania), 99 CN 312
Norwest Bank v. Guthridge Court of Common Pleas 1800000158 Contested foreclosure
(Pennsylvania), 1794-98
Norwest Bank v. Remaley Court of Common Pleas 7001000651 Contested foreclosure
(Pennsylvania), 199800963-Civil
Norwest Bank v. Rose Circuit Court, Collier County Various RESPA and TILA counterclaims in contested
(Florida), various foreclosure action
Ralph Jones No action pending 3003301085 Rescission claim under TILA
Oceanmark Bank v. SPFC U.S. Dist. Ct., S.D. Fla., Various OMB alleging ownership of certain loans
98-6217-CIV-ZLOCH under theory of offset
1
Exhibit D - Page 162 of 166
<PAGE>
Oceanmark Bank v. Cuomo U.S. Dist. Ct, S.D. Fla., 98-1941 Various OMB alleging ownership of certain loans
under theory of offset
Oceanmark Bank v. Bankers Trust Circuit Court, Broward County Various OMB alleging ownership of certain loans
(Florida), 98 20427 under theory of offset
Oceanmark Bank v. Norwest Circuit Court, Broward County Various OMB alleging ownership of certain loans
(Florida), 98 20426 under theory of offset
SPFC v. Oceanmark Bank U.S. Bank. Ct., D. Ore., Adv. No. Various OMB alleging ownership of certain loans
99-3046 under theory of offset
Peaks v. A Home of Your Own Circuit Court, Baltimore City Various Rescission and damages claim based upon
(Maryland), 98022011 alleged fraud on the part of property
sellers
Parker v. A House is a Home Circuit Court, Baltimore City Various Rescission and damages claim based upon
(Maryland), 98124107 alleged fraud on the part of property
sellers
Patrick No Action Pending 6611000666 Rescission and damages claim based upon
alleged misrepresentations by mortgage
broker
Rosen Supreme Court, Kings County (New 0000009062 Guardianship action for borrower; guardian
York), Index No. 106093/98 alleges a third party defrauded borrower in
connection with the origination of the SPFC
loan
Sokolowski No Action Pending 0100607073 Rescission claim
Stanford v. SPFC U.S. Dist. Ct., E.D. Penn., 98 233 40006000103 and Rescission based upon alleged RESPA and
4103200195 TILA violations; summary judgment granted
in favor of SPFC
2
Exhibit D - Page 163 of 166
<PAGE>
Beeman Bros. Drilling v. Dream District Court, Archuleta County 02006070028 Mechanics' lien action, no title insurance
Catcher Homes, et al (Colorado), 98CV38 coverage
Walker v. SPFC U.S. Bank. Ct., D. Md., Adv. No. 6611000420 Suit for trespass based upon property
99-1059 winterization; borrower also claims
rescission right under TILA
Walsh v. SPFC U.S. Dist., Ct., D. Conn 1100601420 Rescission for alleged TILA/HOEPA
violations
State of Washington Audit No Action Pending Various State audit alleged that SPFC charged
origination fees not permitted under state
law
3
Exhibit D - Page 164 of 166
</TABLE>
<PAGE>
SCHEDULE 4.2.2
CONFLICTS WITH ORGANIZATIONAL DOCUMENTS, LAWS, CONTRACTS--
SUBSCRIBER
NONE.
Exhibit D - Page 165 of 166
<PAGE>
SCHEDULE 4.2.3
CONSENTS -- SUBSCRIBERS
NONE.
Exhibit D - Page 166 of 166
<PAGE>
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT (this "Agreement"), dated as of June 17,
1999, by and among Southern Pacific Funding Corporation ("SPFC"), Norwest Bank
Minnesota, National Association, solely in its capacity as trustee for the
Transactions, as defined below (the "Trustee"), MBIA Insurance Corporation
("MBIA"), and THE Goldman Sachs GROUP, INC. (the "Purchaser"), recites and
provides as follows:
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Trustee serves as trustee and MBIA acts as certificate
insurer, with respect to each of the following series of Southern Pacific
Secured Assets Corp., Mortgage Asset-Backed Pass-Through Certificates
securitization transactions (the "Insured Transactions"): Series 1996-4, Series
1997-1, Series 1997-3, Series 1997-4, Series 1998-1 and Series 1998-2;
WHEREAS, the Trustee serves as trustee with respect to each of the
following securitization transactions (the "Non-Insured Transactions", and
together with the Insured Transactions, the "Transactions"): Southern Pacific
Secured Assets Corp. Mortgage Asset-Backed Pass-Through Certificates, Series
1997-2 and Southern Pacific Home Loan Trust Collateralized Asset-Backed Notes,
Series 1998-H1;
WHEREAS, MBIA acts as certificate insurer with respect to the following
series of Southern Pacific Secured Assets Corp. Mortgage Asset-Backed
Pass-Through Certificates securitization transactions for which the Trustee does
not serve as trustee (the "Additional Insured Transactions"): Series 1995-1,
Series 1995-2, Series 1996-1, Series 1996-2, and Series 1996-3;
WHEREAS, the trust related to each of the Transactions and each of the
Additional Insured Transactions (each, a "Trust") has been established pursuant
to the terms of a Pooling and Servicing Agreement or an Indenture and is
serviced pursuant to an agreement identified on Schedule 1 hereto (collectively,
the "Pooling and Servicing Agreements");
WHEREAS, SPFC commenced a case under Chapter 11 of the United States
Bankruptcy Code (the "Bankruptcy Code") on October 1, 1998 (the "Chapter 11
Case") in the United States Bankruptcy Court for the District of Oregon (the
"Bankruptcy Court");
WHEREAS, on June 3, 1999, SPFC proposed its second amended Chapter 11
plan (the "Plan") that provides for the assumption of the Pooling and Servicing
Agreements under Section 365(b) of the Bankruptcy Code and the sale of newly
issued common stock of SPFC to the Purchaser (such sale of stock to the
Purchaser pursuant to the Plan, the "Acquisition");
WHEREAS, the Trustee and MBIA assert that SPFC has failed to repurchase
certain Mortgage Loans owned by the Trusts as to which various alleged breaches
of representations or warranties materially and adversely affecting the value of
such mortgage loans have occurred and have not been cured (collectively, the
"Breaches"), and the Trustee and MBIA further assert that SPFC has the
obligation under Section 365(b) of the Bankruptcy Code to cure such defaults by
Exhibit E - Page 1 of 35
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repurchasing the related Mortgage Loans in accordance with certain of the
Pooling and Servicing Agreements contemporaneously with the assumption of those
the Pooling and Servicing Agreements;
WHEREAS, SPFC has not repurchased the Mortgage Loans affected by the
Breaches, but asserts that its failures to repurchase such Mortgage Loans do not
constitute defaults under the Pooling and Servicing Agreements, but, at most,
constitute defaults under the related mortgage loan purchase agreements
identified on Schedule 2 hereto (the "Mortgage Loan Purchase Agreements");
WHEREAS, SPFC intends to reject the Mortgage Loan Purchase Agreements,
Insurance Agreements and the indemnification agreements associated with the
Insurance Agreements (the "Indemnification Agreements"), and SPFC contends that
the Trustee's claims for the repurchase price of the Mortgage Loans affected by
the Breaches, as set forth in the proofs of claim filed by the Trustee
(collectively, the "Trustee's Proofs of Claim"), constitute no more than general
unsecured claims, to the extent such claims are allowed, and should be treated
as such under the Plan;
WHEREAS, MBIA and the Trustee assert certain rights and remedies
against SPFC in respect of various defaults under the terms of certain of the
Insurance Agreements, Mortgage Loan Purchase Agreements and Pooling and
Servicing Agreements and various rights of consent to the appointment of any
subservicer or successor master servicer; and
WHEREAS, the Parties hereto have agreed to resolve certain issues
arising from the proposed assumption of the Pooling and Servicing Agreements
under the Plan upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto hereby agree as follows:
1. Definitions. Except as otherwise expressly provided herein or
unless the context otherwise requires, capitalized terms used and not otherwise
defined herein shall have the meanings assigned to them in the Pooling and
Servicing Agreements. In addition, the following terms shall have the following
definitions:
(a) "Closing Date" shall mean the date on which the
Acquisition is consummated.
(b) "Confirmation Order" shall mean the order of the
bankruptcy court confirming the Plan and approving the settlement
contained in this Agreement.
(c) "Final Order" shall mean an order or judgment entered by a
court of competent jurisdiction, including without limitation the
Bankruptcy Court, that (i) has not been reversed, stayed, modified or
amended, (ii) is not the subject of a pending appeal or motion for
review or reconsideration, (iii) has not been and may no longer be
appealed from or otherwise reviewed or reconsidered, and (iv) is final
and non-appealable in accordance
Exhibit E - Page 2 of 35
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with applicable law, including without limitation Rule 8002 of the
Federal Rules of Bankruptcy Procedure.
(d) "Excess Loss" shall mean, with respect to a Trust, any loss,
whenever incurred, that would be allocated, in accordance with the
applicable Pooling and Servicing Agreement, to any of the Class A
Certificates or Notes related to such Trust absent any payment under
any Certificate Insurance Policy, which is to say the amount of any
loss incurred by a Trust in excess of the amount of available credit
support for the related Class A Certificates or Notes (including credit
support represented by any related Residual Interests excess cashflow
or overcollateralization, but excluding payments and rights to payment
under any Certificate Insurance Policy).
(e) "Liquidating Trust" shall mean the liquidating trust created
by the Plan for the benefit of SPFC's creditors.
(f) "Reorganized SPFC" shall mean Southern Pacific Funding
Corporation on and following the effective date of the Plan, and shall
exclude the Liquidating Trust.
(g) "Residual Interests" shall mean, with respect to a Trust, any
Class R Certificates, uninsured interest-only securities or any and all
other economic interests in the Trust that are uninsured and are
subordinated in right of payment to the related Class A Certificates or
Notes.
(h) "Series 1998-H1 Servicing Agreement" shall mean the Servicing
Agreement dated as of June 1, 1998 between SPFC and Southern Pacific
CMN Trust Series 1998-H1.
(i) "SPFC" shall mean Southern Pacific Funding Corporation prior
to the effective date of the Plan and shall exclude Reorganized SPFC.
2. Critical Exceptions.
(a) Critical Exception Mortgage Loans. Certain of the Breaches
arise from deficiencies in the contents of the related Mortgage Files
that the parties agree are critical to the effective realization of
value in the related Mortgage Loans by the Trust (the "Critical
Exceptions"). The following constitute Critical Exceptions: (i) missing
or incomplete original Mortgage Notes and (ii) missing or incomplete
recorded assignments of Mortgages or other security instruments related
to the Mortgage Loans to the Trustee. The Mortgage Loans as to which a
Critical Exception exists as of the date hereof (collectively, the
"Critical Exception Mortgage Loans") are identified on Schedule 3
hereto.
(b) Amendment of Pooling and Servicing Agreements. To address
such of the Critical Exceptions as may be cured by such actions, SPFC
shall prepare such amendments to the Pooling and Servicing Agreements
as may be necessary and appropriate to provide for the following
changes to the terms of certain of the Pooling and Servicing
Agreements: (i) to permit delivery of a copy of an executed Mortgage
Note
Exhibit E - Page 3 of 35
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together with a lost note affidavit in form and substance acceptable to
the Trustee in lieu of delivery of the original Mortgage Note and (ii)
to allow for delivery of an Opinion of Counsel that recordation of an
Assignment Of Mortgage to a Trust is not required under applicable law
to protect the Trust's interest in the related Mortgage Loan. Prior to
the entry of the Confirmation Order, SPFC shall cause such amendments
to be prepared and delivered to the Trustee and MBIA for signature
along with all legal opinions, consents, confirmations of ratings and
any and all other documents necessary to amend each applicable Pooling
and Servicing Agreement. The Trustee and MBIA, as applicable, will
enter into such amendments, provided the terms of such amendments are
satisfactory to the Trustee and MBIA, as applicable, and all conditions
to the effectiveness of such amendments have been satisfied. As to each
Critical Exception which is to be cured by recordation of an assignment
of mortgages to the Trustee, SPFC shall submit the assignment to the
applicable recording office prior to the Closing Date.
(c) Repurchase Obligations. On or before the Closing Date, SPFC or
the Liquidating Trust, as successor to SPFC, agrees to repurchase each
Critical Exception Mortgage Loan for which the related Critical
Exception in the reasonable judgment of the Trustee and MBIA, if
applicable, has not either been (i) cured as of such date (or, in the
judgment of the Trustee, MBIA, and the Purchaser) adequate steps to
cure the Critical Exceptions are being taken and, in any event, such
cure is completed within six months of the Closing Date); or (ii)
effectively avoided by the amendments to the applicable Pooling and
Servicing Agreement. If, at any time after the Closing Date, the
Trustee and MBIA, on the one hand or Purchaser, on the other hand,
conclude, in their reasonable judgment, that a Critical Exception
identified for cure on the Closing Date is not likely to be cured
within the six-month period after the Closing Date, SPFC (or the
Liquidating Trust as successor) will repurchase the related Critical
Exception Mortgage Loan within 10 business days after notice and demand
for repurchase. Such repurchase will be effected in accordance with the
terms of the applicable Mortgage Loan Purchase Agreement and Pooling
and Servicing Agreement by payment to each related Trust of the full
amount of the purchase price (as defined by the applicable Mortgage
Loan Purchase Agreement or other document related to the Trust) in
immediately available funds for each related Critical Exception
Mortgage Loan.
3. Non-Critical Exceptions.
(a) Non-Critical Exception Loans. Certain of the Breaches arise
from deficiencies in the contents of the related Mortgage Files that do
not constitute Critical Exceptions (the "Non-Critical Exceptions").
Reorganized SPFC shall cause the Master Servicer or any Subservicer of
the related Trust, in accordance with Accepted Servicing Practices, to
cure any and all Non-Critical Exceptions in the ordinary course of the
Master Servicer's or the Subservicer's servicing of the related
Mortgage Loans.
(b) Exception Losses. If the Master Servicer or any Subservicer
fails to cure a Non-Critical Exception and the Master Servicer, the
Subservicer, the Trustee or any successor servicer is unable to
complete foreclosure proceedings in respect of any Mortgage Loan after
the Closing Date as to which a Non-Critical Exception exists, a loss
(an "Exception Loss") in the amount of the then outstanding principal
balance of the
Exhibit E - Page 4 of 35
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related Mortgage Loan plus accrued interest thereon and any
unreimbursed servicing advances will be allocated pursuant to the terms
of the related Pooling and Servicing Agreement. If the allocation of
any loss pursuant to the terms of any Pooling and Servicing Agreement
would result in an Excess Loss, Reorganized SPFC shall deposit to the
related Trust, in immediately available funds, the full amount of any
such Excess Loss; provided, however, that Reorganized SPFC's obligation
(the "Exception Loss Coverage Obligation") to cover Excess Losses under
this Section with respect to a particular Trust shall not exceed the
aggregate amount of Exception Losses actually incurred in respect of
such Trust following the Closing Date and provided, further, that the
aggregate amount of Reorganized SPFC's Exception Loss Coverage
Obligation will not exceed the following: (i) $5 million with respect
to the Insured Transactions or (ii) $1.7 million with respect to the
Non-Insured Transactions.
(c) Exception Loss Reporting. Reorganized SPFC shall assure that
the Master Servicer or Subservicer with respect to each Trust shall
provide the Trustee and MBIA with a monthly mortgage loan liquidation
report, on a loan-by-loan basis, detailing the amount of any loss
incurred in respect of each liquidated Mortgage Loan. Any liquidated
Mortgage Loan with a Non-Critical Exception for which no net proceeds
are realized as a result of such liquidation will be presumed to have
incurred an Exception Loss unless the Master Servicer provides or
causes the related Subservicer to provide to the Trustee and MBIA an
Officers' Certificate certifying that, in the good faith business
judgment of the Master Servicer or (to the extent provided by the
Subservicer) the related Subservicer, the loss incurred with respect to
such liquidated Mortgage Loan did not result from an inability to
complete foreclosure proceedings with respect to such Mortgage Loan and
detailing the basis for that determination.
4. Phantom Loans.
(a) Phantom Loan Breaches. Certain of the Breaches (the "Phantom
Loan Breaches") arise from Mortgage Loans that SPFC contends were
de-funded prior to sale to the Trust, were sold to another person or
entity, or otherwise were not effectively transferred to the related
Trusts (the "Phantom Loans"). The Phantom Loans are identified on
Schedule 4 hereto.
(b) Repurchase of Phantom Loans. On the Closing Date, SPFC (or the
Liquidating Trust, as successor) shall deposit to each applicable
Trust, in immediately available funds, an amount (the "Phantom Loan
Repurchase Amount") with respect to each Phantom Loan equal to the sum
of the purchase price and the amount of unreimbursed advances related
to such Phantom Loan, each as specified in Schedule 4 hereto. Upon
deposit of the Phantom Loan Repurchase Amount for a Phantom Loan to the
related Trust, SPFC, as Master Servicer (or the Liquidating Trust as
successor), shall be entitled to reimbursement from the Trust of the
amount of unreimbursed advances related to such Phantom Loan, as
specified on Schedule 4 hereto. The parties agree that, notwithstanding
the terms of the Pooling and Servicing Agreement or Mortgage Loan Sale
Agreement related to the Trust, the obligation of SPFC (or the
Liquidating Trust as successor) to deposit the Phantom Loan Repurchase
Amount for each Phantom Loan to the related Trust satisfies SPFC's (or
the Liquidating Trust's as successor) repurchase
Exhibit E - Page 5 of 35
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<PAGE>
obligation with respect to the Phantom Loans, and SPFC (or the
Liquidating Trust as successor) shall have no rights of reimbursement
for any advances in respect of any Phantom Loan other than the rights
under this Section; and Reorganized SPFC shall have no rights of
reimbursement for any advances in respect of any Phantom Loan.
5. Oceanmark Loans.
(a) Oceanmark Claims. Certain of the Breaches arise as a result of
claims made and issues related to litigation commenced by Oceanmark
Bank, F.S.B. ("Oceanmark") in Florida state court styled Oceanmark Bank
F.S.B. v. Norwest Bank Minnesota, N.A. and Advanta Mortgage Corp.,
U.S.A., Case No. 98-20426, and Oceanmark Bank F.S.B. v. Bankers Trust
Company of California N.A. and Advanta Mortgage Company, Case No.
98-20427 (together with all pending litigation in the Bankruptcy Court
related to the same subject matter, the "Oceanmark Cases"), in which
Oceanmark asserts ownership of and/or entitlement to or encumbrances on
certain Mortgage Loans identified on Schedule 5 hereto (collectively,
the "Oceanmark Loans").
(b) Oceanmark Loans Obligation. In the event that any of the
Oceanmark Loans is determined in a Final Order issued by a court of
competent jurisdiction to be owned or otherwise encumbered by Oceanmark
and (i) such Final Order requires reconveyance to Oceanmark of any such
loan, or (ii) such Final Order awards Oceanmark money damages against
the Trustee or a Trust in respect of any such loans, Reorganized SPFC
shall promptly pay to the Trustee an amount equal to the amount
necessary to permit the Trustee to honor such reconveyance obligation
and/or the amount of damages set forth in the Final Order, provided
that, such amount shall not exceed, with respect to the Oceanmark Loans
for which reconveyance and/or damages were awarded, (A) the aggregate
principal balances as of the Cut-off Date for the Oceanmark Loans to
which the Final Order relates plus any premium as determined from the
Final Order, plus (B) interest calculated for each such loan at the
related note rate thereon from the Cut-off Date to the date of payment
pursuant to the Final Order. In addition, Reorganized SPFC agrees to
reimburse directly all out-of-pocket costs and expenses (including
reasonable attorneys' fees and expenses) reimbursable to the Trustee or
the Trust pursuant to the terms of the related Pooling and Servicing
Agreement with respect to the Oceanmark Cases. Upon demand of Trustee,
Reorganized SPFC shall remit to the Trustee or deposit to the related
Trust any amount payable hereunder in immediately available funds. The
Trustee agrees to provide written notice to MBIA and Purchaser of any
claim for payment hereunder, which notice shall include the
identification of the Oceanmark Loans related to such claim and the
amount of the claim. The parties agree, notwithstanding the terms of
the Pooling and Servicing Agreement or Mortgage Loan Sale Agreement
related to the applicable Trust, the obligation of Reorganized SPFC
under this Section 5(b) satisfies Reorganized SPFC's obligations with
respect to such Oceanmark Loan and neither the Trustee nor MBIA shall
have any further rights against SPFC, Reorganized SPFC, or the
Purchaser in respect thereof, except as contemplated by Section 6.
(c) SPFC hereby instructs Purchaser and Reorganized SPFC, that in
the event that SPFC (or the Liquidating Trust as successor) shall fail
to pay any amount owing to the Trustee pursuant to this Section (after
application of amounts paid pursuant to Section
Exhibit E - Page 6 of 35
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<PAGE>
6), Reorganized SPFC shall pay to the Trustee all amounts due to be
paid to Liquidating Trust by Reorganized SPFC pursuant to the Cash Flow
Instrument to be issued by Reorganized SPFC to Liquidating Trust as
Holder on the Closing Date until all amounts due to the Trustee under
this Section have been paid.
6. Guaranty of Performance; Appointment of Subservicer; Forbearance.
(a) Purchaser Guaranty. Subject to and conditioned upon the
closing of the Acquisition, Purchaser hereby guarantees the full and
prompt payment of all amounts required to be paid by Reorganized SPFC
pursuant to Section 5(b) of this Agreement, excluding any amounts
payable with respect to premium, if any. The Purchaser's guaranty
hereunder is a guaranty of payment, not of collection, and Purchaser
hereby expressly waives any right to require that demand be made (other
than the demand for payment contemplated by Section 5(b)) or any action
be brought against Reorganized SPFC as a condition to Purchaser's
obligation under this guaranty.
(b) Appointment of Subservicer. Reorganized SPFC agrees to use
its reasonable best efforts promptly to appoint a Subservicer
acceptable to the Trustee and MBIA, in their sole and absolute
discretion, as subservicer (the "Subservicer") with respect to each
Trust for which Reorganized SPFC acts as Master Servicer. Reorganized
SPFC shall enter into a Subservicing Agreement with such Subservicer
(the "Subservicing Agreement"), which Subservicing Agreement shall
comply with the requirements of the related Pooling and Servicing
Agreements and shall provide for the transfer of servicing in respect
of all related Mortgage Loans for which Reorganized SPFC acts as Master
Servicer. The Subservicing Agreement shall be executed and effective no
later than September 30, 1999. In addition, "good-bye letters"
notifying borrowers of the transfer of servicing to the Subservicer
shall be mailed no later than September 30, 1999, and the transfer of
servicing of all related Mortgage Loans to the Subservicer shall be
completed no later than October 31, 1999. The Trustee and MBIA agree
that Ocwen Financial Corporation ("Ocwen Financial") and Ocwen Federal
Bank FSB ("Ocwen Bank") each shall constitute an acceptable
Subservicer, and consent to the appointment of either as Subservicer
pursuant to the terms of the Pooling and Servicing Agreements. The
Trustee and MBIA further consent to the retention by the Master
Servicer or any Subservicer of Fannie Mae to provide management and
liquidation services with respect to any mortgaged property, ownership
of which is acquired by a Trust.
(c) Forbearance. Each of the Parties acknowledges and agrees
that one or more Events of Default have occurred and are continuing
under Section 7.01(vii), (viii) or (ix) of the Pooling and Servicing
Agreements (or Section 6.01(v), in the case of the Series 1998-H1
Servicing Agreement). The Trustee and MBIA hereby agree, upon the
satisfaction of all Conditions Precedent under Section 10 of this
Settlement Agreement, to forbear from enforcing their respective rights
and remedies against each of SPFC and Reorganized SPFC or any
successor, as Master Servicer, with respect to (A) any Events of
Default which may have previously occurred or which may occur in the
future under Section 7.01(iii) of the Pooling and Servicing Agreements
with respect to any breach of a representation or warranty of the
Master Servicer contained in Section 3.01(c) or of the
Exhibit E - Page 7 of 35
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<PAGE>
Master Servicer's covenants in Sections 5.08, 5.17 and 5.22 of the
Pooling and Servicing Agreements, Section 7.01 (vi) (with respect to
the Chapter 11 Case), (vii), (viii) or (ix) of the Pooling and
Servicing Agreements, or (B) any Servicing Defaults which may have
previously occurred or which may occur in the future under Section
6.01(ii) of the Series 1998-H1 Servicing Agreement with respect to any
breach of a representation or warranty of the Master Servicer or of the
Master Servicer's covenants in Sections 2.03, 3.09, 3.15, and 3.16 of
the Series 1998-H1 Servicing Agreement or Section 6.01(v) of the Series
1998-H1 Servicing Agreement, for so long as the following conditions
are met:
(i) Subservicer is appointed and performing as provided
in this Section;
(ii) Reorganized SPFC, as Master Servicer, is in
compliance with all other terms and conditions of the Pooling and
Servicing Agreements and SPFC and Reorganized SPFC are in
compliance with all terms and conditions of this Settlement
Agreement;
(iii) the Subservicer meets certain financial covenants
specified by MBIA, in its sole and absolute discretion, for such
Subservicer; provided that, if the Subservicer is either Ocwen
Financial or Ocwen Bank, the Subservicer meets the following
financial covenants: (A) Ocwen Bank maintains at least "adequately
capitalized" status at all times, as defined by its banking
regulators, for so long as the Purchaser (or an affiliate)
continues to have a substantial economic interest in the Residual
Interests for the related Transaction, and, otherwise maintains
"well capitalized" status at all times as defined by its banking
regulators; (B) if the Subservicer is Ocwen Financial, Ocwen
Financial provides MBIA with audited financial statements within
ninety days after the end of each fiscal year; (C) Ocwen Bank
agrees to notify MBIA of the entry of any consent or cease and
desist order or similar order or directive issued against Ocwen
Bank by any regulator of Ocwen Bank; (D) Ocwen Bank agrees to
notify MBIA of any material adverse change in the operations or
finances of Ocwen Bank; and (E) if the Subservicer is Ocwen
Financial, the performance of all of its obligations as
Subservicer are guaranteed by Ocwen Bank;
(iv) on and after the six month anniversary of the
Closing Date, the Subservicer meets certain resource and
procedural criteria derived from Subservicer's published policy
and procedures, which criteria shall be specified by MBIA, in its
sole and absolute discretion; provided, however, that if the
Subservicer is Ocwen Financial or Ocwen Bank, such criteria shall
be those selected by MBIA in its sole and absolute discretion, up
to eight such criteria, from the resource and procedural standards
contained in Ocwen Financial's or Ocwen Bank's (as applicable)
current servicing manual and attached to this Agreement on or
prior to the Closing Date, as Exhibit A;
(v) the agreement to forbear with respect to a failure
to maintain a fidelity bond under Section 5.08 of the Pooling and
Servicing Agreements and Section 3.09 of the Series 1998-H1
Servicing Agreement shall only be effective at
Exhibit E - Page 8 of 35
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<PAGE>
such times as the Master Servicer does not collect, process or
otherwise handle any monies and the Subservicer does maintain
fidelity bonds and errors and omissions policies as required
therein; and
(vi) the agreement to forbear with respect to failure to
provide annual reports as required by Section 5.17 of the Pooling
and Servicing Agreements and Section 3.15 of the Series 1998-H1
Servicing Agreement shall only be effective so long as the
Subservicer provides the reports required therein with respect to
the Subservicer;
provided, however, that the Trustee and MBIA agree that Reorganized
SPFC, as Master Servicer, shall be entitled to a period of 30 days
following any failure by the Subservicer to meet the conditions
contained in subsections (iii) or (iv) above to cure such breach or
cause Subservicer to cure such breach. Without limiting the following
sentence, the parties agree that time is of the essence in any
transition to a successor subservicer, and shall cooperate with each
other if the breach is to be cured through the replacement of the
Subservicer. In the case of replacement, MBIA and the Trustee agree to
forbear from removing Reorganized SPFC as Master Servicer for so long
as MBIA is satisfied, in its reasonable business judgment, that
Reorganized SPFC is using its reasonable efforts to cause a successor
subservicer to be identified and performing in a timely manner and MBIA
agrees, in the event it is not so satisfied, to give Reorganized SPFC
30 days' written notice and opportunity to cure in advance of removing
Reorganized SPFC as Master Servicer.
(d) Enforcement of Remedies. Upon expiration of the term of any
forbearance and any applicable cure period under this Section, (i) each
of the parties hereby agrees that MBIA has the right to terminate all
the rights of Reorganized SPFC as Master Servicer under the Pooling and
Servicing Agreement for each of the related Transactions and, subject
to any rights of certificate holders, to cause all authority and power
of Reorganized SPFC as Master Servicer under each such Pooling and
Servicing Agreement to pass to and be vested in the Trustee, or its
designee approved by MBIA, and (ii) each of the parties (other than the
Trustee) agrees not to contest, challenge or object in any way to
MBIA's exercise at any time of any such right or remedy.
(e) Acquisition of Additional Master Servicing. The Trustee
and MBIA agree to consent to Reorganized SPFC (or any successor) as a
successor master servicer under the terms of any Pooling and Servicing
Agreement for Transactions for which SPFC is not currently acting as
Master Servicer provided (i) Reorganized SPFC (or any successor) is in
compliance with the terms of this Agreement and each Pooling and
Servicing Agreement under which Reorganized SPFC acts as Master
Servicer (otherwise than as contemplated by subsection (c)), (ii) the
Subservicer is in compliance with the conditions for forbearance under
this Section, (iii) the Subservicer is obligated to subservice the
related Mortgage Loans pursuant to the terms of the Subservicing
Agreement, and (iv) the Purchaser owns a substantial economic interest
(as determined by MBIA) in the Residual Interests for the related
Transaction.
Exhibit E - Page 9 of 35
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<PAGE>
7. REMIC Reporting Matters. The Trustee, in its capacity as
administrator of each of the REMICs related to the Trusts, has consented to use
certain methodologies, described in Schedule 7 relating to the calculation of
the taxable income of the REMICs (the "Methodologies"), and has agreed to sign
amended federal income tax returns in respect of certain of the REMICs and
future returns for the REMICs (collectively, the "Returns") that reflect the use
of the Methodologies. The Trustee, in its capacity as administrator of the
REMICs, agrees to sign the Returns upon satisfaction of the following
conditions: (a) receipt of an opinion of counsel satisfactory to the Trustee
that the Methodologies are permissible under the REMIC Provisions and that the
preparation and filing of Returns reflecting the use of the Methodologies will
have no adverse effect on the status of any REMIC as a REMIC and (b) receipt of
a written opinion of a nationally-recognized tax and financial accounting firm
acceptable to the Trustee that the use of the Methodologies in preparation of
the Returns does not constitute a change in accounting method requiring notice
to or consent of the Internal Revenue Service. The parties further agree that
(unless the Trustee agrees otherwise) all Returns and other required schedules
will be prepared for the Trustee's signature by a nationally-recognized tax and
financial accounting firm acceptable to the Trustee as a paid preparer of such
Returns and other required schedules. Reorganized SPFC agrees to bear all costs
and expenses associated with the preparation of such Returns and other required
schedules by the paid preparer.
8. Releases of the Trustee and MBIA; Waiver by Trustee.
(a) Release. SPFC (and the Liquidating Trust as successor),
Reorganized SPFC, and the Purchaser hereby jointly and severally
irrevocably and absolutely release, remise, acquit, and discharge each
of the Trustee and MBIA, their respective affiliates, and each of their
respective current and former officers, directors, employees,
attorneys, agents, consultants, shareholders, successors and assigns
from and of any and all claims, demands, causes of action, actions,
liabilities, damages, losses, expenses and costs, of any kind or nature
whatsoever, absolute or contingent, matured or unmatured, liquidated or
unliquidated, now known or subsequently discovered, that (a) arise out
of or in any way relate to the settlement set forth herein and/or the
transactions contemplated hereby (other than the performance by the
Trustee and MBIA of their obligations under this Agreement), (b) relate
to the Trustee's or MBIA's performance (or failure to perform) pursuant
to the terms of the Pooling and Servicing Agreements prior to the
Closing Date, to the extent resulting from any failure to perform by
SPFC as Master Servicer, and/or (c) are identified on Schedule 6
hereto. The parties hereto hereby agree to amend each of the Pooling
and Servicing Agreements for the Transactions to require the following:
(a) that any subsequent purchaser of any Residual Interests in any
Trust provide the foregoing release, mutatis mutandis, and (b) that a
restrictive legend regarding the foregoing be placed on any and all
certificated Residual Interests. Each of SPFC and the Purchaser hereby
represents and warrants that it is not currently aware of any other
claims against the Trustee or MBIA.
(b) Waiver. The Trustee hereby waives its rights and any claims it
may have under the indemnity covenants in Sections 9.05(d) and 10.03(b)
of the Pooling and Servicing Agreements and Section 5.06(b) of the
Series 1998-H1 Servicing Agreement with respect to any event occurring
prior to the Closing Date.
Exhibit E - Page 10 of 35
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9. Consent to Assumption and Partial Withdrawal of the Trustee's Proofs
of Claim. Subject to and conditioned upon the full and complete satisfaction of
the Conditions Precedent specified in Section 10, the Trustee shall consent to
the assumption of the Pooling and Servicing Agreements for the Transactions and
withdraw the Trustee's Proofs of Claim related to the Breaches, and MBIA shall
withdraw its proofs of claim. Further, all obligations of SPFC, Reorganized
SPFC, and Purchaser arising out of the rejection of the Mortgage Loan Purchase
Agreements and the Insurance Agreements and Indemnification Agreements, shall be
only as expressly set forth in this Settlement Agreement. The Trustee and MBIA,
and their successors in interest, waive and shall be forever estopped from
asserting any claim or demand arising out of such rejections or in any way
related to the Breaches, subject to Section 14 and otherwise except as expressly
set forth in this Settlement Agreement.
10. Conditions Precedent to the Obligations of the Trustee and MBIA
Hereunder. The obligations of the Trustee and MBIA under this Agreement shall
not arise until each of the following conditions (the "Conditions Precedent") is
satisfied (or waived) to the reasonable satisfaction of the Trustee and MBIA, as
evidenced by an officer's certificate from each of the Trustee and MBIA to such
effect:
(a) The Plan and the related disclosure provide an accurate and
adequate summary of the terms of this Settlement Agreement and
otherwise are reasonably satisfactory to the Trustee and MBIA;
(b) Notice is provided to each holder of any Class A Certificate
or Note and any other holders of interests in the related Trusts of the
terms of this Settlement Agreement, and the Bankruptcy Court issues an
order approving the terms of this Settlement Agreement, each of which
notice and order is in form and substance acceptable to the Trustee and
MBIA, in their sole and absolute discretion;
(c) The Confirmation Order is in form and substance acceptable to
the Trustee and MBIA in their sole and absolute discretion, and either
(i) becomes a Final Order, or (ii) an opinion (satisfactory to the
Trustee, MBIA and the Purchaser in form and substance) of counsel for
SPFC concluding that consummation of the Plan will effectively moot any
appeal from the Confirmation Order has been delivered to the Trustee,
MBIA and the Purchaser;
(d) An assumption agreement executed and delivered by the
Liquidating Trust in form and substance acceptable to MBIA and the
Trustee, pursuant to which the Liquidating Trust assumes its
obligations hereunder;
(e) SPFC and/or the Liquidating Trust have repurchased the
Critical Exception Mortgage Loans as to which the corresponding
Breaches have not been cured in accordance with Section 2 of this
Agreement;
(f) The Trustee and MBIA have reviewed and approved, in their sole
and absolute discretion, the Subservicer (if other than Ocwen Financial
or Ocwen Bank) and the terms of the Subservicing Agreement;
Exhibit E - Page 11 of 35
- 11 -
<PAGE>
(g) Delivery of Exhibit A described in sub-paragraph 6(c)(iv);
(h) The procedures for transfer of servicing of the Mortgage Loans
to the Subservicer have been presented to MBIA and MBIA has consented
to such procedures, which consent shall not unreasonably be withheld;
and
(i) SPFC and/or the Purchaser have delivered opinions of counsel
regarding the due authorization, execution, delivery and enforceability
of this Agreement with respect to each of SPFC, Reorganized SPFC and
the Purchaser and an opinion of counsel for the Liquidating Trust
regarding the due authorization, execution, delivery and enforceability
of the assumption agreement referred to in subparagraph (d).
11. Opinions of Counsel to Trustee and MBIA. The obligations of SPFC,
Reorganized SPFC and Purchaser hereunder shall not arise until each of the
Trustee and MBIA delivers an opinion of counsel regarding the due authorization,
execution, delivery and enforceability of this Agreement with respect to such
party.
12. Continuing Representations, Warranties and Covenants.
(a) Notwithstanding the rejection of any Insurance Agreement,
Reorganized SPFC hereby represents, warrants and covenants as follows:
(i) Upon the request of MBIA, Reorganized SPFC shall furnish, with
reasonable promptness, any financial data, financial reports and other
data relating to Reorganized SPFC or the Subservicer as MBIA may
reasonably request.
(ii) Reorganized SPFC shall, upon the request of MBIA, permit
MBIA, or its authorized agent, at reasonable times and upon reasonable
notice, to inspect the books and records of Reorganized SPFC and the
Subservicer as they may relate to the Class A Certificates, the
Mortgage Loans and Reorganized SPFC's obligations under the Transaction
Documents and to discuss matters relating to the Class A Certificates,
the Mortgage Loans or Reorganized SPFC's obligations under the
Transaction Documents with an appropriate authorized officer of
Reorganized SPFC.
(iii) Reorganized SPFC shall promptly deliver to MBIA any Notice
of Material Event (as defined in the Insurance Agreement).
(iv) Except as permitted in this Agreement or the Pooling and
Servicing Agreement, Reorganized SPFC, in its capacity as Master
Servicer, shall not take any action, or fail to take any action, if
such action or failure to take action will have a material adverse
effect on MBIA's ability to enforce its rights under any of the
Transaction Documents.
(b) Reorganized SPFC shall either enter into new custodial
arrangements for the Mortgage Loans with the same fee schedule as the existing
schedule or assume all obligations of SPFC to pay fees and costs related to
existing custodial arrangements for the Mortgage Loans. In either event, SPFC
will pay all fees due and payable before the Closing Date.
Exhibit E - Page 12 of 35
- 12 -
<PAGE>
(c) SPFC (or the Liquidating Trust as successor) shall continue to
provide to the Trustee all release requests as required under any Pooling and
Servicing Agreement for any Mortgage Loans paid off or otherwise subject to
release through the Closing Date (and shall pay all fees associated with such
releases), assisted as required and as customary by the Trustee.
13. Representations and Warranties. Each of the Parties hereby
represents and warrants that each of the following statements is true and
accurate as of the date hereof:
(a) This Agreement has been duly authorized and validly executed
and delivered by such party and constitutes such party's legal, valid
and binding obligation, enforceable against such party in accordance
with its terms;
(b) Subject, in the case of SPFC, to the authority of the
Bankruptcy Court, such party is not subject to any restriction,
agreement or law, order, writ, injunction, decree, rule or regulation
of any court, administrative agency or other governmental authority
that, with or without the giving of notice, the passage of time or
both, would prohibit, contravene, be violated by, or be inconsistent
with the execution, delivery and performance by such party of this
Agreement or the consummation of the transaction effected hereby or
contemplated herein; and
(c) There is no action, suit or proceeding pending or, to the best
of such party's knowledge and belief, threatened against such party
that questions the validity of, in any way legally impairs, or seeks to
enjoin or otherwise prevent the execution, delivery and/or performance
by such party of this Agreement or, if adversely determined, would have
a material adverse effect on such party's ability to perform his or
its, as the case may be, obligations hereunder.
14. No Exception Loss; No Other Breaches. SPFC hereby represents and
warrants that to its best knowledge there has not been any loss prior to the
date hereof and there will be no loss as of the Closing Date which would be
defined as an "Exception Loss" within the meaning of paragraph 3(b) if it
occurred after the Closing Date. SPFC hereby represents and warrants to each of
the Trustee and MBIA that SPFC is not aware of any breach of any representation
or warranty of SPFC or any affiliate of SPFC under any Pooling and Servicing
Agreement or any Mortgage Loan Purchase Agreement other than the Breaches
resulting directly from SPFC's bankruptcy, or dealt with in this Agreement. MBIA
and the Trustee represent that they are not aware of any such additional
breaches. The Trustee and MBIA hereby acknowledge and agree that the
representations and warranties contained in this Section are made by SPFC and
not by Reorganized SPFC, and that the recourse of the Trustee and MBIA hereunder
is limited to a claim against the Liquidating Trust.
15. Transfer of Servicing; No Acquisition. In the event SPFC and
Purchaser fail to consummate the Acquisition, SPFC agrees as follows:
(a) SPFC shall enter into a Subservicing Agreement to be executed
and effective no later than September 30, 1999, which Subservicing
Agreement shall comply with the requirements of the related Pooling and
Servicing Agreements and provide for
Exhibit E - Page 13 of 35
- 13 -
<PAGE>
the transfer of servicing with respect to all related Mortgage Loans
for which SPFC acts as Master Servicer.
(b) "Good-bye letters" notifying borrowers of the transfer of
servicing to the Subservicer shall be mailed no later than September
30, 1999.
(c) Transfer of servicing of all related Mortgage Loans to the
Subservicer shall be completed no later than October 31, 1999.
(d) If SPFC fails to fulfill any of the obligations set forth in
subscections (a) through (c) above, (i) each of the parties hereby
agrees that MBIA has the right to terminate all the rights of SPFC, or
any successor, as Master Servicer under the Pooling and Servicing
Agreement for each of the related Transactions or Additional Insured
Transactions, as applicable, and, subject to the rights of the
certificate holders, to cause all authority and power of SPFC, or any
successor, as Master Servicer under each such Pooling and Servicing
Agreement to pass to and be vested in the Trustee, or its designee
approved by MBIA, and (ii) each of the parties (other than the Trustee)
agrees (A) not to contest, challenge or object in any way to MBIA's
exercise at any time of any such right or remedy, (B) irrevocably and
absolutely to waive and cooperate to obtain, at MBIA's expense, any
necessary relief from the automatic stay under the Bankruptcy Code or
other impediment to exercise of any remedy against SPFC and (C) to join
with MBIA and the Trustee, at MBIA's request and expense, in asking any
court of competent jurisdiction (including, without limitation, the
Bankruptcy Court) to approve any such action at any and all times.
(e) It shall secure an order approving the waiver of the automatic
stay of Section 362(a) of the Bankruptcy Code, as set forth in Section
15 hereof, to be entered by the Bankruptcy Court on or before July 7,
1999 and to become a Final Order.
If SPFC and Purchaser fail to consummate the Acquisition, Reorganized SPFC under
this Agreement shall mean SPFC and Purchaser shall have no obligation of any
nature whatsoever under this Agreement or otherwise with respect to the subject
matter of this Agreement.
16. Attorneys' Fees. In the event any litigation, arbitration or other
proceeding is commenced by a party hereto against one or more of the other
parties hereto for purposes of enforcing the terms of this Agreement, the
prevailing party in such litigation, arbitration or other proceeding shall be
entitled to recover its attorneys' fees and expenses from the non-prevailing
party or parties in such litigation, arbitration or other proceeding.
17. Consent to Jurisdiction. Each of the parties hereby agrees that all
actions, suits or other proceedings arising out of or relating in any way to
this Agreement may, but need not, be brought in the Bankruptcy Court. Each of
the parties hereby knowingly, voluntarily, intelligently, absolutely and
irrevocably waives and agrees not to assert any objection it may now or
hereafter have to the laying of venue of all actions, suits or proceedings
arising out of or relating in any way to this Agreement in the Bankruptcy Court
and irrevocably submits to the jurisdiction of the Bankruptcy Court for such
purposes. Each of the parties hereby knowingly, voluntarily, intelligently,
absolutely and irrevocably waives and agrees not to assert in any such
Exhibit E - Page 14 of 35
- 14 -
<PAGE>
action, suit or proceeding that it is not subject to the personal jurisdiction
of the Bankruptcy Court or that the action, suit or proceeding should be
transferred to a different venue under forum non conveniens principles or
statutes embodying such principles.
18. Amendment. This Agreement may be amended from time to time by the
parties hereto pursuant to a written agreement signed by the parties hereto.
19. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
20. Notices. All demands, notices and communications hereunder shall be
in writing and shall be deemed to have been duly given if personally delivered
at or mailed by registered mail, postage prepaid, addressed as follows, or such
other address as may be furnished by proper notice as described herein
(facsimile numbers are provided below for convenience of communication and not
as an alternative means of delivery of notice):
SPFC: Southern Pacific Funding Corporation
---- One Centerpointe Drive, Suite 551
Lake Oswego, Oregon 97035
Attention: Mr. Kevin D. Padrick
Facsimile No.: (503) 598-0662
Trustee: Norwest Bank Minnesota, National Association
------- 11000 Broken Land Parkway
Columbia, Maryland 21044-3562
Attention: Mr. Brian W. Bartlett
Facsimile No.: (410) 884-2363
MBIA: MBIA Insurance Corporation
---- 113 King Street
Armonk, NY 10504
Attention: Mr. Stephen G. Holliday
Facsimile No.: (914) 765-3810
Purchaser and The Goldman Sachs Group, Inc.
Reorganized SPFC: 85 Broad Street
---------------- New York, NY 10004
Attention: Mr. Marvin Kabatznick
Facsimile No.: (212) 346-3568
Attention: Jay Strauss, Esq.
Facsimile No.: (212) 902-3876
21. Relationship of Parties. Nothing herein contained shall be deemed
or construe to create a partnership or joint venture between the parties
hereto.
Exhibit E - Page 15 of 35
- 15 -
<PAGE>
22. Counterparts. This Agreement may be executed in one or more
counterparts and by the different parties hereto on separate counterparts, each
of which, when so executed, shall be deemed to be an original and such
counterparts, together, shall constitute one and the same agreement.
23. Term. The term of this Agreement shall extend until satisfaction of
all obligations of the parties hereunder and until payment in full of any and
all amounts required to be paid hereunder or under the terms of any Pooling and
Servicing Agreement.
24. Entire Agreement; Amendment. This Agreement constitutes the entire
agreement and understanding between the parties concerning the subject matter
hereof and supersedes and terminates all prior written and oral agreements,
proposals, promises and representations of the parties respecting the subject
matter hereof. No representation or promise hereafter made, nor any modification
or amendment of this Agreement, shall be binding upon either party, unless made
in writing and signed by the parties hereto.
25. Assignment; Binding Effect. None of the parties hereto may assign
its rights hereunder or delegate its duties and obligations hereunder without
the express prior written consent of each of the Trustee and MBIA. Subject to
all terms and conditions hereof, this Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and permitted
assigns.
[Signature Page Follows]
Exhibit E - Page 16 of 35
- 16 -
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered by its duly authorized officer thereunto
as of the day and year first above written.
SOUTHERN PACIFIC FUNDING CORPORATION
By:----------------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL ASSOCATION
By:----------------------------------------
Name:
Title:
MBIA INSURANCE CORPORATION
By:----------------------------------------
Name:
Title:
THE GOLDMAN SACHS GROUP, INC.
By:----------------------------------------
Name:
Title:
Exhibit E - Page 17 of 35
- 17 -
<PAGE>
EXHIBIT A
EXCERPTS FROM OCWEN FINANCIAL'S OR OCWEN BANK'S (AS APPLICABLE)
CURRENT SERVICING MANUAL
(TO BE SUPPLIED BEFORE CLOSING.)
Exhibit E - Page 18 of 35
- 18 -
<PAGE>
Schedule 1
----------
POOLING AND SERVICING AGREEMENTS
1. Pooling and Servicing Agreement dated as of June 1, 1995 by and among
Southern Pacific Secured Assets Corp., Imperial Credit Industries, Inc.
and Bankers Trust Company of California, N.A. with respect to Mortgage
Pass-Through Certificates, Series 1995-1.
2. Pooling and Servicing Agreement dated as of September 1, 1995 by and
among Southern Pacific Secured Assets Corp., Imperial Credit
Industries, Inc. and Bankers Trust Company of California, N.A. with
respect to Mortgage Pass-Through Certificates, Series 1995-2.
3. Pooling and Servicing Agreement dated as of February 1, 1996 by and
among Southern Pacific Secured Assets Corp., Advanta Mortgage Corp. USA
and Bankers Trust Company of California, N.A. with respect to Mortgage
Pass-Through Certificates, Series 1996-1.
4. Pooling and Servicing Agreement dated as of May 8, 1996 by and among
Southern Pacific Secured Assets Corp., Advanta Mortgage Corp. USA and
Bankers Trust Company of California, N.A. with respect to Mortgage
Pass-Through Certificates, Series 1996-2.
5. Pooling and Servicing Agreement dated as of August 1, 1996 by and among
Southern Pacific Secured Assets Corp., Advanta Mortgage Corp. USA and
Bankers Trust Company of California, N.A. with respect to Mortgage
Pass-Through Certificates, Series 1996-3.
6. Pooling and Servicing Agreement dated as of December 1, 1996 by and
among Southern Pacific Secured Assets Corp., Advanta Mortgage Corp. USA
and Norwest Bank Minnesota, N.A. with respect to Mortgage Pass-Through
Certificates, Series 1996-4.
7. Pooling and Servicing Agreement dated as of February 1, 1997 by and
among Southern Pacific Secured Assets Corp., Advanta Mortgage Corp. USA
and Norwest Bank Minnesota, N.A. with respect to Mortgage Pass-Through
Certificates, Series 1997-1.
8. Pooling and Servicing Agreement dated as of June 1, 1997 by and among
Southern Pacific Secured Assets Corp., Advanta Mortgage Corp. USA and
Norwest Bank Minnesota, N.A. with respect to Mortgage Pass-Through
Certificates, Series 1997-2.
9. Pooling and Servicing Agreement dated as of September 1, 1997 by and
among Southern Pacific Secured Assets Corp., Advanta Mortgage Corp. USA
and Norwest Bank Minnesota, N.A. with respect to Mortgage Pass-Through
Certificates, Series 1997-3.
10. Pooling and Servicing Agreement dated as of December 1, 1997 by and
among Southern Pacific Secured Assets Corp., Advanta Mortgage Corp. USA
and Norwest Bank Minnesota, N.A. with respect to Mortgage Pass-Through
Certificates, Series 1997-4.
Exhibit E - Page 19 of 35
- 19 -
<PAGE>
11. Pooling and Servicing Agreement dated as of March 1, 1998 by and among
Southern Pacific Secured Assets Corp., Southern Pacific Funding
Corporation and Norwest Bank Minnesota, N.A. with respect to Mortgage
Pass-Through Certificates, Series 1998-1.
12. Pooling and Servicing Agreement dated as of June 1, 1998 by and among
Southern Pacific Secured Assets Corp., Southern Pacific Funding
Corporation and Norwest Bank Minnesota, N.A. with respect to Mortgage
Pass-Through Certificates, Series 1998-2.
13. Servicing Agreement dated as of June 1, 1998 between Southern Pacific
Funding Corporation and Southern Pacific CMN Trust Series 1998-H1.
Exhibit E - Page 20 of 35
- 20 -
<PAGE>
Schedule 2
----------
MORTGAGE LOAN PURCHASE AGREEMENTS
1. Mortgage Loan Purchase Agreement dated as of June 28, 1995 between
Southern Pacific Secured Assets Corp. and Southern Pacific Funding
Corporation with respect to Mortgage Pass-Through Certificates, Series
1995-1.
2. Mortgage Loan Purchase Agreement dated as of September 1, 1995 between
Southern Pacific Secured Assets Corp. and Southern Pacific Funding
Corporation with respect to Mortgage Pass-Through Certificates, Series
1995-2.
3. Mortgage Loan Purchase Agreement dated as of February 1, 1996 between
Southern Pacific Secured Assets Corp. and Southern Pacific Funding
Corporation with respect to Mortgage Pass-Through Certificates, Series
1996-1.
4. Mortgage Loan Purchase Agreement dated as of May 8, 1996 between
Southern Pacific Secured Assets Corp. and Southern Pacific Funding
Corporation with respect to Mortgage Pass-Through Certificates, Series
1996-2.
5. Mortgage Loan Purchase Agreement dated as of August 1, 1996 between
Southern Pacific Secured Assets Corp. and Southern Pacific Funding
Corporation with respect to Mortgage Loan Asset-Backed Pass-Through
Certificates, Series 1996-3.
6. Mortgage Loan Purchase Agreement dated as of December 1, 1996 between
Southern Pacific Secured Assets Corp. and Southern Pacific Funding
Corporation with respect to Mortgage Loan Asset-Backed Pass-Through
Certificates, Series 1996-4.
7. Mortgage Loan Purchase Agreement dated as of February 1, 1997 between
Southern Pacific Secured Assets Corp. and Southern Pacific Funding
Corporation with respect to Mortgage Loan Asset-Backed Pass-Through
Certificates, Series 1997-1.
8. Mortgage Loan Purchase Agreement dated as of June 1, 1997 between
Southern Pacific Secured Assets Corp. and Southern Pacific Funding
Corporation with respect to Mortgage Loan Asset-Backed Pass-Through
Certificates, Series 1997-2.
9. Mortgage Loan Purchase Agreement dated as of September 1, 1997 between
Southern Pacific Secured Assets Corp. and Southern Pacific Funding
Corporation with respect to Mortgage Loan Asset-Backed Pass-Through
Certificates, Series 1997-3.
10. Mortgage Loan Purchase Agreement dated as of December 1, 1997 between
Southern Pacific Secured Assets Corp. and Southern Pacific Funding
Corporation with respect to Mortgage Loan Asset-Backed Pass-Through
Certificates, Series 1997-4.
Exhibit E - Page 21 of 35
- 21 -
<PAGE>
11. Mortgage Loan Purchase Agreement dated as of March 1, 1998 between
Southern Pacific Secured Assets Corp. and Southern Pacific Funding
Corporation with respect to Asset-Backed Floating Rate Certificates,
Series 1998-1.
12. Mortgage Loan Purchase Agreement dated as of June 1, 1998 between
Southern Pacific Secured Assets Corp. and Southern Pacific Funding
Corporation with respect to Mortgage Loan Asset-Backed Pass-Through
Certificates, Series 1998-2.
13. Home Loan Purchase Agreement dated as of June 25, 1998 between Southern
Pacific Secured Assets Corp. and Southern Pacific Funding Corporation
with respect to Fixed Rate Home Loans, Series 1998-H1.
Exhibit E - Page 22 of 35
- 22 -
<PAGE>
Schedule 3
----------
Critical Exception Loans
The following Mortgage Loans are required to have the assignment to the
Trustee recorded.
<TABLE>
Trust Loan Trust Loan Trust Loan
Series Number Series Number Series Number
<S> <C> <C> <C> <C> <C>
1997-2 0100604032 1997-3 0700603159 1997-2 3100602611
1997-3 0100604655 1997-3 0700603521 1997-2 3100602871
1997-3 0100604660 1997-4 0700604140 1997-1 3103303902
1997-3 0100604695 1998-H1 703201511 1997-1 3103303968
1997-3 0100604767 1996-4 0703301999 1997-1 3103304102
1997-3 0100604777 1996-4 0703302325 1997-2 3103304420
1997-3 0100604799 1996-4 0703302330 1997-3 5000000462
1997-3 0100604822 1996-4 0703302335 1997-4 5000000617
1997-4 0100604899 1996-4 0703302413 1997-4 5000000648
1997-4 0100604921 1997-1 0703302654 1997-4 5000000669
1997-3 0103201136 1997-1 0703302757 1997-4 5000000678
1997-2 0103306839 1997-1 0703302764 1997-4 5000000690
1997-3 0103306842 1997-1 0703302769 1997-4 5000000789
1997-3 0103306846 1997-2 0703302834 1997-4 5000001066
1997-3 0103306879 1997-2 0703302837 1997-4 5000001429
1998-1 0700000015 1997-3 0703302945 1997-4 5000001454
1997-4 0700000045 1997-2 0703303236 1997-4 5000001578
1997-4 0700000050 1997-4 0703303806 1997-4 5400000019
1997-4 0700000079 1998-1 0703303860 1997-4 5400000027
1998-1 0700000089 1997-4 0703303886 1997-4 5400000286
1998-1 0700000141 1997-4 0703303955 1997-4 5400000378
1998-1 0700000142 1997-4 0703303975 1997-4 5400000461
1998-1 0700000166 1996-4 0800603442 1997-4 5400000557
1998-1 0700000184 1996-4 0800603446 1997-4 5400000612
1998-1 0700000191 1998-1 1300007347 1997-4 6201001482
1998-1 0700000198 1996-4 2000600109 1997-1 6201001974
1998-1 0700000209 1997-3 2003301403 1997-1 6201002927
1998-1 0700000240 1996-4 3000601657 1997-1 6201003493
1998-1 0700000242 1996-4 3000601671 1997-1 6201003925
1998-1 0700000257 1997-1 3000602508 1997-1 6201003989
1998-1 0700000258 1997-1 3000602537 1997-1 6201004599
1998-1 0700000259 1997-1 3000603302 1998-1 6201800250
1998-1 0700000305 1997-2 3000604489 1998-1 6201800888
1998-1 0700000306 1997-3 3000604943 1997-1 6210011212
1998-1 0700000340 1997-4 3000606041 1997-4 6210019939
1996-4 0700601891 1997-4 3000606043 1997-2 6211512950
1996-4 0700601899 1997-4 3003200434 1997-2 6211515832
1996-4 0700602013 1997-1 3003302990 1997-3 6212820053
1996-4 0700602069 1997-1 3003303034 1997-3 6212820824
1997-1 0700602316 1997-1 3003303155 1998-1 6216810473
1996-4 0700602389 1997-2 3003303272 1998-1 6217610328
1997-1 0700602461 1997-2 3003303524 1997-4 6220030314
1996-4 0700602464 1997-3 3003304372 1998-1 6222810135
1997-1 0700602607 1997-4 3003304651 1998-1 6222810777
1997-1 0700602645 1997-4 3003304653 1997-4 6222850531
1997-1 0700602728 1998-1 3003305762 1997-4 6222850792
1997-1 0700602832 1998-1 3003305767 1997-4 6250001297
1997-2 0700602870 1996-4 3100601336 1997-4 6250001908
1997-2 0700602943 1997-1 3100601790 1997-4 6250001909
1997-2 0700603010 1997-1 3100601952 1998-1 6250010096
1997-2 0700603089 1997-2 3100602103 1998-1 6250010967
1997-2 0700603098 1997-2 3100602141 1998-1 6250011019
1997-2 0700603154 1997-2 3100602420 1998-1 6250011187
1997-2 3100602547 1997-4 6250060353
-1-
Exhibit E - Page 23 of 35
<PAGE>
Schedule 3
----------
Critical Exception Loans
The following Mortgage Loans are required to have the assignment to the
Trustee recorded.
Trust Loan Trust Loan Trust Loan
Series Number Series Number Series Number
1997-4 6250060426 1997-4 6601097026 1998-1 6603000095
1997-4 6250060529 1997-4 6601097027 1998-1 6603000101
1997-4 6250060535 1997-4 6601097030 1998-1 6603000103
1997-4 6250070604 1997-4 6601097032 1998-1 6603000113
1997-4 6250070605 1997-4 6601097035 1998-1 6603000114
1997-4 6250080047 1997-4 6601097036 1998-1 6603000125
1997-4 6250080814 1997-4 6601097037 1998-1 6603000127
1997-4 6250080831 1997-4 6601097040 1998-1 6603000133
1997-4 6270030947 1997-4 6601097047 1998-1 6603000137
1997-4 6280010399 1997-4 6601197004 1998-1 6603000142
1998-1 6600000009 1997-4 6601197007 1998-1 6603000143
1998-1 6600000106 1997-4 6601197008 1998-1 6603000144
1997-4 6600107028 1997-4 6601197031 1998~1 6603000145
1998-1 6600198048 1997-4 6601197054 1998-1 6603000148
1997-3 6600797006 1997-4 6601297002 1998-1 6603000153
1997-3 6600797009 1997-4 6601297032 1998-1 6603000156
1997-3 6600797011 1998-1 6601297053 1998-1 6603000157
1997-3 6600797013 1998-1 6601297054 1998-1 6603000159
1997-3 6600797026 1998-1 6601297055 1998-1 6603000165
1997-3 6600797027 1998-1 6601297056 1998-1 6603000175
1997-3 6600797030 1998-1 6601297074 1998-1 6603000177
1997-3 6600797043 1998-1 6602000004 1998-1 6603000178
1997-4 6600897012 1998-1 6602000027 1998-1 6603000181
1998-1 6601000016 1998-1 6602000030 1998-1 6603000184
1998-1 6601000019 1998-1 6602000047 1998-1 6603000188
1998-1 6601000022 1998-1 6602000050 1998-1 6603000192
1998-1 6601000027 1997-4 6602897005 1998-1 6603000194
1998-1 6601000028 1997-4 6602997002 1998-1 6603000205
1998-1 6601000029 1997-4 6602997018 1998-1 6603000206
1998-1 6601000030 1997-4 6602997019 1998-1 6603000208
1998-1 6601000043 1997-4 6602997023 1998-1 6603000209
1998-1 6601000045 1998-1 6603000006 1998-1 6603000210
1998-1 6601000061 1998-1 6603000008 1998-1 6603000234
1998-1 6601000088 1998-1 6603000010 1997-4 6606970017
1998-1 6601000116 1998-1 6603000013 1998-1 6606970025
1998-1 6601000136 1998-1 6603000014 1998-1 6606970048
1998-1 6601000144 1998-1 6603000015 1998-1 6606970051
1998-1 6601000159 1998-1 6603000016 1998-1 6606970056
1998-1 6601000173 1998-1 6603000028 1998-1 6606970066
1998-1 6601000179 1998-1 6603000038 1998-1 6606970067
1998-1 6601000213 1998-1 6603000040 1998-1 6609079175
1998-1 6601000226 1998-1 6603000049 1997-3 6609706007
1998-1 6601000230 1998-1 6603000051 1997-3 6609706015
1998-1 6601000231 1998-1 6603000052 1997-3 6609706016
1998-1 6601000232 1998-1 6603000053 1997-3 6609706018
1998-l 6601000251 1998-1 6603000054 1997-3 6609706021
1998-1 6601000258 1998-1 6603000058 1997-3 6609706022
1998-1 6601000275 1998-1 6603000059 1997-3 6609706023
1998-1 6601000288 1998-1 6603000062 1997-3 6609706025
1998-1 6601000376 1998-1 6603000064 1997-3 6609706026
1997-4 6601097008 1998-1 6603000066 1997-3 6609706039
1997-4 6601097014 1998-1 6603000068 1997-3 6609706040
1997-4 6601097022 1998-1 6603000071 1997-3 6609706062
1997-4 6601097024 1998-1 6603000074 1997-3 6609706064
1998-1 6603000084 1997-3 6609706067
-2-
Exhibit E - Page 24 of 35
<PAGE>
Schedule 3
----------
Critical Exception Loans
The following Mortgage Loans are required to have the
assignment to the Trustee recorded.
Trust Loan Trust Loan Trust Loan
Series Number Series Number Series Number
1997-3 6609706070 1997-4 6609708121 1997-4 6609711052
1997-4 6609706089 1997-3 6609708126 1997-4 6609711061
1997-4 6609706090 1997-4 6609708137 1997-4 6609711069
1997-4 6609706117 1997-4 6609708156 1997-4 6609711071
1997-3 6609706144 1997-4 6609708161 1997-4 6609711084
1997-3 6609706162 1997-4 6609708162 1997-4 6609711105
1997-3 6609707169 1997-4 6609708171 1997-4 6609711125
1997-3 6609707173 1997-4 6609709091 1997-4 6609711132
1997-3 6609707180 1997-4 6609709121 1997-4 6609711134
1997-3 6609707184 1997-4 6609709132 1997-4 6609711167
1997-3 6609707189 1997-4 6609709138 1997-4 6609711178
1997-3 6609707205 1997-4 6609709139 1997-4 6609711184
1997-3 6609707206 1997-4 6609709142 1997-4 6609711191
1997-3 6609707211 1997-4 6609709152 1997-4 6609711214
1997-3 6609707212 1997-4 6609709153 1997-4 6609711220
1997-3 6609707218 1997-4 6609709157 1997-4 6609711221
1997-3 6609707222 1997-4 6609709180 1997-4 6609711222
1997-3 6609707240 1997-4 6609709183 1997-4 6609711233
1997-3 6609707246 1997-4 6609709186 1997-4 6609711238
1997-3 6609707251 1997-4 6609709208 1997-4 6609711249
1997-3 6609707253 1997-4 6609709212 1997-4 6609712033
1997-3 6609707262 1997-4 6609709214 1997-4 6609712034
1997-3 6609707267 1997-4 6609709219 1997-4 6609712042
1997-3 6609707275 1997-4 6609709246 1997-4 6609712077
1997-3 6609707281 1997-4 6609709248 1997-4 6609712096
1997-4 6609707285 1997-4 6609709249 1998-1 6609712105
1997-3 6609707287 I997-4 6609709252 1998-1 6609712134
1997-4 6609707294 1997-4 66097O9266 1998-1 6609712156
1997-4 6609707295 1997-4 6609709269 1998-1 6609712164
1997-4 6609707296 1997-4 6609709278 1998-1 6609712213
1997-3 6609707300 1997-4 6609709281 1998-1 6609712234
1997-3 66097O7302 1997-4 6609709282 1998-1 6609800131
1997-3 6609707320 1997-4 6609710022 1998-1 6609801013
1997-3 6609707322 1997-4 6609710031 1998-1 6609801020
1997-3 6609707323 1997-4 6609710034 1998-1 6609801023
1997-3 6609707324 1997-4 6609710040 1998-1 6609801024
1997-3 6609707329 1997-4 6609710049 1998-1 6609801030
1997-3 6609707334 1997-4 6609710050 1998-1 6609801032
1997-3 6609707362 1997-4 6609710051 1998-1 6609801037
1997-3 6609708009 1997-4 6609710060 1998-1 6609801038
1997-3 6609708017 1997-4 6609710062 1998-1 6609801039
1997-3 6609708030 1997-4 6609710071 1998-1 6609801040
1997-4 6609708031 1997-4 6609710072 1998-1 6609801063
1997-3 6609708034 1997-4 6609710087 1998-1 6609801080
1997-3 6609708036 1997-4 6609710093 1998-1 6609801083
1997-3 6609708058 1997-4 6609711002 1998-1 6609801085
1997-3 6609708061 1997-4 6609711003 1998-1 6609801086
1997-3 6609708076 1997-4 6609711006 1998-1 6609801090
1997-3 6609708082 1997-4 6609711008 1998-1 6609801091
1997-3 6609708084 1997-4 6609711017 1998-1 6609801097
1997-3 6609708099 1997-4 6609711024 1998-1 6609801113
1997-4 6609708108 1997-4 6609711028 1997-4 6609970030
1997-4 6609708120 1997-4 6609711029
</TABLE>
-2-
Exhibit E - Page 25 of 35
<PAGE>
Schedule 3
----------
Critical Exception Loans
The following Mortgage Loans are required to have the assignment to the
Trustee recorded:
Trust Loan Trust Loan
Series Number Series Number
<TABLE>
<S> <C> <C> <C> <C>
1997-4 6609970078 1997-4 6619712014 Note: This list is intended to
1997-4 6609970115 1998-1 6619801014 to include all Mortgage Loans
1997-4 6609970198 1998-1 6619801042 secured by real property in
1997-4 6609970204 1998-1 6619801045 Maryland unless the final
1997-4 6609970240 1998-1 6619801063 assignment to the Trustee has
1997-4 6609970253 1998-1 6619801083 been recorded. This Schedule
1997-4 6609970300 1998-1 6619801084 3 will be supplemented before
1997-4 6609970342 1998-1 6619801092 Closing as appropriate by
1997-4 6609970401 1998-1 6619801096 agreement of SPFC and the Trustee
1997-4 6609970403 1997-4 6619970291 if other Mortgage Loans are
1997-4 6609970484 1997-4 6629708132 determined to satisfy the
1997-4 6609970532 1997-3 6797007320 definition of Critical
1997-4 6609970546 1997-4 6797008245 Exception Loans.
1997-4 6609970558 1997-3 6797008537
1997-4 6609970570 1997-3 6797008949
1997-4 6609970616 1997-3 6797009201
1997-4 6609970650 1997-3 6797012266
1997-4 6609970786 1997-4 6797012458
1998-1 6611000100 1997-3 6797012641
1998-2 6611000311 1997-4 6797016520
1998-1 6611000329 1997-4 6797016697
1998-1 6611000490 1997-4 6797017236
1997-4 6611197021 1997-4 6797017492
1997-4 6611197022 1997-4 6797017872
1998-1 6612000027 1997-4 6797018694
1998-1 6612000094 1997-4 6797019545
1998-1 6612000117 1997-4 6797020395
1998-1 6612000119 1997-4 6797020402
1998-1 6613000156 1997-4 6797020410
1998-1 6613000157 1997-4 6797020413
1998-1 6613000185 1997-4 6797020422
1998-1 6613000228 1997-4 6797020441
1998-1 6613000232 1997-4 6797020518
1998-1 6613000236 1998-1 6797022731
1998-1 6613000243 1998-1 6798000230
1998-1 6613000248 1998-1 6798000953
1998-1 6613000274 1998-1 6798001351
1998-2 6613000507 1998-1 6798002619
1998-2 6613000508 1998-1 6798002733
1998-2 6613000664
1998-2 6613000905
1998-2 6613000907
1997-3 6619707198
1997-3 6619708016
1997-4 6619708023
1997-4 6619709144
1997-4 6619710048
1998-1 6619711145
1997-4 6619711194
1997-4 6619711195
</TABLE>
-4-
Exhibit E - Page 26 of 35
<PAGE>
Schedule 4
----------
Phantom Loans
<TABLE>
Loan Purchase Unreimbursed Phantom Loan
Security Number Price Interest Advances Repurchase Amount
- -------- ------ ----- ----------------- -----------------
<S> <C> <C> <C> <C>
1997-4 0600000556 203,237.86 20,482.76 223,720.62
1997-4 5400000013 24,169.85 2,971.28 27,141.13
1997-4 5400000424 90,134.09 13,352.81 103,486.90
1997-4 5400000492 30,817.35 4,139.85 34,957.20
1997-4 6109951642 129,691.21 13,219.82 142,911.03
1997-4 6301704022 96,989.99 7,659.38 104,649.37
1997-4 6609706470 517,250.32 26,449.37 543,699.69
1997-4 6619712084 131,720.61 6,317.67 138,038.28
1997-4 6797018593 61,912.31 5,557.99 67,470.30
1997-4 6797019161 574,079.67 22,996.01 597,075.68
1997-4 6797020337 265,998.77 9,409.95 275,408.72
TOTAL 2,126,002.03 132,556.89 2,258,558.92
1998-1 0100000683 21,417.82 2,014.91 23,432.73
1998-1 0100000944 37,659.05 1,720.00 39,379.05
1998-1 1300006242 209,400.28 12,235.18 221,635.46
1998-1 1400000978 69,805.83 3,333.42 73,139.25
1998-1 1500000748 40,575.68 2,237.30 42,812.98
1998-1 1600001770 174,390.86 6,594.68 180,985.54
1998-1 1900000342 71,349.92 4,500.60 75,850.52
1998-1 6277000465 16,815.45 1,142.12 17,957.57
1998-1 6798004242 71,372.88 3,623.51 74,996.39
TOTAL 712,787.77 37,401.72 750,189.49
1998-2 1600001057 53,304.00 1,689.96 54,993.96
1998-2 1800000645 20,963.79 1,507.12 22,470.91
1998-2 6613000280 26,583.05 1,440.88 28,023.93
1998-2 6621000516 82,405.63 5,894.53 88,300.16
1998-2 6621000601 71,951.50 4,279.16 76,230.66
TOTAL 255,207.97 14,811.65 270,019.62
GRAND TOTAL (97-4,98-1, 3,093,997.77 184,770.26 3,278,768.03
98-2)
</TABLE>
-24-
Exhibit E - Page 27 of 35
<PAGE>
Schedule 5
----------
OCEANMARK LOANS
See attachment.
-25-
Exhibit E - Page 28 of 35
<PAGE>
SCHEDULE 5
OCEANMARK LOANS
1 of 5
<TABLE>
LOAN # NAME PROPERTY ADDRESS STATE
<S> <C> <C> <C>
97002616 Ajaj 1965 S. Ocean Drive, Hallandale, FL 33009 FL
96010300 Al-Saadhi 5119 Marion St., Philadelphia, PA 19144 PA
6798003286 Ardite 1 Madison Court, Marlton, NJ 08053 NJ
6798002484 Arenas/Yumang 1165 Broad Street, Bloomfield, NJ 07003 NJ
96013110 Autino 1506 Elm Avenue, Brooklyn, NY (zip not available) NY
6798003495 Basnight 31 Atherstone Road, Scarsdale, NY 10583 NY
6798004554 Arruda 1567 East Avenue, R-4, Palmdale, CA 93550 CA
6798004550 Arruda 44273 Glenraven Road, Lancaster, CA 93535 CA
6798004556 Arruda 37554 Glavon Street, Palmdale, CA 93552 CA
97000265 Ashby 9807 Nordic Drive, Louisville, KY 40272 KY
96001932 Betts 7185 Northgreen Drive, Atlanta, GA 30328 GA
96004335 Bonilla 385 Lennox Avenue, Uniondale, NY 11553 NY
953110-1 Boone 2989/2975 Cartersville Hwy., Cartersville, GA 30120 GA
Bowens 5971 Northland Road, Indiana IN
96006627 Branch 3522 No. Guilford Avenue, Indianapolis, IN 46205 IN
6797017964 Breault 46 Myrtle Street, New Bedford, MA 02740 MA
96012186 Broughton 7219 Monterey Avenue, Lithonia, GA 30058 GA
6798004296 Brunner 1031 Saratoga Road, Pottstown, PA 14465 PA
6798003245 Carter 38887 Kearsarge Mill Road, Emigrant Cap, CA 95104 CA
6798004232 Castellon 10715 Mona Blvd., Los Angeles, CA 90059 CA
6798003764 Coman 3385 Santa Fe Avenue, #74, Long Beach, CA 90810 CA
6798003410 Compton 14426 Janet Way, Redding, CA 96003 CA
97001857 Cooke 2679 Cimarron Street, Los Angeles, CA 90018 CA
6797013295 Cross 8268 Brentwood, Detroit, MI 48234 MI
6797012849 D'Incecco 43 Rockgate Farm Road, Bedford, NY 10549 NY
Exhibit E - Page 29 of 35
<PAGE>
SCHEDULE 5
OCEANMARK LOANS
2 of 5
LOAN # NAME PROPERTY ADDRESS STATE
96005463 Dittner 40 Walden Avenue, New London, CT 06320 CT
6798000489 Edmond 147-40 228th Street, Laurelton, NY 11422 NY
Not available Edozle 3351 Reservoir Oval West, Bronx, NY NY
97003257 Ellis 3217 N.E. 21st Avenue, Lighthouse Point, FL 33064 FL
6798004027 Fleary 666 Linwood Street, Brooklyn, NY 11208 NY
6798000067 Francis 5666 Glauchester, Forst Park, GA 30050 GA
6797001624 Frazer 1243 West Florence, Los Angeles, CA 90044 CA
6798004011 Freeman 11 Weber Road, West Orange, NJ 07052 NJ
6798004588 Fus 1324 W. Greenleaf, #3A, Chicago, IL 60626 IL
6798002235 Glave, Tanya 205 29th Street, Brooklyn, NY 11232 NY
6798001099 Glave, Donovan 976 Dumont Avenue, Brooklyn, NY 11208 NY
96007725 Gong 1701 S. Walnut Street, Bloomington, IN 47401 IN
6798002778 Gonzalez 220 5th Avenue, Brooklyn, NY 11215 NY
6798003984 Graber 80-86 Summer Street, Uit #13, Passaic, NJ 07055 NJ
96014707 Green 705 Oak Street, Atlantic, IA 50022 IA
6798001798 Hare 115 Hutchins Street, Batavia, NY 14020 NY
6798002809 Helmich 9 Morris Avenue, Patchoque, NY NY
97001310 Hitt 7 Somerton Lane, Bella Vista, AR 72717 AR
6798000723 Hodgson 30 North 8th Street, Paterson, NJ 07522 NJ
6798001529 Inyang 132 Berry Street, Park Forest, IL 60466 IL
Jamison 108-52 217th Place, Queensvillage, NY 11429 NY
6798003252 Johansen 148 Norfolk Street, Brooklyn, NY 11235 NY
96007028 Jones Rt. 4, Box 655, Bristow, OK 74010 OK
6798004361 Joseph 176 Hancock Street, Brentwood, NY 11717 NY
6798003661 King 5210 S. Dorchesterm Unit #3N, Chicago, IL 60619 IL
Exhibit E - Page 30 of 35
<PAGE>
SCHEDULE 5
OCEANMARK LOANS
3 of 5
LOAN # NAME PROPERTY ADDRESS STATE
96010327 Lagrow 608 Pepperdine Avenue, Edmond, OK 73013 OK
Liggieri Not available
6798003134 Lindsay 1212 Frank Street, Roselle, NJ 07203 NJ
6798004218 Lindsay 544 Squaw Brook Rd., North Haledon, NJ 07508 NJ
97003240 Lopez 1418 E. Silva Street, Long Beach, CA 90807 CA
96004618 Mara 9 Turner Drie, Grenwich, CT 06831 CT
6798002396 Martinez 159 North Main Street, Freeport, NY 11520 NY
96013660 McCreavy, Sr. 2 Comly Court, Flourtown, PA 19031 PA
96013470 McHenry 1612 Lisbon Street, East Liverpool, OH 43920 OH
97005762 Miller 225 Morgan Court, Inwood, WV 25428 WV
97005859 Miller 5355 Fox Run Lane, Hume, VA 22639 VA
6798003921 Mungal 336 Wyona Street, Brooklyn, NY 11207 NY
6798004005 Musnl 500 Cherry Hill Ct., Schaumburg, IL 60193 IL
6798004393 Nath 421 Green Cove Avenue, Uniondale, NY 11553 NY
97000999 Nelms/Pierce 3040 Worthington Avenue, Cincinnati, OH 45211 OH
6797016112 Okeefe 21877 Nall Road, Bucyrus, KS 66013 KS
6798003468 Paciulli 284 Pennington Avenue, Passaic, NJ 07055 NJ
6798003416 Pak 55 Ridge Road, Lyndhurst, NJ 07071 NJ
6798002821 Perez 48 Franklin Street, Dumont, NJ 97628 NJ
97003112 Perlandri 18302 Flamingo Avenue, Cleveland, OH 44135 OH
6798001448 Pitts 624-18th Street, Bessemer, AL 35021 AL
6798004416 Quach 4262 Suter Street, Oakland, CA 94619 CA
6798004420 Quach 4262 Suter Street, Oakland, CA 94619 CA
6798003967 Richards 374 E. Nula Street, Covina, CA 91722 CA
97001965 Rodriguez-Bobes 8430 S.W. 88th Street FL
Exhibit E - Page 31 of 35
<PAGE>
SCHEDULE 5
OCEANMARK LOANS
4 of 5
LOAN # NAME PROPERTY ADDRESS STATE
96013361 Scott, Janice 15708 E. 11th Avenue, Veradale, WA 99037 WA
6798004301 Sessions 166-A Hull St., Brooklyn, NY 11233 NY
96013938 Shelburne 1317 Omsby Lane, Louisville, KY 40222 KY
96012144 Simpson 1511 A/B-1513 Whitaker St., Savannah, GA 31401 GA
96012140 Simpson 638 E. 27th St., Savannah, GA 31405 GA
96012150 Simpson 1306 E. 40th Street, Savannah, GA 31404 GA
6797009637 Simpson 57291 Rossell, Lenox, MI 48048 MI
6797019739 Smith 392 East 38th Street, Paterson, NJ 07514 NJ
97002124 Sternal 49 Little Hungary Creek Lane, Hendersonville, NC 28792 NC
6798002987 Stroman 128 Manhattan Avenue, Brooklyn, NY 11206 NY
6797005041 Stryker 461 Maple Avenue, Phillipsburg, NJ 08865 NJ
96005327 Stubbs, Sr. 913 & 921 School Road, McKinleyville, CA 95519 CA
6798002767 Swift 128-130 Hudson Street, Syracuse, NY 13204 NY
6798004175 Taraneh 20308 Chaster Drive, Woodland Hills, CA 91364 CA
97001139 Tursi 5061 Main St., Terrace Grand Voorhees, NJ 08043 NJ
96014455 Vanderpool 406 S. East Avenue, Baxter, IA 50028 IA
6798002491 Walker III 6165 Carrier Drive, #3805, Orlando, FL 32819 FL
6798004257 Wasser 58 Quartz Lane, #58, Paterson, NJ 07501 NJ
6797011044 Wooten 6925 South May, Chicago, IL 60636 IL
97009280 Yancey 11358 Abington, Detroit, MI 48227 MI
6798002055 Yengo 927 Pavonia Avenue, Jersey City, NJ 07305 NJ
Exhibit E - Page 32 of 35
<PAGE>
SCHEDULE 5
OCEANMARK LOANS
5 of 5
LOAN # NAME PROPERTY ADDRESS STATE
GRAND TOTAL $10,271,775.00
</TABLE>
Exhibit E - Page 33 of 35
<PAGE>
Schedule 6
----------
CLAIMS AGAINST TRUSTEE
1. Any and all claims relating to or arising from any actions of the
Trustee in its capacity as administrator of any REMIC with respect to the
preparation of (or failure to prepare) tax returns or schedules (including the
methods employed and calculations therein) for any of the REMICs prior to the
date hereof under the terms of any Pooling and Servicing Agreement.
Exhibit E - Page 34 of 35
- 26 -
<PAGE>
Schedule 7
----------
Methodologies
-------------
1. Collateral value at the date of funding of Securitization Trusts 1996-4
through 1998-2 is 107 percent of mortgage principal face value.
2. Amortization of premium determined according to the customary
procedures and programs employed by KPMG.
3. REMIC interest non-accrual on Mortgage Loans that have been in a 90 day
plus (or more serious) delinquency status for two consecutive quarters
or more, applied from the first day of the second quarter.
4. REMIC expense accrual for non-principal and interest (i.e. "corporate")
advances with respect to Mortgage Loans more than 60 days past due.
Exhibit E - Page 35 of 35
- 27 -
<PAGE>
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF OREGON
In re
Case No. 398-37613-elp11
SOUTHERN PACIFIC FUNDING
CORPORATION,
Chapter 11
Debtor-in-Possession.
STIPULATED NONMATERIAL MODIFICATION TO SECOND
MENDED PLAN OF REORGANIZATION (United Pacific
Insurance Company)
Hearing Date: July 7, 1999
Hearing Time: 9:00 a.m.
Courtroom No.: 1
Southern Pacific Funding Corporation ("SPFC") and United Pacific
Insurance Company/Reliance Insurance Company ("United Pacific") hereby stipulate
to the following facts:
A. Before October 1, 1998, the date SPFC filed its petition commencing this
case, United Pacific or Reliance Insurance Company, as surety, posted a number
of miscellaneous bonds to various state agencies which enabled SPFC to carry on
its business. The past due premiums on these bonds are in the amount of
$17,940.20 (the "Past-Due Amount").
Page 1 - Stipulated Nonmaterial Modification to Second Amended Plan of
Reorganization (United Pacific Insurance Company)
Exhibit F - Page 1 of 17
<PAGE>
B. Several of these bonds have been canceled. However, the bonds described
in the attached Exhibit A (the "Bonds") are required to be continued pending the
completion of operation by SPFC as a servicer of residential loans.
C. SPFC and United Pacific entered into a Continuing Agreement of
Indemnity-Miscellaneous Surety Bonds, dated November 26, 1997, a copy of which
is attached hereto as Exhibit B (the "Indemnity Agreement").
D. SPFC wishes to allow the continuation of the bonds for the benefit of the
reorganized SPFC. United Pacific is willing to allow this continuation provided
that there is a nonmaterial modification to second amended plan of
reorganization (the "Plan") as provided for below.
THEREFORE, SPFC, United Pacific, and the Official Creditors' Committee
request that the Plan be modified as follows:
1. United Pacific will continue to provide the Bonds to SPFC and the
reorganized SPFC until the earlier of (a) 60 days after entry of an order
confirming the Plan except, however, that under this subparagraph United Pacific
will provide Bond No. B2693801 until December 31, 1999, (b) 20 days after the
reorganized SPFC or the Liquidating Trustee provides written notice to United
Pacific of cancellation of a Bond, in which case only such Bond will be
cancelled, or (c) if terminated pursuant to a default as set forth below.
2. Reorganized SPFC and the Liquidating Trustee will comply with applicable
state laws and regulations under which the Bonds are posted in all respects.
3. Reorganized SPFC or the Liquidating Trustee shall deliver to United
Pacific such financial information and monitoring reports as United Pacific may
reasonably request.
4. To secure (a) repayment of any loss, cost or expense in connection with
the Bonds, and (b) repayment of any other loss, cost, or expenses in connection
with all extensions of surety credit made hereunder, SPFC shall deposit with
United Pacific cash collateral in the
Page 2 - Stipulated Nonmaterial Modification to Second Amended Plan of
Reorganization (United Pacific Insurance Company)
Exhibit F - Page 2 of 17
<PAGE>
sum of $185,000 (the "Collateral"). The Collateral shall be held in accordance
with the terms of the Collateral Pledge Agreement and Receipt attached hereto as
Exhibit C (the "Collateral Pledge Agreement").
5. Nothing contained herein shall constitute a waiver of United Pacific's
rights of equitable subrogation.
6. The Past-Due Amount will be paid within 10 days after the Effective Date
(as defined in the Plan).
7. United Pacific acknowledges that its claim is a contingent claim and is a
Class 8 claim. Upon approval of this modification, United Pacific shall be
deemed to have voted in favor of the Plan.
8. Reorganized SPFC and the Liquidating Trustee are authorized to execute
and deliver to United Pacific any agreements, security agreements, mortgages,
financing statements, certificates of title, or other insurance or documents
considered by United Pacific to be necessary or desirable to perfect the
security interest and liens given to United Pacific in the Collateral.
9. Reorganized SPFC or the Liquidating Trustee shall be in default under
this Stipulation if (a) there is a failure by SPFC or the Liquidating Trustee to
make any payments required, or otherwise defaults under any of the Bonds; (b)
there occurs a material breach of the terms of this Stipulation, the terms of
any indemnity agreement, or the terms of the Collateral Pledge Agreement; or (c)
the authorization of reorganized SPFC or the Liquidating Trustee (through any
subservicing agent) to operate in any state for which the Bonds are posted
(Illinois, Massachusetts, Iowa, Nebraska, Wisconsin, Florida, or California) is
revoked or otherwise prohibited, but not because reorganized SPFC has
voluntarily ceased business in such state.
10. Upon release and exoneration of all the Bonds, United Pacific shall
return the Collateral to the Liquidating Trustee, less any amounts United
Pacific is entitled to deduct under the terms of this Stipulation or the
Collateral Pledge Agreement, including any and all unpaid
Page 3 - Stipulated Nonmaterial Modification to Second Amended Plan of
Reorganization (United Pacific Insurance Company)
Exhibit F - Page 3 of 17
<PAGE>
premiums, costs and expenses, including reasonable attorney fees, incurred in
connection with any of the Bonds, including United Pacific's attorney fees
negotiating and documenting this Stipulation, subject to any necessary court
approval.
IT IS SO STIPULATED:
Page 4 - Stipulated Nonmaterial Modification to Second Amended Plan of
Reorganization (United Pacific Insurance Company)
Exhibit F - Page 4 of 17
<PAGE>
MILLER, NASH, WIENER, HAGER & CARLSEN
/s/ John Casey Mills
- --------------------------
John Casey Mills
Oregon State Bar No. 84417
Attorneys for Debtor-in-Possession
Southern Pacific Funding Corporation
STEWART, SOKOL & GRAY, LLC
/s/ Jan Sokol
- --------------------------
Jan Sokol
Oregon State Bar No. 78087
Attorneys for United Pacific Insurance Company
LANE POWELL SPEARS LUBERSKY LLP
/s/ John H. Durkheimer
- --------------------------
John H. Durkheimer
Oregon State Bar No. 79034
Attorneys for Official Unsecured Creditors Committee
Presented by:
/s/ John Casey Mills
- --------------------------
John Casey Mills
Oregon State Bar No. 84417
MILLER, NASH, WIENER, HAGER & CARLSEN LLP
3500 U.S. Bancorp Tower
111 S.W. Fifth Avenue
Portland, Oregon 97204
Telephone: (503) 224-5858
Attorneys for Debtor-in-Possession
Southern Pacific Funding Corporation
Page 5 - Stipulated Nonmaterial Modification to Second Amended Plan of
Reorganization (United Pacific Insurance Company)
Exhibit F - Page 5 of 17
<PAGE>
EXHIBIT "A"
<TABLE>
<S> <C> <C>
Bond Obligee Amount
- ---- ------- ------
U2596369 Illinois $20,000
U2698629 Massachusetts $25,000
U2596364 Iowa $30,000
U2596367 Nebraska $50,000
U2596374 Florida $10,000
U2693811 California $25,000
B2446274 Financial Institution Bond Form No. 15 $1,000,000
B2693801 Pension & Benefit Plan Fiduciary Liability Policy $1,000,000
</TABLE>
Exhibit F - Page 6 of 17
<PAGE>
<TABLE>
<S> <C> <C>
[LOGO] RELIANCE RELIANCE SURETY COMPANY UNITED PACIFIC INSURANCE COMPANY
Philadelphia, Pennsylvania Philadelphia, Pennsylvania
RELIANCE INSURANCE COMPANY RELIANCE NATIONAL INDEMNITY COMPANY
Philadelphia, Pennsylvania Philadelphia Pennsylvania
</TABLE>
- --------------------------------------------------------------------------------
CONTINUING AGREEMENT OF INDEMNITY
MISCELLANEOUS SURETY BONDS
THIS AGREEMENT is made by the undersigned for the continuing benefit of RELIANCE
INSURANCE COMPANY, UNITED PACIFIC INSURANCE COMPANY, RELIANCE NATIONAL INDEMNITY
COMPANY and/or RELIANCE SURETY COMPANY (hereinafter referred to collectively as
the "SURETY") for the purpose of saving each and all of them harmless and
indemnifying each and all of them from all loss and expense in connection with
any Bonds executed on behalf of any one or more of the following persons, firms
or corporations:
- --------------------------------------------------------------------------------
SOUTHERN PACIFIC FUNDING CORPORATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(hereinafter referred to as "Applicant").
WITNESSETH.
WHEREAS, the Applicant, individually, jointly with others or on behalf of any of
its subsidiaries, affiliates or divisions or their subsidiaries, affiliates or
divisions now in existence or hereafter formed or acquired, or on behalf of
individuals, partnerships or corporations, may desire or be required from time
to time to give certain bonds, undertakings, or instruments of guarantee (all of
which will hereinafter be included within the term "BOND" or "BONDS"), and
WHEREAS, upon the express condition that this instrument be executed, the Surety
has executed or procured the execution of, or may from time to time hereafter
execute or procure the execution of such Bonds, and the Surety may continue the
Bond or Bonds heretofore executed and may forebear cancellation of such Bonds;
NOW, THEREFORE, in consideration of the execution of any such Bond or Bonds or
the forbearance of cancellation of existing Bonds and as an inducement to such
execution or forbearance, we, the Undersigned, agree and bind ourselves, our
heirs, executors, administrators, successors and assigns, jointly and severally,
as follows:
FIRST: To pay the Surety in advance upon the execution of each Bond the initial
premium computed in accordance with the rates currently charged by the Surety at
the time such Bond is executed and the Undersigned will also pay all renewal or
additional premiums computed at such rates until proof is furnished satisfactory
to the Surety of its discharge from and liability under such Bond.
SECOND: To indemnify, and keep indemnified, and hold and save harmless the
Surety against all demands, claims, loss, costs, damages, expenses, and
attorneys' fees whatever, and any and all liability therefor, sustained or
incurred by the Surety by reason of executing or procuring the execution of any
said Bond or Bonds, or any other Bonds, which may be already or hereafter
executed for or at the request of the Undersigned, or renewal or continuation
thereof; or sustained or incurred by reason of making any investigation on
account thereof, prosecuting or defending any action brought in connection
therewith, obtaining a release therefrom, recovering or attempting to recover
any salvage in connection therewith or enforcing by litigation or otherwise any
of the agreements herein contained. Payment of amounts due Surety hereunder
together with legal interest shall be payable upon demand.
THIRD: That if Surety shall be required or shall deem it necessary to set up a
reserve in any amount to cover any claim, demand, liability, expense, suit,
order, judgment or adjudication under or on any Bond or Bonds or for any other
reason whatsoever, to immediately upon demand deposit with Surety an amount of
money sufficient to cover such reserve and any increase thereof, at any time, in
payment or compromise of any liability, claims, demands, judgment, damages, fees
and disbursements or other expenses; and the Undersigned, in the event of their
failure to comply with such demand, hereby authorize and empower any attorney of
any court of record in the United States or any of its territories or
possessions, to appear for them or any of them in any suit by Surety and to
confess judgment against them or any of them for any sum or sums of money up to
the amount of any or all Bond or Bonds, with costs, interest and reasonable
attorneys' fees, such judgment, however, to be satisfied upon the payment of any
and all such sums as may be found due by the Undersigned to Surety under the
terms of this agreement. The authority to confess judgment as set forth herein
shall not be exhausted by any one exercise thereof, but may be exercised from
time to time and more than one time until all liability of the Undersigned to
Surety shall have been paid in full. Demand shall be sufficient if sent by
registered or certified mail to the Undersigned at the address or addresses
given herein or last known to Surety, whether or not actually received.
FOURTH: All collateral security held by or assigned to the Surety may be used by
the Surety at any time in payment of any claim, loss or expense which the
Undersigned have agreed to pay hereby, whether or not such claim, loss or
expense arises out of or in connection with such Bond under which such
collateral is held. The Surety may sell or realize upon any or all such
collateral security, at public or private sale, with or without notice to the
Undersigned or any of them, and with the right to be purchaser itself at any
public sale, and shall be accountable to the Undersigned only for such surplus
or remainder of such collateral security or the proceeds thereof as may be in
the Surety's possession after it has been fully indemnified as in this agreement
provided. The Surety shall not be liable for decrease in value or loss or
destruction of or damage to such security, however caused.
FIFTH: The Surety shall have the right, at its option and in its sole
discretion:
(a) To deem this Agreement breached should the Applicant become
involved in any agreement or proceeding of liquidation,
receivership, or bankruptcy, voluntarily or involuntarily, or
should the Applicant, if an individual, die, be convicted of a
felony, become a fugitive from justice, or for any reason
disappear and cannot immediately be found by the Surety by use
of usual methods.
(b) To adjust, settle or compromise any claim, demand, suit or
judgment upon said Bond or Bonds, or any of them, unless the
Undersigned shall request in writing the Surety to litigate
such claim or demand, or defend such suit, or appeal from such
judgment, and shall deposit with the Surety, at the time of
such request, cash or collateral satisfactory to the Surety in
kind and amount to be used in paying any judgment or judgments
rendered with interest, costs and attorneys' fees.
All damage, loss or expense of any nature which the Surety may
incur under Section FIFTH shall be borne by the Undersigned.
PAGE 9 - STIPULATION AND ORDER AUTHORIZING
POST-PETITION FINANCING
EXHIBIT F - Page 7 of 17
<PAGE>
SIXTH: Each of the Undersigned expressly consent that in the event of any action
against the Surety arising out of its execution of such Bond or Bonds which is
not handled pursuant to the provisions of Section FIFTH subparagraph (b), the
Surety shall have the right to apply to the Court in which such action is
brought for an order making them or any one or more of them defendants and
hereby further consent to the granting of such application for making such order
and agree to become parties defendant.
SEVENTH: The Surety shall have the exclusive right for itself and for the
Undersigned to decide and determine whether any claim, demand, suit or judgment
upon said Bond or Bonds shall, on the basis of liability, expediency or
otherwise, be paid, settled, defended or appealed, and its determination shall
be final, conclusive and binding upon the Undersigned (except as provided in
Section FIFTH (b) hereof: and any loss, costs, charges, expense or liability
thereby sustained or incurred, as well as any and all disbursements on account
of costs, expenses, and attorneys' fees, deemed necessary or advisable by the
Surety, shall be borne and paid immediately by the Undersigned, together with
legal interest in the event of any voucher or vouchers or other evidence of such
payment, settlement or compromise shall be prima facie evidence of the fact and
extent of the liability of the Undersigned to the Surety in any claim or suit
hereunder and in any and all matters arising between the Undersigned and the
Surety.
EIGHTH: Until the Surety shall have been furnished with competent legal evidence
of its discharge without loss from any and all Bonds, the Surety shall have the
right at all times to free access to the books, records and accounts of each of
the Undersigned for the purpose of examining the same. Each of the Undersigned
hereby authorizes and requests any and all depositories in which funds of any of
the Undersigned may be deposited to furnish to the Surety the amount of such
deposits as of any date requested and any person, firm or corporation doing
business with the Undersigned is hereby authorized to furnish any information
requested by the Surety concerning any transaction. The Surety may furnish
copies or any and all statements, agreements and financial statements and any
information which it now has or may hereafter obtain concerning each of the
Undersigned, to other persons or companies for the purpose of procuring
co-suretyship or reinsurance or of advising interested persons or companies.
NINTH: Each of the Undersigned does hereby waive all right to claim any
property, including homestead as exempt from levy, execution, sale or other
legal process under the law of any state, province or other government as
against the rights of the Surety to proceed against the same for indemnity
hereunder. The Undersigned hereby waive all notice of any default or any other
act or acts giving rise to any claim under any said Bond or Bonds, and waive
notice of any and all liability of the Surety under any said Bond or Bonds or
any and all liability on the part of the Undersigned to the effect and end that
each of the Undersigned shall be and continue liable to the Surety hereunder
notwithstanding any notice of any kind to which the Undersigned might have been
or be entitled and notwithstanding any defenses which the Undersigned might have
been or be entitled to make.
TENTH: The Surety shall have every right and remedy which a personal surety
without compensation would have, including the right to secure its discharge
from the suretyship, and nothing herein contained shall be considered or
construed to waive, abridge or diminish any right or remedy which the Surety
might have if this instrument were not executed. The Undersigned will, on
request of the Surety procure the discharge of the Surety from any Bonds, and
all liability by reason thereof. Separate suits may be brought hereunder as
causes of action may accrue, and the pendency or termination of any such suit
shall not bar any subsequent action. The Surety shall be notified immediately by
the Undersigned of any claim or action which may result in a claim against the
Surety, such notice to be given by registered mail to the Surety at its Home
Office. In the event of legal proceedings against the Surety, upon or on account
of any said Bond or Bonds, the Surety may apply for a court order making any or
all of the undersigned parties defendants, and such Undersigned hereby consents
to the granting of such application and agrees to become such a party defendant
and to allow judgment, in the event of judgment against the Surety, to be
rendered also against such Undersigned in like amount and in favor of the
Surety, if the Surety so desires.
ELEVENTH: The Surety may decline to execute any Bond herein applied for and it
shall not be liable to the Undersigned and the Undersigned shall make no claim
for any damages alleged to arise from such declination nor shall it be liable to
the Undersigned should its Bond or Bonds be not accepted. Furthermore, the
Surety shall have the absolute right to cancel any Bond in accord with any
cancellation provision contained therein, to procure its release from any Bond
under any law for the release of sureties, and the Surety is hereby released
from any liability for expense, cost or damage alleged to be sustained by the
Undersigned by reason of such cancellation or release of Bond obligation.
TWELFTH: This Agreement shall, in all its terms and agreements, be for the
benefit of and protect any person or company joining with the Surety in
executing said Bond or Bonds, or any of them, or executing at the request of the
Surety said Bond or Bonds, or any of them as well as any company or companies
assuming co-suretyship or reinsurance thereon.
THIRTEENTH: The Undersigned warrant that each of them is specifically and
beneficially interested in the obtaining of each Bond. Failure to execute, or
defective execution, by any party, shall not affect the validity of this
obligation as to any other party executing the same and each such other party
shall remain fully bound and liable hereunder. Invalidity of any portion or
provision of this Agreement by reason of the laws of any state or for any other
reason shall not render the other provisions or portions hereof invalid.
Execution of any application for any Bond by the Applicant, or of any other
indemnity agreement by any Undersigned for the Applicant shall in no way
subrogate, waive or diminish any rights of Surety under this Agreement. The
undersigned acknowledge that the execution of this Agreement and the undertaking
of indemnity was not made in reliance upon any representation concerning the
financial responsibility of any Undersigned, or concerning the competence of the
Applicant to perform.
FOURTEENTH: Each of the Undersigned expressly recognizes and covenants that this
Agreement is a continuing obligation applying to and indemnifying the Surety as
to any and all Bonds (whether or not covered by an application signed by
Applicant--such application to be considered between the parties hereto as
merely supplemental to this continuing Agreement of indemnity) heretofore or
hereafter executed by Surety on behalf of Applicant (whether acting along or as
a Co-adventurer) until this Agreement shall be canceled in the manner
hereinafter provided. Any of the Undersigned may notify the Surety at its Home
Office, of such Undersigned's withdrawal from this Agreement; such notice shall
be sent by certified or registered mail and shall state when, not less than
thirty days after receipt of such notice by the Surety, such withdrawal shall be
effective. Such Undersigned will not be liable under this Agreement as to any
Bonds executed by the Surety after the effective date of such notice; provided,
that as to any and all such Bonds executed or authorized by the Surety prior to
effective date of such notice and as to all and all renewals, continuations and
extensions thereof or substitutions therefor regardless of when the same are
executed, such Undersigned shall be and remain fully liable hereunder, as if
said notice had not been served. Such withdrawal by any Undersigned shall in no
way affect the obligation of any other Undersigned who has given no such notice
of termination.
FIFTEENTH: The Surety shall have the right, and is hereby authorized and
empowered but not required (a) to increase or decrease the penalty or penalties
of any such Bond or Bonds, to change the obligee or obligees therein, to execute
any continuations, enlargements, modifications and renewals thereof or
substitute therefore with the same or different conditions, provisions and
obligees, and with the same or larger or smaller penalties, it being agreed that
this instrument shall apply to and cover such new or changed bonds or renewals
even though the consent of the Surety may or does substantially increase the
liability of the Applicant and the Undersigned; (b) to take such steps as it may
deem necessary or proper to obtain release from liability under any such Bond or
Bonds.
SIXTEENTH: The foregoing indemnity shall apply as to all Bonds as aforesaid
unless the Undersigned herein shall specifically designate in this paragraph the
Bond to which his indemnity shall be limited and affix his signature following
that description.
BOND DESCRIPTION:------------------------------------------------------
SIGNATURE:-------------------------------------------------------------
SEVENTEENTH: The Surety shall be entitled to enforce the obligations hereof
directly against any and all Undersigned without the necessity of first
proceeding against the Applicant.
EIGHTEENTH: This Agreement or a carbon, photographic, xerographic or other
reproduction or copy of this Agreement shall constitute a Security Agreement to
Surety and also a Financing Statement, both in accordance with the provisions of
the Uniform Commercial Code of every jurisdiction wherein such Code is in
effect, but the filing or recording of this Agreement shall be solely at the
option of Surety and the failure to do so shall not release or impair any of the
obligations of the Applicant or the Undersigned under this Agreement or
otherwise.
PAGE 10 - STIPULATION AND ORDER AUTHORIZING
POST-PETITION FINANCING
EXHIBIT F- Page 8 of 17
<PAGE>
NINETEENTH: The rights of indemnification of each signatory to this Agreement
shall be individual and not joint [illegible] of the other signatory Sureties as
respects any Bond issued by it to any Applicant and shall be enforceable against
the Undersigned as to any and all bonds issued to any Applicant hereunder.
<TABLE>
Signed, sealed and dated this --------------------- day of ------------------------------------- 19--
SOUTHERN PACIFIC FUNDING CORPORATION
ATTEST:
<S> <C>
BY: /s/ [illegible] (Seal) BY: /s/ [illegible] (Seal)
PRESIDENT
- ---------------------------------------------(Seal) --------------------------------------------(Seal)
- ---------------------------------------------(Seal) --------------------------------------------(Seal)
- ---------------------------------------------(Seal) --------------------------------------------(Seal)
- ---------------------------------------------(Seal) --------------------------------------------(Seal)
- ---------------------------------------------(Seal) --------------------------------------------(Seal)
- ---------------------------------------------(Seal) --------------------------------------------(Seal)
- ---------------------------------------------(Seal) --------------------------------------------(Seal)
- ---------------------------------------------(Seal) --------------------------------------------(Seal)
</TABLE>
PAGE 11 - STIPULATION AND ORDER AUTHORIZING
POST-PETITION FINANCING
EXhibit F - Page 9 of 17
<PAGE>
State of ----------- ss
County of ----------
On this ---- day of ---------19-- before me personally appeared ----------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
to me known and known to me to be the individual(s) described in and who
executed the foregoing agreement and acknowledged that ------ he ------ executed
the same for the purposes, considerations and uses therein set forth as
- ------------n ------------------ free and voluntary act and deed
----------------------------------------------------------
Notary Public, residing ----------------------------------
(Commission expires -------------------------------------)
State of ----------- ss
County of ----------
On this ---- day of ---------19-- before me personally came---------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
to me known, who being by me duly sworn did repose and say: that he resides in
- -------------------------------------------------------------------------------,
that he is the -------------------- of the -----------------------------------,
the corporation described in and which executed the foregoing instrument, that
he knows the seal of the said corporation, that the seal affixed to the said
instrument is the corporate seal; that it was so affixed by order of the Board
of Directors of the said corporation, and that he signed his name to the said
instrument by like order.
----------------------------------------------------------
Notary Public, residing ----------------------------------
(Commission expires -------------------------------------)
State of ----------- ss
County of ----------
On this ---- day of ---------19-- before me personally came
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
to me known, who being by me duly sworn did repose and say: that he resides in
- -------------------------------------------------------------------------------,
that he is the -------------------- of the -----------------------------------,
the corporation described in and which executed the foregoing instrument, that
he knows the seal of the said corporation, that the seal affixed to the said
instrument is the corporate seal; that it was so affixed by order of the Board
of Directors of the said corporation, and that he signed his name to the said
instrument by like order.
----------------------------------------------------------
Notary Public, residing ----------------------------------
(Commission expires -------------------------------------)
State of Oregon ss
County of Clackamas
On this 26th day of November 1997 before me personally came
Robert Howard and Ann Muir
- --------------------------------------------------------------------------------
to me known, who being by me duly sworn did repose and say: that he resides in
Clackamas County, Oregon, that he is the President of the corporation, the
corporation described in and which executed the foregoing instrument, that he
knows the seal of the said corporation that the seal affixed to the said
instrument is the corporate seal; that it was so affixed by order of the Board
of Directors of the said corporation, and that he signed his name to the said
instrument by like order.
/s/ Annette R. Eyraud
Notary Public, residing at Clackamas County, Oregon
(commission expires 5-1-01)
[OFFICIAL SEAL OF ANNETTE R EYRAUD]
PAGE 12 - STIPULATION AND ORDER AUTHORIZING
POST-PETITION FINANCING
Exhibit F - Page 10 of 17
<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGEMENT
State of Oregon
County of Clackamas
On 11/26/97 before me, Annette R. Eraud, Notary Public
DATE NAME AND TITLE OF OFFICER--E.G. "JANE DOE, NOTARY PUBLIC"
personally appeared Robert Howard and Ann Muir
NAME(S) OF SIGNER(S)
[X] personally known to me - OR - [ ] proved to me on the basis of satisfactory
evidence to be the person(s) whose
name(s) is/are subscribed to the within
instrument and acknowledged to me that
he/she/they executed the same in
his/her/their authorized capacity(ies),
and that by his/her/their signature(s)
on the instrument the person(s), or the
entity upon behalf of which the
person(s) acted, executed the
instrument.
[OFFICIAL SEAL OF WITNESS my hand and official seal.
ANNETTE R EYRAUD]
/s/ Annette R. Eyraud
SIGNATURE OF NOTARY
- ---------------------------------OPTIONAL---------------------------------------
Though the data below is not required by law, it may prove valuable to person
relying on the document and could prevent fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
[ ] INDIVIDUAL
[ ] CORPORATE OFFICER
----------------------------------
------------------------------------ TITLE OR TYPE OF DOCUMENT
TITLE(S)
[ ] PARTNER(S) [ ] LIMITED
[ ] GENERAL ----------------------------------
[ ] ATTORNEY-IN-FACT NUMBER OF PAGES
[ ] TRUSTEE(S)
[ ] GUARDIAN/CONSERVATOR
[ ] OTHER: ----------------------------- ----------------------------------
------------------------------------ DATE OF DOCUMENT
------------------------------------
SIGNER IS REPRESENTING:
NAME OF PERSON(S) OR ENTITY(IES)
----------------------------------
- ---------------------------------------- SIGNER(S) OTHER THAN NAMED ABOVE
- ----------------------------------------
PAGE 12 - STIPULATION AND ORDER AUTHORIZING
POST-PETITION FINANCING
Exhibit F - Page 11 of 17
<PAGE>
Collateral Pledge Agreement and Receipt
This COLLATERAL PLEDGE AGREEMENT (this "Agreement"), made as of this
- ---- day of May 1999 is made from Southern Pacific Funding Corp. ("Pledgor") in
favor of Reliance Insurance Company, a Pennsylvania corporation and United
Pacific Insurance Company, a Pennsylvania corporation (individually and
collectively "Reliance").
WHEREAS, Reliance acknowledges receipt of certain assets identified as
cash ("Pledged Collateral") from the Pledgor, deposited with Reliance for good
consideration and under the terms and conditions herein stated, for the benefit
of Reliance and its co-sureties, reinsurers, successors and assigns, and such
other surety as Reliance may procure to execute said Bond(s).
WHEREAS, Pledgor, individually, jointly with others or on behalf of any
Subsidiaries, Affiliates, or divisions or their Subsidiaries, Affiliates, or
divisions now in existence or hereafter formed or acquired, or on behalf of
individuals, partnerships, or corporations, may desire or be required from
time-to-time in connection with their business to give certain Bond(s); and
WHEREAS, upon the express condition that this Agreement be executed by,
and all conditions herein performed by Pledgor, Reliance has executed or
procured or will execute or procure the execution of such Bond(s), and Reliance
may continue previously executed Bond(s) and may forbear cancellation of such
Bond(s); and
WHEREAS, Pledgor has determined that the execution, delivery, and
performance of this Agreement by Pledgor will inure directly to the benefit of
Pledgor and is in the best interest of Pledgor.
NOW THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor hereby agrees with Reliance, as follow:
1. Pledge. Pledgor hereby pledges, hypothecates, assigns, transfers,
sets over, and delivers unto Reliance, and hereby grants Reliance a lien upon
and continuing security interest in the Pledged Collateral in the amount of
$185,000 and all interest, earnings and other returns thereon (the "Pledged
Collateral") to secure the payment of any and all Loss, and the payment and
performance of all other obligations and undertakings now or hereafter owing to
Reliance under the terms and conditions of the Bond(s), that certain Continuing
Agreement of Indemnity (the "Indemnity Agreement") to which Pledgor is a party,
this Agreement and any other agreement as same may now or hereafter be amended,
modified, replaced, extended or renewed.
Collateral Pledge Agreement and Receipt - 1
PAGE 14 - STIPULATION AND ORDER AUTHORIZING
POST-PETITION FINANCING
Exhibit F - Page 12 of 17
<PAGE>
2. Loss. Loss shall include all damages, costs, reasonable attorney
fees, and liabilities which Reliance may sustain or incur by reason of executing
or procuring the execution of any Bond(s) which Bond(s) Pledgor has agreed to
reimburse or indemnify Reliance under the Bond(s) and this Agreement, or which
may be sustained or incurred by reason of making any investigation on account
thereof, prosecuting or defending any action in connection therewith, obtaining
a release, recovering, or attempting to recover any salvage in connection
therewith or enforcing by litigation or otherwise any of the provisions of this
Agreement, including but not limited to:
(a) Money judgments, amounts paid in settlement or compromise, the full
amount of reasonable attorney and other professional fees incurred or paid by
Reliance, including without limitation allocated costs of in-house counsel,
accountants and engineers, court costs and fees, and interest at the maximum
legal rate allowable on all sums due it from the date of Reliance's demand for
said sums, whether or nor interest has been awarded by a court;
(b) Any Loss which Reliance may sustain or incur in connection with
Bond(s), whether that Loss results from any activity of Principal, individually
or as part of a joint venture, partnership, or other entity which has been or
may be formed;
(c) Any Loss which Reliance may sustain or incur as a result of any
actions taken by Reliance upon information provided by any Indemnitor; and
(d) Any Reserve set aside by Reliance to pay present and future
liabilities under Bond(s).
3. Event of Default. An Event of Default means any one or more of the
following:
(a) Principal, Indemnitors, or any of them have failed or refused to
perform any obligation under the Indemnity Agreement, Bond(s), or this Agreement
including, without limitation, the failure to pay any sum due an Obligee under a
Bond; or
(b) Reliance has received notice or knowledge of facts, giving rise to
a reasonable belief that it has sustained or may sustain or incur a Loss.
4. Representations and Warranties. Notwithstanding any agreement or
representation to the contrary, Pledgor hereby represents, warrants, covenants
to Reliance:
(a) Pledgor is the sole, legal and equitable owner of the Pledged
Collateral, and Pledgor's absolute title thereto is not the subject of any claim
or challenge threatened or asserted by any third party;
Collateral Pledge Agreement and Receipt - 2
PAGE 15 - STIPULATION AND ORDER AUTHORIZING
POST-PETITION FINANCING
Exhibit F - Page 13 of 17
<PAGE>
(b) Pledgor's acknowledges and agrees that Reliance would not issue
Bond(s) but for Pledgor's execution of this Agreement and the delivery of the
Pledged Collateral;
(c) This Agreement and the delivery of the Pledged Collateral provide
Reliance with a valid pledge of, and a valid first priority security interest in
the Pledged Collateral;
(d) Pledgor will not, after the date hereof, create any Lien on the
Pledged Collateral;
(e) Pledgor will pay and discharge promptly all taxes, assessments, and
governmental charges or levies imposed upon the Pledged Collateral, as well as
all judgment liens, which, if unpaid might constitute a Lien or charge upon the
Pledged Collateral; and
(f) Pledgor will give Reliance full and prompt written notice of any
condemnation or forfeiture proceeding given by any Person, and of any judgment,
order or decree entered against the Pledged Collateral, in or by any court or
governmental body.
5. Minimum Collateral. The fair market value of the Pledged Collateral
upon receipt was $185,000. Pledgor covenants that if the Pledged Collateral
shall by reason of depreciation, or otherwise, fall below its market value as of
the time of deposit, or become insufficient for the protection of Reliance
against Loss, Pledgor shall, upon demand, deposit additional collateral
security, satisfactory to Reliance, of a value at least equal to the amount of
such depreciation and, in the event of Pledgor's failure to deposit such
additional collateral within ten (10) days of said demand, Reliance shall
thereupon have the right to dispose of the Pledged Collateral as hereinbefore
provided.
6. Custody of Pledge Collateral and Payment of Interest.
(a) Reliance will hold custody of the Pledged Collateral until such
time as all of the obligations under the Bond(s), Indemnity Agreement, and this
Agreement have been paid and performed in full, at which time the Pledged
Collateral will be transferred to Pledgor. Reliance will be under no obligation
to segregate or maintain the Pledged Collateral in a separate account.
(b) It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right to possession of the Pledged
Collateral, Reliance is authorized and directed to retain the Pledged Collateral
in its possession without liability to anyone until such dispute will have been
settled either by mutual agreement of the parties concerned or by a final order,
decree, or judgment of a court of competent jurisdiction in the United States of
America, and time for appeal has expired and no appeal has been perfected,
Reliance will be under no duty whatsoever to institute or defend any such
proceedings.
Collateral Pledge Agreement and Receipt - 3
PAGE 16 - STIPULATION AND ORDER AUTHORIZING
POST-PETITION FINANCING
Exhibit F - Page 14 of 17
<PAGE>
(c) If agreed in advance of receipt and until such time as an Event of
Default has occurred, Reliance will pay interest on pledged cash collateral.
Said interest will be computed at a varied rate of interest that is equal to the
13-Week Treasury Bill Rate. The interest rate will be adjusted on the first day
of each quarter (i.e., April 1, July 1, October 1, January 1) as quoted by The
Wall Street Journal. Interest-earning collateral will accrue interest with
payments made annually, or upon return of collateral, but no more frequently
than once per quarter.
(d) In connection with any certificate of deposit or any other
instrument evidencing the deposit of money with any person, firm or corporation
included in the Pledged Collateral, it is agreed and understood that Pledgor has
selected the depository, and assumes full responsibility for the safety of the
deposited funds.
7. Termination. This Agreement will terminate on the date upon which
all obligations of Principal for Bond(s) covered by this Agreement have been
paid and performance fulfilled on the Indemnity Agreement and this Agreement,
and Reliance will thereupon reassign and deliver to Pledgor, or to such Person
or Persons as Pledgor will designate, against receipt, such of the Pledged
Collateral, if any, as will not have been sold or otherwise applied by Reliance
pursuant to the terms hereof or will still be held by Reliance hereunder,
together with appropriate instruments of reassignment and releases. Any such
reassignment will be without recourse upon or warranties by Reliance and will be
at the expense of the Pledgor.
8. Additional Security. This Agreement will not impair or prejudice the
right of Reliance to enforce collection of any indebtedness or any amount due
under the Indemnity Agreement or any other agreement when due and payable. This
Agreement is additional, cumulative, and concurrent security for the payment and
performance of the obligations of the Principal and Indemnitors. Reliance, its
respective successor, and assigns, will have the right to proceed against the
Pledged Collateral and to proceed against all security at the same time or
against individually pledged or liened assets from time-to-time at the sole
election of Reliance. No action against any specific security will be a bar to
any subsequent action or actions against the same or any other security.
9. Attorney Fees and Costs. If this Agreement is referred to
collection, or placed in the hands of an attorney for collection, or referred to
arbitration, or to an attorney for resolution of any dispute arising directly or
indirectly out of this Agreement, Pledgor agrees to pay Reliance's collection
expense, reasonable attorney fees, and other expenses incident to collection or
the dispute. If an action or a suit is instituted to enforce any of the terms of
this Agreement, or if any dispute is referred to arbitration hereunder, the
party not prevailing agrees to pay all of the prevailing party's actual court or
arbitration expenses, costs, and disbursements, expert witness fees in addition
to such sum as the court or arbitrator(s) may adjudge reasonable as attorney's
fees at arbitration, trial or on appeal of such arbitration, suit, or action, in
addition to all other sums provided by law. The fees, costs and expenses shall
bear interest at the maximum legal rate.
Collateral Pledge Agreement and Receipt - 4
PAGE 17 - STIPULATION AND ORDER AUTHORIZING
POST-PETITION FINANCING
Exhibit F - Page 15 of 17
<PAGE>
Payment of costs and expenses, including attorney fees, shall be secured by the
Pledged Collateral.
10. Counterparts. This Agreement may be executed in two or more
counterparts which together shall constitute one agreement
11. Governing Law. This Agreement shall be governed as to performance,
administration and interpretation by the laws of the State of Oregon exclusive
of the rules with respect to conflicts of law.
12. Notices. Any notice, request, demand, or other communications
required, permitted or otherwise contemplated by this Agreement will be in
writing and delivered personally, sent by regularly scheduled overnight air
courier service, or postage prepaid certified United States mail, return receipt
requested, or by confirmed facsimile to the following: addresses:
RELIANCE: PLEDGOR:
--------- --------
Ms. Cindy Sanders -----------------------------
Bond Claim Department
Reliance Insurance Company -----------------------------
P.O. Box 9719 Southern Pacific Funding Corp.
Federal Way, WA 98063-9719
Fax: (253) 941-7156 -----------------------------
RELIANCE: -----------------------------
Reliance Insurance Company
United Pacific Insurance Company. -----------------------------
By:-----------------------------
Title:--------------------------
PLEDGOR:
Southern Pacific Funding Corp
By:-----------------------------
Title:--------------------------
Collateral Pledge Agreement and Receipt - 5
PAGE 18 - STIPULATION AND ORDER AUTHORIZING
POST-PETITION FINANCING
Exhibit F - Page 16 of 17
<PAGE>
I hereby certify that on July 6, 1999, I caused to be served copies
of the foregoing Stipulated Nonmaterial Modification to Plan of Second Amended
Plan of Reorganization (United Pacific Insurance Company), a copy of which is
attached hereto, by the following indicated method or methods:
|X| by FAXING full, true, and correct copies thereof to the
attorneys at the fax numbers shown above, which are the
last-known fax numbers for the attorneys' offices, on the date
set forth below. The receiving fax machines were operating at
the time of service and the transmissions were properly
completed, according to the attached confirmation reports.
M. Vivienne Popperl
Office of the United States Trustee
851 S.W. Sixth Avenue, Suite 1300
Portland, Oregon 97204
Fax: (503) 326-7658
Office of the United States
Trustee
Jay Strauss, Esq. James E. Millstein
Goldman, Sachs & Co. James Bromley
85 Broad Street Cleary, Gottlieb, Steen & Hamilton
New York, New York 10004 One Liberty Plaza
Fax: (212) 902-3876 New York, New York 10006-1470
Fax: (212)-225-3999
Attorneys for Goldman, Sachs
& Co.
DATED this 6 day of July, 1999.
/s/ John Casey Mills
--------------------
John Casey Mills
Of Attorneys for Southern Pacific
Funding Corporation
Page 1 - Certificate of Service Exhibit F - Page 17 of 17
