<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 3, 1996
REGISTRATION NO. 333-3954
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
IMC MORTGAGE COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
FLORIDA 6162 59-3350574
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
3450 BUSCHWOOD PARK DRIVE
TAMPA, FLORIDA 33618
(813) 932-2211
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
GEORGE NICHOLAS
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
IMC MORTGAGE COMPANY
3450 BUSCHWOOD PARK DRIVE
TAMPA, FLORIDA 33618
(813) 932-2211
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES OF ALL COMMUNICATIONS, INCLUDING ALL COMMUNICATIONS SENT TO THE
AGENT FOR SERVICE, SHOULD BE SENT TO:
<TABLE>
<S> <C>
MARK R. BAKER, ESQ. STEVEN R. FINLEY, ESQ.
MARK W. LORIMER, ESQ. SEAN P. GRIFFITHS, ESQ.
DEWEY BALLANTINE GIBSON, DUNN & CRUTCHER LLP
1301 AVENUE OF THE AMERICAS 200 PARK AVENUE
NEW YORK, NEW YORK 10019 NEW YORK, NEW YORK 10166
(212) 259-8000 (212) 351-4000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]_________
If this Form is a post-effective amendment filed pursuant to rule-462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]_________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
<S> <C> <C>
PROPOSED MAXIMUM ADDITIONAL
TITLE OF EACH CLASS OF SECURITIES AGGREGATE AMOUNT OF
TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE(2)
<S> <C> <C>
Common Stock, par value $0.01 per share............................... $ 67,735,000 $ 1,546.56
</TABLE>
(1) Estimated solely for purposes of determining the registration fee pursuant
to Rule 457 under the Securities Act.
(2) Calculated pursuant to Rule 457(o). A fee of $21,810.34 was paid with filing
of the Registration Statement on April 24, 1996.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
________________________________________________________________________________
<PAGE>
<PAGE>
IMC MORTGAGE COMPANY
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K SHOWING LOCATION IN PROSPECTUS OF
INFORMATION REQUIRED BY ITEMS OF FORM S-1
<TABLE>
<CAPTION>
FORM S-1 ITEM NUMBER AND HEADING LOCATION IN THE PROSPECTUS
--------------------------------------------------------- ------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside Front
Cover Page of Prospectus............................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus............................................. Inside Front and Outside Back Cover Pages
3. Summary Information, Risk Factors and Ratio of Earnings
to Fixed Charges....................................... Prospectus Summary; Business; Risk Factors
4. Use of Proceeds.......................................... Outside Front Cover Page; Prospectus Summary;
Use of Proceeds
5. Determination of Offering Price.......................... Underwriting
6. Dilution................................................. Dilution
7. Selling Security Holders................................. Not Applicable
8. Plan of Distribution..................................... Outside Front Cover Page; Underwriting
9. Description of Securities To Be Registered............... Description of Capital Stock
10. Interests of Named Experts and Counsel................... Not Applicable
11. Information With Respect to the Registrant:
(a) Description of Business............................ Prospectus Summary; Recent Events; Business
(b) Description of Property............................ Business -- Property
(c) Legal Proceedings.................................. Business -- Legal Proceedings
(d) Market Price of and Dividends on the Registrant's
Common Equity and Related Stockholder Matters...... Outside Front Cover Page; The Reorganization
Plan; Dividend Policy; Selected Consolidated
Financial Data; Description of Capital Stock;
Shares Eligible for Future Sale; Available
Information
(e) Financial Statements............................... Consolidated Financial Statements
(f) Selected Financial Data............................ Selected Consolidated Financial Data
(g) Supplementary Financial Information................ Not Applicable
(h) Management's Discussion and Analysis of Financial
Condition and Results of Operations................ Management's Discussion and Analysis of
Financial Condition and Results of Operations
(i) Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ Management's Discussion and Analysis of
Financial Condition and Results of Operations
(j) Directors and Executive Officers................... Management
(k) Executive Compensation............................. Management
(l) Security Ownership of Certain Beneficial Owners and
Management......................................... Principal Stockholders
(m) Certain Relationships and Related Transactions..... Certain Relationships and Related Transactions;
Certain Accounting Considerations Relating to
The Conti VSA
12. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities............................. Not Applicable
</TABLE>
<PAGE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 3, 1996
PROSPECTUS
3,100,000 SHARES
[LOGO]
IMC MORTGAGE COMPANY
COMMON STOCK
------------------------------
The 3,100,000 shares of common stock (the 'Common Stock') offered hereby
(the 'Public Offering') are being offered and sold by IMC Mortgage Company
('IMC' or the 'Company'). Prior to the Public Offering, there has been no public
market for the Common Stock. It is currently estimated that the initial public
offering price will be between $17.00 and $19.00 per share. See 'Underwriting'
for a discussion of the factors to be considered in determining the initial
public offering price.
At the request of the Company, the Underwriters have initially reserved up
to 310,000 shares of Common Stock for sale at the initial public offering price
to certain employees, Industry Partners (as defined herein) and their affiliates
(the 'Directed Share Program'). The numbers of shares of Common Stock available
for sale to the general public will be reduced to the extent such persons
purchase such reserved shares. Any such reserved shares which are not so
purchased will be offered by the Underwriters to the general public on the same
basis as other shares offered thereby.
The Company has applied for listing of the Common Stock on The Nasdaq
National Market ('Nasdaq') under the symbol IMCC.
------------------------------
SEE 'RISK FACTORS' ON PAGES 8 THROUGH 15 OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN
INVESTMENT IN THE COMMON STOCK OFFERED HEREBY.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
<S> <C> <C> <C>
Per Share.............................. $ $ $
Total (3).............................. $ $ $
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the 'Securities Act'). See 'Underwriting.'
(2) Before deducting estimated expenses of $1,000,000 payable by the Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
465,000 additional shares of Common Stock, on the same terms and conditions
as set forth above, solely to cover over-allotments, if any. If such option
is exercised in full, the Price to Public will be $ , Underwriting
Discount will be $ and Proceeds to Company will be $ . See
'Underwriting.'
------------------------------
The shares of Common Stock are offered, subject to prior sale, when, as and
if delivered to and accepted by the Underwriters, and subject to certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
said offer and to reject orders in whole or in part. It is expected that
delivery of the Common Stock will be made on or about June , at the offices of
Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New York 10167.
------------------------------
BEAR, STEARNS & CO. INC. OPPENHEIMER & CO., INC.
JUNE , 1996
<PAGE>
<PAGE>
HEADQUARTERS, FULL SERVICE, AND RETAIL LOCATIONS
[MAP OF THE UNITED STATES OF AMERICA]
<TABLE>
<S> <C>
Headquarters Tampa, FL
Top Ten States Maryland, New York, New Jersey, Michigan, Florida, Ohio, Pennsylvania, Virginia, Georgia, District of Columbia
Full Service Cincinnati, OH; Ft. Washington, PA; Cherry Hill, NJ; Lincoln, RI
Retail Atlanta, GA; Englewood, CO; W. Des Moines, IA; St. Louis, MO; Brookfield, WI; Phoenix, AZ; Jacksonville, FL;
Roselle, IL; Bellevue, WA.
</TABLE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
The Company was formerly known as IMC Acquisitions, Inc., a Florida
corporation ('IMC Acquisitions'), and is a wholly-owned subsidiary of Industry
Mortgage Company, LP, a Delaware limited partnership (the 'Partnership'). In
connection with the Public Offering, the Partnership will become a subsidiary of
the Company, pursuant to a plan in which the Partnership will retain all of its
assets, operations and liabilities (the 'Reorganization Plan'). See 'The
Reorganization Plan.' This Prospectus gives effect to the Reorganization Plan
and, unless the context otherwise requires, the terms the 'Company' and 'IMC'
refer to IMC Mortgage Company, its subsidiaries and their respective operations,
and include the Partnership. The following summary is qualified in its entirety
by the more detailed information and consolidated financial statements and
related notes appearing elsewhere in this Prospectus.
THE COMPANY
Overview. IMC is a specialized consumer finance company engaged in
purchasing, originating, servicing and selling home equity loans secured
primarily by first liens on one- to four-family residential properties. The
Company focuses on lending to individuals whose borrowing needs are generally
not being served by traditional financial institutions due to such individuals'
impaired credit profiles and other factors. Loan proceeds typically are used by
the Company's borrowers for a variety of purposes such as to consolidate debt,
to finance home improvements and to pay educational expenses. By focusing on
individuals with impaired credit profiles and by providing prompt responses to
their borrowing requests, the Company has been able to charge higher interest
rates for its loan products than typically are charged by conventional mortgage
lenders.
IMC was formed in 1993 by a team of executives experienced in the
non-conforming home equity loan industry. IMC was originally structured as a
partnership, with the limited partners consisting of correspondents and other
originators of home equity loans (the 'Industry Partners') and certain members
of management. The original Industry Partners included: American Industrial Loan
Association; Champion Mortgage Co. Inc.; Cityscape Corp.; Equitysafe, a Rhode
Island General Partnership; Investors Mortgage, a Washington LP; Mortgage
America Inc.; Residential Money Centers; First Government Mortgage and Investors
Corp.; Investaid Corp.; and New Jersey Mortgage and Investment Corp. TMS
Mortgage Inc., a wholly-owned subsidiary of The Money Store Inc., ('The Money
Store') and Equity Mortgage, a Maryland LP, became Industry Partners in 1994.
Branchview, Inc. became an Industry Partner in 1995.
IMC purchases and originates home equity loans through a diversified
network of 248 correspondents, which include the Industry Partners, and 1,348
mortgage loan brokers and, to a lesser extent, on a retail basis through its
recently initiated direct consumer lending effort. Since its inception in
August, 1993, IMC has experienced considerable growth in loan production, with
total purchases and originations of $29.6 million, $282.9 million, $621.6
million and $264.0 million in 1993, 1994, 1995 and the first three months of
1996, respectively. IMC's network of correspondents accounted for 82.5%, 87.5%
and 89.6% of IMC's loan production in 1994, 1995 and the first three months of
1996, respectively, with the largest correspondent contributing 7.1%, 9.7% and
9.5% of total loan production in such periods. Through its network of approved
mortgage brokers, IMC generated 17.5%, 10.7% and 8.0% of its loan production in
1994, 1995 and the first three months of 1996, respectively. IMC's direct
consumer lending effort contributed approximately 1.8% and 2.4% of loan
production in 1995 and the first three months of 1996. IMC is seeking to expand
its direct consumer lending by opening branch offices and expanding its use of
advertising, direct mail and other marketing strategies.
The Industry Partners are currently required to sell to IMC, under market
terms and conditions, an aggregate of $102.0 million, on average, of home equity
loans per year. IMC has consistently purchased loan production from the Industry
Partners in excess of such aggregate annual commitment. Concurrent with the
Public Offering, the majority of the Industry Partners have agreed to increase
their annual loan sale commitment, or the economic equivalent, to an aggregate
of $162.0 million. See 'Certain Relationships and Related Transactions.'
3
<PAGE>
<PAGE>
IMC sells its loans through securitizations, which involve the private
placement or public offering of asset-backed securities, and whole loan sales,
which involve selling blocks of loans to institutional purchasers. Whole loan
sales have declined from 100% of total loan sales in 1993 (prior to IMC's first
securitization of its loans) to 15.3% of total loan sales in 1995. Each of IMC's
securitizations has been credit-enhanced by an insurance policy provided through
a monoline insurance company to receive ratings of Aaa from Moody's Investors
Service, Inc. ('Moody's') and AAA from Standard & Poor's Ratings Group
('Standard & Poor's'). Through April 30, 1996, IMC had completed six real estate
mortgage investment conduit ('REMIC') securitizations totalling $845.0 million.
As of December 31, 1995 and March 31, 1996, IMC had a servicing portfolio of
$535.8 million and $783.4 million, respectively.
IMC has maintained a financing and investment banking relationship with
ContiFinancial Corporation and its subsidiaries and affiliates
('ContiFinancial') since 1993. As part of this relationship, ContiFinancial has
provided warehouse and revolving credit facilities to IMC and acted as placement
agent and underwriter of its securitizations. In addition, as part of its cash
flow management strategy, the securitizations were structured so that
ContiFinancial received, in exchange for cash, a portion of the residual
interest in such securitizations. These transactions reduced IMC's gain on sale
of loans by approximately $0.6 million in 1994, $5.5 million in 1995 and $2.8
million during the first three months of 1996. ContiFinancial also has an option
to purchase 1.5 million shares of Common Stock (subject to certain adjustments)
for a de minimis amount (the 'Conti Option').
Loan purchases and originations increased 119.7% from $282.9 million in
1994 to $621.6 million in 1995, and the Company's servicing portfolio increased
482.4% from $92.0 million to $535.8 million. During this same period, the
Company's total revenues increased 94.9% from $10.1 million to $19.7 million,
pro forma net income increased 117.3% from $1.9 million to $4.0 million and
pre-tax income before the partnership equity value sharing arrangement with
ContiFinancial (the 'Conti VSA') increased 127.4% from $4.7 million to $10.8
million. See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Transactions with ContiFinancial -- Sharing of
Proportionate Value of Equity' and Note 4 to Notes to Consolidated Financial
Statements.
Business Strategy. IMC is following these strategies for expansion: (i)
increasing the number of correspondents and brokers in its networks and
increasing the amount of loans purchased or originated from correspondents
(including the Industry Partners) and brokers; (ii) expanding its direct
consumer lending; (iii) acquiring additional loan production capability through
acquisitions of correspondents; (iv) generating loan production in the home
equity market in the United Kingdom ('UK'); and (v) broadening its product
offerings. See 'Business -- Business Strategy.'
Recent Securitization. In April, 1996, the Company completed its sixth
securitization in the aggregate amount of $200.0 million. The securities sold in
the securitization were rated AAA/Aaa and were sold in a public offering. As
part of its cash flow management strategy, the securitization was structured so
that ContiFinancial received, in exchange for cash, 25% of the residual
interests of the April, 1996 securitization. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources.'
RISK FACTORS
Prior to making an investment decision, prospective investors should
carefully consider all of the information set forth in this Prospectus and, in
particular, should evaluate the factors set forth in 'Risk Factors.' Such risks
include, among others, effect of adverse economic conditions, interest rate
risk, dependence on funding sources, liquidity-negative cash flow, valuation and
potential impairment of excess servicing receivables, dependence on
securitizations, dependence on credit enhancement, limited operating history,
recent formation and expansion and competition.
4
<PAGE>
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.......... 3,100,000 shares
Common Stock to be outstanding after the
Public Offering............................ 11,065,092 shares
Use of proceeds.............................. For general corporate purposes, including the repayment of certain
indebtedness estimated to be $22.9 million, the funding of loan
purchases and originations, the funding of future acquisitions
and the expansion of its direct lending branch office network.
See 'Use of Proceeds.'
Proposed Nasdaq symbol....................... IMCC
</TABLE>
------------------------
Except as otherwise specified, all information in this Prospectus (i)
assumes no exercise of the Underwriters' over-allotment option (see
'Underwriting'), (ii) regarding outstanding shares excludes: (a) 107,527 shares
of Common Stock reserved for issuance upon the conversion of a convertible
secured debenture (the 'Rotch Debenture') due September 18, 1996 held by Rotch
Property Group Limited ('Rotch'), (b) 325,323 shares of Common Stock reserved
for issuance upon exercise of outstanding options, and (c) 141,666 shares of
Common Stock reserved for issuance when and if earned under the contingent
payout arrangement with respect to IMC's acquisition (the 'Equitystars
Acquisition') of the assets of Mortgage Central Corp. ('Equitystars') and (iii)
regarding outstanding shares includes: (a) 119,833 shares of Common Stock
reserved for issuance upon conversion of the Company's Series A Voting
Convertible Preferred Stock (the 'Convertible Preferred Stock') issued pursuant
to the Equitystars Acquisition, (b) 345,259 shares of Common Stock reserved for
issuance upon exercise of outstanding options and (c) 1,500,000 shares of Common
Stock reserved for issuance upon exercise of the Conti Option. See 'The
Reorganization Plan,' 'Certain Relationships and Related
Transactions -- Agreements with ContiFinancial -- Conti Warrant' and
'Management -- Stock Option Plans.'
5
<PAGE>
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The historical and pro forma data reflect the exchange of all of the
partnership interests in the Partnership for shares of Common Stock as described
in the Reorganization Plan, giving effect to such exchange as if it had occurred
at the inception of the Partnership.
<TABLE>
<CAPTION>
PERIOD THREE MONTHS
FROM INCEPTION ENDED
(AUGUST 12, 1993) YEAR ENDED DECEMBER 31, MARCH 31,
THROUGH ------------------------- -------------------------------
DECEMBER 31, 1993 1994 1995 1995 1996
----------------- ---------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Gain on sale of loans(1)................. $438,774 $8,583,277 $20,680,848 $3,297,408 $10,875,466
Additional securitization transaction
expense(2)............................. 0 (560,137) (5,547,037) (254,507) (2,828,591)
----------------- ---------- ----------- -------------- --------------
Gain on sale of loans, net........... 438,774 8,023,140 15,133,811 3,042,901 8,046,875
----------------- ---------- ----------- -------------- --------------
Warehouse interest income................ 97,159 2,510,062 7,884,679 1,090,933 5,160,943
Warehouse interest expense............... (50,709) (1,610,870) (6,006,919) (1,019,643) (3,375,244)
----------------- ---------- ----------- -------------- --------------
Net warehouse interest income........ 46,450 899,192 1,877,760 71,290 1,785,699
----------------- ---------- ----------- -------------- --------------
Servicing fees........................... 0 99,224 1,543,339 109,167 995,439
Other.................................... 28,235 1,072,855 1,117,903 208,243 628,536
----------------- ---------- ----------- -------------- --------------
Total servicing fees and other....... 28,235 1,172,079 2,661,242 317,410 1,623,975
----------------- ---------- ----------- -------------- --------------
Total revenues................... 513,459 10,094,411 19,672,813 3,431,601 11,456,549
----------------- ---------- ----------- -------------- --------------
Expenses:
Compensation and benefits................ 507,904 3,348,236 5,139,386 1,021,815 3,666,685
Selling, general and administrative
expenses............................... 355,526 2,000,401 3,477,677 553,910 2,240,856
Other.................................... 0 14,143 297,743 16,084 342,534
Sharing of proportionate value of
equity(3).............................. 0 1,689,000 4,204,000 718,952 2,555,000
----------------- ---------- ----------- -------------- --------------
Total expenses....................... 863,430 7,051,780 13,118,806 2,310,761 8,805,075
----------------- ---------- ----------- -------------- --------------
Pre-tax income (loss).................... (349,971) 3,042,631 6,554,007 1,120,840 2,651,474
Pro forma provision (benefit) for income
taxes.................................. (134,000) 1,187,000 2,522,000 431,299 1,026,000
----------------- ---------- ----------- -------------- --------------
Pro forma net income (loss).............. $(215,971) $1,855,631 $ 4,032,007 $ 689,541 $ 1,625,474
----------------- ---------- ----------- -------------- --------------
----------------- ---------- ----------- -------------- --------------
Pro forma per share data:
Pro forma net income per share:
Primary.............................. $0.51 $0.20
Fully diluted........................ $0.51 $0.20
Weighted average common and common share
equivalents:
Primary.............................. 7,935,752 7,935,752
--------------
--------------
Fully diluted........................ 7,935,752 8,304,778
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1996
---------------------------------------------- -------------------------------
AS
1993 1994 1995 ACTUAL ADJUSTED(4)
----------------- ----------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Mortgage loans held for sale............. $ 7,971,990 $28,995,750 $193,002,835 $257,458,182 $257,458,182
Excess servicing receivables............. 0 3,403,730 14,072,771 22,905,311 22,905,311
Warehouse finance facilities............. 7,212,915 27,731,859 189,819,046 261,417,193 220,467,956
Term debt................................ 0 0 11,120,642 21,879,297 17,879,297
Convertible debenture.................... 0 0 0 1,800,000 0
Stockholders' equity(5).................. 1,449,092 5,856,011 5,608,844 12,122,435 72,245,170
Total assets(5).......................... 8,861,144 36,641,991 354,551,434 525,200,197 532,422,932
<CAPTION>
PERIOD
FROM INCEPTION YEAR ENDED THREE MONTHS ENDED
(AUGUST 12, 1993) DECEMBER 31, MARCH 31,
THROUGH -------------------------- -------------------------------
DECEMBER 31, 1993 1994 1995 1995 1996
----------------- ----------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C>
OPERATING DATA (DOLLARS IN THOUSANDS):
Loans purchased or originated............ $29,608 $282,924 $621,629 $119,385 $263,987
Loans sold through securitization........ 0 81,637 388,363 74,782 175,000
Whole loan sales......................... 21,636 180,263 70,400 20,765 21,272
Serviced loan portfolio (period end)..... 0 92,003 535,798 166,914 783,367
DELINQUENCY DATA:
Total delinquencies as a percentage of
loans serviced (period end)(6)......... 0.00% 0.87% 3.43% 1.32% 2.34%
Defaults as a percentage of loans
serviced (period end)(7)............... 0.00 0.12 1.16 0.12 1.40
Net losses as a percentage of average
loans serviced for period.............. 0.00 0.00 0.08 0.01 0.01
</TABLE>
6
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------
MARCH 31, 1995 JUNE 30, 1995 SEPTEMBER 30, 1995 DECEMBER 31, 1995
-------------- ------------- ------------------ -----------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Gain on sale of loans(1)......................... $3,297,408 $2,823,232 $7,303,333 $7,256,875
Additional securitization transaction
expense(2)..................................... (254,507) (176,860) (2,424,000) (2,691,670)
-------------- ------------- ------------------ -----------------
Gain on sale of loans, net................... 3,042,901 2,646,372 4,879,333 4,565,205
-------------- ------------- ------------------ -----------------
Warehouse interest income........................ 1,090,933 1,703,094 2,430,904 2,659,748
Warehouse interest expense....................... (1,019,643) (1,192,707) (1,814,957) (1,979,612)
-------------- ------------- ------------------ -----------------
Net warehouse interest income................ 71,290 510,387 615,947 680,136
-------------- ------------- ------------------ -----------------
Servicing fees................................... 109,167 322,564 423,476 688,132
Other............................................ 208,243 272,773 307,425 329,462
-------------- ------------- ------------------ -----------------
Total revenues............................... 3,431,601 3,752,096 6,226,181 6,262,935
-------------- ------------- ------------------ -----------------
Expenses:
Compensation and benefits........................ 1,021,815 1,263,021 1,364,344 1,490,206
Selling, general and administrative expenses..... 553,910 662,627 940,033 1,321,107
Other............................................ 16,084 92,540 31,028 158,091
Sharing of proportionate value of equity(3)...... 718,952 677,575 1,520,433 1,287,040
-------------- ------------- ------------------ -----------------
Total expenses............................... 2,310,761 2,695,763 3,855,838 4,256,444
-------------- ------------- ------------------ -----------------
Pre-tax income................................... 1,120,840 1,056,333 2,370,343 2,006,491
Pro forma provision for income taxes............. 431,299 406,477 912,108 772,116
-------------- ------------- ------------------ -----------------
Pro forma net income................................. $689,541 $649,856 $1,458,235 $1,234,375
-------------- ------------- ------------------ -----------------
-------------- ------------- ------------------ -----------------
Pro forma per share data:
Pro forma net income per share................... $0.09 $0.08 $0.18 $0.16
Weighted average common and common share
equivalents.................................... 7,935,752 7,935,752 7,935,752 7,935,752
OPERATING DATA (DOLLARS IN THOUSANDS):
Loans purchased or originated.................... $119,385 $124,667 $154,990 $222,587
Loans sold through securitization................ 74,782 43,581 120,000 150,000
Whole loan sales................................. 20,765 31,763 8,224 9,648
Serviced loan portfolio (period end)............. 166,914 271,522 355,374 535,798
DELINQUENCY DATA:
Total delinquencies as a percentage of loans
serviced (period end)(6)....................... 1.32% 1.09% 2.42% 3.43%
Defaults as a percentage of loans serviced
(period end)(7)................................ 0.12 0.45 0.98 1.16
Net losses as a percentage of average loans
serviced for period............................ 0.01 0.00 0.03 0.04
</TABLE>
- ------------
(1) Includes excess servicing receivables received by ContiFinancial in
connection with IMC's agreement with ContiFinancial. See
'Business -- Loans -- Securitizations' and 'Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Transactions
with ContiFinancial -- Additional Securitization Transaction Expense.'
(2) In 1994 and 1995 and the three months ended March 31, 1996, ContiFinancial
received excess servicing receivables with estimated values of $3.0 million,
$25.1 million and $9.5 million in exchange for $2.0 million, $18.4 million
and $6.2 million, respectively. In addition, ContiFinancial paid IMC $0.4
million, $1.1 million and $.5 million in 1994, 1995 and the three months
ended March 31, 1996, respectively, in expenses related to securitizations.
See 'Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Transactions with ContiFinancial -- Additional
Securitization Transaction Expense.'
(3) Reflects expenses recorded in connection with the Conti VSA which was
superseded by the Conti Option in March, 1996. The Company's pre-tax income
before the Conti VSA for 1994 and 1995 and the three months ended March 31,
1996 was $4.7 million, $10.8 million and $5.2 million, respectively. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Transactions with ContiFinancial -- Sharing of Proportionate
Value of Equity,' 'Certain Accounting Considerations Relating to the Conti
VSA' and Note 4 to Notes to Consolidated Financial Statements.
(4) Adjusted to give effect to the sale of 3,100,000 shares of Common Stock
offered by the Company hereby at an assumed offering price of $18.00 per
share and the application of the estimated net proceeds therefrom. See 'Use
of Proceeds' and 'Capitalization.'
(5) Total assets and Stockholders' equity include the effect of recording a
deferred tax asset of $5.6 million in connection with the conversion from a
partnership to a taxable corporation.
(6) Represents the percentages of account balances contractually past due 30
days or more, exclusive of home equity loans in foreclosure, bankruptcy or
real estate owned.
(7) Represents the percentages of account balances on loans in foreclosure,
bankruptcy or real estate owned.
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RISK FACTORS
Before purchasing the shares of Common Stock offered hereby, a prospective
investor should carefully consider the factors set forth below as well as the
other information set forth elsewhere in this Prospectus.
EFFECT OF ADVERSE ECONOMIC CONDITIONS
The Company's business may be adversely affected by periods of economic
slowdown or recession which may be accompanied by decreased demand for consumer
credit and declining real estate values. Any material decline in real estate
values reduces the ability of borrowers to use home equity to support borrowings
and increases the loan-to-value ratios of loans previously made by the Company,
thereby weakening collateral coverage and increasing the possibility of a loss
in the event of default. In addition, delinquencies, foreclosures and losses
generally increase during economic slowdowns or recessions.
INTEREST RATE RISK
Profitability may be directly affected by the levels of and fluctuations in
interest rates, which affect the Company's ability to earn a spread between
interest received on its loans and the costs of borrowings. The profitability of
the Company is likely to be adversely affected during any period of unexpected
or rapid changes in interest rates. For example, a substantial or sustained
increase in interest rates could adversely affect the ability of the Company to
purchase and originate loans and would reduce the value of loans held for sale
and the interest rate differential between newly originated loans and the
pass-through rate on loans that are securitized. A significant decline in
interest rates could decrease the size of the Company's loan servicing portfolio
by increasing the level of loan prepayments. Additionally, to the extent excess
servicing spread has been capitalized on the books of the Company, higher than
anticipated rates of loan prepayments or losses could require the Company to
write down the value of such excess servicing spread, adversely impacting
earnings.
Fluctuating interest rates also may affect the net interest income earned
by the Company, resulting from the difference between the yield to the Company
on loans held pending sale and the interest paid by the Company for funds
borrowed under the Company's warehouse facilities. In addition, inverse or
flattened interest yield curves could have an adverse impact on the
profitability of the Company because the loans pooled and sold by the Company
have long-term rates, while the senior interests in the related REMIC trusts are
priced on the basis of intermediate rates. While the Company monitors the
interest rate environment and employs a hedging strategy designed to mitigate
the impact of changes in interest rates, there can be no assurance that the
profitability of the Company would not be adversely affected during any period
of changes in interest rates.
DEPENDENCE ON FUNDING SOURCES
The Company funds substantially all of the loans which it purchases and
originates through borrowings under warehouse facilities, secured by pledges of
its loans, through repurchase agreements and through internally generated funds.
These borrowings are in turn repaid with the proceeds received by the Company
from selling such loans either through securitizations or whole loan sales. The
Company is dependent upon a few lenders to provide the primary credit facilities
for its loan purchases and originations. Any failure to renew or obtain adequate
funding under these warehouse facilities or other financings, or any substantial
reduction in the size of or pricing in the markets for the Company's loans,
could have a material adverse effect on the Company's operations. To the extent
that the Company is not successful in maintaining or replacing existing
financing, it would not be able to hold a large volume of loans pending
securitization and therefore would have to curtail its loan production
activities or sell loans either through whole loan sales or in smaller
securitizations, thereby having a material adverse effect on the Company's
results of operations. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources.'
The Company has relied upon a Standby Agreement (the 'Standby Agreement')
with ContiFinancial and its excess servicing receivable sharing arrangements
with ContiFinancial and its
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affiliates to fund the tax consequences of the recognition of the securitization
gain on sale and other working capital needs prior to receipt of any cash flow
from the residual interests and interest-only ('I/O') classes in its
securitizations. ContiFinancial has agreed to lend the Company an additional
$10.0 million (the 'Additional Draw') under the Standby Agreement, which must be
repaid with a portion of the net proceeds from the Public Offering. The Company
intends to borrow the full $25.0 million available under the Standby Agreement
and the Additional Draw by the time of the Public Offering. The Standby
Agreement expires on January 12, 2000. If ContiFinancial fails to renew the
Standby Agreement in 2000, and the Company is unable to find similar alternative
financing, the Company's growth and profitability will be adversely affected.
ContiFinancial has not agreed to increase the Standby Agreement beyond the
Additional Draw. If the Company is unable to secure funding or financing for the
tax consequences of its future securitizations, it may be forced to either
curtail its growth, or seek out increased or additional residual sharing
arrangements, either of which would have an adverse impact on its future
profitability.
In connection with the Company's prefunding commitments in its
securitization transactions, investors deposit in cash a prefunded amount into
the related trust to purchase the loans the Company commits to sell on a forward
basis. This prefunded amount is invested pending use in short-term obligations
which pay a lower interest rate than the interest rate the trust is obligated to
pay the certificate investors on the outstanding balance of the prefunded
amount. The Company is required to deposit at the closing of the related
transaction an amount sufficient to make up the difference between these rates.
If the Company were unable to make such deposits, it would be unable to access
the prefunding mechanism, which could result in less efficient execution of the
Company's securitizations. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources.'
LIQUIDITY -- NEGATIVE CASH FLOW
As a result of its increased volume of loan purchases and originations and
its growing use of securitizations, the Company has operated since November,
1994, and expects to continue to operate, on a negative cash flow basis. Prior
to the Company's first securitization in November, 1994, the Company sold loans
primarily through whole loan sales which generate immediate cash flow on the
date of sale. During 1995 and the three months ending March 31, 1996, the
Company operated on a negative cash flow basis using $165.3 million and $78.7
million, respectively, more in operations than was generated, due primarily to
an increase in mortgages purchased and originated and the Company's sale of
loans through securitizations. In securitizations, the Company recognizes a gain
on sale of the loans securitized upon the closing of the securitization and the
delivery of the loans, but does not receive the cash representing such gain
until it receives the excess servicing spread, which is payable over the actual
life of the loans securitized. The Company incurs significant expenses in
connection with securitizations and incurs tax liabilities as a result of the
gain on sale. The Company must maintain short- and long-term external sources of
cash to fund its operations and therefore must maintain warehouse lines of
credit and other external funding sources. If the capital sources of the Company
were to decrease significantly, the rate of growth of the Company would be
negatively affected.
The documents governing the Company's securitizations require the Company
to build over-collateralization levels through retention within each
securitization trust of excess servicing distributions and application thereof
to reduce the principal balances of the senior interests issued by the related
trust. This retention causes the aggregate principal amount of the loans in the
related pool to exceed the aggregate principal balance of the outstanding
investor certificates. Such over-collateralization amounts serve as credit
enhancement for the related trust and therefore are available to absorb losses
realized on loans held by such trust. The Company continues to be subject to the
risks of default and foreclosure following the sale of loans through
securitizations to the extent excess servicing distributions are required to be
retained or applied to reduce principal from time to time. Such retained amounts
are pre-determined by the entity issuing the guarantee of the related senior
interests and are a condition to obtaining an AAA/Aaa rating thereon. In
addition, such retention delays cash distributions that otherwise would flow to
the Company through its retained interest in the transaction, thereby slowing
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the flow of cash to the Company. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations.'
VALUATION AND POTENTIAL IMPAIRMENT OF EXCESS SERVICING RECEIVABLES
At March 31, 1996, the Company's balance sheet reflected investment in
excess servicing receivables, representing I/O and residual classes of
certificates, of approximately $22.9 million. The Company derives a significant
portion of its income by recognizing gains upon the sale of loans through
securitizations due to the excess servicing spread associated with such loans
recorded at the time of sale. If the Company's assumptions used in deriving the
value of excess servicing receivables differ from the actual results, there can
be a material adverse impact on the Company's financial condition and results of
operations. The principal assumptions relate to prepayment speeds, discount
rates and anticipated credit losses. Excess servicing spread is initially
capitalized on the Company's books as excess servicing receivables using
prepayment, credit loss and interest rate assumptions that the Company believes
are reasonable. See 'Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Certain Accounting Considerations -- Excess
Servicing Receivables.'
Higher than anticipated rates of loan prepayments or losses would require
the Company to write down the value of the excess servicing receivables,
adversely impacting earnings. Similarly, if delinquencies or liquidations were
to be greater than were initially assumed, excess servicing receivables
amortization would occur more quickly than originally anticipated, which would
have an adverse effect on income in the period of such adjustment. To the
Company's knowledge, there is no liquid market for the sale of excess servicing
receivables. No assurance can be given that this asset could in fact be sold at
its stated value on the balance sheet, if at all. See ' -- Contingent Risks.'
DEPENDENCE ON SECURITIZATIONS
Since its first securitization in November, 1994, the Company has pooled
and sold through securitizations an increasing percentage of the loans that it
purchases or originates. Adverse changes in the securitization market could
impair the Company's ability to purchase, originate and sell loans through
securitizations on a favorable or timely basis. Any such impairment could have a
material adverse effect upon the Company's results of operations and financial
condition. Furthermore, the Company's quarterly operating results can fluctuate
significantly as a result of the timing and level of securitizations. If
securitizations do not close when expected, the Company's results of operations
may be adversely affected for that period.
DEPENDENCE ON CREDIT ENHANCEMENT
In addition, in order to gain access to the securitization market, the
Company has relied on credit enhancements provided by a monoline insurance
carrier to guarantee outstanding senior interests in the related REMIC trusts to
enable it to obtain an AAA/Aaa rating for such interests. The Company has not
attempted to structure a mortgage loan pool for sale through a securitization
based solely on the internal credit enhancements of the pool or the Company's
credit. Any substantial reductions in the size or availability of the
securitization market for the Company's loans, or the unwillingness of insurance
companies to guarantee the senior interests in the Company's loan pools, could
have a material adverse effect on the Company's results of operations and
financial condition. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources.'
LIMITED OPERATING HISTORY; RECENT EXPANSION
The Company commenced operations in August, 1993 and has a limited
operating history. In 1995, the Company purchased and originated a significantly
greater number of loans than previously. In light of this growth, the historical
performance of the Company may be of limited relevance in predicting future
performance. Any credit or other problems associated with the larger number of
loans purchased and originated in the recent past will not become apparent until
sometime in the future. Consequently, the Company's historical results of
operations may be of limited relevance to an investor seeking to predict the
Company's future performance. See 'Business -- Loans -- Loan Purchases and
Originations.'
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The Company's significant growth and expansion have placed substantial new
and increased pressures on the Company's personnel and systems. Failure by the
Company to manage its growth effectively, or to sustain its historical levels of
performance in credit analysis and transaction structuring with respect to the
increased loan purchase and origination volume could have a material adverse
effect on the Company's results of operations and financial condition.
COMPETITION
As a purchaser and originator of mortgage loans, the Company faces intense
competition, primarily from mortgage banking companies, commercial banks, credit
unions, thrift institutions, credit card issuers and finance companies. Many of
these competitors in the financial services business are substantially larger
and have more capital and other resources than the Company. Furthermore, certain
large national finance companies and conforming mortgage originators have
announced their intention to adapt their conforming origination programs and
allocate resources to the origination of non-conforming loans. In addition,
certain of these larger mortgage companies and commercial banks have begun to
offer products similar to those offered by the Company, targeting customers
similar to those of the Company. The entrance of these competitors into the
Company's market could have a material adverse effect on the Company's results
of operations and financial condition.
Competition can take many forms, including convenience in obtaining a loan,
service, marketing and distribution channels and interest rates. Furthermore,
the current level of gains realized by the Company and its competitors on the
sale of the type of loans purchased and originated is attracting additional
competitors, including at least one quasi-governmental agency, into this market
with the effect of lowering the gains that may be realized by the Company on
future loan sales. Competition may be affected by fluctuations in interest rates
and general economic conditions. During periods of rising rates, competitors
which have 'locked in' low borrowing costs may have a competitive advantage.
During periods of declining rates, competitors may solicit the Company's
borrowers to refinance their loans. During economic slowdowns or recessions, the
Company's borrowers may have new financial difficulties and may be receptive to
offers by the Company's competitors.
The Company depends largely on brokers, financial institutions and other
mortgage bankers for its purchases and originations of new loans. The Company's
competitors also seek to establish relationships with the Company's brokers and
financial institutions and other mortgage bankers. The Company's future results
may become more exposed to fluctuations in the volume and cost of its wholesale
loans resulting from competition from other purchasers of such loans, market
conditions and other factors.
RELIANCE ON THE INDUSTRY PARTNERS
The Company purchases a significant portion of its loans from the Industry
Partners, which accounted for 23.9% and 24.2% of total loan purchases and
originations by the Company, or $148.4 million and $63.9 million, respectively,
in the year ended December 31, 1995 and the three months ended March 31, 1996.
Immediately prior to the Public Offering, the Company had contractual annual
loan sale commitments from the Industry Partners of an aggregate of $102.0
million, on average. Increased loan sale commitments, or the economic
equivalent, to an aggregate of $162.0 million (a 58.8% increase) to the Company
from the majority of the Industry Partners will become effective simultaneously
with the Public Offering. There can be no assurance that the commitments to
increase loan production will result in an actual increase in the dollar amount
of loans purchased by the Company from the Industry Partners. At the present
time, a number of Industry Partners are selling more loans to the Company than
they are obligated to sell, even under the new higher commitments. Certain of
the Industry Partners could reduce their loan sales to the Company without
violating their commitments to the Company, resulting in an overall decrease in
the volume of loans available to the Company for purchase. The commitments to
sell loans to the Company by the Industry Partners will expire in April, 2001,
after which date the Industry Partners will be under no obligation to sell loans
to the Company, which could negatively affect the Company's results of
operations. If the Industry Partners, individually or in the aggregate, become
unable to meet their loan sale commitments, it would have a negative effect on
the Company's results of operations and financial condition. See 'Restrictions
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on Future Sales by Stockholders; Effect on Share Price of Shares Available for
Future Sale' and 'Shares Eligible for Future Sale.'
MARKET CONDITIONS IN THE UK
The Company has recently entered into a joint venture in the United Kingdom
('UK'). There can be no guarantee that the joint venture will be able to
purchase or originate loans in sufficient volume to make the joint venture
profitable. Currently, the joint venture has arrangements with a single lender
for its funds. There can be no guarantee that the joint venture will be able to
obtain sufficient financing to fulfill its capital requirements. Further, no
assurances can be given that the Company will be successful in structuring,
marketing and completing securitizations of UK mortgage loans or, if such
securitizations were unsuccessful, that a viable market for whole loan sales
would develop. Failure to securitize or sell UK mortgage loans would have a
material adverse effect on the Company's joint venture.
CONTINGENT RISKS
Although the Company sells substantially all loans that it purchases and
originates on a nonrecourse basis, the Company retains some degree of credit
risk on substantially all loans purchased or originated. During the period of
time that loans are held pending sale, the Company is subject to the various
business risks associated with lending, including the risk of borrower default,
the risk of foreclosure and the risk that an increase in interest rates would
result in a decline in the value of loans to potential purchasers. In addition,
documents governing the Company's securitizations require the Company to commit
to repurchase or replace loans that do not conform to the representations and
warranties made by the Company at the time of sale. When borrowers are
delinquent in making monthly payments on loans included in a REMIC trust, the
Company is required to advance interest payments with respect to such delinquent
loans to the extent that the Company deems such advances ultimately recoverable.
These advances require funding from the Company's capital resources but have
priority of repayment from the succeeding month's collections.
In the ordinary course of its business, the Company is subject to claims
made against it by borrowers and private investors arising from, among other
things, losses that are claimed to have been incurred as a result of alleged
breaches of fiduciary obligations, misrepresentations, errors and omissions of
employees, officers and agents of the Company (including its appraisers),
incomplete documentation and failures by the Company to comply with various laws
and regulations applicable to its business. If the loans in the Company's
securitizations experience losses in excess of the projections used to value the
Company's excess servicing receivables, the Company will recognize a loss in
such assets. See ' -- Investment in Excess Servicing Receivables.'
CONCENTRATION OF OPERATIONS IN MID-ATLANTIC REGION
For the three months ended March 31, 1996, 38.7% of the aggregate principal
balance of the home equity loans purchased or originated by the Company were
secured by properties located in four mid-Atlantic states (New York, New Jersey,
Maryland and Pennsylvania). Although the Company has expanded its mortgage
origination network outside the mid-Atlantic region, the Company's origination
business is likely to remain concentrated in that region for the foreseeable
future. Consequently, the Company's results of operations and financial
condition are dependent upon general trends in the economy and the residential
real estate market in the mid-Atlantic region.
CREDIT-IMPAIRED BORROWERS
The Company targets credit-impaired borrowers. Loans made to such borrowers
generally entail a higher risk of delinquency and possibly higher losses than
loans made to more creditworthy borrowers. No assurance can be given that the
Company's underwriting policies and collection procedures will alleviate such
risks. In the event that pools of loans warehoused, sold and serviced by the
Company experience higher delinquencies, foreclosures or losses than
anticipated, the Company's results of operations or financial condition would be
adversely affected.
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LOSS OF SERVICING RIGHTS AND SUSPENSION OF FUTURE CASH FLOWS
The Company is entitled to receive servicing income only while it acts as a
servicer for loans it does not own, including securitizations and third-party
servicing. Any loss of servicing rights would have a material adverse effect on
the Company's results of operations and financial condition. The Company's right
to act as servicer under its securitizations can be terminated by FSA, as
certificate insurer, upon the occurrence of certain servicer termination events
(as defined in the pooling and servicing agreements, the 'Servicer Termination
Events'). The Servicer Termination Events include: (i) bankruptcy or the
inability of the Company to pay its debts; (ii) failure of the Company to
perform its obligations; and (iii) failure of the Company to cure any breaches
of its representations and warranties which materially and adversely affect the
underlying loans.
LEGISLATIVE RISK
Members of Congress and government officials from time to time have
suggested the elimination of the mortgage interest deduction for federal income
tax purposes, either entirely or in part, based on borrower income, type of loan
or principal amount. Because many of the Company's loans are made to borrowers
for the purpose of consolidating consumer debt or financing other consumer
needs, the competitive advantages of tax deductible interest, when compared with
alternative sources of financing, could be eliminated or seriously impaired by
such government action. Accordingly, the reduction or elimination of these tax
benefits could have a material adverse effect on the demand for loans of the
kind offered by the Company.
REGULATORY RISK
The Company's business is subject to extensive regulation, supervision and
licensing by federal, state and local governmental authorities and is subject to
various laws and judicial and administrative decisions imposing requirements and
restrictions on part or all of its operations. The Company's consumer lending
activities are subject to the Federal Truth-in-Lending Act and Regulation Z
(including the Home Ownership and Equity Protection Act of 1994), the Federal
Equal Credit Opportunity Act and Regulation B, as amended ('ECOA'), the Fair
Credit Reporting Act of 1994, as amended, the Federal Real Estate Settlement
Procedures Act ('RESPA') and Regulation X, the Home Mortgage Disclosure Act and
the Federal Debt Collection Practices Act, as well as other federal and state
statutes and regulations affecting the Company's activities. The Company is also
subject to the rules and regulations of, and examinations by, the Department of
Housing and Urban Development ('HUD') and state regulatory authorities with
respect to originating, processing, underwriting, selling and servicing loans.
These rules and regulations, among other things, impose licensing obligations on
the Company, establish eligibility criteria for mortgage loans, prohibit
discrimination, provide for inspections and appraisals of properties, require
credit reports on loan applicants, regulate assessment, collection, foreclosure
and claims handling, investment and interest payments on escrow balances and
payment features, mandate certain disclosures and notices to borrowers and, in
some cases, fix maximum interest rates, fees and mortgage loan amounts. Failure
to comply with these requirements can lead to loss of approved status,
termination or suspension of servicing contracts without compensation to the
servicer, demands for indemnifications or mortgage loan repurchases, certain
rights of rescission for mortgage loans, class action lawsuits and
administrative enforcement actions. There can be no assurance that the Company
will maintain compliance with these requirements in the future without
additional expenses, or that more restrictive local, state or federal laws,
rules and regulations will not be adopted that would make compliance more
difficult for the Company.
POSSIBLE ENVIRONMENTAL LIABILITIES
In the ordinary course of its business, the Company from time to time
forecloses on properties securing loans. Under various federal, state and local
environmental laws, ordinances and regulations, a current or previous owner or
operator of real estate may be required to investigate and clean up hazardous or
toxic substances or chemical releases at such property and may be held liable to
a governmental entity or to third parties for property damage, personal injury,
and investigation and
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cleanup costs incurred by such parties in connection with the contamination.
Such laws typically impose cleanup responsibility. Liability under such laws has
been interpreted to be joint and several unless the harm is divisible, and there
is a reasonable basis for allocation of responsibility. The costs of
investigation, remediation or removal of such substances may be substantial, and
the presence of such substances, or the failure to properly remediate such
property, may adversely affect the owner's ability to sell or rent such property
or to borrow using such property as collateral. Persons who arrange for the
disposal or treatment of hazardous or toxic substances also may be liable for
the costs of removal or remediation of such substances at a disposal or
treatment facility, whether or not the facility is owned or operated by such
person. In addition, the owner or former owners of a contaminated site may be
subject to common law claims by third parties based on damages and costs
resulting from environmental contamination emanating from such property.
ABSENCE OF ACTIVE PUBLIC TRADING MARKET
Prior to the Public Offering, there has been no market for the Common
Stock. Although the Company has applied for listing of the Common Stock on
Nasdaq, there can be no assurance that an active public trading market for the
Common Stock will develop after the Public Offering or that, if developed, it
will be sustained. The public offering price of the Common Stock offered hereby
will be determined by negotiations among the Company and Bear, Stearns & Co.
Inc. and Oppenheimer & Co., Inc. acting as representatives of the Underwriters
(the 'Representatives') and may not be indicative of the price at which the
Common Stock will trade after the Public Offering. See 'Underwriting.'
Consequently, there can be no assurance that the market price for the Common
Stock will not fall below the public offering price.
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the Common Stock may experience fluctuations that are
unrelated to the operating performance of the Company. In particular, the price
of the Common Stock may be affected by general market price movements as well as
developments specifically related to the consumer finance industry such as,
among other things, interest rate movements and delinquency trends. In addition,
the Company's operating income on a quarterly basis is significantly dependent
upon the Company's ability to access the securitization market and complete
significant securitization transactions in a particular quarter. Failure to
complete securitizations in a particular quarter may have a material adverse
impact on the Company's results of operations for that quarter and could
negatively affect the price of the Common Stock.
RESTRICTIONS ON FUTURE SALES BY STOCKHOLDERS; EFFECT ON SHARE
PRICE OF SHARES AVAILABLE FOR FUTURE SALE
Persons who purchase shares of Common Stock pursuant to the Directed Share
Program, if any, will be subject to certain lock-up restrictions with respect to
their ability to sell or otherwise dispose of such shares for a period of 180
days from the date of the completion of the Public Offering, without the prior
written consent of the Representatives. When such lock-up restrictions lapse,
such shares of Common Stock may be sold in the public market or otherwise
disposed of, subject to compliance with applicable securities laws. Sales of a
substantial number of shares of Common Stock, or the perception that such sales
could occur, could adversely affect prevailing market prices for the Common
Stock. See 'Shares Eligible for Future Sale.'
EFFECTS OF CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Certificate of Incorporation, equity
incentive plans, Bylaws and Florida law may significantly delay or defer, or
even prevent, a change in control of the Company and may adversely affect the
voting and other rights of the holders of Common Stock. In particular, the
existence of the Company's classified Board of Directors, the ability of the
Board of Directors to issue 'blank check' preferred stock without further
stockholder approval, limitations on the ability of stockholders to take action
by written consent or call special stockholders' meetings and the advance
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notice requirements governing proposals submitted for stockholder vote,
including nominations for election to the Board of Directors, may have the
effect of delaying, deferring or preventing a change in control of the Company.
See 'Management -- Terms of Directors and Officers' and 'Description of Capital
Stock.'
DILUTION
Purchasers of the Common Stock will experience immediate and substantial
dilution in net tangible book value per share of Common Stock from the public
offering price per share of Common Stock from $18.00 to $6.37. See 'Dilution.'
DEPENDENCE ON KEY PERSONNEL
The Company's growth and development to date have been largely dependent
upon the services of George Nicholas, Chairman of the Board and Chief Executive
Officer, and Thomas G. Middleton, President and Chief Operating Officer. The
loss of Mr. Nicholas' or Mr. Middleton's services for any reason could have a
material adverse effect on the Company. Certain of the Company's principal
credit agreements contain a provision which permit the lender to accelerate the
Company's obligations in the event that Mr. Nicholas were to leave the Company
for any reason and not be replaced with an executive acceptable to such lender.
See ' -- Dependence on Funding Sources' and 'Management -- Executive
Compensation.'
CONTROL BY CERTAIN STOCKHOLDERS
Immediately prior to the Public Offering and pursuant to the Reorganization
Plan, the Industry Partners, Mr. George Nicholas, and certain members of IMC's
senior management and Board of Directors (the 'Management Partners') will
receive shares of Common Stock of the Company. As a result, the Industry
Partners will beneficially own an aggregate of 62.5% of the outstanding shares
of Common Stock (45.5% following the completion of the Public Offering assuming
no exercise of the Underwriters' over-allotment option). Also, the Management
Partners will beneficially own an aggregate of 817,182 of the outstanding shares
of Common Stock (7.2% following the completion of the Public Offering assuming
no exercise of the Underwriters' over-allotment option). Accordingly, such
persons, if they were to act in concert, would have majority control of the
Company, with the ability to approve certain fundamental corporate transactions
(including mergers, consolidations and sales of assets) and to elect all members
of the Board of Directors. See 'The Reorganization Plan' and 'Principal
Stockholders.'
RECENT EVENTS
COMMENCEMENT OF UK OPERATIONS
IMC commenced operations in the UK in April, 1996 through Preferred
Mortgages Limited ('Preferred Mortgages'), a UK joint venture. The participants
in the joint venture are IMC, Foxgard Limited ('Foxgard') and FSA (together, the
'Joint Venture Partners'). Preferred Mortgages is owned 45% by IMC, 45% by
Foxgard and 10% by FSA. Through Preferred Mortgages, IMC intends to serve what
management believes to be an underserved segment of the home equity market in
the UK by lending to borrowers with impaired credit profiles similar to its
domestic customers. Preferred Mortgages plans to actively market its products
and services directly to UK borrowers by means of newspaper, radio and
television advertising, in addition to direct mail. Preferred Mortgages plans to
adapt IMC's loan application procedures, appraisal procedures and underwriting
procedures to the UK market, while directing its underwriting and processing
staff to provide prompt, efficient and reliable service to the UK broker
community. Preferred Mortgages has received a commitment for a `L'47.5 million
(approximately $71.8 million as of April 11, 1996) line of credit from National
Westminster Bank, PLC for the purchase and origination of mortgage loans (the
'NatWest Facility'), and FSA has agreed to provide an insurance policy as credit
enhancement for the NatWest Facility.
15
<PAGE>
<PAGE>
In connection with the agreements among the Joint Venture Partners, IMC has
issued to Rotch, an affiliate of Foxgard, the Rotch Debenture due September 18,
1996, pursuant to which IMC agrees to pay Rotch $1.8 million plus interest at a
rate of LIBOR plus 1.0% per annum. The Company intends to repay the Rotch
Debenture in full with a portion of the proceeds from the Public Offering.
ACQUISITION OF EQUITYSTARS
In order to increase the flow of loans for purchase, IMC seeks to acquire
loan originators that would enhance or enlarge IMC's market penetration or
product offerings. Pursuant to this strategy, on January 1, 1996, IMC acquired
all of the assets of Equitystars (the 'Equitystars Acquisition'), a mortgage
banking company which does business primarily in Rhode Island, New York,
Connecticut and Massachusetts, with smaller operations in Maine and New
Hampshire. Equitystars originated over $95 million of residential mortgage loans
during 1995. Of the loans originated, approximately $17 million or 18% were
conforming loans and approximately $78 million or 82% were non-conforming loans.
During 1995, IMC purchased a total of $11.3 million of non-conforming loans from
Equitystars. At the time of the Equitystars Acquisition, the Partnership created
IMC Acquisitions to act as the holding company for the assets of Equitystars.
See 'Business -- Loans -- Acquisition of Equitystars.'
The purchase price for all of the assets of Equitystars was $2.0 million
base payment in the form of 20,060 shares of Convertible Preferred Stock, and up
to an aggregate of $2.55 million of contingent payments, based on formulae keyed
to be paid over two years based on the performance of the non-conforming and
conforming mortgage loan business of Equitystars. In accordance with the terms
of the provisions governing the 20,060 shares of Convertible Preferred Stock
issued in the Equitystars Acquisition, such shares will be automatically
converted upon the completion of any public offering of the Common Stock to a
number of shares of Common Stock having a value, at 93% of the public offering
price, of $2.0 million plus interest of 8% per annum.
If a public offering does not occur by June 30, 1996, holders of the
Convertible Preferred Stock have the right to 'put' those shares to IMC for an
amount equal to the liquidation preference of $100 per share plus interest at
8.0% per annum. If the put is exercised, the contingency payment that IMC owes
in the Equitystars Acquisition will be paid in cash.
RECENT SECURITIZATION
In February and April, 1996, the Company completed its fifth and sixth
securitizations in the aggregate amount of $175.0 million and $200.0 million,
respectively. The securities sold in the securitizations were rated AAA/Aaa and
were sold in public offerings. As part of its cash flow management, the
securitizations were structured so that ContiFinancial received, in exchange for
cash, 50% and 25%, respectively of the residual interests of the February and
April, 1996 securitizations.
THE COMPANY
The Company was formed in 1995 to serve as a holding company for interests
in Equitystars and the Partnership. The Partnership has conducted the business
described in this Prospectus since its formation in 1993. The Partnership was
formed by Mr. George Nicholas, the Management Partners and the Industry
Partners, which included: American Industrial Loan Association; Champion
Mortgage Co. Inc.; Cityscape Corp.; Equitysafe, a Rhode Island General
Partnership, an affiliate of which, Equitystars, was acquired by the Company on
January 1, 1996; Investors Mortgage, a Washington LP; Mortgage America Inc.;
Residential Money Centers; First Government Mortgage and Investors Corp.;
Investaid Corp.; and New Jersey Mortgage and Investment Corp. In 1994, The Money
Store and Equity Mortgage, a Maryland LP became Industry Partners. Also in 1994,
Portfolio Placement Partners and Equitysafe divided ownership in an interest in
the Partnership initially purchased in the name of Equitysafe. In 1995,
Branchview, Inc. purchased an interest in the Partnership previously owned by
Residential Money Centers.
The principal executive offices of the Company are located at 3450
Buschwood Park Drive, Tampa, Florida 33618 and the Company's telephone number is
(813) 932-2211.
16
<PAGE>
<PAGE>
THE REORGANIZATION PLAN
Prior to the Public Offering, the Industry Partners, the Management
Partners and Mr. Nicholas will contribute their interests in the Partnership to
the Company and Mr. Nicholas will contribute the common stock of Industry
Mortgage Corporation, general partner of the Partnership ('IMCI'), to the
Company. In exchange, the Industry Partners, the Management Partners and Mr.
Nicholas will receive Common Stock. At the same time, ContiFinancial will
surrender its option to purchase limited partnership interests in the
Partnership in exchange for a warrant (the 'Conti Warrant'), entitling the
holder upon exercise to 1.5 million shares of the Common Stock (subject to
certain adjustments) for a de minimis amount. These actions will convert the
Partnership into a subsidiary of the Company, 99% directly owned by the Company
and 1% owned by IMCI (the stock of which will, in turn, be held by the Company).
Simultaneously, the Partnership's option plan will be terminated, and all
options granted thereunder will be assumed by the Company pursuant to the
Company Incentive Plan and the Directors' Stock Option Plan.
The Company has been informed that, prior to the effectiveness of the
Registration Statement of which this Prospectus is a part, certain Industry
Partners and ContiFinancial intend to transfer among themselves the limited
partnership interests (or options to purchase limited partnership interests) in
transactions not involving the Company. The Company has been informed that such
transactions will involve no greater than 10%, in the aggregate, of all limited
partnership interests. The Company has been informed that, as a result of these
transactions, ContiFinancial's beneficial ownership of shares of Common Stock
will be reduced by 150,000 shares from 1.5 million to 1.35 million.
In accordance with the provisions governing the Company's Convertible
Preferred Stock, in connection with the Public Offering, all outstanding
Convertible Preferred Stock will be automatically converted into Common Stock.
After the closing of the Public Offering, the Partnership will retain title
to all of its assets and remain liable for all of its obligations, including all
of the liabilities and encumbrances relating to its credit facilities and its
joint venture in the UK. The Company will become a joint and several obligor on
the principal agreements governing the Partnership's indebtedness.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of Common
Stock offered hereby, after deduction of estimated underwriting discount and
offering expenses, are estimated to be approximately $50.9 million, assuming an
offering price of $18.00 per share.
Up to a maximum of $22.9 million of the net proceeds is expected to be used
to retire or reduce certain indebtedness of the Company, including: (i)
repayment of up to $10.0 million to ContiFinancial representing the Additional
Draw under the Standby Agreement, which amount bears interest at a rate of LIBOR
plus 8.0% per annum; (ii) repayment of up to $7.0 million to Lakeview Savings
Bank ('Lakeview') under the Lakeview unsecured bridge credit facility (the
'Lakeview Facility'), which bears interest at a fixed rate of 12.0% per annum;
(iii) repayment of the $1.8 million Rotch Debenture, which bears interests at a
rate of LIBOR plus 1.0% per annum; and (iv) repayment of an aggregate of $4.1
million to certain of the Industry Partners and Mr. Nicholas, representing
amounts owed to such Industry Partners and Mr. Nicholas for accrued and unpaid
tax distributions pursuant to the Partnership Agreement, which amount bears
interest at 10.0% per annum.
The remaining net proceeds will be used to fund future loan purchases and
originations, to support securitization transactions, to fund acquisitions of
loan originators and expenses associated with the opening of new direct lending
branch offices and for general corporate purposes. Prior to such use, the
remaining net proceeds will be invested in high quality short-term investment
instruments such as short-term corporate investment grade or United States
Government interest-bearing securities or used to pay down warehouse lines.
17
<PAGE>
<PAGE>
DILUTION
The data reflect the exchange of all of the partnership interests in the
Partnership for shares of Common Stock as described in the Reorganization Plan,
giving effect to such exchange as if it had occurred at the inception of the
Partnership.
The net tangible book value of the Company as of March 31, 1996 as adjusted
for the conversion of the Convertible Preferred Stock and the exercise of all
dilutive Common Stock equivalents was approximately $19.6 million or $2.47 per
share of Common Stock. Net tangible book value per share, as adjusted,
represents the amount of the Company's total tangible assets, the recording of a
deferred tax asset of approximately $5.6 million in connection with the exchange
of all partnership interests in the partnership for shares of Common Stock
pursuant to the Reorganization Plan, less total liabilities, divided by the
number of shares of Common Stock outstanding. After giving effect to the sale of
the 3,100,000 shares of Common Stock offered by the Company hereby at an assumed
public offering price of $18.00 per share and after deducting the estimated
underwriting discount and offering expenses, the net tangible book value of the
Company as of March 31, 1996, as adjusted, would have been approximately $6.37
per share. This represents an immediate increase of $3.90 per share to existing
stockholders and an immediate dilution of $11.63 per share to investors
purchasing shares of Common Stock in the Public Offering. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Asssumed public offering price per share............................................... $18.00
Net tangible book value per share, as adjusted, before the Public Offering....... $2.47
Increase per share attributable to new investors................................. 3.90
-----
Net tangible book value per share after the Public Offering........................... 6.37
------
Dilution per share to new investors................................................... $11.63
------
------
</TABLE>
The following table sets forth the difference between the existing
stockholders and new investors purchasing shares of Common Stock in the Public
Offering with respect to the number of shares initially purchased from the
Company, the total consideration paid to the Company (at an assumed public
offering price of $18.00 per share and before deducting the estimated
underwriting discount and offering expenses), and the average consideration per
share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............ 7,965,092 72.0% $ 7,533,336 11.9% $ .94
New investors.................... 3,100,000 28.0 55,800,000 88.1 18.00
---------- ------- ----------- -------
Total....................... 11,065,092 100.0% $63,333,336 100.0%
---------- ------- ----------- -------
---------- ------- ----------- -------
</TABLE>
DIVIDEND POLICY
The Company has not paid, and currently has no intention to pay, any cash
dividends on its Common Stock. The Company intends to retain all of its future
earnings to finance its operations and does not anticipate paying cash dividends
in the foreseeable future. Any decision made by the Company's Board of Directors
to declare dividends in the future will depend upon the Company's future
earnings, capital requirements, financial condition and other factors deemed
relevant by the Company's Board of Directors. In addition, certain agreements to
which the Company is a party restrict the Company's ability to pay dividends on
common equity.
18
<PAGE>
<PAGE>
CAPITALIZATION
The data reflect the exchange of all of the partnership interests in the
Partnership for shares of Common Stock as described in the Reorganization Plan,
giving effect to such exchange as if it had occurred at the inception of the
Partnership.
The following table sets forth the capitalization of the Company at March
31, 1996, and as adjusted as of such date to give effect to completion of the
Reorganization Plan, the sale of the 3,100,000 shares of Common Stock offered by
the Company hereby (at an assumed offering price of $18.00 per share before
deducting estimated underwriting discount and offering expenses) and the
application of the estimated net proceeds therefrom as described under 'Use of
Proceeds.'
<TABLE>
<CAPTION>
MARCH 31, 1996
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Warehouse finance facilities............................................................ $261,417 $ 220,468
Term debt............................................................................... 21,879 17,879
Convertible debenture................................................................... 1,800 0
-------- -----------
Total debt.................................................................... $285,096 $ 238,347
-------- -----------
-------- -----------
Convertible Preferred Stock, Series A, par value $100.00 per share; 10,000,000 shares
authorized; 2,006 shares issued and outstanding, actual; no shares issued and
outstanding, as adjusted.............................................................. $ 2,006 $ 0
-------- -----------
-------- -----------
Stockholders' equity:
Common Stock, par value $0.01 per share; 50,000,000 shares authorized; 6,000,000
shares issued and outstanding, actual; and 6,500,000 shares issued and
outstanding, as adjusted.......................................................... 60 111
Additional paid-in capital......................................................... 12,293 66,764
Retained earnings.................................................................. (230) 5,370
Total stockholders' equity.................................................... 12,123 72,245
-------- -----------
Total capitalization..................................................... $299,225 $ 310,592
-------- -----------
-------- -----------
</TABLE>
19
<PAGE>
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The historical financial data set forth below as of and for the period from
inception to December 31, 1993 and the fiscal years ended December 31, 1994 and
1995 and the three months ended March 31, 1996, have been derived from, and
should be read in conjunction with, the Consolidated Financial Statements of the
Company included elsewhere herein, which have been audited by Coopers & Lybrand
L.L.P., independent accountants. The historical financial data set forth below
as of and for the three months ended March 31, 1995 have been derived from the
unaudited consolidated financial statements of the Company that have been
prepared on the same basis as the audited Consolidated Financial Statements and
include all adjustments, consisting of normal recurring accruals, that the
Company considers necessary for a fair presentation of the financial position
and results of operations for such period. Operating results for the three
months ended March 31, 1996 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1996. The historical and pro
forma data reflect the exchange of all of the partnership interests in the
Partnership for shares of Common Stock as described in the Reorganization Plan,
giving effect to such exchange as if had occurred at the inception of the
Partnership. This data should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
Consolidated Financial Statements and related Notes.
<TABLE>
<CAPTION>
PERIOD
FROM INCEPTION THREE MONTHS ENDED MARCH
(AUGUST 12, 1993) YEAR ENDED DECEMBER 31, 31,
THROUGH ------------------------- -------------------------
DECEMBER 31, 1993 1994 1995 1995 1996
----------------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Gain on sale of loans(1).................. $ 438,774 $8,583,277 $20,680,848 $3,297,408 $10,875,466
Additional securitization transaction
expense(2).............................. 0 (560,137) (5,547,037) (254,507) (2,828,591)
----------------- ---------- ----------- ---------- -----------
Gain on sale of loans, net............ 438,774 8,023,140 15,133,811 3,042,901 8,046,875
----------------- ---------- ----------- ---------- -----------
Warehouse interest income................. 97,159 2,510,062 7,884,679 1,090,933 5,160,943
Warehouse interest expense................ (50,709) (1,610,870) (6,006,919) (1,019,643) (3,375,244)
----------------- ---------- ----------- ---------- -----------
Net warehouse interest income......... 46,450 899,192 1,877,760 71,290 1,785,699
----------------- ---------- ----------- ---------- -----------
Servicing fees............................ 0 99,224 1,543,339 109,167 995,439
Other..................................... 28,235 1,072,855 1,117,903 208,243 628,536
----------------- ---------- ----------- ---------- -----------
Total revenues........................ 513,459 10,094,411 19,672,813 3,431,601 11,456,549
----------------- ---------- ----------- ---------- -----------
Expenses:
Compensation and benefits................. 507,904 3,348,236 5,139,386 1,021,815 3,666,685
Selling, general and administrative
expenses................................ 355,526 2,000,401 3,477,677 553,910 2,240,856
Other..................................... 0 14,143 297,743 16,084 342,534
Sharing of proportionate value of
equity(3)............................... 0 1,689,000 4,204,000 718,952 2,555,000
----------------- ---------- ----------- ---------- -----------
Total expenses........................ 863,430 7,051,780 13,118,806 2,310,761 8,805,075
----------------- ---------- ----------- ---------- -----------
Pre-tax income (loss)......................... (349,971) 3,042,631 6,554,007 1,120,840 2,651,474
Pro forma provision (benefit) for income
taxes................................... (134,000) 1,187,000 2,522,000 431,299 1,026,000
----------------- ---------- ----------- ---------- -----------
Pro forma net income (loss)............... $(215,971) $1,855,631 $ 4,032,007 $ 689,541 $ 1,625,474
----------------- ---------- ----------- ---------- -----------
----------------- ---------- ----------- ---------- -----------
Pro forma per share data:
Pro forma net income per share:
Primary................................. $0.51 $0.20
Fully diluted........................... $0.51 $0.20
Weighted average common and common share
equivalents:
Primary................................. 7,935,752 7,935,752
-----------
-----------
Fully diluted........................... 7,935,752 8,304,778
Supplemental pro forma per share data:(5)
Pro forma net income per share:
Primary................................. $0.50 $0.20
Fully diluted........................... $0.50 $0.19
Weighted average common and common share
equivalents:
Primary................................. 8,007,974 8,541,307
Fully diluted........................... 8,007,974 8,910,333
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1996
------------------------------------------ ------------------------------
1993 1994 1995 ACTUAL AS ADJUSTED(4)
----------- ----------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Mortgage loans held for sale............. $ 7,971,990 $28,995,750 $193,002,835 $257,458,182 $257,458,182
Excess servicing receivables............. 0 3,403,730 14,072,771 22,905,311 22,905,311
Warehouse finance facilities............. 7,212,915 27,731,859 189,819,046 261,417,193 220,467,956
Term debt................................ 0 0 11,120,642 21,879,297 17,879,297
Convertible debentures................... 0 0 0 1,800,000 0
Stockholders' equity(6).................. 1,449,092 5,856,011 5,608,844 12,122,435 72,245,170
Total assets(6).......................... 8,861,144 36,641,991 354,551,434 525,200,197 532,422,932
</TABLE>
20
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PERIOD
FROM INCEPTION YEAR ENDED DECEMBER THREE MONTHS ENDED
(AUGUST 12, 1993) 31, MARCH 31,
THROUGH -------------------- ---------------------------------
DECEMBER 31, 1993 1994 1995 1995 1996
----------------- -------- -------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
OPERATING DATA (DOLLARS IN THOUSANDS):
Loans purchased or originated......... $29,608 $282,924 $621,629 $119,385 $ 263,987
Loans sold through securitization..... 0 81,637 388,363 74,782 175,000
Whole loan sales...................... 21,636 180,263 70,400 20,765 21,272
Serviced loan portfolio (period
end)................................ 0 92,003 535,798 166,914 783,367
DELINQUENCY DATA:
Total delinquencies as a percentage of
loans serviced (period end)(7)...... 0.00% 0.87% 3.43% 1.32% 2.34%
Defaults as a percentage of loans
serviced (period end)(8)............ 0.00 0.12 1.16 0.12 1.40
Net losses as a percentage of average
loans serviced for period........... 0.00 0.00 0.08 0.01 0.01
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------
MARCH 31, 1995 JUNE 30, 1995 SEPTEMBER 30, 1995 DECEMBER 31, 1995
-------------- ------------- ------------------ -----------------
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues:
Gain on sale of loans(1)........................ $3,297,408 $ 2,823,232 $7,303,333 $ 7,256,875
Additional securitization transaction
expense(2).................................... (254,507) (176,860) (2,424,000) (2,691,670)
-------------- ------------- ------------------ -----------------
Gain on sale of loans, net.................. 3,042,901 2,646,372 4,879,333 4,565,205
-------------- ------------- ------------------ -----------------
Warehouse interest income....................... 1,090,933 1,703,094 2,430,904 2,659,748
Warehouse interest expense...................... (1,019,643) (1,192,707) (1,814,957) (1,979,612)
-------------- ------------- ------------------ -----------------
Net warehouse interest income............... 71,290 510,387 615,947 680,136
Servicing fees.................................. 109,167 322,564 423,476 688,132
Other........................................... 208,243 272,773 307,425 329,462
-------------- ------------- ------------------ -----------------
Total revenues.............................. 3,431,601 3,752,096 6,226,181 6,262,935
-------------- ------------- ------------------ -----------------
Expenses:
Compensation and benefits....................... 1,021,815 1,263,021 1,364,344 1,490,206
Selling, general and administrative expenses.... 553,910 662,627 940,033 1,321,107
-------------- ------------- ------------------ -----------------
Other........................................... 16,084 92,540 31,028 158,091
Sharing of proportionate value of equity(3)..... 718,952 677,575 1,520,433 1,287,040
-------------- ------------- ------------------ -----------------
Total expenses.............................. 2,310,761 2,695,763 3,855,838 4,256,444
-------------- ------------- ------------------ -----------------
Pre-tax income.................................. 1,120,840 1,056,333 2,370,343 2,006,491
Pro forma provision for income taxes............ 431,299 406,477 912,108 772,116
-------------- ------------- ------------------ -----------------
Pro forma net income............................ $ 689,541 $ 649,856 $1,458,235 $ 1,234,375
-------------- ------------- ------------------ -----------------
-------------- ------------- ------------------ -----------------
Pro forma per share data:
Pro forma net income per share.................. $0.09 $0.08 $0.18 $0.16
Weighted average common and common share
equivalents................................... 7,935,752 7,935,752 7,935,752 7,935,752
OPERATING DATA (DOLLARS IN THOUSANDS):
Loans purchased or originated................... $119,385 $124,667 $154,990 $222,587
Loans sold through securitization............... 74,782 43,581 120,000 150,000
Whole loan sales................................ 20,765 31,763 8,224 9,648
Serviced loan portfolio (period end)............ 166,914 271,522 355,374 535,798
DELINQUENCY DATA:
Total delinquencies as a percentage of loans
serviced (period end)(7)...................... 1.32% 1.09% 2.42% 3.43%
Defaults as a percentage of loans serviced
(period end)(8)............................... 0.12 0.45 0.98 1.16
Net losses as a percentage of average loans
serviced for period........................... 0.01 0.00 0.03 0.04
</TABLE>
- ------------
(1) Includes excess servicing receivables received by ContiFinancial in
connection with IMC's agreement with ContiFinancial. See
'Business -- Loans -- Securitizations' and 'Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Transactions
with ContiFinancial -- Additional Securitization Transaction Expense.'
(footnotes continued on next page)
21
<PAGE>
<PAGE>
(footnotes continued from previous page)
(2) In 1994 and 1995 and the three months ended March 31, 1996, ContiFinancial
received excess servicing receivables with estimated values of $3.0 million,
$25.1 million and $9.5 million in exchange for $2.0 million, $18.4 million
and $6.2 million, respectively. In addition, ContiFinancial paid IMC $0.4
million, $1.1 million and $0.5 million in 1994, 1995 and the three months
ended March 31, 1996, respectively, in expenses related to securitizations.
See 'Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Transactions with ContiFinancial -- Additional
Securitization Transaction Expense.'
(3) Reflects expenses recorded in connection with the Conti VSA which was
superseded by the Conti Option in March, 1996. The Company's pre-tax income
before the Conti VSA for 1994 and 1995 and the three months ended March 31,
1996 was $4.7 million, $10.8 million and $5.2 million, respectively. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Transactions with ContiFinancial -- Sharing of Proportionate
Value of Equity,' 'Certain Accounting Considerations Relating to the Conti
VSA' and Note 4 to Notes to Consolidated Financial Statements.
(4) Adjusted to give effect to the sale of 3,100,000 shares of Common Stock
offered by the Company hereby at an assumed offering price of $18.00 per
share and the application of the estimated net proceeds therefrom. See 'Use
of Proceeds' and 'Capitalization.'
(5) Adjusted to give effect to the number of shares of Common Stock which would
have been issued for the retirement of debt in the application of the
estimated net proceeds therefrom.
(6) Total assets and Stockholders' equity include the effect of recording a
deferred tax asset of $5.6 million in connection with the conversion from a
partnership to a taxable corporation.
(7) Represents the percentages of account balances contractually past due 30
days or more, exclusive of home equity loans in foreclosure, bankruptcy or
real estate owned.
(8) Represents the percentages of account balances on loans in foreclosure,
bankruptcy or real estate owned.
22
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements of the Company and accompanying Notes set
forth herein.
GENERAL
The Company is a specialized consumer finance company engaged in
purchasing, originating, servicing and selling home equity loans secured
primarily by first liens on one- to four-family residential properties. The
Company focuses on lending to individuals whose borrowing needs are generally
not being served by traditional financial institutions due to such individuals'
impaired credit profiles and other factors. The Company derives its income from
gain on sale of loans, reflecting excess servicing spread income from loans sold
through securitizations, gains recognized from premiums on loans sold through
whole loan sales to institutional purchasers, net warehouse interest earned on
loans held for sale, servicing fees and origination, processing and other fees
received as part of the loan application process.
CERTAIN ACCOUNTING CONSIDERATIONS -- EXCESS SERVICING RECEIVABLES
The Company purchases and originates loans for the purpose of sale and
primarily securitizes these loans in the form of REMICs, deriving its monthly
principal paydowns from a pool of underlying mortgages. Most of the regular
interests of the REMICs are sold, with the residual class certificates (or a
portion thereof) retained by the Company. The Company classifies as excess
servicing receivables the I/O and the residual classes of certificates of its
securitizations. Excess servicing spread represents the excess of the interest
rate receivable from the borrower on a loan over the interest rate passed
through to the purchaser acquiring an interest in such loans, less the Company's
normal servicing fee, expected losses and other applicable recurring costs and
fees. These residual classes of certificates are initially recorded at their
allocated cost based upon the present value of the interest in the cash flows
retained by the Company after considering various economic factors, including
interest rates, collateral value and estimates of the value of future cash flows
from the REMIC mortgage pools under expected loss and prepayment assumptions
discounted at a market yield. The weighted average rate used to discount the
cash flows for the year ended December 31, 1995, and the three months ended
March 31, 1996, was approximately 11%, and the assumed loss ratio was 50 basis
points per annum.
TRANSACTIONS WITH CONTIFINANCIAL
Additional Securitization Transaction Expense
The Company has relied on ContiFinancial to provide credit facilities for
funding its loan purchases and originations and the financing of excess
servicing receivables, as well as ContiFinancial's expertise and assistance in
loan securitization. In order to provide immediate cash flow to the Company, in
the years ended December 31, 1994 and 1995 and the three months ended March 31,
1996, the Company sold to ContiFinancial excess servicing receivables with
estimated values of $3.0 million, $25.1 million and $9.5 million, respectively.
See 'Certain Relationships and Related Transactions -- Agreements with
ContiFinancial' and ' -- Additional Securitization Transaction Expense.'
In exchange for the excess servicing receivables, ContiFinancial paid $2.1
million, $18.4 million and $6.2 million in the years ended December 31, 1994 and
1995 and the three months ended March 31, 1996, respectively, in the form of
premiums paid for I/Os and the residual classes of certificates purchased from
the Company. In addition, ContiFinancial paid $0.4 million, $1.1 million and
$0.5 million in expenses related to securitization in the years ended December
31, 1994 and 1995 and the three months ended March 31, 1996, respectively.
The difference between the estimated value of the excess servicing
receivables sold to ContiFinancial and the total amount paid by ContiFinancial
has been recorded as additional securitization transaction expense of $0.6
million in the year ended December 31, 1994, $5.5 million in
23
<PAGE>
<PAGE>
the year ended December 31, 1995, $0.3 million in the three months ended March
31, 1995 and $2.8 million in the three months ended March 31, 1996.
Sharing of Proportionate Value of Equity
In August, 1993, the Company entered into a five-year agreement (the '1993
Agreement') with ContiFinancial which provided the Company with a standby credit
facility to fund retention of excess servicing receivables and certain
investment banking services and also committed ContiFinancial to provide a
warehouse facility to the Company, subject to the satisfaction of certain
conditions. Pursuant to the 1993 Agreement, the Company agreed to share a
portion of its equity with ContiFinancial through an agent fee based on a
percentage of increases in equity (as defined in the 1993 Agreement) at the
termination of the 1993 Agreement.
On January 12, 1995, the Company and ContiFinancial entered into a revised
10-year agreement (the '1995 Agreement') which replaced the 1993 Agreement and
provided for agent fees to ContiFinancial based on the fair market value of the
Company (as defined). The amount of the agent fee ranged from 15% to 25% of the
fair market value of the Company dependent upon whether ContiFinancial or the
Company elected to terminate the agreement.
The 1993 Agreement and the 1995 Agreement included a value sharing
agreement with ContiFinancial (the 'Conti VSA'). The existence of the Conti VSA
had no cash impact on the Company, but resulted in a $1.7 million, $4.2 million,
$0.7 million and $2.6 million reduction in the Company's pre-tax income for the
years ended December 31, 1994 and 1995 and the three months ended March 31, 1995
and 1996, respectively. Since ContiFinancial had the right, pursuant to the
Conti VSA, to require cash payments, the Conti VSA was reflected on the balance
sheet as a liability, and any increase in the value of the Conti VSA from
accounting period to accounting period was reflected as an expense in the income
statement for the relevant period.
The Conti VSA was converted into the Conti Option by an agreement executed
March 26, 1996. Pursuant to the Conti Option, there is no ongoing right to
receive cash. Consequently, no liability will be reflected on the balance sheet
and no expense will be reflected on the income statement after March 26, 1996
with respect to any future increases in value. See 'Certain Accounting
Considerations Relating to the Conti VSA' and Note 4 to Notes to Consolidated
Financial Statements.
The Company's earnings before the Conti VSA were as follows:
<TABLE>
<CAPTION>
PERIOD
ENDED YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
DECEMBER 31, -------------------------- -------------------------------
1993 1994 1995 1995 1996
------------ ----------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Total revenues.......... $513,459 $10,094,411 $19,672,813 $3,431,601 $11,456,549
Total expenses.......... 863,430 7,051,780 13,118,806 2,310,761 8,805,075
------------ ----------- ----------- ------------ ---------------
Pre-tax income (loss)
after Conti VSA....... (349,971) 3,042,631 6,554,007 1,120,840 2,651,474
Conti VSA............... 0 1,689,000 4,204,000 718,952 2,555,000
------------ ----------- ----------- ------------ ---------------
Pre-tax income (loss)
before Conti VSA...... $ (349,971) $ 4,731,631 $10,758,007 $1,839,792 $ 5,206,474
------------ ----------- ----------- ------------ ---------------
------------ ----------- ----------- ------------ ---------------
</TABLE>
RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 Compared to Three Months Ended March 31, 1995
Pro forma net income for the three months ended March 31, 1996 was $1.6
million, representing an increase of $0.9 million or 135.7% over pro forma net
income of $0.7 million for the three months ended March 31, 1995. This increase
resulted principally from a $5.0 million or 164.4% increase in gain on sale of
loans, net of additional securitization transaction expense, to $8.0 million for
the three months ended March 31, 1996 from $3.0 million for the three months
ended March 31, 1995. Pro forma
24
<PAGE>
<PAGE>
net income is calculated on the basis of historical net income, adjusted for a
pro forma income tax expense as if the Company had been taxable as a corporation
since its inception. In addition, a $1.7 million or 2,404.8% increase in net
warehouse interest income to $1.8 million for the three months ended March 31,
1996 from $0.1 million for the three months ended March 31, 1995, a $0.9 million
or 811.8% increase in servicing fees to $1.0 million for the three months ended
March 31, 1996 from $0.1 million for the three months ended March 31, 1995 and a
$0.4 million or 201.8% increase in other revenues to $0.6 million for the three
months ended March 31, 1996 from $0.2 million for the three months ended March
31, 1995 also contributed to this increase in pro forma net income. The increase
was partially offset by a $2.7 million or 258.8% increase in compensation and
benefits to $3.7 million for the three months ended March 31, 1996 from $1.0
million for the three months ended March 31, 1995 and a $1.6 million or 304.6%
increase in selling, general and administrative expenses to $2.2 million for the
three months ended March 31, 1996 from $0.6 million for the three months ended
March 31, 1995. The increase in pro forma net income was further offset by a
$0.3 million increase in other expenses to $0.3 million for the three months
ended March 31, 1996 from a negligible amount for the three months ended March
31, 1995, a $1.9 million or 255.4% increase in sharing of proportionate value of
equity to $2.6 million for the three months ended March 31, 1996 from $0.7
million for the three months ended March 31, 1995 and a $0.6 million or 137.9%
increase in pro forma income tax expense to $1.0 million for the three months
ended March 31, 1996 from $0.4 million for the three months ended March 31,
1995.
Revenues. The following table sets forth information regarding components
of the Company's revenues for the three months ended March 31, 1995 and 1996:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1995 1996
----------- -----------
<S> <C> <C>
Gain on sale of loans........................................... $3,297,408 $10,875,466
Additional securitization transaction expense................... (254,507) (2,828,591)
----------- -----------
Gain on sale of loans, net................................. 3,042,901 8,046,875
----------- -----------
Warehouse interest income....................................... 1,090,933 5,160,943
Warehouse interest expense...................................... (1,019,643) (3,375,244)
----------- -----------
Net warehouse interest income.............................. 71,290 1,785,699
----------- -----------
Servicing fees.................................................. 109,167 995,439
Other........................................................... 208,243 628,536
----------- -----------
Total revenues............................................. $ 3,431,601 $11,456,549
----------- -----------
----------- -----------
</TABLE>
Gain on Sale of Loans, Net. Gain on sale of loans, net, which arose
primarily from securitizations, includes all related revenues and costs,
including the proceeds from sales of residual class certificates, the value of
excess servicing receivables, hedging gains or losses and underwriting fees and
other related securitization expenses and fees. See ' -- Transactions with
ContiFinancial -- Additional Securitization Transaction Expense.' For the three
months ended March 31, 1996, gain on sale of loans increased to $10.9 million
from $3.3 million for the three months ended March 31, 1995, an increase of
229.8%, reflecting increased loan production and securitizations for the three
months ended March 31, 1996 and the adoption of the Financial Accounting
Standard Board's SFAS 122 -- Accounting for Mortgage Servicing Rights. The total
volume of loans produced increased by 121.1% to $264.0 million for the three
months ended March 31, 1996 as compared with a total volume of $119.4 million
for the three months ended March 31, 1995. Originations by the correspondent
network increased 129.0% to $236.5 million for the three months ended March 31,
1996 from $103.3 million for the three months ended March 31, 1995, while
production from the Company's broker network and direct lending operations
increased to $27.5 million or 70.6% for the three months ended March 31, 1996
from $16.1 million for the three months ended March 31, 1995. Production volume
increased during the 1996 period due to: (i) the Company's expansion program;
(ii) the growth of its securitization capability; (iii) the growth of its loan
servicing capability; (iv) the acquisition of the assets and business of
Equitystars acquired by the Company; and (v) the Company's ability to finance
its growth. For the three months ended March 31, 1996, the Company experienced
higher gains as it sold more loans through securitization. Securitizations
25
<PAGE>
<PAGE>
increased by $65.0 million or 59.1% to $175.0 million in the three months ended
March 31, 1996 from $110.0 million in the three months ended March 31, 1995. The
number of approved correspondents increased by 113 or 83.7% to 248 at March 31,
1996 from 135 at March 31, 1995 and the number of brokers increased by 705 or
109.6% to 1,348 at March 31, 1996 from 643 at March 31, 1995. Additional
securitization transaction expense increased by $2.6 million or 1,011.4% to $2.8
million in the three months ended March 31, 1996 from $0.2 million in the three
months ended March 31, 1995. For the three months ended March 31, 1996, gain on
sale of loans, net, increased to $8.0 million from $3.0 million for the three
months ended March 31, 1995, an increase of 164.4%, reflecting increased loan
production and securitizations in the three months 1996 period. See
' -- Transactions with ContiFinancial -- Additional Securitization Transaction
Expense.'
Net Warehouse Interest Income. Net warehouse interest income is interest
earned from the Company's mortgage loans which generally carry long-term
interest rates, less interest expense on borrowings to finance the funding of
such mortgage loans pending receipt of proceeds from their sale. The Company
generally sells loans in its inventory within 150 days and finances such loans
under its secured borrowing facilities, which bear short-term interest rates.
Ordinarily, short-term interest rates are lower than long-term interest rates,
and the Company earns net interest income from this difference, or spread,
during the period the mortgage loans are held by the Company.
Net warehouse interest income increased to $1.8 million for the three
months ended March 31, 1996 from $0.1 million for the three months ended March
31, 1995, an increase of 2,404.8%. The increase in the 1996 period reflected
higher interest income resulting from increased mortgage loan production which
was offset by interest costs associated with warehouse facilities. The holding
period of loans increased in the three months ended March 31, 1996 from the
three months ended March 31, 1995 as the Company increased the portion of its
loans in warehouse sold through securitizations.
Servicing Fees. Servicing fees increased to $1.0 million for the three
months ended March 31, 1996 from $0.1 million for the three months ended March
31, 1995, an increase of 811.8%. Servicing fees for the three months ended March
31, 1996 were positively affected due to an increase in loans serviced over the
prior year. The increase in loans serviced came from the Company's normal
purchase and origination channels.
Other. Other revenues, consisting principally of interest on excess
servicing receivables, increased by $0.4 million or 201.8% to $0.6 million in
the three months ended March 31, 1996 from $0.2 million in the three months
ended March 31, 1995 as a result of increased securitization volume.
Expenses. The following table sets forth information regarding components
of the Company's expenses for the three months ended March 31, 1995 and 1996:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1995 1996
---------- ----------
<S> <C> <C>
Compensation and benefits......................................... $1,021,815 $3,666,685
Selling, general and administrative expenses...................... 553,910 2,240,856
Other............................................................. 16,084 342,534
Sharing of proportionate value of equity.......................... 718,952 2,555,000
---------- ----------
Total expenses............................................... $2,310,761 $8,805,075
---------- ----------
---------- ----------
</TABLE>
Compensation and benefits increased by $2.7 million or 258.8% to $3.7
million in the three months ended March 31, 1996 from $1.0 million in the three
months ended March 31, 1995, principally due to an increase in the number of
employees to service the Company's increased loan production, the acquisition of
the assets and business of Equitystars and an increase in executive bonuses.
Selling, general and administrative expenses increased by $1.6 million or
304.6% to $2.2 million in the three months ended March 31, 1996 from $0.6
million in the three months ended March 31, 1995, principally due to an increase
in the volume of loan production and the acquisition of the assets and business
of Equitystars.
26
<PAGE>
<PAGE>
Other expenses increased to $0.3 million in the three months ended March
31, 1996 from a negligible amount in the three months ended March 31, 1995 as a
result of increased loan production and securitization volume in 1996.
The sharing of proportionate value of equity, representing the amount
payable under the Conti VSA, increased by $1.9 million or 255.4% to $2.6 million
in the three months ended March 31, 1996 from $0.7 million in the three months
ended March 31, 1995. See ' -- Transactions with ContiFinancial -- Sharing of
Proportionate Value of Equity,' 'Certain Accounting Considerations Relating to
the Conti VSA' and Note 4 to Notes to Consolidated Financial Statements.
Pro Forma Income Taxes. The effective pro forma income tax rate for the
three months ended March 31, 1996 was 38.7% which differed from the federal tax
rate of 35% primarily due to state income taxes. The increase in pro forma
income taxes of $0.6 million or 137.9% to $1.0 million in the three months ended
March 31, 1996 from $0.4 million in the three months ended March 31, 1995 was
proportionate to the increase in pre-tax income.
Acquisition of Equitystars. On January 1, 1996, the Company acquired all of
the assets of Equitystars, a Rhode Island corporation and a mortgage banking
company, operating primarily in Rhode Island, New York, Connecticut and
Massachusetts, with smaller operations in Maine and New Hampshire. Equitystars
originated over $95 million of residential loans during 1995, of which
approximately $17 million or 18% was conforming loan origination and
approximately $78 million or 82% was non-conforming loan origination. During
1995, IMC purchased $11.3 million of non-conforming loans from Equitystars. The
purchase price of all the assets of Equitystars was paid by delivery to
Equitystars of Convertible Preferred Stock. There may be a contingent payout
based on the results of operations of Equitystars. See 'Recent Events' and
'Business -- Loans -- Acquisition of Equitystars.'
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Pro forma net income for the year ended December 31, 1995 was $4.0 million,
representing an increase of $2.1 million or 117.3% over pro forma net income of
$1.9 million for the year ended December 31, 1994. This increase resulted
principally from a $7.1 million or 88.6% increase in gain on sale of loans, net
of additional securitization transaction expense, to $15.1 million for the year
ended December 31, 1995 from $8.0 million for the year ended December 31, 1994.
Pro forma net income is calculated on the basis of historical net income,
adjusted for a pro forma income tax expense as if the Company had been taxable
as a corporation since its inception. In addition, a $1.0 million or 108.8%
increase in net warehouse interest income to $1.9 million for the year ended
December 31, 1995 from $0.9 million for the year ended December 31, 1994 and a
$1.4 million or 1,445.4% increase in servicing fees to $1.5 million for the year
ended December 31, 1995 from $0.1 million for the year ended December 31, 1994
also contributed to this increase in pro forma net income. The increase was
partially offset by a $1.8 million or 53.5% increase in compensation and
benefits to $5.1 million for the year ended December 31, 1995 from $3.3 million
for the year ended December 31, 1994 and a $1.5 million or 73.8% increase in
selling, general and administrative expenses to $3.5 million for the year ended
December 31, 1995 from $2.0 million for the year ended December 31, 1994. The
increase in pro forma net income was further offset by a $0.3 million increase
in other expenses to $0.3 million for the year ended December 31, 1995 from $0
for the year ended December 31, 1994, a $2.5 million or 148.9% increase in
sharing of proportionate value of equity to $4.2 million for the year ended
December 31, 1995 from $1.7 million for the year ended December 31, 1994 and a
$1.3 million or 112.5% increase in pro forma income tax expense to $2.5 million
for the year ended December 31, 1995 from $1.2 million for the year ended
December 31, 1994.
Revenues. The following table sets forth information regarding components
of the Company's revenues for the years ended December 31, 1994 and 1995:
27
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1994 1995
----------- -----------
<S> <C> <C>
Gain on sale of loans.......................................... $8,583,277 $20,680,848
Additional securitization transaction expense.................. (560,137) (5,547,037)
----------- -----------
Gain on sale of loans, net................................ 8,023,140 15,133,811
----------- -----------
Warehouse interest income...................................... 2,510,062 7,884,679
Warehouse interest expense..................................... (1,610,870) (6,006,919)
----------- -----------
Net warehouse interest income............................. 899,192 1,877,760
----------- -----------
Servicing fees................................................. 99,224 1,543,339
Other.......................................................... 1,072,855 1,117,903
----------- -----------
Total revenues............................................ $10,094,411 $19,672,813
----------- -----------
----------- -----------
</TABLE>
Gain on Sale of Loans, Net. Gain on sale of loans, net, which arose
primarily from securitizations, includes all related revenues and costs,
including the proceeds from sales of residual class certificates, the value of
excess servicing receivables, hedging gains or losses and underwriting fees and
other related securitization expenses and fees. See ' -- Transactions with
ContiFinancial -- Additional Securitization Transaction Expense.' For the year
ended December 31, 1995, gain on sale of loans increased to $20.7 million from
$8.6 million, an increase of 140.9%, reflecting increased loan production and
securitizations in the 1995 period. The total volume of loans produced increased
by 119.7% to $621.6 million for the year ended December 31, 1995 as compared
with a total volume of $282.9 million in 1994. Originations by the correspondent
network increased 132.9% to $543.6 million in 1995 from $233.5 million in 1994,
while production from the Company's broker network and direct lending operations
increased to $78.0 million or 57.6% for the year ended December 31, 1995 from
$49.5 million for the year ended December 31, 1994. Production volume increased
during the period due to: (i) the Company's expansion program; (ii) the
development of a securitization capability; (iii) the development of a loan
servicing capability; and (iv) the Company's ability to finance its growth. In
1995 the Company experienced higher gains as it sold more loans through
securitization. Securitizations increased by $290.0 million or 322.2% to $380.0
million in the year ended December 31, 1995 from $90.0 million in the year ended
December 31, 1994. The number of approved correspondents increased by 108 or
102.9% to 213 at December 31, 1995 from 105 at December 31, 1994 and the number
of brokers increased by 600 or 120.5% to 1,098 at December 31, 1995 from 498 at
December 31, 1994. Additional securitization transaction expense increased by
$5.0 million or 890.3% to $5.6 million in the year ended December 31, 1995 from
$0.6 million in the year ended December 31, 1994. For the year ended December
31, 1995, gain on sale of loans, net, increased to $15.1 million from $8.0
million, an increase of 88.6%, reflecting increased loan production and
securitizations in the 1995 period. See ' -- Transactions with
ContiFinancial -- Additional Securitization Transaction Expense.'
Net Warehouse Interest Income. Net warehouse interest income is interest
earned from the Company's mortgage loans which generally carry long-term
interest rates, less interest expense on borrowings to finance the funding of
such mortgage loans pending receipt of proceeds from their sale. The Company
generally sells loans in its inventory within 150 days and finances such loans
under its secured borrowing facilities, which bear short-term interest rates.
Ordinarily, short-term interest rates are lower than long-term interest rates,
and the Company earns net interest income from this difference, or spread,
during the period the mortgage loans are held by the Company.
Net warehouse interest income increased to $1.9 million for the year ended
December 31, 1995 from $0.9 million for the year ended December 31, 1994, an
increase of 108.8%. The increase in 1995 reflected higher interest income
resulting from increased mortgage loan production which was offset by interest
costs associated with warehouse facilities. The holding period of loans
increased in 1995 from 1994 as the Company increased the portion of its loans in
warehouse sold through securitizations.
Servicing Fees. Servicing fees increased to $1.5 million for the year ended
December 31, 1995 from $0.1 million for the year ended December 31, 1994, an
increase of 1,455.4%. Servicing fees for the year ended December 31, 1995 were
positively affected due to an increase in loans serviced over the prior
28
<PAGE>
<PAGE>
year. The increase in loans serviced came from the Company's normal purchase and
origination channels.
Other. Other revenues increased by a negligible amount to $1.1 million in
the year ended December 31, 1995 from $1.1 million in the year ended December
31, 1994.
Expenses. The following table sets forth information regarding components
of the Company's expenses for the years ended December 31, 1994 and 1995:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1995
---------- -----------
<S> <C> <C>
Compensation and benefits........................................ $3,348,236 $ 5,139,386
Selling, general and administrative expenses..................... 2,000,401 3,477,677
Other............................................................ 14,143 297,743
Sharing of proportionate value of equity......................... 1,689,000 4,204,000
---------- -----------
Total expenses.............................................. $7,051,780 $13,118,806
---------- -----------
---------- -----------
</TABLE>
Compensation and benefits increased by $1.8 million or 53.5% to $5.1
million in the year ended December 31, 1995 from $3.3 million in the year ended
December 31, 1994, principally due to an increase in the number of employees to
service the Company's increased loan production.
Selling, general and administrative expenses increased by $1.5 million or
73.8% to $3.5 million in the year ended December 31, 1995 from $2.0 million in
the year ended December 31, 1994, principally due to an increase in the volume
of loan production.
Other expenses increased to $0.3 million in the year ended December 31,
1995 from $0 in the year ended December 31, 1994 as a result of increased loan
production and securitization volume in 1995.
The sharing of proportionate value of equity, representing the amount
payable under the Conti VSA, increased by $2.5 million or 148.9% to $4.2 million
in the year ended December 31, 1995 from $1.7 million in the year ended December
31, 1994. See ' -- Transactions with ContiFinancial -- Sharing of Proportionate
Value of Equity,' 'Certain Accounting Considerations Relating to the Conti VSA'
and Note 4 to Notes to Consolidated Financial Statements.
Pro Forma Income Taxes. The effective pro forma income tax rate for the
year ended December 31, 1995 was 38.5% which differed from the federal tax rate
of 35% primarily due to state income taxes. The increase in pro forma income
taxes of $1.3 million or 112.5% to $2.5 million in the year ended December 31,
1995 from $1.2 million in the year ended December 31, 1994 was proportionate to
the increase in pre-tax income.
Year Ended December 31, 1994 Compared to the Period from August 12, 1993
(Inception) to December 31, 1993
The Company commenced operations on August 12, 1993. The period from August
12, 1993 to December 31, 1993 was a start-up period which had low production
levels and resulted in a loss. Due to the nature of the period ended December
31, 1993, the inclusion of percentage comparisons would not be meaningful.
Pro forma net income for the year ended December 31, 1994 was $1.9 million
representing an increase of $2.1 million over the $0.2 million pro forma loss
for the period ended December 31, 1993. This increase resulted principally from
a $7.6 million increase in gain on sale of loans, net of additional
securitization transaction expense to $8.0 million for the year ended December
31, 1994 from $0.4 million for the period ended December 31, 1993. Pro forma net
income is calculated on the basis of historical net income, adjusted for a pro
forma income tax expense as if the Company had been taxable as a corporation
since its inception. In addition, a $0.9 million increase in net warehouse
interest income to $0.9 million for the year ended December 31, 1994 from a
negligible amount for the period ended December 31, 1993, a $0.1 million
increase in servicing fees to $0.1 million for the year ended December 31, 1994
from $0 for the period ended December 31, 1993 and a $1.1 million increase in
other revenues to $1.1 million for the year ended December 31, 1994 from a
negligible amount for the period ended December 31, 1993 also contributed to the
increase in pro forma net income. The increase was
29
<PAGE>
<PAGE>
partially offset by a $2.8 million increase in compensation and benefits to $3.3
million for the year ended December 31, 1994 from $0.5 million for the period
ended December 31, 1993 and a $1.6 million increase in selling, general and
administrative expenses to $2.0 million for the year ended December 31, 1994
from $0.4 million for the period ended December 31, 1993. The increase in pro
forma net income was further offset by a $1.7 million increase in sharing of
proportionate value of equity to $1.7 million for the year ended December 31,
1994 from $0 for the period ended December 31, 1993 and a $1.3 million increase
in pro forma income tax expense to $1.2 million for the year ended December 31,
1994 from an income tax credit of $0.1 million for the period ended December 31,
1993.
Revenues. The following table sets forth information regarding the
components of the Company's revenues for the periods shown:
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
DECEMBER 31, 1993 DECEMBER 31, 1994
----------------- -----------------
<S> <C> <C>
Gain on sale of loans................................. $ 438,774 $8,583,277
Additional securitization transaction expense......... 0 (560,137)
----------------- -----------------
Gain on sale of loans, net....................... 438,774 8,023,140
----------------- -----------------
Warehouse interest income............................. 97,159 2,510,062
Warehouse interest expense............................ (50,709) (1,610,870)
----------------- -----------------
Net warehouse interest income.................... 46,450 899,192
----------------- -----------------
Servicing fees........................................ 0 99,224
Other................................................. 28,235 1,072,855
----------------- -----------------
Total revenues................................... $ 513,459 $10,094,411
----------------- -----------------
----------------- -----------------
</TABLE>
Gain on sale of loans in the year ended December 31, 1994 increased by $8.2
million to $8.6 million from $0.4 million in the period ended December 31, 1993
due to an increase in loan production to $282.9 million in 1994 from $29.6
million in 1993 and the Company's initial securitization in November, 1994.
Additional securitization transaction expense increased to $0.6 million in the
year ended December 31, 1994 from $0 in the period ended December 31, 1993. Gain
on sale of loans, net, increased by $7.6 million to $8.0 million in the year
ended December 31, 1994 from $0.4 million in the period ended December 31, 1993.
See ' -- Transactions with ContiFinancial -- Additional Securitization
Transaction Expense.'
Net Warehouse Interest Income. Net warehouse interest income is interest
earned from the Company's mortgage loans which generally carry long-term
interest rates, less interest expense on borrowings to finance the funding of
such mortgage loans pending receipt of proceeds from their sale. The Company
generally sells loans in its inventory within 150 days and finances such loans
under its secured borrowing facilities, which bear short-term interest rates.
Ordinarily, short-term interest rates are lower than long-term interest rates,
and the Company earns net interest income from this difference, or spread,
during the period the mortgage loans are held by the Company.
Net warehouse interest income increased to $0.9 million in the year ended
December 31, 1994 from a negligible amount in the period ended December 31,
1993, resulting primarily from increased production and a longer holding period
for loans towards the end of the year as a result of the Company's initial
securitization.
Servicing Fees. The Company commenced servicing during 1994 and generated
servicing revenues of approximately $0.1 million during the year ended December
31, 1994.
Other. Other revenues, primarily consisting of origination and processing
fees, increased to $1.1 million in the year ended December 31, 1994 from a
negligible amount in the period ended December 31, 1993 due to increased
production and the expansion of the broker network and direct lending operations
which generate origination income and processing fees.
Expenses. The following table sets forth information regarding components
of the Company's expenses for the periods shown:
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<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
DECEMBER 31, 1993 DECEMBER 31, 1994
----------------- -----------------
<S> <C> <C>
Compensation and benefits....................................... $ 507,904 $ 3,348,236
Selling, general and administrative expenses.................... 355,526 2,000,401
Other........................................................... 0 14,143
Sharing of proportionate value of equity........................ 0 1,689,000
----------------- -----------------
Total expenses............................................. $ 863,430 $ 7,051,780
----------------- -----------------
----------------- -----------------
</TABLE>
Compensation and benefits increased by $2.8 million to $3.3 million in the
year ended December 31, 1994 from $0.5 million in the period ended December 31,
1993. This increase was generated by the increase in loan production due to the
growth of the business and the increase in the period of operations to 12 months
from approximately four months.
Selling, general and administrative expenses increased by $1.6 million to
$2.0 million in the year ended December 31, 1994 from $0.4 million in the period
ended December 31, 1993. This increase was generated by the increased production
due to the growth of the business and the increase in the period of operations
to 12 months from approximately four months.
There was no material change in other expenses between periods.
Sharing of proportionate value of equity increased to $1.7 million in the
year ended December 31, 1994 from $0 in the period ended December 31, 1993 as a
result of the increase in the equity of the Company. See ' -- Transactions with
ContiFinancial -- Sharing of Proportionate Value of Equity.'
Pro Forma Income Taxes. The effective pro forma income tax rates for the
year ended December 31, 1994 and the period ended December 31, 1993 were 39.0%
and 38.3%, respectively, which differed from the federal tax rate of 35%
primarily due to state income taxes. The increase in pro forma income tax
expense of $1.3 million from a $0.1 million pro forma income tax benefit in the
1993 period to $1.2 million income tax provision in the year ended December 31,
1994 was proportionate to the change in pre-tax income.
FINANCIAL CONDITION
March 31, 1996 Compared to December 31, 1995
Mortgage loans held for sale at March 31, 1996 were $257.5 million,
representing an increase of $64.5 million or 33.4% over mortgage loans held for
sale of $193.0 million at December 31, 1995. This increase was a result of
increased loan origination and purchasing as the Company expanded into new
states and as well as increased origination and purchasing efforts in states in
which the Company had an existing market presence.
Excess servicing receivables at March 31, 1996 were $22.9 million,
representing an increase of $8.8 million or 62.8% over excess servicing
receivables of $14.1 million at December 31, 1995. This increase was a result of
the completion of one securitization.
Warehouse financing facilities at March 31, 1996 were $261.4 million,
representing an increase of $71.6 million or 37.7% more than warehouse financing
facilities of $189.8 million at December 31, 1995. This increase was primarily a
result of increased loan originations and purchases.
Term debt at March 31, 1996 was $23.7 million, representing an increase of
$12.6 million or 112.9% more than term debt of $11.1 million at December 31,
1995. This increase was primarily a result of financing the additional
securitization.
Stockholders' equity at March 31, 1996 was $12.1 million, representing an
increase of $6.5 million or 116.1% over stockholders' equity of $5.6 million at
December 31, 1995. This increase was primarily a result of the conversion of the
Conti VSA into the Conti Option.
December 31, 1995 Compared to December 31, 1994
Mortgage loans held for sale at December 31, 1995 were $193.0 million,
representing an increase of $164.0 million or 565.6% over mortgage loans held
for sale of $29.0 million at December 31, 1994. This
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increase was a result of increased loan origination and purchasing as the
Company expanded into new states and as well as increased its origination and
purchasing efforts in states in which the Company has an existing market
presence.
Excess servicing receivables at December 31, 1995 were $14.1 million,
representing an increase of $10.7 million or 313.5% over excess servicing
receivables of $3.4 million at December 31, 1994. This increase was the result
of completing two securitizations.
Warehouse financing facilities at December 31, 1995 were $189.8 million,
representing an increase of $162.1 million or 584.5% more than warehouse
financing facilities of $27.7 million at December 31, 1994. This increase was
primarily a result of the Company's increased loan purchases and originations.
Term debt at December 31, 1995 was $11.1 million, representing an increase
of $11.1 million over December 31, 1994. This increase was primarily a result of
the Company's securitizations and the financing thereof.
Stockholders' equity at December 31, 1995 was $5.6 million, representing a
decrease of $0.3 million or 4.2% from stockholders' equity of $5.9 million at
December 31, 1994. This decrease, which is negligible, represents the difference
between net income and distributions.
LIQUIDITY AND CAPITAL RESOURCES
The Company uses its cash flow from loans sold through securitizations,
whole loan sales, loan origination fees, processing fees, net interest income,
servicing fees and borrowings under its warehouse facility and standby facility
to meet its working capital needs. The Company's cash requirements include the
funding of loan purchases and originations, payment of interest expenses,
funding the over-collateralization requirements for securitizations, operating
expenses, income taxes and capital expenditures.
Adequate credit facilities and other sources of funding, including the
ability of the Company to sell loans, are essential to the continuation of the
Company's ability to purchase and originate loans. As a result of increased loan
purchases and originations and its growing securitization program, the Company
has operated, and expects to continue to operate, on a negative cash flow basis.
During fiscal 1994 and 1995 and the three months ended March 31, 1996, the
Company raised through its financing activity cash of $21.4 million, $167.7
million and $83.4 million, respectively. The Company's sale of loans through
securitizations has resulted in a significant increase in the amount of gain on
sale recognized by the Company. The recognition of this excess servicing spread
has a negative impact on the cash flow of the Company because significant costs
are incurred upon closing of the securitization transactions and the Company is
required to pay state and federal income taxes on the gain on sale in the period
recognized. The Company does, however, receive the cash representing the gain in
later periods, as the related loans are repaid or otherwise collected. During
the same periods, the Company received cash of $0.1 million, $1.2 million and
$0.6 million, respectively, related to excess servicing receivables. The Company
borrows funds on a short-term basis to support the accumulation of loans prior
to sale. These short-term borrowings are made under warehouse lines of credit
with various lenders.
At March 31, 1996, the Company had available warehouse lines of credit
totaling $645.0 million for financing the acquisition of mortgage loans held for
sale, $261.4 million of which was outstanding at March 31, 1996. Of the
warehouse lines of credit available at March 31, 1996, the full amount matures
within one year. Interest rates on these facilities ranged from 6.3% to 6.9% as
of March 31, 1996. Outstanding borrowings under these lines of credit are
secured by all of the Company's mortgage loans held for sale and warehouse
financing due from stockholders. Upon the sale of these loans and repayment of
warehouse financing due from stockholders, the related amounts outstanding under
the lines will be repaid.
At March 31, 1996, the Company also had available a standby facility
totaling $25.0 million. Outstanding borrowings under this facility are secured
by the Company's interest in the excess servicing receivables. At March 31,
1996, outstanding borrowings under this facility were $15.0 million, accruing
interest at a rate of 7.1% per annum. This agreement terminates in January,
2000. The facility includes the $10.0 million Additional Draw which must be
repaid with a portion of the net proceeds from the
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Public Offering. The Company intends to borrow the full $25.0 million available
under this facility by the time of the Public Offering.
On March 20, 1996, the Company issued the $1.8 million convertible secured
Rotch Debenture. The Rotch Debenture matures on September 20, 1996 at which time
the Company may extend the maturity for an additional six-month period, subject
to a 1% gross renewal fee. Interest is calculated at a rate of LIBOR plus 1%.
Rotch has the right to convert the Rotch Debenture into Common Stock at any time
prior to maturity at a conversion price per share of 93% of the price at which
the Company sells its Common Stock in the Public Offering. The Rotch Debenture
is expected to be repaid in full from a portion of the proceeds of the Public
Offering.
In February, 1996, the Company borrowed $2.9 million under a one-year
agreement bearing interest at 1.25% per annum in excess of LIBOR to finance
certain excess servicing receivables which were secured by such excess servicing
receivables.
On January 12, 1996, Lakeview, an affiliate of one of the Industry
Partners, extended the $7.0 million Lakeview Facility to the Company. Such line,
which had an outstanding balance of $4.0 million as of March 31, 1996, is
expected to be repaid in full from a portion of the proceeds of the Public
Offering. The Lakeview Facility provides that if it is still outstanding on
September 30, 1996, then Lakeview has the right to require that the Company
grant to Lakeview a second lien on the Company's excess servicing receivables.
The Company's warehouse lines and standby facility contain various
affirmative and negative covenants customary for credit arrangements of their
type and which the Company believes will not have a material effect on its
operations, growth and financial flexibility. The warehouse lines and standby
facility also contain certain financial covenants requiring the maintenance of
certain debt-to-equity or debt-to-net worth ratios, restricting distributions to
equity holders and capital expenditures as well as establishing limits on the
ability of the Company to incur unsecured indebtedness. The Company does not
believe that the existing financial covenants will restrict its operations or
growth within the next twelve months if the Company's future operations and
growth are consistent with management's current expectations. Management
believes the Company is in compliance with all such covenants under these
agreements.
The Company purchases and originates mortgage loans and then sells them
primarily through securitizations. At the time of securitization and the
delivery of the loans, the Company recognizes gain on sale based on a number of
factors including the difference, or 'spread' between the interest rate on the
loans and the interest rate on the treasury security with a maturity
corresponding to the anticipated life of the loans. If interest rates rise
between the time the Company originates or purchases the loans and the time the
loans are priced at securitization, the spread narrows, resulting in a loss in
value of the loans. To protect against such losses, the Company hedges the value
of the loans through the short sale of treasury securities. Prior to hedging,
the Company performs an analysis of its loans taking into account, among other
things, interest rates and maturities to determine the amount, type (usually
three and five years), duration (usually less than three months) and proportion
of each treasury security to sell short so that the risk to the value of the
loans is more effectively hedged. The Company will execute the sale of the
treasury securities (with large, reputable securities firms including
ContiFinancial) and uses the proceeds received to acquire treasury securities
under repurchase agreements. These securities are designated as hedges in the
Company's records and are closed out when the loans are sold.
If the value of the hedges decreases, offsetting an increase in the value
of the loans, the Company, upon settlement with its counterparty, will pay the
hedge loss in cash and realize the corresponding increase in the value of the
loans as part of its excess servicing receivables. Conversely, if the value of
the hedges increase, offsetting a decrease in the value of the loans, the
Company, upon settlement with its counterparty, will receive the hedge gain in
cash and realize the corresponding decrease in the value of the loans through a
reduction in the value of the corresponding excess servicing receivables.
The Company believes that its hedging activities using treasury securities
are substantially similar in purpose, scope and execution to customary hedging
activities using treasury securities engaged in by its competitors.
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While most of the Company's strategies for expansion have been formulated
so as to require minimal cash outlay to implement, establishing branch offices
for direct originations and other strategies may require greater cash
commitments. If any of the Company's strategies are successful, they will result
in greater loan purchases and originations, larger or more frequent
securitizations and, therefore, greater liquidity needs. Funds available under
the Company's current warehouse and other credit facilities and the net proceeds
from the Public Offering are expected to be sufficient to fund the Company's
liquidity requirements, including the implementation of each of its business
strategies, for the next 12 months if the Company's future operations are
consistent with management's current expectations. Consequently, the Company
anticipates that it will need to arrange for additional external cash resources
by July, 1997 through additional financing. The Company has no commitments for
additional external financing and there can be no assurance that the Company
will be successful in consummating any such financing transactions in the future
on terms the Company would consider favorable. The Company's current warehouse
and credit facilities generally are subject to one-year terms. Certain
agreements have automatic renewal features subject to the absence of defaults
and creditor notification of termination. The Company's business and growth
strategies over the next twelve months are dependent on the Company's ability to
maintain its current warehouse and credit facilities and the Company's growth
beyond the next twelve months is dependent on the ability to acquire additional
credit lines. While the Company anticipates that it will be able to meet its
warehouse and credit needs for the next twelve months through its current
facilities, and has no reason to believe that additional credit facilities will
be unavailable if future operations are consistent with current performance,
there can be no assurance either that the Company's current creditors will renew
their facilities as they expire or that the Company will be able to acquire
additional credit lines. See 'Risk Factors -- Dependence on Funding Sources.'
INFLATION
Inflation has had no material effect on the Company's results of
operations. Inflation affects the Company most significantly in the area of loan
originations and can have a substantial effect on interest rates. Interest rates
normally increase during periods of high inflation and decrease during periods
of low inflation.
Profitability may be directly affected by the level and fluctuation in
interest rates which affect the Company's ability to earn a spread between
interest received on its loans and the costs of its borrowings. The
profitability of the Company is likely to be adversely affected during any
period of unexpected or rapid changes in interest rates. A substantial and
sustained increase in interest rates could adversely affect the ability of the
Company to purchase and originate loans and affect the mix of first and second
mortgage loan products. Generally, first mortgage production increases relative
to second mortgage production in response to low interest rates and second
mortgage production increases relative to first mortgage production during
periods of high interest rates. A significant decline in interest rates could
decrease the size of the Company's loan servicing portfolio by increasing the
level of loan prepayments. Additionally, to the extent servicing rights and
excess servicing receivables have been capitalized on the books of the Company,
higher than anticipated rates of loan prepayments or losses could require the
Company to write down the value of such servicing rights and excess servicing
receivables that has been capitalized on the books of the Company, adversely
impacting earnings. Fluctuating interest rates also may affect the net interest
income earned by the Company resulting from the difference between the yield to
the Company on loans held pending sales and the interest paid by the Company for
funds borrowed under the Company's warehouse facilities. In addition, inverse or
flattened interest yield curves could have an adverse impact on the
profitability of the Company because the loans pooled and sold by the Company
have long-term rates, while the senior interests in the related REMIC trusts are
priced on the basis of intermediate rates.
Since 1994, the Company has been selling certain excess spread receivables
to ContiFinancial to provide a source of cash flow to fund its growing
securitization program and other liquidity needs. Although the Company intends
to lessen its reliance on the sale of excess spread receivables to meet its cash
flow needs, no assurance can be given that such sales will not be necessary in
the future.
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The net proceeds from the Public Offering will be used by the Company for
the repayment of debt, general corporate purposes, including funding loan
originations and purchases, supporting securitization transactions (including
the retention of excess spread receivables) and other working capital needs. See
'Use of Proceeds.'
RECENT EVENTS
Commencement of UK Operations
The Company commenced operations in the UK in April, 1996 through Preferred
Mortgages, a joint venture formed in March, 1996, of which the Company owns 45%.
Through Preferred Mortgages, the Company intends to serve what management
believes to be an underserved segment of the home equity market in the UK by
lending to borrowers with impaired credit profiles similar to its domestic
customers. The Company paid $2.1 million, 50% of which was paid for in Common
Stock and 50% of which was paid for with a note receivable, for its interest in
Preferred Mortgages.
Recent Securitization
In April, 1996, the Company completed its sixth securitization in the
aggregate amount of $200.0 million. The securities sold in the securitization
had a weighted average pass-through rate of 7% for the fixed-rate tranches plus
an adjustable rate tranche initially set at 7.3%, were rated AAA/Aaa and were
sold in a public offering. As part of its cash flow management strategy, the
securitization was structured so that ContiFinancial received, in exchange for
cash, 25% of the residual interests of the April, 1996 securitization.
CHANGE IN CERTIFYING ACCOUNTANT
Termination of Certifying Accountant
IMC terminated the engagement of Deloitte & Touche LLP ('D&T') as its
independent accountants, effective December, 1995 after completing the audit for
the year ended December 31, 1994. The decision to terminate D&T was approved by
the Board of Directors of IMCI, the general partner of IMC.
The audit reports of D&T on the financial statements of IMC for the period
from inception to December 31, 1993 and for the year ended December 31, 1994,
did not contain an adverse opinion or a disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope or accounting principles.
There were no disagreements with D&T during the period from inception to
December 31, 1993 and for the fiscal year ended December 31, 1994, or in any
subsequent interim period through the date of this Prospectus on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure which, if not resolved to the satisfaction of D&T, would have
caused D&T to make reference to such disagreement in connection with its opinion
on IMC's financial statements.
A letter from D&T is filed with the registration statement of which this
Prospectus is a part as Exhibit 16.1.
Engagement of New Certifying Accountant
Effective December, 1995, IMC engaged Coopers & Lybrand L.L.P. to serve as
independent accountants to audit and certify IMC's financial statements.
Pursuant to this engagement, Coopers & Lybrand L.L.P. has audited IMC's
financial statements for the period from inception to December 31, 1993, the
years ended December 31, 1994 and 1995 and the three months ended March 31,
1996.
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BUSINESS
IMC is a specialized consumer finance company engaged in purchasing,
originating, servicing and selling home equity loans secured primarily by first
liens on one- to four-family residential properties. The Company focuses on
lending to individuals whose borrowing needs are generally not being served by
traditional financial institutions due to such individuals' impaired credit
profiles and other factors. Loan proceeds typically are used by the Company's
borrowers for a variety of purposes such as to consolidate debt, to finance home
improvements and to pay educational expenses. By focusing on individuals with
impaired credit profiles and by providing prompt responses to their borrowing
requests, the Company has been able to charge higher interest rates for its loan
products than typically are charged by conventional mortgage lenders.
IMC was formed in 1993 by a team of executives experienced in the
non-conforming home equity loan industry. IMC was originally structured as a
partnership, with the limited partners consisting of the Industry Partners and
certain members of management. The original Industry Partners included: American
Industrial Loan Association; Champion Mortgage Co. Inc.; Cityscape Corp.;
Equitysafe, a Rhode Island General Partnership; Investors Mortgage, a Washington
LP; Mortgage America Inc.; Residential Money Centers; First Government Mortgage
and Investors Corp.; Investaid Corp.; and New Jersey Mortgage and Investment
Corp. The Money Store and Equity Mortgage, a Maryland LP, became Industry
Partners in 1994. Branchview, Inc. became an Industry Partner in 1995.
IMC purchases and originates home equity loans through a diversified
network of 248 correspondents, which includes the Industry Partners, and 1,348
mortgage loan brokers and, to a lesser extent, on a retail basis through its
recently initiated direct consumer lending effort. Since its inception in
August, 1993, IMC has experienced considerable growth in loan production, with
total purchases and originations of $29.6 million, $282.9 million, $621.6
million and $264.0 million in 1993, 1994, 1995 and the first three months of
1996, respectively. IMC's network of correspondents accounted for 82.5%, 87.5%
and 89.6% of IMC's loan production in 1994, 1995 and the first three months of
1996, respectively, with the largest correspondent contributing 7.1%, 9.7% and
9.5% of total loan production in such periods. Through its network of approved
mortgage brokers, IMC generated 17.5%, 10.7% and 8.0% of its loan production in
1994, 1995 and the first three months of 1996, respectively. IMC's direct
consumer lending effort contributed approximately 1.8% and 2.4% for 1995 and for
the first three months of 1996, respectively. IMC is seeking to expand its
direct consumer lending by opening branch offices and expanding its use of
advertising, direct mail and other marketing strategies.
The Industry Partners are currently required to sell to IMC, under market
terms and conditions, an aggregate of $102.0 million, on average, of home equity
loans per year. IMC has consistently purchased loan production from the Industry
Partners in excess of their aggregate annual commitment. Concurrent with the
Public Offering, the majority of the Industry Partners have agreed to increase
their annual loan sale commitment, or the economic equivalent, to an aggregate
of $162.0 million. See 'Certain Relationships and Related Transactions.'
IMC sells its loans through securitizations, which involve the private
placement or public offering of asset-backed securities, and whole loan sales,
which involve selling blocks of loans to individual purchasers. Whole loan sales
have declined from 100% of total loan sales in 1993 (prior to IMC's first
securitization of its loans) to 15.3% of total loan sales in 1995. Each of IMC's
securitizations has been credit-enhanced by an insurance policy provided through
a monoline insurance company to receive ratings of Aaa from Moody's and AAA from
Standard & Poor's. Through April 30, 1996, the Company had completed six
AAA/Aaa-rated REMIC securitizations totaling $845.0 million. As of December 31,
1995 and March 31, 1996, IMC had a servicing portfolio of $535.8 million and
$783.4 million, respectively.
IMC has had a financing and investment banking relationship with
ContiFinancial since 1993. As part of this relationship, ContiFinancial has
provided warehouse and revolving credit facilities to IMC and acted as placement
agent and underwriter of its securitizations. In addition, as part of its cash
flow management strategy, IMC has sold to ContiFinancial a portion of the excess
servicing receivables created as a result of its securitization activities.
These sales reduced IMC's gain on sale of loans by approximately $0.6 million in
1994, $5.5 million in 1995 and $2.8 million during the first three months of
1996. ContiFinancial also holds the Conti Option.
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Loan purchases and originations increased 119.7% from $282.9 million in
1994 to $621.6 million in 1995, and the Company's servicing portfolio increased
482.4% from $92.0 million to $535.8 million. During this same period, the
Company's total revenues increased 94.9% from $10.1 million to $19.7 million,
pro forma net income increased 117.3% from $1.9 million to $4.0 million and
pre-tax income before the Conti VSA increased 127.4% from $4.7 million to $10.8
million. See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Transactions with ContiFinancial -- Sharing of
Proportionate Value of Equity,' 'Certain Accounting Considerations Relating to
the Conti VSA' and Note 4 to Notes to Consolidated Financial Statements.
BUSINESS STRATEGY
IMC is following these strategies for expansion: (i) increasing the number
of correspondents and brokers in its networks and increasing the amount of loans
purchased or originated from correspondents (including the Industry Partners)
and brokers; (ii) expanding its direct consumer lending; (iii) acquiring
additional loan production capability through acquisitions of correspondents;
(iv) generating loan production in the home equity market in the UK; and (v)
broadening its product offerings.
Expansion of Correspondent and Broker Networks
In 1995 and the three months ended March 31, 1996, 87.5% and 89.6% of IMC's
loan production was purchased or originated through its correspondent network,
respectively, and 10.7% and 8.0% was purchased or originated through its broker
network, respectively. IMC intends to continue to increase its loan production
from correspondents and brokers by expanding its networks to include new
correspondents and brokers and increasing the efficiency and production of the
correspondents and brokers that are a part of IMC's network. IMC plans to
implement this strategy of increasing its market share through geographic
expansion, tailored marketing strategies and a continued focus on servicing
smaller correspondents in cities which have historically been underserved. IMC
believes that it strengthens its relationships with correspondents and brokers
by providing attractive products and responsive service in conjunction with
consistent underwriting, substantial funding sources and competitive prices.
Expansion of Direct Consumer Lending
IMC intends to expand its direct consumer lending efforts by opening eight
new branch offices nationwide to reach a total of 17 by the end of 1996. The
branch offices will allow IMC to focus on developing contacts with individual
borrowers, local brokers and referral sources such as accountants, attorneys and
financial planners, with a view toward expanding its direct consumer loan
business. In addition, IMC's direct consumer loan expansion strategy involves:
(i) targeting cities where the population density and economic indicators are
favorable for home equity lending, the foreclosure rate is within normal ranges
and the non-conforming loan market has been underserved; (ii) testing the target
market prior to the establishment of a branch office, where local regulations
permit, via newspaper, radio, direct mail advertising and through a toll-free
telephone number which routes borrower inquiries directly to a loan officer in
the Tampa, Florida office; (iii) if test marketing is positive, establishing a
small branch office, generally with an initial staff of two business development
representatives; and (iv) setting up branch offices in executive office space
with short-term leases, which eliminates the need for IMC to pay high startup
costs for office equipment, furniture and leasehold improvements, and allows IMC
to exit the market easily if the office is not successful.
Expansion Through Acquisitions
IMC intends to strengthen its loan production capabilities not only through
internal growth, but also through acquisitions from time to time. IMC's
management believes that acquisitions not only accelerate the pace of growth,
but also are often the most cost-effective growth strategy, enabling IMC to
realize significant economies of scale in the securitization and mortgage
servicing businesses. IMC will continue to seek out candidates for acquisition
which operate in geographic and product areas that complement its existing
businesses. These candidates may include both correspondents and brokers. In
January, 1996, IMC completed the Equitystars Acquisition which expanded the
Company's operations in New England in both the non-conforming and conforming
mortgage loan markets. See ' -- Loans -- Acquisition of Equitystars.'
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Commencement of UK Operations
IMC commenced operations in the UK in April, 1996 through Preferred
Mortgages, a UK joint venture. The participants in the joint venture are IMC,
Foxgard Limited ('Foxgard') and Financial Security Assurance Inc. ('FSA')
(together, the 'Joint Venture Partners'). Preferred Mortgages is owned 45% by
IMC, 45% by Foxgard and 10% by FSA. Through Preferred Mortgages, IMC intends to
serve what management believes to be an underserved segment of the home equity
market in the UK by lending to borrowers with impaired credit profiles similar
to its domestic customers. Preferred Mortgages plans to market its products and
services directly to UK borrowers by means of newspaper, radio and television
advertising, in addition to direct mail. Preferred Mortgages plans to adapt the
loan application procedures, appraisal procedures and underwriting procedures
used by IMC to the UK market, while directing its underwriting and processing
staff to provide prompt, efficient and reliable service to the UK broker
community. Preferred Mortgages has received a commitment for a `L'47.5 million
(approximately $71.8 million as of April 11, 1996) line of credit from National
Westminster Bank, PLC for the purchase and origination of mortgage loans (the
'NatWest Facility'), and FSA has agreed to provide an insurance policy as credit
enhancement for the NatWest Facility.
Broadening Product Offerings
IMC frequently reviews its pricing and loan offerings for competitiveness
relative to the market. IMC introduces new loan products to meet the needs of
its correspondents, brokers and borrowers and to expand its market share to new
customers who are not traditionally a part of IMC's market.
Preferred Partners Program. IMC designed a program for traditional mortgage
lenders (the 'Preferred Partners Program') for the benefit of mortgage companies
that are attempting to diversify their product offering in the non-conforming
loan business. For correspondents participating in the Preferred Partners
Program (the 'Preferred Partners'), IMC acts as a consultant in all critical
areas of the non-conforming loan business, including marketing, regulatory
compliance, underwriting, risk-adjusted pricing, processing, funding, servicing
and selling loans. Experienced personnel from IMC work on-site with a Preferred
Partner, conducting internal training of employees of the Preferred Partner to
introduce an understanding of the credit profile of the non-conforming borrower.
In return, IMC is contractually granted the right of first refusal to purchase
all non-conforming mortgage originations of the Preferred Partner for the first
24 months of its participation in the Preferred Partners Program.
Since inception in November, 1995, three Preferred Partner relationships
have been formed with companies ranging in conforming production size from
approximately $300 million per year to $3 billion per year. IMC believes that
the Preferred Partners Program provides an opportunity for increasing its volume
of loan purchases. IMC's initial target is to develop 15 Preferred Partners,
each producing from $2 million to $3 million per month in non-conforming loan
originations for sale to IMC.
Home Equity Line of Credit ('HELOC'). IMC is developing a HELOC product,
which will enable customers to borrow on a revolving basis against the equity of
their homes. After repayment of the initial advance, the availability of credit
under the line will increase in proportion to the amount repaid. In the past,
this type of product has been offered primarily by commercial banks due to the
complexity of the methodology necessary to process and maintain the loans. IMC
has developed the methodology to facilitate the HELOC program through an
agreement with a large commercial bank. This new product will offer the
convenience of a revolving mortgage credit line to the non-conforming borrower.
IMC will offer HELOCs to borrowers using the same general underwriting criteria
IMC uses for its non-conforming lending business. IMC expects to introduce the
HELOC program to its customers in the second half of 1996.
LOANS
Overview
IMC's consumer finance activities consist primarily of purchasing,
originating, selling and servicing mortgage loans. The vast majority of these
loans are secured by first or second mortgages on one- to four-family residences
with the balance secured by small multi-family residences and mixed-use
properties. Once loan applications have been received, the underwriting process
completed and the
38
<PAGE>
<PAGE>
loans funded, IMC typically packages the loans in a portfolio and sells the
portfolio, either through a securitization or directly on a whole loan basis to
institutional purchasers. IMC retains the right to service the loans that it
securitizes and may release the right to service the loans it sells through
whole loan sales.
Loan Purchases and Originations
IMC purchases and originates loans in 48 states and the District of
Columbia through its networks of 248 correspondents and 1,348 brokers, and
through its seven branch offices.
The following table shows channels of loan purchases and originations for
the periods shown:
<TABLE>
<CAPTION>
PERIOD
FROM
INCEPTION
(AUGUST 12,
1993) YEAR ENDED THREE MONTHS
THROUGH DECEMBER 31, ENDED
DECEMBER 31, -------------------- MARCH 31,
1993 1994 1995 1996
------------ -------- -------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Correspondent(1):
Principal balance.................................. $ 28,008 $233,460 $543,635 $ 236,537
Average principal balance per loan................. 66 66 62 65
Combined weighted average loan-to-value ratio(2)... 66.6% 69.2% 70.6% 71.2%
Weighted average interest rate..................... 10.2 11.2 12.1 11.5
Broker:
Principal balance.................................. $ 1,600 $ 49,376 $ 66,584 $ 21,079
Average principal balance per loan................. 55 56 47 54
Combined weighted average loan-to-value ratio(2)... 70.9% 71.8% 72.6% 74.6%
Weighted average interest rate..................... 11.2 12.0 12.0 11.2
Direct consumer loan originations:
Principal balance.................................. $ 0 $ 88 $ 11,410 $ 6,371
Average principal balance per loan................. 0 88 49 48
Combined weighted average loan-to-value ratio(2)... 0.0% 80.0% 72.6% 73.9%
Weighted average interest rate..................... 0.0 11.3 11.7 11.1
Total loan purchases and originations:
Principal balance.................................. $ 29,608 $282,924 $621,629 $ 263,987
Average principal balance per loan................. 65 64 60 64
Combined weighted average loan-to-value ratio(2)... 66.8% 69.7% 70.9% 71.5%
Weighted average interest rate..................... 10.3 11.4 12.1 11.4
</TABLE>
- ------------
(1) Includes purchases from the Industry Partners with principal balances of
$10.7 million, or 36.3% of total purchases and originations, for the period
ended December 31, 1993, $92.4 million, or 32.6% of total purchases and
originations, for the year ended December 31, 1994, $148.4 million, or 23.9%
of total purchases and originations, for the year ended December 31, 1995
and $63.9 million, or 24.2% of total purchases and originations, for the
three months ended March 31, 1996.
(2) The weighted average loan-to-value ratio of a loan secured by a first
mortgage is determined by dividing the amount of the loan by the lesser of
the purchase price or the appraised value of the mortgaged property at
origination. The weighted average loan-to-value ratio of loans secured by a
second mortgage is determined by taking the sum of the loans secured by the
first and second mortgages and dividing by the lesser of the purchase price
or the appraised value of the mortgaged property at origination.
39
<PAGE>
<PAGE>
The following table shows channels of loan purchases and originations on a
quarterly basis for the fiscal quarters shown:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1995 1995 1995 1995 1996
--------- -------- ------------- ------------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Correspondent(1):
Principal balance.............. $ 103,296 $104,727 $ 133,857 $201,755 $ 236,537
Average principal balance per
loan......................... 66 58 60 64 65
Combined weighted average
loan-to-value ratio(2)....... 69.7% 70.1% 70.8% 71.2% 71.2%
Weighted average interest
rate......................... 12.5 12.6 12.1 11.8 11.5
Broker:
Principal balance.............. $ 14,948 $ 17,327 $ 17,297 $ 17,012 $ 21,079
Average principal balance per
loan......................... 52 46 45 48 54
Combined weighted average
loan-to-value ratio(2)....... 72.7% 72.5% 72.7% 72.6% 74.6%
Weighted average average
interest rate................ 12.5 12.3 11.8 11.3 11.2
Direct consumer loan originations:
Principal balance.............. $ 1,141 $ 2,613 $ 3,836 $ 3,820 $ 6,371
Average principal balance per
loan......................... 52 47 49 50 48
Combined weighted average
loan-to-value ratio(2)....... 73.8% 70.0% 73.3% 73.2% 73.9%
Weighted average interest
rate......................... 12.4 11.9 11.6 11.4 11.1
Total loan purchases and
originations:
Principal balance.............. $ 119,385 $124,667 $ 154,990 $222,587 $ 263,987
Average principal balance per
loan......................... 57 50 51 54 64
Combined weighted average
loan-to-value ratio(2)....... 70.4% 70.5% 71.0% 71.4% 71.5%
Weighted average interest
rate......................... 12.5 12.5 12.0 11.8 11.4
</TABLE>
- ------------
(1) Includes purchases from the Industry Partners of an aggregate principal
balance of $148.4 million, or 23.9% of total purchases and originations, for
the year ended December 31, 1995 and $63.9 million, or 24.2% of total
purchases and originations, for the three months ended March 31, 1996.
(2) The weighted average loan-to-value ratio of a loan secured by a first
mortgage is determined by dividing the amount of the loan by the lesser of
the purchase price or the appraised value of the mortgaged property at
origination. The weighted average loan-to-value ratio of loans secured by a
second mortgage is determined by taking the sum of the loans secured by the
first and second mortgages and dividing by the lesser of the purchase price
or the appraised value of the mortgaged property at origination.
40
<PAGE>
<PAGE>
The following table shows lien position, weighted average interest rates
and loan-to-value ratios for the periods shown.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(AUGUST 12,
1993) YEAR ENDED THREE MONTHS
THROUGH DECEMBER 31, ENDED
DECEMBER 31, ------------ MARCH 31,
1993 1994 1995 1996
------------ ---- ---- ------------
<S> <C> <C> <C> <C>
First mortgage:
Percentage of total purchases and originations................. 88.3% 82.4% 77.0% 90.3%
Weighted average interest rate................................. 10.2 11.3 12.1 11.4
Weighted average initial loan-to-value ratio(2)................ 67.3 69.8 70.7 71.4
Second mortgage:
Percentage of total purchases and originations................. 11.7% 17.6% 23.0% 9.7%
Weighted average interest rate...................................... 11.1 11.7 12.4 11.7
Weighted average initial loan-to-value ratio(1)................ 61.9 68.8 71.7 71.9
</TABLE>
- ------------
(1) The weighted average loan-to-value ratio of a loan secured by a first
mortgage is determined by dividing the amount of the loan by the lesser of
the purchase price or the appraised value of the mortgaged property at
origination. The weighted average loan-to-value ratio of loans secured by a
second mortgage is determined by taking the sum of the loans secured by the
first and second mortgages and dividing by the lesser of the purchase price
or the appraised value of the mortgaged property at origination.
Correspondents. The majority of IMC's loan volume is purchased through
correspondents. For the year ended December 31, 1995, $543.6 million or 87.5% of
IMC's loan purchases and originations were purchased through the mortgage
correspondent network as compared with $233.5 million or 82.5% of IMC's loan
purchases and originations for the year ended December 31, 1994. During the
three months ended March 31, 1996, $236.5 million or 89.6% of IMC's loan
purchases and originations were so acquired. The Industry Partners contributed
$10.7 million or 36.3% of total purchases and originations for the period ended
December 31, 1993, $92.4 million or 32.6% for the year ended December 31, 1994,
$148.4 million or 23.9% for the year ended December 31, 1995 and $63.9 million
or 24.2% for the three months ended March 31, 1996. No single correspondent
contributed 10.0% or more of IMC's total loan purchases and originations in
1994, 1995 or the first three months of 1996.
IMC has a list of approved correspondents from which it will purchase loans
on a wholesale basis. Prior to approving a financial institution or mortgage
banker as a loan correspondent, IMC performs an extensive investigation of,
among other things, the proposed loan correspondent's lending operations, its
licensing or registration and the performance of its previously originated
loans. The investigation includes contacting the agency that licenses or
registers such loan correspondent and other purchasers of the correspondent's
loans and reviewing the correspondent's financial statements. IMC requires that
the correspondent remain current on all licenses required by federal and state
laws and regulations and that it maintain sufficient equity to fund its loan
operations. IMC periodically reviews and updates the information it has relating
to each approved correspondent to insure that all legal requirements are current
and that lending operations continue to meet IMC's standards.
Before purchasing loans from correspondents, IMC requires that each loan
correspondent enter into a purchase and sale agreement with customary
representations and warranties regarding such loans. Correspondents will then
sell loans to IMC either on a flow basis or through block sales. IMC will make a
flow basis purchase when a correspondent approaches IMC with the application of
a prospective borrower. Because the correspondent has not granted a loan, IMC
has the opportunity to preapprove the loan. In the preapproval process, the
correspondent provides IMC with information about the borrower and the
collateral for the potential loan, including the applicant's credit, employment
history, current assets and liabilities, a copy of recent tax returns and the
estimated property value of the collateral. If IMC pre-approves the loan, the
correspondent lends to the borrower pursuant to certain IMC guidelines. After
the correspondent has made the loan, IMC purchases the loan from the
41
<PAGE>
<PAGE>
correspondent. A block purchase occurs when the correspondent has made numerous
loans without seeking preapproval from IMC. The correspondent offers a block of
loans to IMC, and IMC will purchase those loans in the block that meet its
underwriting standards.
Brokers. For the year ended December 31, 1995 and the three months ended
March 31, 1996, IMC originated $66.6 million or 10.7% and $21.1 million or 8.0%,
respectively, of loans through broker transactions. As with correspondents, IMC
maintains an approved list of brokers. Brokers become part of IMC's network
after IMC performs a thorough license and credit check. If a broker is approved,
IMC will accept loan applications from the broker for prospective borrowers.
Because brokers may submit loan applications to several prospective lenders
simultaneously, IMC makes every effort to provide a quick response. IMC will
process each application given by a broker from a prospective borrower and grant
or deny preliminary approval of the application within one business day. In the
case of an application denial, IMC will make all reasonable attempts to insure
that there is no missing information concerning the borrower that might change
the decision on the loan. In addition, IMC emphasizes service to the broker and
loan applicant by having loan processors follow the loan from the time of the
initial application, through the underwriting verification and audit process, to
the funding and closing process. Because brokers collect fees from the borrower
and are not compensated by IMC, IMC believes that consistent underwriting, quick
response times and personal service are critical to successfully originating
broker loans.
Direct Consumer Loans. For the year ended December 31, 1995 and the three
months ended March 31, 1996, IMC originated $11.4 million or 1.8% and $6.4
million or 2.4%, respectively, of loans directly to borrowers through its branch
offices. IMC has nine branch offices in Iowa, Georgia, Missouri, Wisconsin,
Colorado, Florida, Arizona, Washington and Illinois. Prior to the establishment
of a branch office, where local regulations permit, IMC tests the target market
via newspaper radio and direct mail advertising and through a toll-free
telephone number which routes borrower inquiries directly to a loan officer in
the Tampa, Florida office. If test marketing is positive, the branch offices are
staffed with two business development representatives and established in
executive office space with short-term leases, which eliminates the need for IMC
to pay high startup costs for office equipment, furniture and leasehold
improvements and allows IMC to exit the market easily if the office is not
successful. IMC plans to use the branch office network for marketing to and
meeting with individual borrowers, local brokers and referral sources such as
accountants, attorneys and financial planners. All advertising, branch expenses,
regulatory disclosure, appraisals, title searches, loan processing, underwriting
and funding of branch office loans take place in the Tampa, Florida office of
IMC. The centralization of loan origination and processing allows IMC to control
branch expenses, supervise regulatory compliance and offer consistent
underwriting and processing to its customers. IMC believes that this strategy
will result in a more efficient use of its capital and a higher success rate.
Negative pre-testing results could limit expansion into new locations, but would
also limit the size of potential losses. IMC plans to open nine new branch
offices nationwide to reach a total of 17 by the end of 1996, and estimates that
new branches will reach a monthly operating break-even point by the fourth or
fifth month of operation. The start-up costs and operating expenses prior to
this break-even point are estimated at $25,000 per branch, with half of that
expense allocated to marketing and advertising. Additionally, IMC feels that, by
centralizing its marketing and advertising efforts in Tampa, Florida, economies
of scale will be obtained and expenses will be controlled.
Because borrowers may submit loan applications to several prospective
lenders simultaneously, IMC makes every effort to provide a quick response. IMC
will process each application from a borrower and grant or deny preliminary
approval for the application generally within one business day from receipt of
the application. In addition, IMC ensures direct contact with an underwriter in
the Tampa, Florida office who follows the loan from the application to the
closing process. IMC believes that consistent underwriting, quick response times
and personal service are critical to successfully originating loans directly
with potential borrowers.
Geographic Distribution of Loans. Although IMC is licensed or registered in
48 states and the District of Columbia, it has historically concentrated its
business in the mid-Atlantic states. While this concentration has declined,
Maryland and New York contributed 12.8% and 12.4%, respectively, of IMC's total
loan purchase and origination volume for the year ended December 31, 1995, and
New York and New Jersey contributed 14.6% and 10.9%, respectively, for the three
months ended March 31, 1996.
42
<PAGE>
<PAGE>
IMC intends to expand and geographically diversify its loan purchase and
origination activities through its nationwide branch office network, the
Preferred Partners Program and its joint venture in the UK. See ' -- Business
Strategy -- Broadening Product Offerings -- Preferred Partners Program' and
'Recent Events -- Commencement of UK Operations.'
The following table shows geographic distribution of loan purchases and
originations for the periods shown.
<TABLE>
<CAPTION>
PERIOD
FROM INCEPTION YEAR ENDED
(AUGUST 12, 1993) DECEMBER 31, THREE MONTHS
THROUGH ------------------- ENDED
DECEMBER 31, 1993 1994 1995 MARCH 31, 1996
----------------- ------- ------- --------------
<S> <C> <C> <C> <C>
States(1):
New York.................................. 17.5% 11.7% 12.4% 14.6%
New Jersey................................ 4.0 6.6 9.9 10.9
Maryland.................................. 14.4 18.6 12.8 9.3
Michigan.................................. 10.0 7.3 8.8 8.7
Florida................................... 1.8 4.2 6.2 6.8
Ohio...................................... 4.5 4.9 4.7 5.6
Georgia................................... 5.6 3.2 3.5 5.6
Pennsylvania.............................. 3.3 5.3 4.3 3.9
Virginia.................................. 2.0 5.4 3.8 3.6
District of Columbia...................... 3.2 4.6 3.3 2.8
All other states(39)...................... 33.7 28.2 30.3 28.2
</TABLE>
- ------------
(1) States are listed in order of percentage of loan purchases and originations
for the three months ended March 31, 1996.
Acquisition of Equitystars
In order to increase the flow of loans for purchase, IMC seeks to acquire
loan originators that would enhance or enlarge IMC's market penetration or
product offerings. Pursuant to that strategy, on January 1, 1996, IMC acquired
all of the assets of Equitystars, a mortgage banking company which does business
primarily in Rhode Island, New York, Connecticut and Massachusetts, with smaller
operations in Maine and New Hampshire. Equitystars originated over $95 million
of residential mortgage loans during 1995. Of the loans originated,
approximately $17 million or 18% were conforming loans and approximately $78
million or 82% were non-conforming loans. During 1995, IMC purchased a total of
$11.3 million of non-conforming loans from Equitystars.
The purchase price for the Equitystars Acquisition was a $2.0 million base
payment in the form of 20,060 shares of Convertible Preferred Stock, and up to
an aggregate of $2.55 million of contingent payments, based on formulae keyed to
the performances of the non-conforming and conforming mortgage loan business of
Equitystars. In accordance with the provisions governing the Convertible
Preferred Stock, the 20,060 shares of Convertible Preferred Stock issued in the
Equitystars Acquisition will be automatically converted upon the completion of
any public offering of the Common Stock to a number of shares of Common Stock
having a value, at 93% of the public offering price, of $2.0 million plus
interest at 8.0% per annum. Pursuant to the agreement governing the Equitystars
Acquisition, the contingent payments will be made at the end of 1996 and 1997
and, if the Convertible Preferred Stock has been converted into Common Stock,
are to be made in Common Stock valued at the then-current market price. If a
public offering does not occur by June 30, 1996, holders of the Convertible
Preferred Stock have the right to 'put' those shares to IMC for an amount equal
to the liquidation preference of $100 per share plus interest at 8.0% per annum.
If the put is exercised, any contingency payments owed in respect of the
Equitystars Acquisition will be paid in cash.
Loan Underwriting
IMC's origination volume is generated primarily from correspondents selling
loans to IMC either on a flow basis or through block sales. For correspondents
and brokers that originate loans on a flow
43
<PAGE>
<PAGE>
basis, IMC provides them with its underwriting guidelines. Loan applications
received from correspondents and brokers on a flow basis are classified
according to certain characteristics including available collateral, loan size,
debt ratio, loan-to-value ratio and the credit history of the applicant. Loan
applicants with less favorable credit ratings generally are offered loans with
higher interest rates and lower loan-to-value ratios than applicants with more
favorable credit ratings. IMC also purchases loans on a block sale basis, in
which a correspondent makes several loans without the preapproval of the Company
and offers them to the Company for block purchase. Because IMC only chooses
loans that meet its underwriting requirements and reunderwrites them, block
loans follow the same underwriting guidelines as flow loan purchases.
IMC maintains a staff of 36 underwriters based in its Florida,
Pennsylvania, New Jersey, Ohio and Rhode Island offices. IMC's loan application
and approval process generally is conducted via facsimile submission of the
credit application to IMC's underwriters. An underwriter reviews the applicant's
credit history based on the information contained in the application and reports
available from credit reporting bureaus in order to determine if the applicant's
credit history is acceptable under IMC's underwriting guidelines. Based on this
review, the underwriter assigns a preliminary rating to the application. The
proposed terms of the loan are then communicated to the correspondent or broker
responsible for the application who in turn discusses the proposal with the loan
applicant. When a potential borrower applies for a loan through a branch office,
the underwriter will discuss the proposal directly with the applicant. IMC
endeavors to respond, and in most cases does respond, to the correspondent,
broker or borrower within one business day from when the application is
received. If the applicant accepts the proposed terms, the underwriter will
contact the broker or the loan applicant to gather additional information
necessary for the closing and funding of the loan.
All loan applicants must have an appraisal of their collateral property
prior to closing the loan. IMC requires correspondents and brokers to use
licensed appraisers that are listed on or qualify for IMC's approved appraiser
list. IMC approves appraisers based upon a review of sample appraisals,
professional experience, education, membership in related professional
organizations, client recommendations and review of the appraiser's experience
with the particular types of properties that typically secure IMC's loans. In
the case of loans purchased in blocks, if an appraisal was performed by an
appraiser that is not approved by IMC, IMC will review the appraisal and accept
it if the appraisal meets its underwriting standards.
The decision to provide a loan to an applicant is based upon the value of
the underlying collateral, the applicant's creditworthiness and IMC's evaluation
of the applicant's ability to repay the loan. A number of factors determine a
loan applicant's creditworthiness, including debt ratios (the borrower's average
monthly expenses for debts, including fixed monthly expenses for housing, taxes
and installment debt, as a percentage of gross monthly income), payment history
on existing mortgages and the combined loan-to-value ratio for all existing
mortgages on a property.
Assessment of the applicant's ability to pay is one of the principal
elements in distinguishing IMC's lending specialty from methods employed by
traditional lenders, such as thrift institutions and commercial banks. All
lenders utilize debt ratios and loan-to-value ratios in the approval process.
Many lenders simply use software packages to score an applicant for loan
approval and fund the loan after auditing the data provided by the borrower. In
contrast, IMC employs experienced non-conforming mortgage loan credit
underwriters to scrutinize the applicant's credit profile and to evaluate
whether an impaired credit history is a result of previous adverse circumstances
or a continuing inability or unwillingness to meet credit obligations in a
timely manner. Personal circumstances including divorce, family illnesses or
deaths and temporary job loss due to layoffs and corporate downsizing will often
impair an applicant's credit record. Among IMC's specialties is the ability to
identify and assist this borrower in the establishment of improved credit.
Upon completion of the loan's underwriting and processing, the closing of
the loan is scheduled with a closing attorney or agent approved by IMC. The
closing attorney or agent is responsible for completing the loan closing
transaction in accordance with applicable law and IMC's operating procedures.
Title insurance that insures IMC's interest as mortgagee and evidence of
adequate homeowner's insurance naming IMC as an additional insured are required
on all loans.
44
<PAGE>
<PAGE>
IMC has established classifications with respect to the credit profiles of
loans based on certain of the applicant's characteristics. Each loan applicant
is placed into one of four letter ratings 'A' through 'D,' with subratings
within those categories. Ratings are based upon a number of factors including
the applicant's credit history, the value of the property and the applicant's
employment status, and are subject to the discretion of IMC's trained
underwriting staff. Terms of loans made by IMC, as well as the maximum
loan-to-value ratio and debt service-to-income coverage (calculated by dividing
fixed monthly debt payments by gross monthly income), vary depending upon the
classification of the borrower. Borrowers with lower credit ratings generally
pay higher interest rates and loan origination fees. The general criteria
currently used by IMC's underwriting staff in classifying loan applicants are as
set forth below.
<TABLE>
<CAPTION>
'A' RISK 'B' RISK 'C' RISK 'D' RISK
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
General repayment.... Has repaid Has generally repaid May have experienced May have experienced
installment or installment or credit significant past significant past
revolving debt problems credit problems
revolving debt
Existing mortgage
loans.............. Current at Current at May not be current at Must be paid in full
application time and application time and application time and from loan proceeds
a maximum of two a maximum of three a maximum of four and no more than 149
30-day late payments 30-day late payments 30-day late payments days delinquent at
in the last 12 months in the last 12 months and one 60-day late closing and an
payment in the last explanation is
12 months required
Non-mortgage
credit............. Minor derogatory Some prior defaults Significant prior Significant prior
items allowed with a allowed but major delinquencies may defaults may have
letter of credit or installment have occurred, but occurred, but must
explanation; no open debt paid as agreed major credit or demonstrate an
collection accounts may offset some installment debt paid ability to maintain
or charge-offs, delinquency; open as agreed may offset regularity in payment
judgments or liens charge-offs, some delinquency of credit
judgments or liens obligations in the
are permitted on a future
case-by-case basis
Bankruptcy filings... Discharged more than Discharged more than Discharged more than Discharged prior to
four years prior to two years prior to one year prior to closing
closing and credit closing and credit closing and credit
reestablished reestablished reestablished
Debt service-to-
income ratio....... Generally 45% or less Generally 45% or less Generally 50% or less Generally 50% or less
Maximum loan-to-value
ratio:
Owner-occupied... Generally 80% (or Generally 80% (or Generally 75% (or 80% Generally 65% (or 70%
90%*) for a one- to 85%*) for a one- to for first liens*) for for first liens*) for
two-family residence; two-family residence a one- to two- family a one- to four- family
75% for a condominium residence; 65% for a residence; 60% for a
condominium; 60% for three- to four- family
a three- to residence or
four-family residence condominium
Non-owner-
occupied....... Generally 70% for a Generally 70% for a Generally 60% for a Generally 55% for a
one- to four-family one- to two-family one- to two-family one- to four-family
residence residence residence residence
</TABLE>
- ------------
* On an exceptional basis.
The Company uses the foregoing categories and characteristics as guidelines
only. On a case-by-case basis, the Company may determine that the prospective
borrower warrants an exception. Exceptions may generally be allowed if the
application reflects certain compensating factors such as loan-to-value ratio,
debt ratio, length of employment and other factors. For example, a higher debt
ratio may be acceptable with a lower loan-to-value ratio. Accordingly, the
Company may classify in a more favorable risk category certain mortgage loans
that, in the absence of such compensating factors, would satisfy only the
criteria of a less favorable risk category.
45
<PAGE>
<PAGE>
The following table sets forth certain information with respect to IMC's
loan purchases and originations by borrower classification, along with weighted
average coupons, for the periods shown.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------- THREE MONTHS ENDED
1994 1995 MARCH 31, 1996
---------------------------- ---------------------------- ----------------------------
WEIGHTED WEIGHTED WEIGHTED
% OF AVERAGE % OF AVERAGE % OF AVERAGE
BORROWER CLASSIFICATION TOTAL TOTAL COUPON TOTAL TOTAL COUPON TOTAL TOTAL COUPON
- --------------------------- -------- ----- -------- -------- ----- -------- -------- ----- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
'A' Risk................... $155,729 55.0% 10.6% $276,120 44.4% 11.4% $113,890 43.1% 10.7%
'B' Risk................... 74,527 26.3 11.6 177,149 28.5 12.0 74,444 28.2 11.3
'C' Risk................... 38,022 13.5 13.0 125,811 20.2 13.0 56,367 21.4 12.3
'D' Risk................... 14,646 5.2 14.4 42,549 6.9 14.4 19,286 7.3 13.5
-------- ----- -------- ----- -------- -----
Total...................... $282,924 100.0% $621,629 100.0% $263,987 100.0%
-------- ----- -------- ----- -------- -----
-------- ----- -------- ----- -------- -----
</TABLE>
Loan Sales
Currently, IMC sells the loans it purchases or originates through one of
two methods: (i) securitization, which involves the private placement or public
offering of pass-through mortgage-backed securities; and (ii) whole loan sales,
which involve selling blocks of loans to single purchasers. This dual approach
allows IMC the flexibility to better manage its cash flow, take advantage of
favorable conditions in either the securitization or whole loan market when
selling its loan production, diversify its exposure to the potential volatility
of the capital markets and maximize the revenues associated with the gain on
sale of loans given market conditions existing at the time of disposition. For
the years ended December 31, 1994 and 1995 and the three months ended March 31,
1996, IMC sold $261.9 million, $458.8 million and $196.3 million, respectively,
of loan production.
The following table sets forth certain information with respect to IMC's
channels of loan sales by type of sale for the periods shown.
<TABLE>
<CAPTION>
PERIOD
FROM INCEPTION
(AUGUST 12, 1993) YEAR ENDED DECEMBER 31, THREE MONTHS
THROUGH ---------------------------------------- ENDED
DECEMBER 31, 1993 1994 1995 MARCH 31, 1996
----------------- ------------------ ------------------ ------------------
% OF % OF % OF % OF
TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL
------- ----- -------- ----- -------- ----- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Whole loan sales.................... $21,636 100.0% $180,263 68.8% $70,400 15.3% $21,272 10.8%
------- ----- -------- ----- -------- ----- -------- -----
Securitizations..................... 0 0.0 81,637 31.2 388,363 84.7 175,000 89.2
------- ----- -------- ----- -------- ----- -------- -----
Total loan sales............... $21,636 100.0% $261,900 100.0% $458,763 100.0% $196,272 100.0%
------- ----- -------- ----- -------- ----- -------- -----
------- ----- -------- ----- -------- ----- -------- -----
</TABLE>
Whole Loan Sales. Whole loan sales represented all of IMC's loan sales
during 1993. With the initiation of the sale of loans through securitizations,
whole loan sales declined to 15.3% and 10.8% of total loan sales for the year
ended December 31, 1995 and the three months ended March 31, 1996, respectively.
For each of the years ended December 31, 1994 and 1995, IMC sold loans to five
institutional investors. Upon the sale of a loan portfolio, IMC generally
receives a premium, representing a cash payment in excess of the par value of
the loans (par value representing the unpaid balance of the loan amount). IMC
maximizes its premium on whole loan sale revenue by closely monitoring
institutional investors' requirements and focusing on originating the types of
loans that meet those requirements and for which institutional purchasers tend
to pay higher rates.
IMC will sell some of its loan volume to various institutional investors on
a non-recourse basis with customary representations and warranties covering
loans sold. IMC may be required to repurchase loans pursuant to its
representation and warranties. Occasionally, IMC will agree to rebate a portion
of the premium earned if a loan is prepaid during a limited period of time after
sale, usually six months and no greater than one year. For the years ended
December 31, 1994 and 1995, IMC was required to rebate $287,347 and $167,951,
respectively, in premiums when certain loans prepaid during the
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<PAGE>
<PAGE>
contractual rebate period. In its purchase agreements with its correspondents,
IMC requires its correspondents to rebate premium payments if loans sold to IMC
are prepaid within a specified period of time after the sale. For the years
ended December 31, 1994 and 1995, related premium rebates due to IMC were
$89,113 and $1.4 million, respectively. For the fiscal quarter ended March 31,
1996, $22,309 in premium rebates was required to be paid by IMC and $946,510 was
due to IMC under premium rebate agreements.
Securitizations. To date, IMC has completed six securitizations. The
following table sets forth certain information with respect to IMC's
securitizations by offering size, (including prefunded amounts) weighted average
pass-through rate and credit rating of securities sold.
<TABLE>
<CAPTION>
WEIGHTED CREDIT
AVERAGE RATING OF
OFFERING SIZE PASS-THROUGH SECURITIES
SECURITIZATION COMPLETED (MILLIONS) RATE SOLD(1)
- --------------- ---------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
1994 - 1 11/18/94 $90.0 8.4% AAA/Aaa
1995 - 1 03/17/95 110.0 8.2 AAA/Aaa
1995 - 2 07/26/95 120.0 7.0 AAA/Aaa
1995 - 3 11/16/95 150.0 6.6 AAA/Aaa
1996 - 1 02/07/96 175.0 6.1 AAA/Aaa
1996 - 2 04/24/96 200.0 7.0(2) AAA/Aaa
</TABLE>
- ------------
(1) Ratings by Standard & Poor's and Moody's, respectively.
(2) Fixed-rate tranches only.
During the year ended December 31, 1995, IMC sold $388.4 million of its
loan volume through securitizations. IMC markets its loan inventory through
securitization when management believes that employing this strategy will create
higher long term economic benefit to IMC stockholders. Outstanding
securitizations include three public and three private offerings. When IMC
securitizes loans, it sells a portfolio of loans to a trust (the 'Home Equity
Loan Trust') and issues classes of certificates representing undivided ownership
interests in the Home Equity Loan Trust. In its capacity as servicer for each
securitization, the Company collects and remits principal and interest payments
to the appropriate Home Equity Loan Trust which in turn passes through payments
to certificate owners. IMC retains the servicing rights and an interest in the
I/O and residual classes of certificates.
Each Home Equity Loan Trust has purchased insurance policies from a
monoline insurance company, which insures the timely payment of interest and the
ultimate payment of principal of the AAA/Aaa-rated interests in the related
REMIC. In addition to such insurance policies, credit enhancement is provided by
over-collateralization, which is intended to result in receipts and collections
on the loans in excess of the amounts required to be distributed to holders of
senior certificate interests. Although expected loss is calculated into the
pricing of the REMIC, to the extent that borrowers default on the payment of
principal and interest above the expected rate of default, such loss will reduce
the value of the residual class certificate. If payment defaults exceed the
amount of over-collateralization, the insurance policy maintained by the Home
Equity Loan Trust will pay any further losses experienced by certificate holders
of the senior interests in the related REMIC trust. IMC partially owns the
residual interest of its completed securitizations. Management believes that
lessening IMC's reliance on the ContiFinancial residual sharing agreement will
enhance the profit potential for IMC from future Home Equity Loan Trust
offerings. See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Transactions with ContiFinancial.' The remaining
interests in the residual interests have been transferred to ContiFinancial in
exchange for cash at the time of the completion of the securitization
transaction.
IMC may be required either to repurchase or to replace loans which do not
conform to the representations and warranties made by IMC in the pooling and
servicing agreements entered into when the portfolios of loans are sold through
a securitization. IMC intends to continue to conduct loan sales through
securitizations, either in private placements or in public offerings, when
market conditions are attractive for such loan sales.
47
<PAGE>
<PAGE>
Loan Servicing and Collections
IMC has been servicing loans since April, 1994. IMC's loan servicing
operation is divided into three departments: (i) collections; (ii) customer
service for both borrowers and investors; and (iii) tax, insurance, and tax and
insurance escrow. These departments monitor loans, collect current payments due
from borrowers, remit principal and interest payments to current owners of loans
and pay taxes and insurance. The collections department furnishes reports and
enforces the holder's rights, including recovering delinquent payments,
instituting loan foreclosures and liquidating the underlying collateral. IMC
intends to increase its loan servicing operations and thus its revenue stream by
continuing to retain the servicing rights on all its securitized loans and
certain whole loan sales. IMC retained the servicing rights to 87.3% or $400.5
million in loans it sold in 1995 and to 99% or $194.1 million in loans it sold
in the three months ended March 31, 1996.
IMC funds and closes loans throughout the month. Most of IMC's loans
require a first payment 30 days after funding. Accordingly, IMC's servicing
portfolio consists of loans with payments due at varying times each month. This
system ameliorates the cyclical highs and lows that some servicing companies
experience as a result of heavily concentrated due dates.
As of March 31, 1996, IMC was servicing loans representing an aggregate of
$783.4 million. Revenues generated from loans servicing amounted to 7.8% of
total revenues for 1995 and 8.7% of total revenues for the three months ended
March 31, 1996. IMC anticipates that loan servicing will contribute a larger
portion of total revenues in future periods. Management believes that the
business of loan servicing provides a consistent and profitable revenue stream
to augment its loan purchasing and originating activities.
IMC's collections policy is designed to identify payment problems
sufficiently early to permit IMC to quickly address delinquency problems and
when necessary, to act to preserve equity in a preforeclosure property. IMC
believes that these policies, combined with the experience level of independent
appraisers engaged by IMC, help to reduce the incidence of charge-offs of a
first or second mortgage loan.
Collection procedures commence upon identification of a past due account by
IMC's automated servicing system. If the first payment due is delinquent, a
collector will telephone to remind the borrower of the payment. Five days after
any payment is due, a written notice of delinquency is sent to the borrower.
Eleven days after payment is due, the account is automatically placed in the
appropriate collector's queue and the collector will send a late notice to the
borrower. During the delinquency period, the collector will continue to
frequently contact the borrower. Company collectors have computer access to
telephone numbers, payment histories, loan information and all past collection
notes. All collection activity, including the date collection letters were sent
and detailed notes on the substance of each collection telephone call, is
entered into a permanent collection history for each account. Additional
guidance with the collection process is derived through frequent communication
with IMC's senior management.
IMC's loan servicing software also tracks and maintains homeowners'
insurance information. Expiration reports are generated weekly listing all
policies scheduled to expire within 30 days. When policies lapse, a letter is
issued advising the borrower of the lapse and that IMC will obtain force-placed
insurance at the borrower's expense. IMC also has an insurance policy in place
that provides coverage automatically for IMC in the event that IMC fails to
obtain force-placed insurance.
Notwithstanding the above, there are occasions when a charge-off may be
necessary. Prior to a foreclosure sale, IMC performs a foreclosure analysis with
respect to the mortgaged property to determine the value of the mortgaged
property and the bid that IMC will make at the foreclosure sale. This analysis
includes: (i) a current valuation of the property obtained through a drive-by
appraisal conducted by an independent appraiser; (ii) an estimate of the sale
price of the mortgaged property obtained by sending two local realtors to
inspect the property; (iii) an evaluation of the amount owed, if any, to a
senior mortgagee and for real estate taxes; and (iv) an analysis of marketing
time, required repairs and other costs such as real estate broker fees, that
will be incurred in connection with the foreclosure sale.
48
<PAGE>
<PAGE>
All foreclosures are assigned to outside counsel located in the same state
as the secured property. Bankruptcies filed by borrowers are also assigned to
appropriate local counsel who are required to provide monthly reports on each
loan file.
The Company's servicing portfolio had aggregate principal balances of $0,
$92.0 million and $535.8 million at December 31, 1993, 1994 and 1995,
respectively, and $783.4 million at March 31, 1996.
The following table provides certain delinquency and default experience as
a percentage of outstanding principal balances of IMC's servicing portfolio for
the periods shown.
<TABLE>
<CAPTION>
AT AT
DECEMBER 31, MARCH 31,
--------------- ---------------
1994 1995 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Delinquency percentages(1):
30-59 days.................................... 0.72% 2.54% 1.73% 1.00%
60-89 days.................................... 0.15 0.59 0.32 0.32
90+ days...................................... 0.00 0.30 0.29 0.00
---- ---- ---- ----
Total delinquency........................ 0.87% 3.43% 2.34% 1.32%
---- ---- ---- ----
---- ---- ---- ----
Default percentages(2):
Foreclosure................................... 0.00% 0.75% 0.92% 0.03%
Bankruptcy.................................... 0.12 0.25 0.30 0.03
Real estate owned............................. 0.00 0.16 0.18 0.06
---- ---- ---- ----
Total default............................ 0.12% 1.16% 1.40% 0.12%
---- ---- ---- ----
---- ---- ---- ----
</TABLE>
- ------------
(1) Represents the percentages of account balances contractually past due,
exclusive of home equity loans in foreclosure, bankruptcy or real estate
owned.
(2) Represents the percentages of account balances on loans in foreclosure,
bankruptcy or real estate owned.
The following table provides certain delinquency and default experience as
a percentage of outstanding principal balance for each of the Company's
securitization trusts, prior to any potential recoveries, as of March 31, 1996.
<TABLE>
<CAPTION>
1994-1 1995-1 1995-2 1995-3 1996-1
------------------ ------------------ ------------------ ------------------ ------------------
DOLLAR PERCENTAGE DOLLAR PERCENTAGE DOLLAR PERCENTAGE DOLLAR PERCENTAGE DOLLAR PERCENTAGE
------ ---------- ------ ---------- ------ ---------- ------ ---------- ------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Delinquency(1):
30-59 days.............. $1,317 2.07% $2,287 2.80% $1,028 0.99% $2,451 1.74% $3,462 2.04%
60-89 days.............. 274 0.43 243 0.30 580 0.56 103 0.07 629 0.37
90+ days................ 39 0.06 191 0.23 120 0.11 359 0.26 534 0.31
------ ---- ------ ---- ------ ---- ------ ----- ------ ----
Total.............. $1,630 2.56% $2,721 3.33% $1,728 1.66% $2,913 2.07% $4,625 2.72%
------ ---- ------ ---- ------ ---- ------ ----- ------ ----
------ ---- ------ ---- ------ ---- ------ ----- ------ ----
Total defaults(2)....... $2,690 4.24% $2,241 2.75% $2,888 2.77% $1,666 1.19% $ 485 0.29%
------ ---- ------ ---- ------ ---- ------ ----- ------ ----
------ ---- ------ ---- ------ ---- ------ ----- ------ ----
</TABLE>
- ------------
(1) Delinquency is the dollar value of account balances contractually past due,
excluding loans in foreclosure, bankruptcy or real estate owned.
(2) Defaults are the dollar value of account balances contractually past due on
loans in foreclosure, bankruptcy or real estate owned.
49
<PAGE>
<PAGE>
The following table describes certain loan loss experience of IMC's
servicing portfolio of home equity loans for the fiscal years ended December 31,
1994 and 1995 and for the three months ended March 31, 1996.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- MARCH 31,
1994 1995 1996
------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Average amount outstanding(1).................................................. $52,709 $294,252 $ 706,357
Losses(2)...................................................................... 0 279 72
Losses as a percentage of average amount outstanding........................... 0.00% 0.9% 0.01%
</TABLE>
- ------------
(1) Average amount outstanding during the period is the arithmetic average of
the principal balances of home equity loans outstanding on the last business
day of each month during the period.
(2) Losses are actual losses incurred on liquidated properties for each
respective period. Losses include all principal, foreclosure costs and
accrued interest to date.
MARKETING
Correspondent and Broker Networks
Marketing to correspondents and brokers is conducted through IMC's business
development representatives who establish and maintain relationships with IMC's
principal sources of loan purchases and originations, including financial
institutions and mortgage bankers. The business development representatives
provide various levels of information and assistance to correspondents and
brokers and are principally responsible for maintaining IMC's relationships with
its networks. Business development representatives endeavor to increase the
volume of loan originations from brokers and correspondents located within the
geographic territory assigned to that representative. The representatives visit
customers' offices, attend trade shows and supervise advertisements in broker
trade magazines. The representatives also provide IMC with information relating
to correspondents, borrowers and brokers, and products and pricing offered by
competitors and new market entrants, all of which assist IMC in refining its
programs in order to offer competitive products. The business development
representatives are compensated with a base salary and commissions based on the
volume of loans that are purchased or originated as a result of their efforts.
Direct Consumer Lending
IMC markets its direct consumer lending services through branch offices
nationwide and intends to open eight new locations in 1996. IMC's direct
consumer loan expansion strategy involves: (i) targeting cities where the
population density and economic indicators are favorable for home equity
lending, the foreclosure rate is within normal ranges and the non-conforming
loan market has been underserved; (ii) testing the target market prior to the
establishment of a branch office, where local regulations permit, via newspaper,
radio and direct mail advertising and through a toll-free telephone number which
routes borrower inquiries directly to a loan officer in the Tampa, Florida
office; (iii) if test marketing is positive, establishing a small branch office,
generally with an initial staff of two business development representatives; and
(iv) setting up branch offices in executive office space with short-term leases,
which eliminates the need for IMC to pay high startup costs for office
equipment, furniture and leasehold improvements, and allows IMC to exit the
market easily if the office is not successful. The branch office network is used
for marketing to and meeting with IMC's local borrowers and brokers.
COMPETITION
As a mortgage banking company, IMC faces intense competition. Traditional
competitors in the financial services business include other mortgage banking
companies, commercial banks, credit unions, thrift institutions, credit card
issuers and insurance and finance companies. Many of these competitors in the
consumer finance business are substantially larger and have considerably greater
financial, technical and marketing resources than IMC. In addition, many
financial service organizations have formed
50
<PAGE>
<PAGE>
national networks for loan originations which are substantially similar to IMC's
loan programs. Competition can take many forms, including convenience in
obtaining a loan, service, marketing and distribution channels, amount and term
of the loan and interest rates. The current level of gains realized by IMC and
its existing competitors on the sale of loans is attracting additional
competitors into this market with the effect of lowering gain on loan sales
through increased loan origination competition. However, IMC believes that the
talents and experience of its employees together with its large network of
customer relationships in the non-conforming mortgage business make it a strong
competitor in the industry.
REGULATION
IMC's business is subject to extensive regulation, supervision and
licensing by federal, state and local governmental authorities and is subject to
various laws and judicial and administrative decisions imposing requirements and
restrictions on part or all of its operations. IMC's consumer lending activities
are subject to the Federal Truth-in-Lending Act and Regulation Z (including the
Home Ownership and Equity Protection Act of 1994), ECOA, the Fair Credit
Reporting Act of 1970, as amended, RESPA, and Regulation X, the Home Mortgage
Disclosure Act and the Federal Debt Collection Practices Act, as well as other
federal and state statutes and regulations affecting IMC's activities. IMC is
also subject to the rules and regulations of, and examinations by, HUD and state
regulatory authorities with respect to originating, processing, underwriting,
and servicing loans. These rules and regulations, among other things, impose
licensing obligations on IMC, establish eligibility criteria for mortgage loans,
prohibit discrimination, provide for inspections and appraisals of properties,
require credit reports on loan applicants, regulate assessment, collection,
foreclosure and claims handling, investment and interest payments on escrow
balances and payment features, mandate certain disclosures and notices to
borrowers and, in some cases, fix maximum interest rates, fees and mortgage loan
amounts. Failure to comply with these requirements can lead to loss of approved
status, termination or suspension of servicing contracts without compensation to
the servicer, demands for indemnifications or mortgage loan repurchases, certain
rights of rescission for mortgage loans, class action lawsuits and
administrative enforcement actions. IMC believes that it is in compliance in all
material respects with applicable federal and state laws and regulations.
ENVIRONMENTAL MATTERS
To date, IMC has not been required to perform any investigation or clean up
activities, nor has it been subject to any environmental claims. There can be no
assurance, however, that this will remain the case in the future. In the
ordinary course of its business, IMC from time to time forecloses on properties
securing loans. Although IMC primarily lends to owners of residential
properties, there is a risk that IMC could be required to investigate and clean
up hazardous or toxic substances or chemical releases at such properties after
acquisition by IMC, and may be held liable to a governmental entity or to third
parties for property damage, personal injury and investigation and cleanup costs
incurred by such parties in connection with the contamination. In addition, the
owner or former owners of a contaminated site may be subject to common law
claims by third parties based on damages and costs resulting from environmental
contamination emanating from such property.
EMPLOYEES
As of March 31, 1996, IMC had a total of 236 employees, 126 of whom were
working at its Tampa, Florida headquarters. None of IMC's employees is covered
by a collective bargaining agreement. IMC considers its relations with its
employees to be good. Several members of senior management have previously
worked as a team at other lending institutions. Many employees have been
associated with senior management in previous employment positions. IMC believes
that these long-term working relationships will continue to contribute to its
growth and success.
PROPERTIES
IMC's executive and administrative offices, including its servicing
operation and full-service production office, are located at 3450 Buschwood Park
Drive, Suite 250, Tampa, Florida, where IMC
51
<PAGE>
<PAGE>
leases approximately 21,300 square feet of office space at an aggregate annual
rent of approximately $310,572. The lease provides for certain scheduled rent
increases and expires in August, 1998.
IMC maintains full-service offices in Ft. Washington, Pennsylvania,
Cincinnati, Ohio, Cherry Hill, New Jersey, Lincoln, Rhode Island, Bellevue,
Washington and Roselle, Illinois. The Ft. Washington office is located at 501
Office Center Drive, 4th floor, Ft. Washington, Pennsylvania 19034. The
Cincinnati office is located at 144 Merchant Street, Cincinnati, Ohio 45246. The
Cherry Hill office is located at 1060 North Kings Highway, Suite 303, Cherry
Hill, New Jersey 08034. The Lincoln office is located at 25 Blackstone Valley
Place, Lincoln, Rhode Island 02865. The Bellevue office is located at 10900 N.E.
8th Street, Suite 900, Bellevue, Washington 98004. The Roselle office is located
at E. Nerge Rd., Suite N140, Roselle, Illinois 60172. Further, IMC maintains
short-term leases for its branch offices in executive office space in West Des
Moines, Iowa, Atlanta, Georgia, St. Louis, Missouri, Brookfield, Wisconsin,
Englewood, Colorado, Jacksonville, Florida and Phoenix, Arizona. Preferred
Mortgages, IMC's joint venture in the UK, is located at Leconfield House, 7th
floor, Curzon Street, London, UK W147FB.
LEGAL PROCEEDINGS
IMC is a party to various routine legal proceedings arising out of the
ordinary course of its business. Management believes that none of these actions,
individually or in the aggregate, will have a material adverse effect on the
results of operations or financial condition of IMC.
52
<PAGE>
<PAGE>
MANAGEMENT
DIRECTORS AND OFFICERS
The directors and executive officers of IMC and their ages and positions
are:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ------------------------------------------ ---- -----------------------------------------------------
<S> <C> <C>
George Nicholas........................... 53 Chairman of the Board of Directors, Chief Executive
Officer and Assistant Secretary, Member of the
Compensation and Executive Committees
Thomas G. Middleton....................... 49 Director, President, Chief Operating Officer and
Assistant Secretary, Member of the Executive and
Compensation Committees
George Freeman............................ 58 Chief Financial Officer
Timothy W. Griffin........................ 40 Vice President
Susan W. McCarthy......................... 38 Vice President
Karen S. Bausman.......................... 43 Vice President
Laurie S. Wockenfuss...................... 32 Vice President and Secretary
David B. MacDonald........................ 39 Vice President
Dennis J. Pitocco......................... 43 Vice President/Director of European Operations
Jean S. Schwindt.......................... 40 Vice President/Director of Investor Relations and
Strategic Planning
Joseph P. Goryeb.......................... 65 Director, Member of the Audit and Option Committees
Mitchell W. Legler........................ 54 Director, Member of the Compensation and Audit
Committees
Allen D. Wykle............................ 49 Director, Member of the Audit and Option Committees
</TABLE>
George Nicholas has served as Chief Executive Officer and Chairman of the
Board of IMC since the formation of the corporation in December, 1995 and as
Assistant Secretary of IMC since April, 1996. Since his founding of the
Partnership in August, 1993, Mr. Nicholas has served as Chief Executive Officer
of the Partnership and Chairman of the Board and sole stockholder of IMCI, its
general partner. Mr. Nicholas' experience in the lending business spans 32
years. He has previously held positions at General Electric Credit Corp.,
Household Finance Corp. and American Financial Corporation of Tampa ('AFC'), a
company of which he was owner and Chief Executive Officer from its formation in
February, 1986 until it was acquired by Equibank in 1988. From February, 1988
until May, 1992, Mr. Nicholas was president of AFC, a subsidiary of Equibank
which was a wholesale lending institution specializing in the purchase of
non-conforming mortgage loans. From June, 1992 until July, 1993, Mr. Nicholas
was an independent mortgage industry consultant. In 1993, Mr. Nicholas organized
the original Industry Partners and headed negotiations with investment bankers
for the Partnership.
Thomas G. Middleton has served as Director and President of IMC since
December, 1995 and as Assistant Secretary of IMC since April, 1996. Mr.
Middleton has served as Chief Operating Officer of the Partnership since August,
1993 and as President of the Partnership since July, 1995. Mr. Middleton has 26
years of experience in the lending business. From April, 1992 until August, 1993
Mr. Middleton was Senior Vice President with Shawmut National Corporation and
from February, 1991 until April, 1992, Mr. Middleton was Managing Director of
STG Financial Inc. Mr. Middleton served as Executive Vice President and Chief
Credit Officer of Equimark Corp. from June, 1987 until February, 1991.
George Freeman has served as Chief Financial Officer of IMC since April,
1996. Mr. Freeman has served as Chief Financial Officer of IMCI since April,
1995. Mr. Freeman has 23 years of experience in the lending business. From
November, 1991 until January, 1995 Mr. Freeman was a Senior Vice President of
Margaretten & Company, Inc., a lending institution specializing in purchasing,
originating and servicing mortgage loans. Mr. Freeman was responsible for the
areas of taxes, servicing acquisitions and finance. From 1987 until 1991, Mr.
Freeman was Senior Vice President and Chief Financial Officer of Margaretten &
Company, Inc. Mr. Freeman is a certified public accountant.
53
<PAGE>
<PAGE>
Timothy W. Griffin has served as a Vice President of IMC since April, 1996.
Mr. Griffin has served as Vice President of the Partnership since its inception
in August, 1993. Mr. Griffin has 16 years of experience in the mortgage lending
business. Mr. Griffin is primarily responsible for managing the loan
underwriting department in IMC's Tampa, Florida office and directing loan
acquisition activity. Mr. Griffin served as Vice President and National Sales
Manager for AFC from 1990 through 1993. He held the position of Vice President
with Essex Mortgage Corporation from 1980 to 1990.
Susan W. McCarthy has served as a Vice President of IMC since April, 1996.
Ms. McCarthy has served as Vice President of the Partnership since September,
1993. Ms. McCarthy is primarily responsible for the underwriting, funding and
acquisition of loans for the Pennsylvania regional office. Ms. McCarthy has 14
years of experience in the mortgage lending business. From December, 1988 to
September, 1993, Ms. McCarthy was Senior Vice President of AFC, where she was
responsible for managing the direct loan division. From April, 1982, to
December, 1988, Ms. McCarthy was Vice President of Advanta Mortgage USA/Apex
Financial Corporation, where she was an underwriter of non-conforming loans.
Karen S. Bausman, Vice President of IMC, joined the Company in April, 1994.
Ms. Bausman has 17 years of experience in the mortgage lending business and was
director of national credit and client support for Advanta Mortgage, a
non-conforming mortgage company from March, 1992 to April, 1994. From March,
1991 to April, 1992, Ms. Bausman ran an independent credit portfolio consulting
firm. Ms. Bausman's prior experience includes positions with Landmark Financial
Services Inc. and Associates Financial Services Company.
Laurie S. Wockenfuss joined the Company in November, 1993 and has served as
Vice President and Secretary of IMC since April, 1996. Ms. Wockenfuss is
primarily responsible for trust administration of asset-backed securities,
administration of state mortgage lending licenses and federal Home Mortgage
Disclosure Act reporting. Ms. Wockenfuss has 9 years of experience in the
mortgage lending industry, having served as Vice President of AFC from October,
1991 to October, 1993 and as Secondary Marketing Officer of The Dime Savings
Bank of New York from October, 1988 to June, 1990. From January, 1991 to
October, 1991, Ms. Wockenfuss attended The Crummer Graduate School of Business
at Rollins College.
David B. MacDonald has served as Vice President of IMC since January, 1996,
as of IMC's acquisition of Equitystars. Mr. MacDonald has 17 years of experience
in the lending business. Mr. MacDonald was the owner of Equitystars since its
inception in 1979. Mr. MacDonald owned and operated Equitysafe, one of the
original Industry Partners.
Dennis J. Pitocco has served as Vice President/Director of European
Operations of IMC since March, 1996. Mr. Pitocco has 22 years of experience in
the consumer financial services industry, having served in executive level
positions at a number of major banking institutions. From June, 1995 to
February, 1996 Mr. Pitocco served as Senior Vice President and General Manager
of Boatmen's Bancshares. From July, 1992 to April, 1995, Mr. Pitocco served as
Senior Vice President and General Manager of PNC Bank. From 1986 to July, 1992,
Mr. Pitocco served as Senior Vice President of Equimark Corporation, also
serving as Executive Vice President of AFC from May, 1991 to July, 1992.
Jean S. Schwindt has served as Vice President/Director of Investor
Relations and Strategic Planning since March, 1996. Ms. Schwindt has 19 years of
experience in the financial services industry, having served from April, 1989 to
March, 1996 as Senior Vice President/Director and Secretary of Anderson and
Strudwick Inc., a member of the New York Stock Exchange and full-service broker.
Since 1992 Ms. Schwindt has served as a director of American Industrial Loan
Association, a non-conforming mortgage lending institution. Ms. Schwindt is a
Chartered Financial Analyst and is a Registered Investment Advisor.
Joseph P. Goryeb has served as a director of IMC since April, 1996. Mr.
Goryeb is the Chairman and Chief Executive Officer of Champion Mortgage Co.
Inc., a leading non-conforming residential mortgage institution that was founded
by Mr. Goryeb in 1981. His 40 years of experience in the consumer lending
industry include previous positions with Beneficial Finance Company and Suburban
Finance Company.
Mitchell W. Legler has served as a director of IMC since April, 1996. Mr.
Legler is the sole stockholder of Mitchell W. Legler, P.A. and has been general
counsel to IMC since August, 1995. Mr.
54
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<PAGE>
Legler is currently a director of Stein Mart, Inc. a Nasdaq listed company. From
January, 1991 to August, 1995, Mr. Legler was a partner of Foley & Lardner,
prior to which he was a partner of Commander, Legler, Werver, Daws, Sadler &
Howell, P.A.
Allen D. Wykle has served as a director of IMC since April, 1996. Mr. Wykle
has been the Chairman of the Board and Chief Executive Officer of American
Industrial Loan Association, a non-conforming mortgage lending institution since
1984, for which Mr. Wykle negotiated the initial public offering in April, 1992.
Mr. Wykle was owner, President and Chief Executive Officer of Best Homes of
Tidewater, Inc., a residential construction and remolding company in Virginia
from 1972 to 1986.
TERMS OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation provide that the Company's Board of
Directors consist of such number of persons as shall be fixed by the Board of
Directors from time to time by resolution and to be divided into three classes,
with each class to be as nearly equal in number of directors as possible. The
Company's Bylaws provide that the Board of Directors shall consist of no fewer
than one nor more than 10 persons (currently there are five directors). The term
of office of the directors in each of the three classes expires at the annual
meetings of stockholders in 1997 through 1999, respectively. At each annual
meeting, the successors to the class of directors whose term expires at that
time are to be elected to hold office for a term of three years, and until their
respective successors are elected and qualified, so that the term of one class
of directors expires at each such annual meeting. In the case of any vacancy on
the Board of Directors, including a vacancy created by an increase in the number
of directors, the vacancy will be filled by election of the Board of Directors,
with the director so elected to serve for the remainder of the term of the
director being replaced; any newly-created directorships or decreases in
directorships are to be assigned by the Board of Directors so as to make all
classes as nearly equal in number as possible. Directors may be removed only for
cause. See 'Description of Capital Stock -- Certain Articles of Incorporation
and Bylaw Provisions.' Officers are elected annually and serve at the discretion
of the Board of Directors.
COMMITTEES OF THE BOARD
Audit Committee. The Audit Committee consists of Messrs. Goryeb, Legler and
Wykle. The Audit Committee will make recommendations concerning the engagement
of independent public accountants, review with the independent public
accountants the plans and results of the audit engagement, approve professional
services provided by the independent public accountants, review the independence
of the independent public accountants, consider the range of audit and non-audit
fees and review the adequacy of the Company's internal accounting controls.
Compensation Committee. The Compensation Committee consists of Messrs.
Nicholas, Middleton and Legler. The Compensation Committee will determine the
compensation of the Company's executive officers. Previously, Messrs. Nicholas
and Middleton have determined the compensation of the executive officers of the
Partnership.
Other Committees. The Board of Directors may establish other committees as
deemed necessary or appropriate from time to time, including, but not limited
to, an Executive Committee of the Board of Directors.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive stock options
pursuant to the Directors' Stock Option Plan (the 'Directors' Plan'). Each of
Messrs. Goryeb, Legler and Wykle has received options to purchase 6,466 shares
of Common Stock pursuant to the Directors' Plan. See ' -- Stock Option
Plans -- Directors' Plan.' None of the directors of the Company has received any
separate compensation for service on the Board of Directors or on any committee
thereof. Following the consummation of the Public Offering, the Company expects
to pay non-employee directors $6,000 per year plus $2,500 for each meeting
attended. All directors will receive reimbursement of reasonable out-of-pocket
expenses incurred in connection with meetings of the Board of Directors. No
director who is an employee of the Company will receive separate compensation
for services rendered as a director.
55
<PAGE>
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the stock option grants
made to each of the Named Executive Officers for the year ended December 31,
1995. No stock appreciation rights were granted to these individuals during such
year:
<TABLE>
<CAPTION>
INDIVIDUAL GRANT POTENTIAL REALIZABLE
----------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO PER SHARE OPTION TERM(3)
OPTIONS EMPLOYEES IN EXERCISE ----------------------------------
NAME GRANTED(1) FISCAL YEAR PRICE(2) EXPIRATION DATE 5% 10%
- ------------------------------------- --------- ------------- --------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
George Nicholas...................... 282,866 49.16% $4.70 12/11/05 836,097 2,118,833
Thomas G. Middleton.................. 141,433 24.58% 4.70 12/11/05 418,048 1,059,474
Timothy W. Griffin................... 21,013 3.65% 4.70 12/11/05 62,110 157,400
Susan W. McCarthy.................... 21,013 3.65% 4.70 12/11/05 62,110 157,400
Karen S. Bausman..................... 12,931 2.25% 4.70 12/11/05 38,224 96,866
</TABLE>
- ------------
(1) Each option was granted on December 11, 1995 and was immediately exercisable
to the extent of 60% of the option shares, with an additional 20% to vest on
the first anniversary of the grant date and the remaining 20% to vest on the
second anniversary of the grant date.
(2) The exercise price may be paid in cash, in shares of Common Stock valued at
fair market value on the date of exercise or pursuant to a cashless exercise
procedure involving a same-day sale of the purchased shares. The Company may
also allow the optionee to pay the aggregate exercise price plus any tax
liability incurred in connection with the exercise with a promissory note.
The plan administrator has the discretionary authority to reprice the
options through the cancellation of those options and grant of replacement
options with an exercise price based on the fair market value of the option
shares on the regrant date.
(3) The 5% and 10% assumed annual rates of compounded stock price appreciation
are permitted by rules of the Securities and Exchange Commission. There can
be no assurance provided to any executive officer or any other holder of the
Company's securities that the actual stock price appreciation over the
10-year option term will be at the assumed 5% and 10% levels or at any other
defined level. Unless the market price of the Common Stock appreciates over
the option term, no value will be realized from the option grants made to
the executive officers.
AGGREGATE OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information concerning the value of
unexercised options held by each of the Named Executive Officers for the year
ended December 31, 1995. No options or stock appreciation rights were exercised
during such year and no stock appreciation rights were outstanding at the end of
that year.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR END OPTIONS AT FISCAL YEAR END(1)
---------------------------- ------------------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------ ----------- ------------- ------------------------ ----------------------
<S> <C> <C> <C> <C>
George Nicholas........................... 169,720 113,146 0 0
Thomas G. Middleton....................... 84,860 56,573 0 0
Timothy W. Griffin........................ 12,608 8,405 0 0
Susan W. McCarthy......................... 12,608 8,405 0 0
Karen S. Bausman.......................... 7,759 5,172 0 0
</TABLE>
- ------------
(1) Based on the fair market value of the option shares at fiscal year-end
($4.70 per share) less the exercise price ($4.70 per share) payable for such
shares.
56
<PAGE>
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS
No interlocking relationship exists between the Company's Board of
Directors or officers responsible for compensation decisions and the board of
directors or compensation committee of any other company, nor has any such
interlocking relationship existed in the past.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid and accrued during fiscal 1995 to the Company's Chief Executive Officer and
the other executive officers of the Company whose compensation exceeded $100,000
(collectively, the 'Named Executive Officers').
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION --------------
--------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS (#)(2)
- ------------------------------------------------ ---- -------- -------- --------------- --------------
<S> <C> <C> <C> <C> <C>
George Nicholas, Chairman of the Board, Chief
Executive Officer and Assistant Secretary..... 1995 $233,492 $100,000 $ 4,927 282,866
Thomas G. Middleton, President, Chief Operating
Officer and Assistant Secretary............... 1995 208,144 25,000 6,500 141,433
Timothy W. Griffin, Vice President.............. 1995 95,185 10,000 2,925 21,013
Susan W. McCarthy, Vice President............... 1995 95,185 10,000 2,925 21,013
Karen S. Bausman, Vice President................ 1995 103,493 0 2,250 12,931
</TABLE>
- ------------
(1) Represents matching contributions by IMC under the IMC Savings Plan, a
defined contribution plan under Section 401(k) of the Internal Revenue Code,
as amended.
(2) Represents number of shares of Common Stock underlying options. Includes
options granted under the Partnership Option Plan, as amended.
EMPLOYMENT AGREEMENTS
The Company has employment agreements with George Nicholas, its Chairman
and Chief Executive Officer, and Thomas G. Middleton, its President and Chief
Operating Officer (the 'Employment Agreements').
Mr. Nicholas' previous employment agreement commenced on July 1, 1993 and
was replaced as of January 1, 1996. The previous agreement provided for an
annual salary of $220,000, plus an increase of $25,000 commencing each
September. In addition, the agreement provided for payment of a bonus of
$100,000 for the first 12-month period and $125,000 for each 12-month period
thereafter if the pre-tax gross operating income of the Company exceeded certain
specified levels.
Mr. Nicholas' current Employment Agreement commenced on January 1, 1996 and
terminates on December 31, 2001 (subject to a five-year extension). The
Employment Agreement provides for an annual salary of $475,000, plus an increase
each year of the greater of (i) the change in the cost of living in the Tampa,
Florida, or (ii) an amount equal to 10% of the base salary for the prior year,
but only if the Company has achieved an increase in net income on an earnings
per share basis of 10% or greater. In addition, the Employment Agreement
provides for payment of a bonus equal to 15% of the base salary of the relevant
year for each one percent by which the increase in net income on an earnings per
share basis exceeds 10% up to a maximum of 300% of his base salary. For example,
if the increase in net income on an earnings per share basis for a particular
year were 20%, the bonus payment would equal 150% of the base salary for such
year. The Employment Agreement also provides that the Company shall use its best
efforts to elect Mr. Nicholas to the Company's Board of Directors and to its
Executive Committee, if constituted. Mr. Nicholas' employment may be terminated
by the Company at any time for 'cause' (including material breach of the
Employment Agreement, certain criminal or intentionally dishonest and misleading
acts, breaches of confidentiality and failure to follow directives of
57
<PAGE>
<PAGE>
the Board). If Mr. Nicholas is terminated for cause or voluntarily terminates
his employment (in the absence of a Company breach or a 'change of control') he
does not receive any deferred compensation. Mr. Nicholas is entitled to deferred
compensation upon (i) his termination by the Company without cause, (ii) the
Company's failure to renew his Employment Agreement on expiration, (iii) death
or disability, (iv) voluntary termination after a material breach by the
Company, and (v) voluntary termination after a 'change of control' (defined as
any (A) acquisition of 50% or more of the equity of the Company before a public
offering, or 25% after a public offering, has occurred, (B) change in a majority
of the members of the Board excluding any change which was approved by the
Board, or (C) approval by the Company's stockholders of a liquidation or
dissolution of the Company, the sale of substantially all of its assets, or a
merger in which the Company's stockholders own a minority interest of the
surviving entity). The amount, if any, of deferred compensation payable to Mr.
Nicholas will be determined at the time of termination equal to the greater of
(i) his base salary for the remainder of the then-current term of the Employment
Agreement, or (ii) an amount equal to 150% of the highest annualized
compensation earned by him during the preceding three years; provided, however,
that if the deferred compensation calculation is made prior to January 1, 1997,
the deferred compensation shall be $3.0 million. Receipt of deferred
compensation is Mr. Nicholas' sole remedy in the event of a wrongful termination
by the Company. Mr. Nicholas' Employment Agreement contains a restrictive
covenant prohibiting him, for a period of 18 months following the termination of
employment for any reason, from competing with the Company within the
continental United States or from soliciting any employees from the Company who
are earning in excess of $50,000 per year. However, this restrictive covenant is
not applicable if Mr. Nicholas is terminated without cause or if the Company
defaults in the payment of deferred compensation to Mr. Nicholas.
Mr. Middleton's previous employment agreement commenced on September 1,
1993 and was replaced as of January 1, 1996. The previous agreement provided for
an annual salary of $200,000. Upon a change of control or an initial public
offering of stock of the Company, Mr. Middleton would have been entitled to a
payment of $250,000.
Mr. Middleton's current Employment Agreement commenced on January 1, 1996
and extends until December 31, 2001 (subject to a five-year extension). The
terms of Mr. Middleton's Employment Agreement are substantially the same as
those of Mr. Nicholas' Employment Agreement, with the exception that Mr.
Middleton's annual salary is $380,000, plus increases as provided therein.
The Company also has an employment agreement with David MacDonald, Vice
President. Mr. MacDonald's employment agreement commenced on January 1, 1996 and
extends until December 31, 1998, unless terminated upon 30 days' notice by
either party. The agreement provides for an annual salary of $145,000, plus
increases based on the percentage increase, if any, in the Consumer Price Index.
STOCK OPTION PLANS
On December 11, 1995, the Partnership approved the Partnership Option Plan.
In April, 1996, in anticipation of the transactions to be effected pursuant to
the Reorganization Plan, the Company's Board of Directors adopted and the
stockholders of the Company approved two separate plans to replace the
Partnership Option Plan: the Company Incentive Plan (the 'Incentive Plan') and
the Directors' Stock Option Plan (the 'Directors' Plan').
The maximum aggregate ownership interest in the Company which can be
granted pursuant to the Incentive Plan and the Directors' Plan is 12.0% of the
outstanding interest of the Company as such outstanding equity interests existed
as of December 11, 1995. Accordingly, the maximum number of shares which may be
subject to the grant of options under the Incentive Plan and the Directors' Plan
is 957,727 shares and 65,000 shares, respectively.
INCENTIVE PLAN
Purpose. The purpose of the Incentive Plan is to promote the interests of
the Company and its stockholders by attracting and retaining highly competent
individuals to serve as key employees and as non-employee advisors who will
contribute to the Company's success and to motivate such persons to achieve
long-term objectives which will inure to the benefit of the Company.
58
<PAGE>
<PAGE>
Administration/Eligible Participants. The Incentive Plan is administered by
a committee (the 'Committee') appointed by the Company's Board of Directors. The
persons eligible to receive stock option grants under the Incentive Plan are any
officer or other key employee of the Company or any affiliate who is in a
position to make a significant contribution to the management, growth or
profitability of the Company or any affiliate as determined by the Committee
('Key Employees'), and any consultant or independent contractor who is not an
employee of the Company or an affiliate but is in a position to make a
significant contribution to the management, growth or profitability of the
Company or any affiliate as determined by the Committee ('Non-Employee
Advisors').
The Committee has the sole power and authority, among other things to: (i)
designate persons to be participants in the Incentive Plan ('Participants'),
(ii) determine the type, amount, duration and other terms and conditions of
grants awarded to Participants, (iii) interpret and administer the Incentive
Plan and (iv) waive any condition or other restriction with respect to any
option granted pursuant to such plan.
Awards. The Company has granted options under the Incentive Plan to acquire
8.2% of the Common Stock of the Company. Of those grants, the following persons
received options:
<TABLE>
<CAPTION>
PARTICIPANT SHARES SUBJECT TO OPTIONS
- ------------------------------------------------------------------------------ -------------------------
<S> <C>
George Nicholas
Chairman and Chief Executive Officer........................................ 282,866
Thomas G. Middleton
President and Chief Operating Officer....................................... 141,433
Other key employees, directors and advisors................................... 246,283
----------
Total.................................................................... 670,582
----------
----------
</TABLE>
On December 11, 1995, the Partnership granted Mr. William Dacey an option
to acquire a 0.08% interest in the Partnership at an exercise price of $3,802
for each 0.01% interest in return for Mr. Dacey's assistance in organizing the
Partnership and negotiating the Partnership's initial credit facility.
Terms and Conditions of Options Granted Under the Incentive Plan.
Non-qualified and incentive stock options granted under the Incentive Plan are
subject to such terms, including exercise price, conditions and timing of
exercise, as may be determined by the Committee. However, all options shall be
granted with an exercise price of not less than 100% of the fair market value of
the interest in the Company subject to such options as of the date of each
grant. The Committee is authorized to grant appreciation rights to participants
in lieu of options.
Options granted on December 11, 1995 were granted at an exercise price of
$3,802 for each 0.01% interest in the Company as of December 11, 1995. Upon
completion of the Public Offering, options for each 0.01% interest in the
Partnership will, subject to vesting, be exercisable into 808.2 shares of Common
Stock at an exercise price of $4.70 per share. Sixty percent of all options
granted on December 11, 1995 vested upon their grant, with an additional 20% to
vest on the first anniversary of the grant date and the remaining 20% to vest on
the second anniversary of the grant date.
On May 22, 1996, the Option Committee granted options to new employees and
additional options to certain existing key employees and advisors. Options
exercisable into 40,000 shares of common stock at an exercise price of $16 per
share were granted to new employees, to vest 20% at the end of their first year
of employment and 1 2/3% each month thereafter, in order to be fully vested at
the end of five years. In addition, options exercisable into 55,151 shares were
also granted to existing employees and advisors at an exercise price of $16 per
share, to vest 60% on grant and 1 2/3% each month thereafter, in order to be
fully vested at the end of two years.
If the employment or advisor relationship of any Participant is terminated
for any reason other than death or disability, all unvested options held by such
Participant shall be automatically canceled, provided that all unvested options
of a Key Employee or Non-Employee Advisor will vest when the employee is
terminated by the Company without cause. Additionally, all unvested options will
vest upon the occurrence of a change of control. In effect, a change of control
is: (i) the adoption of a plan of reorganization, merger, share exchange or
consolidation of the Company with one or more other entities as a result of
which the holders of Common Stock as a group would receive less than 50% of the
voting power of the capital stock or other interests of the surviving or
resulting entity; (ii) the adoption
59
<PAGE>
<PAGE>
of a plan of liquidation or the approval of the dissolution of the Company;
(iii) the approval by the Board of Directors of an agreement providing for the
sale or transfer of the assets of the Company; or (iv) the acquisition of more
than 20% of the outstanding shares of Common Stock by any person within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended, if
such acquisition is not preceded by a prior expression of approval by the Board
of Directors.
The options granted under the Incentive Plan are exercisable for a period
of 10 years, provided, however, that if a Key Employee or Non-Employee Advisor
is terminated for cause, all unexercised options (whether vested or non-vested)
shall be immediately forfeited. In addition, if a Key Employee or Non-Employee
Advisor terminates such Participant's relationship with the Company voluntarily,
then all unexercised but vested options may be exercised for a period of six
months following such termination. If termination is as a result of disability
or death, the Participant (or such Participant's personal representative) shall
have a period of one year following such termination to exercise vested options.
All awards made to date under the Incentive Plan have been non-qualified
options.
Adjustments. In the event that the Committee determines any corporate
transaction or event affects the interest in the Company subject to options
granted pursuant to the 1995 Stock Plan, then the Committee may take such steps
to adjust the benefits due under the Incentive Plan in such a manner as to
prevent dilution or enlargement of benefits or potential benefits intended to be
made available under the Incentive Plan.
Transferability. Each award under the Incentive Plan shall be exercisable
only by the Participant (or the Participant's legal representative) and is not
subject to transfer except with the permission of the Committee to family
members without consideration.
Directors' Plan. The Directors' Plan provides for the automatic grant of
non-qualified stock options to directors who are not employees of the Company or
any affiliate. Each of Messrs. Goryeb, Legler and Wykle has received options to
purchase 6,466 shares of Common Stock at an exercise price of $4.70 per share.
Any other person who becomes an outside director will receive on the date of
election to the Board, options to purchase 6,466 shares of Common Stock at an
exercise price equal to the fair market value of the Common Stock on the date of
grant. All options granted under the Directors' Plan are 60% vested on the date
of grant, with an additional 20% vesting on the first and second anniversary
dates of grant, respectively. All unvested options will vest upon the occurrence
of a change of control. Options granted under the Directors' Plan will expire on
the earlier of the tenth anniversary date of grant, the date that the director
ceases to be a director for any reason other than death or disability, or one
year after a director ceases to be a director by reason of death or disability.
Industry Partners' Incentive Plan. At the time the Partnership became a
subsidiary of the Company, the Industry Partners were given an opportunity to
double the monthly dollar amount of mortgage loans which they committed to sell
to the Company. To encourage Industry Partners to continue to sell even more
mortgage loans than required under their commitments, the Company has created an
incentive option plan for Industry Partners (the 'Industry Partners' Incentive
Plan'). Under that Plan, options to acquire 10,000 shares of the Company's
common stock at the price at which shares are sold to the public in the Public
Offering will be awarded to Industry Partners each calendar quarter beginning
September 30, 1996. The 10,000 options will be allocated among those Industry
Partners which doubled their commitments, pro rata, to the extent the Industry
Partners exceeded that doubled commitment for the calendar quarter. The Industry
Partners' Incentive Plan will continue for five years, with a total of 200,000
options available under such Plan. All options granted will be exercisable for
five years after their respective dates of grant.
60
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the ownership
of the Common Stock after giving effect to the transactions described in the
Reorganization Plan, of: (i) each person known by the Company to own
beneficially five percent or more of the outstanding Common Stock immediately
prior to the Public Offering; (ii) each of the Company's directors; (iii) each
of the executive officers named in the Summary Compensation Table; and (iv) all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
THE PUBLIC OFFERING THE PUBLIC OFFERING
----------------------------- -----------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OF CLASS NUMBER PERCENT OF CLASS
- ----------------------------------------------------- --------- ---------------- --------- ----------------
<S> <C> <C> <C> <C>
ContiTrade Services Corporation(1) .................. 1,350,000 18.40% 1,350,000 12.80%
277 Park Avenue
New York, New York 10172
Branchview, Inc. .................................... 825,045 13.75 825,045 8.95
989 McBride Avenue
West Patterson, New Jersey 07424
JRJ Associates Inc. ................................. 573,414 9.56 573,414 6.22
20 Waterview Blvd.
Parsippany, New Jersey 07054
Cityscape Corp. ..................................... 454,455 9.09 454,455 5.92
565 Taxter Road
Elmsford, New York 10523-2300
Mortgage America .................................... 567,822 9.46 567,822 6.16
305 5th Street, Suite 200
Bay City, Michigan 48708
Investors Mortgage, a Washington LP(2) .............. 494,988 8.25 494,988 5.36
10220 N.E. Points Drive, Suite 200
Kirkland, Washington 98033
American Industrial Loan Association ................ 601,373 10.02 601,373 6.52
3420 Holland Road, Suite 107
Virginia Beach, Virginia 23452
The Money Store ..................................... 384,563 6.41 384,563 4.20
3301 C Street, Suite 100M
Sacramento, California 95816
George Nicholas(3) .................................. 715,173 10.65 715,174 7.62
3450 Buschwood Park Drive
Tampa, Florida 33618
Thomas G. Middleton(4) .............................. 188,209 3.04 188,209 2.02
3450 Buschwood Park Drive
Tampa, Florida 33618
Karen S. Bausman(5) ................................. 13,759 .23 13,759 .15
3450 Buschwood Park Drive
Tampa, Florida 33618
Susan W. McCarthy(6) ................................ 104,733 1.72 104,733 1.13
3450 Buschwood Park Drive
Tampa, Florida 33618
Timothy W. Griffin(6) ............................... 32,962 .55 32,962 .35
3450 Buschwood Park Drive
Tampa, Florida 33618
David McDonald(7) ................................... 365,288 5.97 365,288 4.00
3450 Buschwood Park Drive
Tampa, Florida 33618
Joseph P. Goryeb(8)(12) ............................. 577,293 8.78 577,293 7.72
Waterview Corporate Centre
20 Waterview Boulevard
Parsippany, New Jersey 07054-1267
</TABLE>
(table continued on next page)
61
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
THE PUBLIC OFFERING THE PUBLIC OFFERING
----------------------------- -----------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OF CLASS NUMBER PERCENT OF CLASS
- ----------------------------------------------------- --------- ---------------- --------- ----------------
<S> <C> <C> <C> <C>
Allen D. Wykle(8)(11) ............................... 3,880 .06% 3,880 .04%
3420 Holland Road
Virginia Beach, Virginia 23452
Mitchell W. Legler(8)(9) 22,487 .21 22,487 .37
Independent Drive, Suite 3104
Jacksonville, Florida 32202
All directors and executive officers as a group (13 2,051,543 31.64 2,051,543 21.41
persons)(10).......................................
</TABLE>
* Less than 1%.
(1) Includes 1,350,000 shares of Common Stock issuable upon the exercise of an
immediately exercisable Warrant.
(2) Shares owned through Investors Mortgage, a Washington LP. The voting power
with respect to these shares is held by Seattle Management Company the
general partner of Investors Mortgage, a Washington LP.
(3) Includes options to purchase 282,866 shares of Common Stock pursuant to the
Incentive Plan.
(4) Includes options to purchase 141,433 shares of Common Stock pursuant to the
Incentive Plan.
(5) Includes options to purchase 22,931 shares of Common Stock held pursuant to
the Incentive Plan.
(6) Includes options to purchase 31,013 shares of Common Stock held pursuant to
the Incentive Plan.
(7) Includes 272,000 shares of Common Stock owned by Equitysafe. Mr. McDonald,
who owns 61% of the partnership interest of Equitysafe, has voting and
investment control of the Common Stock owned by Equitysafe.
(8) Includes options to purchase 6,466 shares of Common Stock held pursuant to
the Director's Plan.
(9) Includes options to purchase 31,013 shares of Common Stock held pursuant to
the Incentive Plan.
(10) Includes options to purchase 670,582 shares of Common Stock held pursuant
to various stock option plans.
(11) Excludes 601,732 shares of Common Stock owned by American Industrial Loan
Association. Mr. Wykle, who owns 32% of the voting stock of American
Industrial Loan Association, has voting, but not investment control of the
Common Stock owned by American Industrial Loan Association. Mr. Wykle
disclaims beneficial ownership of the 601,732 shares of Common Stock owned
by American Industrial Loan Association.
(12) Includes 517,413 shares of Common Stock owned by JRJ Associates, Inc.
(formerly Champion Mortgage Co.). Mr. Goryeb has voting and investment
control of the Common Stock owned by JRJ Associates, Inc.
The following Industry Partners are not included in this table because they
own less than 5% of the Common Stock: Joel E. Furst and Stan L. Furst,
Equitysafe, Portfolio Placement Partners, Mr. Lillienfield, Equity Mortgage, a
Maryland LP and Investaid Corporation.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since its inception, the Company has had business relationships and engaged
in certain transactions with affiliated companies and parties as described
below. It is the policy of the Company to engage in transactions with related
parties only on terms that, in the opinion of the Company, are no less favorable
to the Company than could be obtained from unrelated parties and each of the
transactions described below conforms to that policy.
PARTNERSHIP AGREEMENT
The Partnership was formed as a limited partnership in 1993 and capitalized
pursuant to the Original Partnership Agreement (the 'Original Partnership
Agreement') dated as of July 1, 1993 among American Industrial Loan Association;
Champion Mortgage Co. Inc.; Cityscape Corp.; Equitysafe, a Rhode Island General
Partnership; Investors Mortgage, a Washington LP; Mortgage America Inc.;
Residential Money Centers; First Government Mortgage and Investors Corp.;
Investaid Corp.; New Jersey Mortgage and Investment Corp.; George Nicholas;
certain members of management; and IMCI, the general partner. Pursuant to the
Reorganization Plan and prior to the closing of the Public Offering, the
Partnership will become a wholly-owned subsidiary of the Company. The
Partnership is divided into Full Shares (representing a 9.090% ownership
interest) and Half Shares (representing a 4.545% ownership interest). The
Industry Partners each own either a Full Share or a Half Share of the
Partnership. The Management Partners own a Half Share in the aggregate, and Mr.
Nicholas owns an 8.09% interest and an additional 1% interest through IMCI. The
Industry Partners, the Management Partners and Mr. Nicholas are collectively
referred to as the 'LPs.' Each LP owning a Full Share contributed $100,000 to
the Partnership upon formation and each LP owning a Full Share, except for Mr.
Nicholas, was required to make additional contributions in either loan volume
(via foregone premiums) or in cash until their respective capital contribution
reached $380,000. Foregone premiums represent the difference in the amount paid
by the Partnership for mortgage loans and the value set forth in a price
schedule (estimated fair value) delivered to the LP at the time the mortgage
loans are purchased. As of December 31, 1993, the LPs, with the exception of Mr.
Nicholas, had contributed to the Partnership the aggregate amount of $1.43
million, with total contributions increasing from $1.8 million to $3.9 million
at December 31, 1994. Additional contributions in the amount of $20,000 were
received during 1995. Mr. Nicholas, who is also the Chief Executive Officer of
the Company, was required to make an additional contribution up to a total
capital balance of $380,000. For this purpose, Mr. Nicholas received a special
allocation of profits, as defined in the Original Partnership Agreement, for the
gain on sale of any loans originated from non-LP sources, up to a maximum of
$40,000 per month. Mortgage sales gains represent the excess of the sales price
over the amount paid by the Partnership. As of December 31, 1994, Mr. Nicholas
had contributed special allocation profits of $280,000.
Pursuant to the First Amended and Restated Partnership Agreement, the
Partnership was obligated to make aggregate cash distributions to the LPs equal
to 45% of the Partnership's net profits to enable the LPs to pay taxes owed in
respect of their Partnership interest (the 'Tax Distributions'). At March 31,
1996, the Partnership was required to make Tax Distributions in the aggregate
amount of $5.7 million. The following LPs agreed to forego receipt of cash in
respect of the Tax Distributions: George Nicholas; Branchview, Inc.; JRJ
Associates Inc.; Cityscape Corp.; New Jersey Mortgage and Investment Corp.;
American Industrial Loan Association; Investaid Corp.; Equity Mortgage, a
Maryland LP; First Government Mortgage and Investors Corp.; and The Money Store.
All such debt will be repaid from the proceeds of the Public Offering. See 'Use
of Proceeds.'
Under the terms of the First Amended and Restated Partnership Agreement,
each of the LPs owning a Full Share is required to sell to the Partnership, on
average, $1.0 million per month in loan volume ($500,000 per month for each LP
owning a Half Share), at market prices (the 'Mortgage Loan Commitments').
The First Amended and Restated Partnership Agreement was amended by the
First Amendment as of March 15, 1994 and the Second Amendment as of July 8,
1994, and later restated as the Second Amended and Restated Partnership
Agreement (the 'Second Amended and Restated Partnership Agreement') on November
1, 1994. Equity Mortgage, a Maryland LP, joined the Partnership on
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February 1, 1994. The Money Store joined the Partnership on November 29, 1994.
On October 1, 1994, Equitysafe sold one half of its Full Share in the
Partnership to Portfolio Placement Partners.
The Second Amended and Restated Partnership Agreement was amended and
restated as the Third Amended and Restated Partnership Agreement (the 'Third
Amended and Restated Partnership Agreement') in November, 1995. During 1995,
four partnership changes occurred: Residential Money Centers sold its interest
to Branchview, Inc. on July 31, 1995; Champion Mortgage Co. Inc. transferred its
interest to JRJ Associates Inc. on September 29, 1995; First Government Mortgage
and Investors Corp. sold its interest to Gerald S. Lilienfield on December 28,
1995; and New Jersey Mortgage and Investment Corp. transferred its interest to
Stan L. Furst and Joel E. Furst on December 31, 1995.
PRE-IPO AGREEMENT
Pursuant to the Pre-IPO Agreement, dated as of March 30, 1996, among the
LPs, each of the LPs agreed with the Partnership and the Company that it would
exchange its partnership interests for shares of Common Stock as described in
the Reorganization Plan.
Pursuant to the Third Amended and Restated Partnership Agreement, each LP
had a Mortgage Loan Commitment to sell a certain volume of mortgage loans to the
Partnership. Pursuant to the Pre-IPO Agreement, certain LPs have agreed to
double their Mortgage Loan Commitments or its economic equivalent to $2.0
million a month ($1.0 million for LPs owning a Half Share). In addition,
pursuant to the Pre-IPO Agreement, the LPs will be eligible for 10,000 options
('Incentive Options') to be divided each fiscal quarter among those LPs that
have (i) committed to double their monthly loan volumes and (ii) exceeded their
doubled commitment. The Company believes the Incentive Options will encourage
LPs to increase their loan volume sold to the Company.
AGREEMENTS WITH CONTIFINANCIAL
Warehouse Facility. The Company and ContiFinancial are party to the Amended
and Restated Loan and Security Agreement (the 'Wholesale Warehouse Mortgage
Agreement'), dated as of September 1, 1995 (together with its predecessor
agreement, the 'Warehouse Facility'). Pursuant to the Warehouse Facility, the
Company has a $125.0 million line of credit that is secured by its mortgage
loans. Amounts outstanding under the Warehouse Facility bear interest at a rate
of LIBOR plus 1.5% per annum. During fiscal years 1994 and 1995 and the three
months ended March 31, 1996, the Company made interest payments under the
Warehouse Facility of $0.5 million, $5.1 million and $2.0 million, respectively.
Standby Agreement. The Company and ContiFinancial are party to the Standby
Agreement through which the Company funds the tax consequences of the
recognition of the securitization gain on sale and other working capital needs
prior to receipt of any cash flow from the residual interests in its
securitizations. Amounts borrowed under the Standby Agreement bear interest at a
rate of LIBOR plus 1.7% per annum. The Standby Agreement expires on January 12,
2000. ContiFinancial has agreed to lend the Company the Additional Draw of $10.0
million under the Standby Agreement which bears interest at a rate of LIBOR plus
8.0% and which amount must be repaid with a portion of the net proceeds from the
Public Offering. The Company has borrowed the full $15.0 million available under
the Standby Agreement and $1.2 million under the Additional Draw. During fiscal
years 1994 and 1995 and the three months ended March 31, 1996, the Company made
interest payments to ContiFinancial under the Standby Agreement of $0, $0.2
million and $0.3 million, respectively.
Investment Banking Relationship. As part of the 1995 Agreement, the Company
and ContiFinancial entered into an agreement for investment banking services
dated January 12, 1995 (the '1995 Investment Banking Agreement'). The 1995
Investment Banking Agreement replaced a prior agreement between the parties
under the 1993 Agreement (together with the 1995 Investment Banking Agreement,
the 'Investment Banking Agreements'). Pursuant to the 1995 Investment Banking
Agreement, unless the Company determines, in its sole discretion, that
materially better terms are available from others, ContiFinancial has a right
(the 'Retention Right') to act as underwriter, placement agent or sponsor
('Mortgage Banker') with respect to $2.0 billion of placement or underwriting of
securitizations and whole loan acquisitions or dispositions of the Company
mortgage
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loans (the 'Mortgage Transactions'). In addition, ContiFinancial may retain all
underwriting fees from the Mortgage Transaction in any instance in which it acts
as Mortgage Banker for the Company, receive information from the Company
regarding any Mortgage Transaction in which it is not chosen to be the Mortgage
Banker and receive certain minimum allocations of Retention Rights on a per
annum basis which, if not fulfilled, are rolled over into the minimum allocation
of Retention Rights for the following year. The 1995 Investment Banking
Agreement expires in 2000, unless extended through the mutual agreement of the
parties. Under the Investment Banking Agreements, the Company paid $0.3 million,
$0.2 million and $0 million, respectively, for services as Mortgage Banker in
1994, 1995 and the three months ended March 31, 1996.
Conti Warrant. In August, 1993, the Company entered into the 1993 Agreement
with Conti-Financial which provided IMC with the $15.0 million Standby Agreement
to fund retention of excess servicing receivables and certain investment banking
services and also committed ContiFinancial to provide a warehouse facility to
IMC, subject to the satisfaction of certain conditions. Pursuant to the 1993
Agreement, IMC agreed to share a portion of its equity with ContiFinancial
through an agent fee based on a percentage of increases in equity (as defined)
at the termination of the 1993 Agreement. On January 12, 1995, IMC and
ContiFinancial entered into the 1995 Agreement which replaced the 1993 Agreement
and provided for agent fees to ContiFinancial based on the fair market value of
the Company (as defined in the 1995 Agreement). The amount of the agent fee
ranges from 15% to 25% of the fair market value of the Company dependent upon
whether ContiFinancial or IMC elects to terminate the 1995 Agreement. Pursuant
to the 1995 Agreement, the Conti VSA was established. See 'Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Transactions with ContiFinancial -- Sharing of Proportionate Value of Equity.' A
professional valuation firm valued the Company as of December 31, 1995 in order
to calculate the value of the Conti VSA at that time. The Conti VSA was valued
at $5.9 million. The Conti VSA was converted into the Conti Option effective
December 31, 1995 by an agreement executed March 26, 1996. Upon the Public
Offering, the Conti Option will be converted into the Conti Warrant. The Conti
Warrant will contain certain dilution protections in favor of ContiFinancial,
and will grant ContiFinancial certain registration rights. After the Public
Offering, the Conti Warrant will be exercisable for 1.35 million shares (giving
effect to Conti Financial's proposed sale of 10% of its interest in the Conti
Warrant) of Common Stock subject to adjustment if the Company issues Common
Stock below fair market value. See 'The Reorganization Plan.'
ADDITIONAL SECURITIZATION TRANSACTION EXPENSE
The Company has entered into residual sharing arrangements with
ContiFinancial in connection with its securitizations pursuant to which the
Company arranges to have issued to ContiFinancial a percentage of the residual
interest in the related REMIC trust in exchange for cash. ContiFinancial
received 50% of the residual interests in the Company's 1994-1 securitization
valued at $3.0 million in exchange for $2.1 million, 50% of the residual
interests in the Company's 1995-1 securitization valued at $4.2 million in
exchange for $3.3 million, 100% of the residual interests in the Company's
1995-2 securitization valued at $12.4 million in exchange for $10.0 million, 55%
of the residual interests in the Company's 1995-3 securitization valued at $8.5
million in exchange for $5.1 million, 50% of the residual interests in the
Company's 1996-1 securitization valued at $9.5 million in exchange for $6.2
million. See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Transactions with ContiFinancial -- Additional
Securitization Transaction Expense.'
IMC ASSOCIATES, INC.
IMC Associates, Inc. ('IMC Associates') was formed to lease a skybox suite
in the Ice Palace stadium for games of the Tampa Bay Lightning, a national
hockey league franchise. The Company purchases tickets for the hockey games from
IMC Associates for an aggregate amount equal to the $75,000 annual lease cost of
the skybox. IMC Associates is owned by George Nicholas, the Chairman of the
Board and Chief Executive Officer of the Company.
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GENERAL COUNSEL
The Company paid $28,000 in legal fees in 1995 to Mr. Legler who acted as
general counsel for the Company through his professional association, Mitchell
W. Legler, P.A. The Company anticipates it will pay approximately $250,000 in
legal fees to Mr. Legler in 1996. In addition, on December 11, 1995, Mr. Legler
was granted options to purchase 21,013 shares of Common Stock at an exercise
price of $4.70 per share pursuant to the 1995 Plan for advisory services to the
Company and options to purchase 6,466 shares of Common Stock at an exercise
price of $4.70 per share pursuant to the Directors' Plan and options to purchase
10,000 shares of Common Stock at an exercise price of $16.00 per share pursuant
to the Incentive Plan.
TRANSACTIONS WITH PARTNERS
Lakeview
The Company entered into the Lakeview Facility in January, 1996 with
Lakeview, an affiliate of Branchview, Inc. The Company expects to repay
outstanding amounts under the Lakeview Facility with a portion of the proceeds
of the Public Offering. See 'Use of Proceeds.'
JRJ Associates Inc.
JRJ Associates Inc. sold loans in the aggregate amount of $15.6 million to
the Company during 1995 and has agreed to sell $24.0 million in loans to the
Company in 1996. Mr. Goryeb, a member of the Board of Directors of IMC, is
Chairman and Chief Executive Officer of Champion Mortgage Co. Inc., an affiliate
of JRJ Associates Inc.
Cityscape Corp.
Cityscape Corp. sold loans in the aggregate amount of $8.7 million to the
Company and contributed $420,000 to the Company in lieu of additional loan sales
in satisfaction of its aggregate loan sale commitments for 1995 and 1996.
Mortgage America Inc.
Mortgage America Inc. sold loans in the aggregate amount of $9.4 million to
the Company during 1995. The Partnership determined that $9.4 million of loan
sales was sufficient to meet Mortgage America's loan sale commitment to the
Company for 1995 based on several factors, including Mortgage America's sale to
the Company of substantially more mortgage loans than its commitment in 1994.
Mortgage America has agreed to sell $24.0 million in loans to the Company in
1996.
Investors Mortgage, a Washington LP
Investors Mortgage, a Washington LP ('Investors Mortgage'), sold loans in
the aggregate amount of $5.5 million to IMC during 1995. The Partnership
determined that $5.5 million of loan sales was sufficient to meet Investors
Mortgage's loan sale commitment to the Company for 1995 based on several
factors, including Investors Mortgage's commitment to sell at least $6.5 million
of mortgage loans in excess of its commitment to the Company in 1996. Investors
Mortgage has agreed to sell $12.0 million in loans to the Company in 1996.
American Industrial Loan Association
American Industrial Loan Association sold loans in the aggregate amount of
$38.1 million to IMC during 1995 and has agreed to sell $24.0 million in loans
to IMC in 1996. Mr. Wykle, a member of the Board of Directors of IMC, is
Chairman and Chief Executive Officer of American Industrial Loan Association. In
January, 1996, IMC and American Industrial Loan Association entered into a
warehouse financing facility pursuant to which IMC committed to lend American
Industrial Loan Association $8.0 million secured by mortgage loans. Borrowings
under the facility bear interest at a rate
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of LIBOR plus 1.75%, and American Industrial Loan Association paid IMC $35,100
in interest payments during the first three months of 1996.
TRANSACTIONS WITH EQUITYSTARS
At the time IMC acquired the assets of Equitystars, Equitystars was
licensed as a mortgage banker in certain states in which IMC was not so
licensed. In order to enable IMC to benefit immediately from Equitystars assets,
IMC and Equitystars entered into a warehouse credit facility (the 'Equitystars
Warehouse') and a management agreement pursuant to which IMC directs
substantially all of the business activities of Equitystars (the 'Management
Agreement'). Pursuant to the Equitystars Warehouse, IMC has committed to fund,
from time to time, up to $10 million of Equitystars' mortgage loan origination,
subject to certain conditions. Amounts outstanding under the Equitystars
Warehouse bear interest at an annual rate equal to LIBOR. The Equitystars
Warehouse is for a term of one year (from January 2, 1996) and may be terminated
by IMC quarterly, on 30 days notice. Pursuant to the Management Agreement, IMC
controls all business activities of Equitystars, and Equitystars sells all of
its mortgage loans to IMC. IMC receives a management fee for its services
substantially equal to the difference between the interest earned on the
mortgage loans during the time they are funded through the Equitystars Warehouse
and the LIBOR due to IMC under the Warehouse Line. David McDonald is the general
partner and 61% owner of Equitysafe, an Industry Partner and owns a portion of
the shares of the Convertible Preferred Stock. Equitysafe owns 4.5% of the
limited partnership interests of IMC (which will be exchanged for 272,000 shares
of Common Stock pursuant to the Reorganization Plan).
CERTAIN ACCOUNTING CONSIDERATIONS RELATING TO THE CONTI VSA
BACKGROUND
As originally conceived by the founders of IMC, the general equity of the
Company would be allocated (i) 65% to the limited partners which were to sell
loans to the Company to provide its core business volume, (ii) 15% to management
and (iii) 20% to ContiFinancial which was to provide the initial credit
facilities necessary for the Company's business. However, due to
ContiFinancial's lender position and the complexity of ContiFinancial's being a
partner in a partnership (as opposed to a stockholder in a corporation),
ContiFinancial did not wish to take a 20% partnership interest in the Company.
Instead, since the formation of IMC in 1993, IMC has operated under three value
sharing agreements with ContiFinancial (the 'Conti VSA').
1993 Agreement
The 1993 Agreement between ContiFinancial and the Company was entered into
at the time of the founding of the Company. That agreement provided for
ContiFinancial to receive an amount calculated as an increasing percentage of
the partners' capital account in excess of the amount actually contributed by
the partners.
1995 Agreement
On January 12, 1995, the 1993 Agreement was replaced by the 1995 Agreement
which granted ContiFinancial a right to receive an amount equal to 20% of the
fair market value (as defined) of the Company at the end of the ten-year term of
the agreement, or upon any disposition or windup of the Company, as well as 20%
of any distributions to partners of the Company in excess of the distributions
necessary to allow the partners to pay income taxes on their respective share of
the Company's earnings. ContiFinancial also had the right to demand payment (a
'put') at 15% of the fair market value of the Company, and the Company had the
right to satisfy ContiFinancial's VSA (a 'call') by paying ContiFinancial 25% of
the fair market value of the Company.
1996 Conti Warrant
In March, 1996, the 1995 Agreement was replaced by the Conti Option
entitling ContiFinancial upon exercise to approximately 18% of the equity in the
Partnership. Upon the exchange by the
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Industry Partners of their partnership interests in the Partnership for Common
Stock, the Conti Option automatically converts into the Conti Warrant
exercisable for 1.5 million shares of the Common Stock (subject to certain
adjustments). The Conti Warrant will not contain any put feature permitting
ContiFinancial to require cash for the Conti Warrant.
ACCOUNTING PRINCIPLES
Under Emerging Issues Task Force Issue 88-9 ('EITF 88-9'), the accounting
task force reached a consensus that securities such as put warrants, where the
issuer can be required to redeem the securities for cash, are treated as a
liability on the issuer's balance sheet at the value assigned to that put
warrant at the time of issue. Moreover, EITF 88-9 concluded that where a
security has a mandatory redemption feature or put at an amount which varies
based, for example, upon the value of the issuer, then any increase in value
from accounting period to accounting period is treated as an increase in the
amount of liability recorded and as an additional expense in the period of
increased value.
ACCOUNTING TREATMENT OF CONTI VSA
Applying generally accepted accounting principles ('GAAP'), the Company
concluded that as the 1993 Agreement provided for ContiFinancial to receive a
cash amount at the end of the agreement's term or earlier on the happening of
certain contingencies (such as default), the amount which was due to
ContiFinancial from time to time should be booked as a liability. Applying the
task force determinations described above, the existence of the put feature of
the 1995 Agreement required the Company to record a liability for the value
assigned to the put feature at issuance. Moreover, any increase in the value of
the put feature of the 1995 Agreement was treated by the Company as a charge to
earnings for the period during which the increase in value occurred.
CALCULATION OF BOOK ENTRIES FOR CONTI VSA
The partner's capital account balance did not exceed the amounts
contributed by the Industry Partners when the 1993 Agreement was executed. Thus,
no liability was initially booked upon execution of that agreement. Moreover, as
the formula for calculating the value of the Conti VSA produced no value during
1993 (when the Company had a loss) no charge to earnings was booked during the
year. However, in 1994, the Company earned $4.7 million (without consideration
of the value of the Conti VSA) and the corresponding increase in the partner's
capital accounts in excess of contributions resulted in the Conti VSA under the
1993 Agreement having a value of $1.7 million. Accordingly, during 1994, the
Company booked a liability and an expense of $1.7 million.
The 1995 Agreement provided a calculation of the value of Conti VSA based
not on the partners' capital account but on fair market value. A professional
valuation firm valued the Company as of December 31, 1995 in order to calculate
the value of the Conti VSA at that time. As ContiFinancial could exercise its
put for 15% of the fair market value of the Company, that 15% was calculated at
$5.9 million as of December 31, 1995. The Company, as reflected above, had
already valued the Conti VSA at the end of 1994 at $1.7 million. Thus, the
increase over that amount, or $4.2 million, was recorded as an expense in 1995.
The appraisal of the fair market value of the Company as of December 31,
1995, was based on the assumption that the Conti VSA under the 1995 Agreement
was outstanding as a put. The appraisal firm arrived at the fair market value of
the Company as a non-public company by applying a multiplier of eight times the
Company's 1995 earnings (reduced by a 40% income tax rate) of $6.5 million
producing a gross value for the Company of approximately $51 million. The
appraisers determined that it was unlikely that the Company would find a willing
buyer to purchase the Company unless that buyer simultaneously eliminated the
Conti VSA. The Company could call the Conti VSA only by paying ContiFinancial
25% of the Company's fair market value. Thus, the appraisers determined that the
fair market value of the Company as of December 31, 1995 was approximately $40
million. The Company therefore concluded that the value of the Conti VSA (the
put for 15% of the Company's value) was approximately $5.9 million.
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FIRST QUARTER 1996
On March 26, 1996, the Conti VSA under the 1995 Agreement was replaced by
the Conti Option which has no put feature or right for ContiTrade to demand that
it be redeemed for cash. Accordingly, the periodic determination of the
liability and charge to earnings which had applied to the Conti VSA under the
1993 and 1995 Agreements does not apply to the Conti Option and will not apply
to the Conti Warrant. However, the fair market value of the Conti Option on the
date of grant, March 26, 1996, in excess of amounts previously recorded amounted
to $2.6 million and has been charged to expense in the first quarter of 1996
under GAAP.
RECLASSIFICATION OF LIABILITY TO STOCKHOLDERS' EQUITY
Under GAAP, ContiFinancial's right to receive cash for the Conti VSA under
the 1993 and the 1995 Agreements resulted in a charge against earnings and an
equivalent reduction in the Company's stockholders' equity. The substitution of
the Conti Option for the 1995 Agreement on March 26, 1996 eliminated any put or
other right for ContiFinancial to obtain cash from the Company for the Conti
VSA. That substitution resulted in the reclassification of the liabilities
associated with the value of the Conti VSA to the Company's stockholders'
equity. Accordingly, on March 26, 1996, the Company's stockholders' equity was
increased by the sum of the 1994 liability of $1.7 million, the 1995 additional
liability of $4.2 million and the additional liability reflected in the first
quarter of 1996 for the value of the Conti VSA on March 26, 1996. Also on March
26, 1996 the value of the Conti Option in excess of amounts previously recorded
was charged to expense with a corresponding amount reflected in stockholders'
equity. Moreover, neither the Conti Option nor the Conti Warrant will affect
earnings of the Company after March 26, 1996.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 50,000,000 shares
of Common Stock, par value $0.01 per share, and 10,000,000 shares of Preferred
Stock, par value $0.01 per share (the 'Preferred Stock'). As of the date of this
Prospectus, there were issued and outstanding 6,000,000 shares of Common Stock
held of record by stockholders and an escrow agent. Immediately prior
to the completion of the Public Offering, 5,181,783 shares of Common Stock are
held by the Industry Partners, shares will be issued to the Management
Partners and 545,455 shares are held by Mr. Nicholas pursuant to the
Reorganization Plan, and the shares held by the Partnership will be cancelled.
In addition, pursuant to the terms thereof, all the outstanding shares of
Convertible Preferred Stock will be converted immediately prior to the
completion of the Public Offering into the number of shares of Common Stock
arrived at by dividing the aggregate liquidation preference thereof ($2,281,000
plus 8.0% per annum thereon from January 1, 1996 until the date of conversion)
by the initial public offering price per share of the Common Stock. An
additional 670,582 shares of Common Stock will be issuable upon the exercise of
stock options held by officers, directors and key outside advisors. See
'Management -- Stock Option Plans.' Of the shares of Common Stock issuable upon
the mandatory conversion of the Convertible Preferred Stock, the shares issuable
upon conversion of 2,750 shares of Convertible Preferred Stock will be held in
escrow pending the satisfaction by June 30, 1998 of certain conditions in
connection with the Equitystars Acquisition. Depending on the extent to which
such conditions are satisfied, the shares will be released to the stockholders
of Equitystars, with any remaining shares returned to the Company and canceled.
In certain circumstances, additional shares of Common Stock may be issued to the
stockholders of Equitystars. See 'Business -- Loans -- Acquisition of
Equitystars.'
The following description is qualified in its entirety by reference to the
Company's Articles of Incorporation and Bylaws, which are filed as exhibits to
the registration statement of which this Prospectus is a part. No information is
set forth concerning the Convertible Preferred Stock, which will not be
outstanding following the completion of the Public Offering.
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COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Cumulative voting in
the election of directors is not permitted, which means that holders of more
than one half of the outstanding shares of Common Stock can elect all the
directors of the Company. Subject to preferences that may be granted to holders
of Preferred Stock, holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. See 'Dividend Policy.' In the event of liquidation,
dissolution or winding up of the Company, holders of Common Stock are entitled
to share ratably in all assets remaining after payment of liabilities and the
liquidation preference, if any, which may be granted to the holders of Preferred
Stock. Holders of Common Stock have no conversion, preemptive or other rights to
subscribe for additional shares or other securities, and there are no redemption
or sinking fund provisions with respect to such shares. The issued and
outstanding shares of Common Stock are, and the shares of Common Stock offered
hereby will be upon payment therefor, validly issued, fully paid and
nonassessable.
PREFERRED STOCK
The Board of Directors has the authority to issue up to 10,000,000 shares
of Preferred Stock and to fix the number of shares constituting any such class
or series and the rights and preferences thereof, including dividend rights,
terms of redemption (including sinking fund provisions), redemption price or
prices, voting rights, conversion rights and liquidation preferences of the
shares constituting such class or series, without any further vote or action by
the Company's stockholders.
The authorized but unissued shares of Common Stock and Preferred Stock are
available for future issuance without stockholder approval. These additional
shares may be utilized for a variety of corporate purposes, including future
public offerings to raise additional capital, corporate acquisitions and
employee benefit plans. The existence of authorized but unissued and unreserved
Common Stock and Preferred Stock may enable the Board of Directors to issue
shares to persons friendly to current management which could render more
difficult or discourage an attempt to obtain control of the Company by means of
a proxy contest, tender offer, merger, or otherwise, and thereby protect the
continuity of the Company's management.
CERTAIN STATUTORY PROVISIONS
Control Share Acquisitions
The Company is subject to several anti-takeover provisions under Florida
law that apply to a public corporation organized under Florida law unless the
corporation has elected to opt out of such provisions in its Articles of
Incorporation or (depending on the provision in question) its Bylaws. The
Company has not elected to opt out of these provisions. The Florida Business
Corporation Act (the 'Florida Act') contains a provision that prohibits the
voting of shares in a publicly held Florida corporation which are acquired in a
'control share acquisition' unless the board of directors approves the control
share acquisition or the holders of a majority of the corporation's voting
shares (exclusive of shares held by officers of the corporation, inside
directors or the acquiring party) approve the granting of voting rights as to
the shares acquired in the control share acquisition. A control share
acquisition is defined as an acquisition that immediately thereafter entitles
the acquiring party to vote in the election of directors within each of the
following ranges of voting power: (i) one-fifth or more but less than one-third
of such voting power; (ii) one-third or more but less than a majority of such
voting power and; (iii) a majority or more of such voting power. This statutory
voting restriction is not applicable in certain circumstances set forth in the
Florida Act.
Affiliated Transactions
The Florida Act also contains an 'affiliated transaction' provision that
prohibits a publicly-held Florida corporation from engaging in a broad range of
business combinations or other extraordinary corporate transactions with an
'interested stockholder' unless (i) the transaction is approved by a
70
<PAGE>
<PAGE>
majority of disinterested directors before the person becomes an interested
stockholder, (ii) the interested stockholder has owned at least 80% of the
Company's outstanding voting shares for at least five years, or (iii) the
transaction is approved by the holders of two-thirds of the Company's voting
shares other than those owned by the interested stockholder. An interested
stockholder is defined as a person who, together with affiliates and associates,
beneficially owns (as defined in Section 607.0901(1)(e), Florida Statutes) more
than 10% of the Company's outstanding voting shares.
Indemnification
The Florida Act authorizes Florida corporations to indemnify any person who
was or is a party to any proceeding (other than an action by, or in the right
of, the corporation), by reason of the fact that he or she is or was a director,
officer, employee, or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee, or agent of another
corporation or other entity, against liability incurred in connection with such
proceeding, including any appeal thereof, if he or she acted in good faith and
in a manner he or she reasonably believed to be in, or not opposed to, the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
In the case of an action by or on behalf of a corporation, indemnification may
not be made if the person seeking indemnification is adjudged liable, unless the
court in which such action was brought determines such person is fairly and
reasonably entitled to indemnification. The indemnification provisions of the
Florida Act require indemnification if a director or officer has been successful
on the merits or otherwise in defense of any action, suit or proceeding to which
he or she was a party by reason of the fact that he or she is or was a director
or officer of the corporation. The indemnification authorized under Florida law
is not exclusive and is in addition to any other rights granted to officers and
directors under the Articles of Incorporation or Bylaws of the corporation or
any agreement between officers and directors and the corporation. A corporation
may purchase and maintain insurance or furnish similar protection on behalf of
any officer or director against any liability asserted against the officer or
director and incurred by the officer or director in such capacity, or arising
out of the status, as an officer or director, whether or not the corporation
would have the power to indemnify him or her against such liability under the
Florida Act.
Limitation of Liability
Under the Florida Act, a director is not personally liable for monetary
damages to the Company or any other person for acts or omissions in his or her
capacity as a director except in certain limited circumstances such as certain
violations of criminal law and transactions in which the director derived an
improper person benefit. As a result, stockholders may be unable to recover
monetary damages against directors for actions taken by them which constitute
negligence or gross negligence or which are in violation of their fiduciary
duties, although injunctive or other equitable relief may be available. These
provisions will not limit the liability of the Company's directors under the
Federal securities laws.
PROVISIONS OF ARTICLES OF INCORPORATION AND BYLAWS
Certain provisions of the Company's Articles of Incorporation and Bylaws
summarized in the following paragraphs may have an anti-takeover effect and may
delay, defer or prevent a tender offer or takeover attempt that a stockholder
might consider in its best interest, including those attempts that might result
in a premium over the market price for the shares held by stockholders.
Classified Board of Directors
Under the Company's Articles of Incorporation and Bylaws, the Board of
Directors of the Company is divided into three classes, with staggered terms of
three years each. Each year the term of one class expires. The Company's
Articles of Incorporation provide that any vacancies on the Board of Directors
shall be filled only by the affirmative vote of a majority of the directors then
in office, even if less than a quorum.
71
<PAGE>
<PAGE>
Supermajority Required for Actions by Written Consent
The Company's Articles of Incorporation provide that all actions taken by
the stockholders must be taken at an annual or special meeting of the
stockholders or by the written consent of the holders of 90% of the Company's
outstanding voting shares. This provision may be amended only with the
affirmative vote of the holders of 90% of the Company's outstanding voting
shares.
Special Meetings of Stockholders
The Articles of Incorporation provide that special meetings of the
stockholders may be called by only a majority of the members of the Board of
Directors, the Chairman of the Board or the holders of not less than 35% of the
Company's outstanding voting shares. This provision will make it more difficult
for stockholders to take actions opposed by the Board of Directors.
Advance Notice Requirements
Under the Company's Bylaws, stockholders will be required to comply with
advance notice provisions with respect to any proposal submitted for stockholder
vote, including nominations for elections to the Board of Directors. To be
timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the Company not less than 60 days nor more
than 90 days prior to the meeting; provided, however, that in the event that
less than 70 days' notice or prior public disclosure of the date of the meeting
is given or made to stockholders, notice by the stockholder to be timely must be
received no later than the close of business on the 10th day following the day
on which such notice of the date of the meeting was mailed or such public
disclosure was made. These provisions may preclude some stockholders from
bringing matters before the stockholders at an annual or special meeting or from
making nominations for directors at an annual or special meeting.
TRANSFER AGENT
The transfer agent for the Common Stock is American Stock Transfer
Corporation.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Public Offering, the Company will have outstanding
an aggregate of 11,065,092 shares of Common Stock. Of these shares, 3,100,000 of
the shares sold in the Public Offering will be freely tradable without
restriction or further registration under the Securities Act, except for any
shares purchased by 'affiliates' of the Company as that term is defined under
the Securities Act and all of the 310,000 shares purchased pursuant to the
Directed Share Program will be subject to the lock-up agreement described below.
The remaining 7,965,092 shares held by existing stockholders of the Company
(including the Industry Partners) are 'restricted securities' within the meaning
of Rule 144 under the Securities Act and will become eligible for sale subject
to the provisions of Rule 144. Of such shares, none of such shares of Common
Stock have been held for more than two years by stockholders who are not
affiliates of the Company and will be eligible for sale in the public market
upon the expiration of the referenced lock-up agreements in reliance on Rule
144(k) under the Securities Act.
In general, under Rule 144 under the Securities Act as currently in effect,
a person (or persons whose shares are aggregated), including an affiliate, may
sell an amount of restricted securities which were last purchased from the
issuer or an affiliate of the issuer a minimum of two years prior to such sale,
such that, within any three-month period, such person's sales do not exceed the
greater of 1% of the then outstanding shares of the Company's Common Stock
(110,651 shares immediately after the Public Offering), or the average weekly
trading volume in the Common Stock on Nasdaq during the four calendar weeks
preceding the date on which notice of such sale is filed under Rule 144(h) of
the Securities Act, or if no such notice is required, the date of receipt of the
order to execute the transaction. In addition, under Rule 144(k), a stockholder
who is not deemed an affiliate, and has not been an affiliate for at least three
months prior to the sale, is entitled to sell restricted securities which were
last purchased from the issuer or an affiliate of the issuer a minimum of at
least three years prior
72
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<PAGE>
to such sale without complying with the foregoing requirements. In calculating
the two and three year holding periods described above, a holder of restricted
securities can include the holding period of a prior owner who was not an
affiliate.
Notwithstanding the limitations on sale described above, otherwise
restricted securities may be sold at any time through an effective registration
statement pursuant to the Securities Act.
The Company has agreed with the Underwriters that it will not, without the
prior written consent of the Representatives, offer, sell, contract to sell or
otherwise dispose of any shares of Common Stock or any security convertible or
exchangeable for Common Stock, for a period of 180 days after the date of the
completion of the Public Offering, subject to certain limited exceptions. Any
person purchasing shares of Common Stock pursuant to the Directed Share Program,
if any, will agree with the Underwriters that he/she will not, without the prior
written consent of the Representatives, offer, sell, contract to sell or
otherwise dispose of any such shares for a period of 180 days after the
completion of the Public Offering, subject to certain limited exceptions. See
'Underwriting.'
UNDERWRITING
The Underwriters named below, for whom Bear, Stearns & Co. Inc. and
Oppenheimer & Co., Inc. are acting as representatives (the 'Representatives'),
have severally agreed, subject to the terms and conditions of the Underwriting
Agreement, to purchase from the Company the number of shares of Common Stock set
forth opposite their respective names below. The Underwriters are committed to
purchase and pay for all of such shares if any are purchased.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
UNDERWRITER OF COMMON STOCK
- --------------------------------------------------------------------------- ---------------
<S> <C>
Bear, Stearns & Co. Inc. ..................................................
Oppenheimer & Co., Inc. ...................................................
Total................................................................. 3,100,000
---------------
---------------
</TABLE>
The Underwriters have advised the Company that they propose to offer the
Common Stock to the public on the terms set forth on the cover page of this
Prospectus. The Underwriters may allow selected dealers a concession of not more
than $ per share, and the Underwriters may allow, and such dealers may
re-allow, a concession of not more than $ to certain other dealers. After
the Public Offering, the price and concessions and re-allowances to dealers may
be changed by the Underwriters. The Common Stock is offered subject to receipt
and acceptance by the Underwriters and to certain other conditions, including
the right to reject orders in whole or in part.
Bear Stearns Home Equity Trust 1996-1, an affiliate of Bear, Stearns & Co.
Inc., has agreed to provide the Company with a $200.0 million revolving line of
credit which extends through March, 1997. In addition, Bear, Stearns & Co. Inc.
acted as lead manager for the Company's November, 1995, February, 1996 and
April, 1996 securitizations.
The Company has granted a 30-day option to the Underwriters, to purchase up
to a maximum of 465,000 additional shares of Common Stock to cover
over-allotments, if any, at the same price per share as the initial 3,100,000
shares to be purchased by the Underwriters. To the extent the Underwriters
exercise this option, each of the Underwriters will be committed, subject to
certain conditions, to purchase such additional shares in approximately the same
proportion as set forth in the above table. The Underwriters may purchase such
shares only to cover over-allotments made in connection with the sale of Common
Stock offered hereby.
73
<PAGE>
<PAGE>
At the request of the Company, the Underwriters have initially reserved up
to 310,000 shares of Common Stock for sale at the initial public offering price
to certain employees, Industry Partners and their affiliates. The number of
shares of Common Stock available for sale to the general public will be reduced
to the extent such persons purchase such reserved shares. Any such reserved
shares which are not so purchased will be offered by the Underwriters to the
general public on the same basis as other shares offered thereby.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including civil liabilities under the
Securities Act, or will contribute to payments the Underwriters may be required
to make in respect thereof.
The Company has also agreed not to offer, issue, sell, contract to sell,
grant any option for the sale of, or otherwise dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or any rights to acquire Common
Stock for a period of 180 days after the completion of the Public Offering,
without the prior written consent of the Representatives, subject to certain
limited exceptions. The Industry Partners have agreed with the Underwriters that
they will not, without the prior written consent of the Representatives, offer,
sell, contract to sell or otherwise dispose of any shares of Common Stock
purchased pursuant to the Directed Share Program for a period of 180 days after
the completion of the Public Offering, subject to certain limited exceptions.
See 'Shares Eligible for Future Sale.' Prior to the Public Offering, there has
been no public market for the Common Stock. The initial public offering price
for the Common Stock offered hereby will be determined by negotiation among the
Company and the Representatives. In determining such price, consideration will
be given to various factors, including the market valuation of comparable
companies, market conditions for initial public offerings, the history of and
prospects for the consumer finance industry, the Company's past and present
operations, its past and present earnings and current financial position, an
assessment of the Company's management, the general condition of the securities
markets and other relevant factors.
LEGAL MATTERS
Certain legal matters relating to the Common Stock being offered hereby
will be passed upon for the Company by Dewey Ballantine, 1301 Avenue of the
Americas, New York, New York 10019 and for the Underwriters by Gibson, Dunn &
Crutcher LLP, 200 Park Avenue, New York, New York 10166.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1994, 1995 and March 31, 1996, and for the period from inception (August 12,
1993) through December 31, 1993 and for each of the two years in the period
ended December 31, 1995 and the first three months ended March 31, 1996,
appearing in this Prospectus have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as stated in its report appearing elsewhere herein, and
are included in reliance upon the report of such firm given upon its authority
as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act of 1933, with respect to the Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and the schedules thereto. For further
information with respect to the Company and the Common Stock, reference is made
to the Registration Statement and exhibits and schedules thereto. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to are not necessarily complete, and, with respect to any
contract or other document filed as an exhibit to the Registration Statement,
each such statement is qualified in all respects by reference to such exhibit.
Copies of the Registration Statement and the exhibits thereto are on file at the
offices of the Commission and may be obtained upon payment of the prescribed fee
or may be examined without charge at the Commission's Public Reference Section,
Room 1024, 450 Fifth Street, N.W., Washington D.C. 20549, as well as at the
Commission's Regional Offices at Seven World Trade Center, New York, New York
10048, and
74
<PAGE>
<PAGE>
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material can be obtained in person from the
Public Reference Section of the Commission at its principal office located at
450 Fifth Avenue, N.W., Washington, D.C. 20549, upon payment of the prescribed
fees.
Upon completion of the Public Offering, the Company will be subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended, and
in accordance therewith will file annual and quarterly reports, proxy statements
and other information with the Commission. Such reports, proxy statements and
other information may be inspected, and copies of such material may be obtained
upon payment of the prescribed fees, at the Commission's Public Reference
Section at the addresses set forth above.
The Company intends to furnish to its stockholders annual reports
containing financial statements of the Company audited by its independent
auditors and quarterly reports containing unaudited condensed financial
statements for each of the first three quarters of each fiscal year.
75
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants.......................................................................... F-2
Financial Statements:
Consolidated Balance Sheets as of December 31, 1994, 1995 and March 31, 1996.......................... F-3
Consolidated Statements of Operations for the period August 12, 1993 (inception) through December 31,
1993 and for the years ended December 31, 1994 and 1995 and the three months ended March 31, 1996.... F-4
Consolidated Statements of Stockholders' Equity for the period August 12, 1993 (inception) through
December 31, 1993 and for the years ended December 31, 1994 and 1995 and the three months ended March
31, 1996............................................................................................. F-5
Consolidated Statements of Cash Flows for the period August 12, 1993 (inception) through December 31,
1993 and for the years ended December 31, 1994 and 1995 and the three months ended March 31, 1996.... F-6
Notes to Consolidated Financial Statements............................................................ F-8
</TABLE>
F-1
<PAGE>
<PAGE>
WHEN THE RECAPITALIZATION DESCRIBED IN NOTE 1 OF NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS RELATING TO THE REORGANIZATION OF THE COMPANY HAS BEEN CONSUMMATED,
WE WILL BE IN A POSITION TO ISSUE THE FOLLOWING REPORT.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of
IMC MORTGAGE COMPANY AND SUBSIDIARIES
We have audited the accompanying consolidated balance sheets of IMC
Mortgage Company and Subsidiaries as of December 31, 1994, 1995, and March 31,
1996, and the related consolidated statements of operations, stockholders'
equity, and cash flows for the period August 12, 1993 (inception) through
December 31, 1993 and for each of the two years in the period ended December 31,
1995 and the three month period ended March 31, 1996. These financial statements
are the responsibility of IMC Mortgage Company's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of IMC Mortgage
Company and Subsidiaries as of December 31, 1994, 1995 and March 31, 1996, and
the consolidated results of their operations and their cash flows for the period
August 12, 1993 (inception) through December 31, 1993 and for each of the two
years in the period ended December 31, 1995 and the three month period ended
March 31, 1996, in conformity with generally accepted accounting principles.
Jacksonville, Florida
May 21, 1996
F-2
<PAGE>
<PAGE>
IMC MORTGAGE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- MARCH 31,
1994 1995 1996
----------- ------------ ------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents........................................ $ 3,091,180 $ 5,133,718 $ 7,566,695
Securities purchased under agreements to resell.................. 0 138,058,262 218,835,000
Accrued interest receivable...................................... 218,717 1,872,129 1,993,853
Accounts receivable.............................................. 295,003 1,179,907 3,002,890
Mortgage loans held for sale..................................... 28,995,750 193,002,835 257,458,182
Furniture, fixtures and equipment -- net......................... 431,750 679,950 914,725
Excess servicing receivables..................................... 3,403,730 14,072,771 22,905,311
Warehouse financing due from stockholders (Note 10).............. 57,000 53,200 6,677,044
Capitalized mortgage servicing rights............................ 0 0 1,322,180
Other assets..................................................... 148,861 498,662 851,092
Investment in joint venture...................................... 0 0 1,960,456
Goodwill......................................................... 0 0 1,712,769
----------- ------------ ------------
Total.................................................. $36,641,991 $354,551,434 $525,200,197
----------- ------------ ------------
----------- ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Warehouse finance facilities................................ $27,731,859 $189,819,046 $261,417,193
Term debt................................................... 0 11,120,642 21,879,297
Convertible debenture....................................... 0 0 1,800,000
Securities sold but not yet purchased....................... 0 139,200,000 216,479,966
Accrual for sharing of proportionate value of equity (Note
4)........................................................ 1,689,000 5,893,000 0
Accrued interest payable.................................... 508,576 1,055,550 1,323,311
Amounts payable to stockholders for taxes (Note 2).......... 0 1,306,645 5,126,471
Accrued and other liabilities............................... 405,945 547,707 2,522,323
Deferred income............................................. 450,600 0 523,201
----------- ------------ ------------
Total liabilities...................................... 30,785,980 348,942,590 511,071,762
----------- ------------ ------------
Commitments (Note 14)
Convertible preferred stock...................................... 0 0 2,006,000
Stockholders' equity:
Common stock, par value $.01 per share; 50,000,000
authorized; 6,000,000 shares issued and outstanding....... 60,000 60,000 60,000
Additional paid-in capital.................................. 3,824,601 3,844,601 12,292,601
Retained earnings (deficit)................................. 1,971,410 1,704,243 (230,166)
----------- ------------ ------------
Total stockholders' equity............................. 5,856,011 5,608,844 12,122,435
----------- ------------ ------------
Total.................................................. $36,641,991 $354,551,434 $525,200,197
----------- ------------ ------------
----------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
<PAGE>
IMC MORTGAGE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE
AUGUST 12, 1993 FOR THE YEAR THREE MONTHS ENDED
(INCEPTION) ENDED DECEMBER 31, MARCH 31,
THROUGH DECEMBER 31, ------------------------- -------------------------
1993 1994 1995 1995 1996
-------------------- ----------- ----------- ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Gain on sales of loans.......... $ 438,774 $ 8,583,277 $20,680,848 $ 3,297,408 $10,875,466
Additional securitization
transaction expense (Note
4)............................ 0 (560,137) (5,547,037) (254,507) (2,828,591)
-------------------- ----------- ----------- ----------- -----------
Net gain on sale of
loans.................... 438,774 8,023,140 15,133,811 3,042,901 8,046,875
-------------------- ----------- ----------- ----------- -----------
Warehouse interest income....... 97,159 2,510,062 7,884,679 1,090,933 5,160,943
Warehouse interest expense...... (50,709) (1,610,870) (6,006,919) (1,019,643) (3,375,244)
-------------------- ----------- ----------- ----------- -----------
Net warehouse interest
income................... 46,450 899,192 1,877,760 71,290 1,785,699
-------------------- ----------- ----------- ----------- -----------
Servicing fees.................. 0 99,224 1,543,339 109,167 995,439
Other........................... 28,235 1,072,855 1,117,903 208,243 628,536
-------------------- ----------- ----------- ----------- -----------
Total servicing fees and
other.................... 28,235 1,172,079 2,661,242 317,410 1,623,975
-------------------- ----------- ----------- ----------- -----------
Total revenues............. 513,459 10,094,411 19,672,813 3,431,601 11,456,549
-------------------- ----------- ----------- ----------- -----------
Expenses:
Compensation and benefits....... 507,904 3,348,236 5,139,386 1,021,815 3,666,685
Selling, general and
administrative expenses....... 355,526 2,000,401 3,477,677 553,910 2,240,856
Other........................... 0 14,143 297,743 16,084 342,534
Sharing of proportionate value
of equity (Note 4)............ 0 1,689,000 4,204,000 718,952 2,555,000
-------------------- ----------- ----------- ----------- -----------
Total expenses............. 863,430 7,051,780 13,118,806 2,310,761 8,805,075
-------------------- ----------- ----------- ----------- -----------
Net income (loss).................... $ (349,971) $ 3,042,631 $ 6,554,007 $ 1,120,840 $ 2,651,474
-------------------- ----------- ----------- ----------- -----------
-------------------- ----------- ----------- ----------- -----------
Unaudited Pro Forma Data (giving
effect to provision for income
taxes):
Income before provision for
income taxes.................. $ 6,554,007 $ 2,651,474
Pro forma provision for income
taxes (Note 3)................ 2,522,000 1,026,000
----------- -----------
Pro forma net income............ $ 4,032,007 $ 1,625,474
----------- -----------
----------- -----------
Pro forma net income per common
share......................... $0.51 $0.20
----- -----
----- -----
Weighted average number of
shares outstanding............ 7,935,752 7,935,752
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
<PAGE>
IMC MORTGAGE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
-------------------- PAID-IN EARNINGS
SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
--------- ------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Initial equity contributions (August 12, 1993)................ 6,000,000 $60,000 $ 810,000 $ 0 $ 870,000
Cash contributions............................................ 0 0 696,488 0 696,488
Contributions in foregone premiums............................ 0 0 232,575 0 232,575
Net loss...................................................... 0 0 0 (349,971) (349,971)
--------- ------- ----------- ----------- -----------
Stockholders' equity at December 31, 1993..................... 6,000,000 60,000 1,739,063 (349,971) 1,449,092
Cash contributions............................................ 0 0 1,554,959 0 1,554,959
Contributions in foregone premiums............................ 0 0 530,579 0 530,579
Net income.................................................... 0 0 0 3,042,631 3,042,631
Distributions for taxes (Note 2).............................. 0 0 0 (721,250) (721,250)
--------- ------- ----------- ----------- -----------
Stockholders' equity at December 31, 1994..................... 6,000,000 60,000 3,824,601 1,971,410 5,856,011
Additional cash contributions................................. 0 0 20,000 0 20,000
Net income.................................................... 0 0 0 6,554,007 6,554,007
Distributions for taxes (Note 2).............................. 0 0 0 (6,821,174) (6,821,174)
--------- ------- ----------- ----------- -----------
Stockholders' equity at December 31, 1995..................... 6,000,000 60,000 3,844,601 1,704,243 5,608,844
Issuance of options to ContiFinancial (Note 4)................ 0 0 8,448,000 0 8,448,000
Net income.................................................... 0 0 0 2,651,474 2,651,474
Distributions for taxes (Note 2).............................. 0 0 0 (4,585,883) (4,585,883)
--------- ------- ----------- ----------- -----------
Stockholders' equity at March 31, 1996........................ 6,000,000 $60,000 $12,292,601 $ (230,166) $12,122,435
--------- ------- ----------- ----------- -----------
--------- ------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
<PAGE>
IMC MORTGAGE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD
AUGUST 12, 1993 FOR THE
(INCEPTION) FOR THE YEAR ENDED DECEMBER THREE MONTHS ENDED
THROUGH DECEMBER 31, 31, MARCH 31,
-------------------- ----------------------------- ---------------------------
1993 1994 1995 1995 1996
-------------------- ------------- ------------- ------------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income (loss)............................ $ (349,971) $ 3,042,631 $ 6,554,007 $ 1,120,840 $ 2,651,474
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Sharing of proportionate value of
equity.................................. 0 1,689,000 4,204,000 718,952 2,555,000
Foregone premiums......................... 232,575 530,579 0 0 0
Depreciation and amortization............. 17,651 98,285 163,798 34,423 112,344
Deferred hedge............................ 0 0 (1,141,738) 0 3,496,772
Capitalized mortgage servicing rights..... 0 0 0 0 (1,360,366)
Net loss in joint venture................. 0 0 0 0 103,018
Net change in operating assets and
liabilities, net of effects from
purchase of Mortgage Central Corp.:
Mortgages purchased or originated....... (29,608,000) (282,924,000) (621,628,753) (119,385,000) (263,987,237)
Sales of mortgage loans................. 21,636,010 261,900,240 458,763,406 95,547,000 196,272,412
Decrease (increase) in securities
purchased under agreement to resell
and securities sold but not yet
purchased............................ 0 0 1,141,738 0 (3,496,772)
Increase in organization costs.......... (104,330) 0 0 0 0
Increase in accrued interest receivable
on mortgage loans held for sale...... (43,247) (175,470) (1,653,412) (252,327) (121,724)
Decrease (increase) in warehouse
financing due from stockholders...... 0 0 3,800 (50,350) (6,623,844)
Increase in excess servicing
receivables.......................... 0 (2,953,130) (10,669,041) (4,690,246) (8,832,540)
(Increase) decrease in other assets..... (87,663) 13,338 (370,667) 73,654 (357,646)
Increase in accounts receivable......... (2,950) (292,053) (884,904) (585,917) (1,822,983)
Increase (decrease) in accrued interest
payable.............................. 21,748 486,828 546,974 (334,630) 267,761
Increase (decrease) in deferred
income............................... 0 0 (450,600) 2,929,060 523,201
Increase in accrued and other
liabilities.......................... 108,871 185,596 141,762 (112,226) 1,917,690
-------------------- ------------- ------------- ------------ ------------
Net cash used in operating
activities......................... (8,179,306) (18,398,156) (165,279,630) (24,986,767) (78,703,440)
-------------------- ------------- ------------- ------------ ------------
Investing activities:
Investment in joint venture.................. 0 0 0 0 (2,063,474)
Purchase of furniture, fixtures and
equipment................................. (225,427) (292,809) (391,132) (100,198) (190,854)
-------------------- ------------- ------------- ------------ ------------
Net cash used in investing
activities......................... (225,427) (292,809) (391,132) (100,198) (2,254,328)
-------------------- ------------- ------------- ------------ ------------
</TABLE>
F-6
<PAGE>
<PAGE>
IMC MORTGAGE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD
AUGUST 12, 1993 FOR THE
(INCEPTION) FOR THE YEAR ENDED THREE MONTHS ENDED
THROUGH DECEMBER 31, DECEMBER 31, MARCH 31,
-------------------- ----------------------------- ---------------------------
1993 1994 1995 1995 1996
-------------------- ------------- ------------- ------------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Financing activities:
Contributions from stockholders.............. 1,566,488 1,554,959 20,000 20,000 0
Distributions to stockholders for taxes...... 0 (721,250) (5,514,529) (1,891,184) (766,057)
Borrowings -- warehouse...................... 28,803,402 288,530,292 711,907,906 120,792,822 312,026,441
Borrowings -- term debt...................... 0 0 11,120,642 4,496,694 12,558,655
Repayments of borrowings -- warehouse........ (21,538,670) (268,008,343) (549,820,719) (98,380,320) (240,428,294)
-------------------- ------------- ------------- ------------ ------------
Net cash provided by financing
activities......................... 8,831,220 21,355,658 167,713,300 25,038,012 83,390,745
-------------------- ------------- ------------- ------------ ------------
Net increase (decrease) in cash and cash
equivalents.................................. 426,487 2,664,693 2,042,538 (48,953) 2,432,977
Cash and cash equivalents, beginning of
period....................................... 0 426,487 3,091,180 3,091,180 5,133,718
-------------------- ------------- ------------- ------------ ------------
Cash and cash equivalents, end of period....... $ 426,487 $ 3,091,180 $ 5,133,718 $ 3,042,227 $ 7,566,695
-------------------- ------------- ------------- ------------ ------------
Supplemental disclosure cash flow information:
Cash paid during the year for interest....... $ 30,424 $ 1,364,920 $ 5,459,945 $ 1,329,786 $ 3,299,900
Supplemental disclosure of noncash financing
and investing activities:
Contributed capital via foregone premiums
(Note 2)................................ $ 232,575 $ 530,579 $ 0 $ 0 $ 0
-------------------- ------------- ------------- ------------ ------------
Acquisition of assets of Mortgage Central
Corp. (Note 5).......................... $ 0 $ 0 $ 0 $ 0 $ 2,006,000
-------------------- ------------- ------------- ------------ ------------
-------------------- ------------- ------------- ------------ ------------
Amounts payable to stockholders for taxes
(Note 2)................................ $ 0 $ 0 $ 1,306,645 $ 0 $ 3,819,826
-------------------- ------------- ------------- ------------ ------------
-------------------- ------------- ------------- ------------ ------------
Issuance of options to ContiFinancial..... $ 0 $ 0 $ 0 $ 0 $ 8,448,000
-------------------- ------------- ------------- ------------ ------------
-------------------- ------------- ------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
<PAGE>
IMC MORTGAGE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION:
Industry Mortgage Company, LP and its subsidiaries (the 'Partnership') is a
limited partnership which was organized under the laws of the state of Delaware
on August 12, 1993 (inception). The Partnership's equity is owned 1% by its
corporate general partner, Industry Mortgage Corporation (the 'General Partner')
and 99% by a number of voting limited partners and certain key employee
(nonvoting) partners (collectively the 'Limited Partners'). The Partnership in
turn owns 100% of the common stock of its subsidiaries, IMC Corporation of
America, IMC Securities, Inc. and IMC Mortgage Company.
The Partnership purchases and originates mortgages made to borrowers who
may not otherwise qualify for conventional loans for the purpose of
securitization and sale. The Partnership securitizes these mortgages into the
form of a Real Estate Mortgage Investment Conduit ('REMIC'). A significant
portion of the mortgages are sold on a servicing retained basis.
In contemplation of a proposed public offering, the Limited Partners will
exchange their limited partnership interest and the General Partner will
exchange the voting common stock of the General Partner for 100% of the voting
common shares (the exchange or recapitalization) of IMC Mortgage Company. The
exchange will be consummated on an historical cost basis as all entities are
under common control. After the exchange, IMC Mortgage Company (the 'Company')
will own 100% of the limited partnership interests in the Partnership and 100%
of the general partnership interest in the Partnership.
The accompanying consolidated financial statements include the accounts of
the Partnership, IMC Corporation of America, IMC Securities, Inc. and IMC
Mortgage Company, after giving effect to the exchange as if it had occurred at
inception. All intercompany transactions have been eliminated in the
accompanying consolidated financial statements.
2. DESCRIPTION OF PARTNERSHIP AGREEMENT:
CAPITAL CONTRIBUTIONS
Each voting limited partner ('VLP') owning a full partnership share
contributed $100,000 in cash and was required to make additional contributions
in either loan volume (via foregone premiums) or in cash until its respective
capital contribution reached $380,000, which occurred in 1994. Foregone premiums
represent the difference in the amount paid by the Partnership for mortgage
loans to VLPs who opted to make additional contributions in loan volume and the
value set forth in a pricing schedule (estimated fair value) delivered to the
VLP at the time of purchase. As of December 31, 1993, 1994, 1995 and March 31,
1996, contributions from VLPs totaled $1,601,063, $3,684,601, $3,704,601 and
$3,704,601, respectively, and contributions from certain key employee
(nonvoting) partners were $188,000, $190,000, $190,000 and $190,000,
respectively. Additionally, total contributions from the General Partner were
$10,000 as of December 31, 1993, 1994, and 1995 and March 31, 1996.
PURCHASES/SALES TO PARTNERS
Under the terms of the partnership agreement, each of the VLPs is required
to sell to the Partnership $1,000,000 per month in loan volume for each full
share ($500,000 per month for a 1/2 share), at market prices. Loans purchased
from limited partners during 1993, 1994, 1995, and the first quarter of 1996,
approximated $10,740,000, $92,362,000, $148,420,000 and $63,920,000,
respectively.
INCOME TAXES
All the tax effects of the Partnership's income or loss are passed through
to the partners individually, therefore, no Federal income taxes are payable by
the Partnership. State and Federal income taxes related to the Partnership's
corporate subsidiaries were not material.
F-8
<PAGE>
<PAGE>
IMC MORTGAGE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Under the terms of the partnership agreement, the Company is obligated to
make quarterly cash distributions to the partners equal to 45% of profits (as
defined in the partnership agreement) to enable the partners to pay taxes in
respect of their partnership interests. Distributions to partners for income
taxes were $721,250, $6,821,174 and $4,585,883 for the years ended December 31,
1994, 1995 and the three months ended March 31, 1996, respectively.
Distributions include cash paid to partners as well as distributions accrued but
not yet paid. Certain partners agreed to forego the receipt of the cash
distributions until the public offering, at which time they will receive the
accrued amount plus 10% interest per annum. The amount payable to stockholders
for taxes (including interest) at December 31, 1995 and March 31, 1996 was
$1,306,645 and $5,126,471, respectively.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
INTERIM FINANCIAL STATEMENTS
The consolidated financial statements, as of March 31, 1995 (unaudited) and
March 31, 1996, and for the three months ended March 31, 1995 (unaudited) and
the three months ended March 31, 1996, reflect all adjustments which, in the
opinion of management, are necessary to present fairly the financial position
and results of operations for the period presented. The results of operations
for the three months ended March 31, 1995 and 1996 are not necessarily
indicative of the results for a full year. Certain information and footnote
disclosures as of March 31, 1995 and for the three months ended March 31, 1995
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to the
rules and regulations of the Securities and Exchange Commission, although the
Company believes that the disclosures are adequate to make the information not
misleading.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand and on deposit at
financial institutions. Cash and cash equivalents include interest bearing
deposits of $2,789,580, $5,133,718 and $7,566,695 at December 31, 1994, 1995,
and March 31, 1996, respectively.
EXCESS SERVICING RECEIVABLES
The Company originates and purchases mortgages for the purpose of
securitization and whole loan sale. The Company securitizes these mortgages into
the form of a REMIC. A REMIC is a multi-class security with certain tax
advantages which derives its monthly principal paydowns from a pool of
underlying mortgages. The senior classes of the REMICs are sold, with the
subordinated classes (or a portion thereof) retained by the Company. The
subordinated classes are in the form of residual and interest-only mortgage
securities and are classified as excess servicing receivables. The amount of
senior classes of REMICs outstanding at December 31, 1994, 1995 and March 31,
1996 were $89,103,000, $418,251,000 and $559,508,000, respectively. During 1994,
the Company securitized $90 million of loans through one REMIC; during 1995, the
Company securitized $380 million of loans through three REMICs; and during the
three months ended March 31, 1996, the Company securitized $175 million of loans
through one REMIC.
The Company initially records these securities at their allocated cost
based upon the present value of the interest in the cash flows retained by the
Company after considering various economic factors, including interest rates,
collateral value, and estimates of the value of future cash flows from the REMIC
mortgage pools under expected loss and prepayment assumptions discounted at a
market yield. The weighted average rate used to discount the cash flows was
approximately 11%, and the assumed loss ratio was 50 basis points per year.
In 1994, the Company adopted SFAS No. 115, 'Accounting for Certain
Investments in Debt and Equity Securities' ('SFAS 115') which requires fair
value accounting for these securities. In accordance
F-9
<PAGE>
<PAGE>
IMC MORTGAGE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
with the provisions of SFAS 115, the Company classifies excess servicing
receivables as 'trading securities' and, as such, they are recorded at fair
value with the resultant unrealized gain or loss recorded in the results of
operations in the period of the change in value. The Company determines fair
value at inception and on an ongoing basis based on a discounted cash flow
analysis. The cash flows are estimated as the excess of the weighted average
coupon on each pool of mortgage loans sold over the sum of the pass-through
interest rate plus a normal servicing fee, a trustee fee, an insurance fee and
an estimate of annual future credit losses related to the mortgage loans
securitized over the life of the mortgage loans.
These cash flows are projected over the life of the mortgage loans using
prepayment, default, and interest rate assumptions that market participants
would use for similar financial instruments subject to prepayment, credit and
interest rate risk. The fair valuation includes consideration of the following
characteristics: loan type, size, interest rate, date of origination, term and
geographic location. The Company also used other available information such as
externally prepared reports on prepayment rates, interest rates, collateral
value, economic forecasts and historical default and prepayment rates of the
portfolio under review.
CAPITALIZED SERVICING FEES RECEIVABLE
Effective January 1, 1996, the Company adopted SFAS No. 122 'Accounting for
Mortgage Servicing Rights' ('SFAS 122') which requires that upon sale or
securitization mortgages, companies capitalize the cost associated with the
right to service mortgage loans based on their relative fair values. The Company
determines fair value based on the present value of estimated net future cash
flows related to servicing income. The cost allocated to the servicing rights is
amortized in proportion to and over the period of estimated net future servicing
fee income.
Prior to the adoption of SFAS 122, servicing rights acquired through loan
origination activities were recorded in the period the loans were serviced.
Under SFAS 122, the Company capitalized, at fair value, $1,360,366 of such costs
during the three months ended March 31, 1996. During the same period,
amortization of capitalized servicing rights was $38,186. At March 31, 1996, the
capitalized servicing rights approximated fair value. The Company periodically
reviews capitalized servicing fees receivable for impairment. This review is
performed on a disaggregated basis for the predominant risk characteristics of
the underlying loans which are loan type, term and credit quality. The Company
generally makes loans to borrowers whose borrowing needs may not be met by
traditional financial institutions due to credit exceptions. The Company has
found that these borrowers are payment sensitive rather than interest rate
sensitive. As such the Company does not consider interest rates a predominant
risk characteristic for purposes of impairment. Impairment is recognized in a
valuation allowance for each disaggregated stratum in the period of impairment.
SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL/SECURITIES SOLD BUT NOT YET
PURCHASED
To hedge the interest rate risk on loan purchases, the Company sells short
United States Treasury securities which match the duration of the mortgage loans
held for sale and borrows the securities under agreements to resell.
Securities sold but not yet purchased are recorded on a trade date basis
and are carried at their sale amount. The unrealized gain or loss on these
instruments is deferred and recognized upon securitization as an adjustment to
the carrying value of the hedged asset. Interest expense on the securities sold
but not yet purchased is recorded as incurred.
Securities purchased under agreements to resell are recorded on a trade
date basis and are carried at the amounts at which the securities will be
resold, plus accrued interest.
F-10
<PAGE>
<PAGE>
IMC MORTGAGE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MORTGAGE LOANS HELD FOR SALE
Mortgage loans held for sale are mortgages the Company plans to sell or
securitize. Mortgage loans held for sale are stated at lower of cost, the
origination cost, or market. The cost or origination cost is net of any deferred
hedging gain or loss. Market value is determined by outstanding commitments from
investors, if any, or current investor yield requirements on the aggregate
basis. The Company evaluates the need for an allowance for loan losses to cover
losses related to mortgage loans held for sale based upon periodic analysis of
the portfolio, economic conditions and trends, historical credit loss
experience, borrowers ability to repay and collateral values. There was no
allowance for loan losses at December 31, 1994, 1995 and March 31, 1996.
REVENUE RECOGNITION
Gains on the sale of mortgage loans representing the difference between the
sales price and the net carrying amount of the loan, are recognized when
mortgage loans are sold and delivered to investors. For securitizations of
mortgage loans, the gain on the sale of the loans includes any hedging gains or
losses and represents the present value of the differential between interest
earned on the portion of loans sold and interest paid to investors less related
costs over the expected life of the loans, adjusted for projected prepayments,
expected charge-offs, foreclosure expenses, and a normal servicing fee.
Interest income on the excess servicing receivables is recorded as earned,
which is the recognition of the increased time value of the discounted excess
spread receivable over time. Warehouse interest income on mortgage loans held
for sale is recognized on the accrual method.
The Company generally retains servicing rights and recognizes servicing
income from fees, prepayment penalties and late payment charges earned for
servicing the loans owned by certificate holders and others. Servicing and other
fees are generally earned at a rate of approximately 1/2 of 1% of the
unamortized loan balance being serviced. Servicing fee income is recognized as
collected.
Other income consists primarily of interest on excess servicing receivables
and earnings on deposits.
FURNITURE, FIXTURES AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION
Furniture, fixtures and equipment are carried at cost and depreciated on a
straight-line basis over the estimated useful lives of the assets. Leasehold
improvements are amortized over the useful life of the improvements.
GOODWILL
Goodwill represents the excess of cost over fair value of net tangible
assets acquired through acquisition. Such excess of cost over fair value of net
tangible assets acquired is being amortized on a straight-line basis over
twenty-five years. Amortization expense was $17,000 for the three months ended
March 31, 1996. Management periodically reviews the potential impairment of
goodwill on a non-discounted cash flow basis to assess recoverability. If the
estimated future cash flows are projected to be less than the carrying amount,
an impairment write-down (representing the carrying amount of the goodwill which
exceeds the present value of estimated expected future cash flows) would be
recorded as a period expense.
ORGANIZATION COSTS
Organization costs incurred in connection with the formation of the Company
amounted to $104,330, and are being amortized over five years. At December 31,
1994, 1995 and March 31, 1996, accumulated amortization was $29,450, $50,316 and
$55,533, respectively.
F-11
<PAGE>
<PAGE>
IMC MORTGAGE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS
In 1996, the Company will adopt SFAS No. 123, 'Accounting for Stock-Based
Compensation.' This standard establishes a fair value method for accounting for
stock-based compensation plans, either through recognition or disclosure. The
Company intends to adopt this standard by disclosing in the period options are
issued the pro forma net income and earnings per share amounts assuming the fair
value method was adopted on January 1, 1995. The adoption of this standard will
not have a material impact on results of operations, financial position or cash
flows.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain amounts in the 1993, 1994 and 1995 financial statements have been
reclassified to conform with the 1996 classifications.
PRO FORMA DATA
The Partnership which is included in the consolidated financial statements
will become a wholly owned subsidiary of the Company after the plan of the
exchange is consummated. The Partnership made no provision for income taxes
since the Partnership's income or losses were passed through to the partners
individually.
When the public offering has occurred, and, accordingly, this exchange is
consummated, the Partnership will become subject to income taxes as of the
transaction's effective date. The pro forma data included in the consolidated
statements of operations of the Company include a pro forma provision for income
taxes, to indicate what these taxes would have been had the exchange occurred in
prior years. Also, deferred income taxes reflecting the tax effect of the
temporary differences between the Company's financial statement and tax bases of
certain assets and liabilities will become a net asset of the Company and will
be reflected on the consolidated balance sheet with a corresponding non-
recurring benefit being reflected in the consolidating statement of operations
in the period when the public offering becomes effective. Deferred taxes would
relate primarily to mark-to-market adjustments recognized for tax purposes under
IRS Section 475, accrued contingent fees, and REMIC income recognition. The
approximate amount of such net deferred tax asset computed using the provisions
of SFAS No. 109 'Accounting for Income Taxes' would have been approximately
$5,600,000 at March 31, 1996.
The following unaudited pro forma information reflects the incremental
income tax expense that the Company would have incurred if it had been subject
to Federal and State income taxes for the year ended December 31, 1995 and the
three months ended March 31, 1996.
F-12
<PAGE>
<PAGE>
IMC MORTGAGE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR THREE MONTHS ENDED
ENDED DECEMBER 31, 1995 MARCH 31, 1996
----------------------- ------------------
<S> <C> <C>
Pro forma current:
Federal........................................... $ 3,904,000 $ 2,919,000
State............................................. 649,000 485,000
----------------------- ------------------
4,553,000 3,404,000
----------------------- ------------------
Pro forma deferred:
Federal........................................... (1,843,000) (2,157,000)
State............................................. (188,000) (221,000)
----------------------- ------------------
(2,031,000) (2,378,000)
----------------------- ------------------
Pro forma provision for income taxes................... $ 2,522,000 $ 1,026,000
----------------------- ------------------
----------------------- ------------------
</TABLE>
The following unaudited pro forma information reflects the reconciliation
between the statutory provision for income taxes and the pro forma provision
relating to the income tax expense the Partnership would have incurred as it had
been subject to federal and state income taxes.
<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR THREE MONTHS ENDED
ENDED DECEMBER 31, 1995 MARCH 31, 1996
----------------------- ------------------
<S> <C> <C>
Income tax at federal statutory rate................... $ 2,272,000 $ 928,000
State taxes, net of federal benefit.................... 232,000 95,000
Nondeductible expenses................................. 18,000 3,000
----------------------- ------------------
Pro forma provision for income taxes................... $ 2,522,000 $1,026,000
----------------------- ------------------
----------------------- ------------------
</TABLE>
PRO FORMA EARNINGS PER SHARE
Pro forma net income per common share has been computed using the weighted
average number of common shares and dilutive common share equivalents
outstanding during the period after giving effect to the recapitalization
described in Note 1. Dilutive common share equivalents consist of stock options
(calculated using the treasury stock method) and convertible preferred stock.
Pursuant to the requirements of the Securities and Exchange Commission, common
shares and common equivalent shares issued at prices below the estimated public
offering price of $18 per share during the twelve months immediately preceding
the proposed date of the initial filing of the Registration Statement have been
included in the calculation of common shares and common share equivalents, using
the treasury stock method, as if they were outstanding for all periods
presented.
4. STRATEGIC ALLIANCE:
The Company relies on ContiFinancial Corporation and its subsidiaries and
affiliates ('ContiFinancial') to provide a credit facility for funding its loan
purchases and originations as well as their expertise and assistance in loan
securitization. In 1994, 1995 and the three months ended March 31, 1996, the
securitizations were structured so that ContiFinancial received, in exchange for
cash of $2,109,011, $18,424,827 and $6,157,647, respectively, excess servicing
receivables with estimated values of $3,035,000, $25,054,000 and $9,454,000,
respectively. In addition, ContiFinancial paid $365,852, $1,082,136 and $467,762
in expenses related to securitizations in 1994, 1995, and the three months ended
March 31, 1996. The difference between the estimated value of the excess
servicing receivables provided to ContiFinancial and the total amount of cash
received and expenses paid by ContiFinancial amounts to $560,137, $5,547,037 and
$2,828,591 in 1994, 1995 and the three months ended March 31, 1996,
respectively, and has been recorded as additional securitization transaction
expense.
F-13
<PAGE>
<PAGE>
IMC MORTGAGE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In August 1993, the Company entered into a five-year agreement ('1993
Agreement') with ContiFinancial which provided the Company with a warehouse line
of credit, a standby credit facility, and certain investment banking services.
In compensation for these services, the Company agreed to pay a commitment fee
to ContiFinancial equal to 0.50% of the agreement limit ($10 million) in the
first year and 0.75% of the agreement limit minus the weighted average advance
balance for the prior year, payable on each anniversary of the first purchase
date. Total commitment fees paid to ContiFinancial pursuant to this aspect of
the 1993 agreement were $50,000 in 1994.
Pursuant to the 1993 Agreement, the Company agreed to share the value of
the partnership through a contingent fee based on a percentage of Residual
Company Equity (as defined in the 1993 Agreement) to be paid in cash at the
termination of the agreement. At December 31, 1993, there was no Residual
Company Equity and accordingly no liability was recorded. At December 31, 1994,
the Company had Residual Company Equity and accordingly the Company accrued a
liability to reflect the contingent fee payable at December 31, 1994. This
accrual has been recorded as sharing of proportionate value of equity of
$1,689,000 in the accompanying balance sheet with a corresponding charge in the
statement of operations.
The Company has previously issued financial statements for the year ended
December 31, 1994 which did not include the accrual or corresponding charge for
the sharing of proportionate value of equity. Accordingly, the Company's 1994
financial statements presented herein have been restated for the effect of
sharing of residual partnership value. The restatement reduced both net income
and partnership equity as previously reported by $1,689,000.
On January 12, 1995, the Company and ContiFinancial entered into a revised
ten-year agreement (the '1995 Agreement') which replaced the 1993 Agreement and
provided for contingent fees based on the fair market value of the Company (as
defined). The amount of the contingent fee ranged from 15% to 25% of the fair
market value of the Company if ContiFinancial or the Company, respectively,
elected to terminate these arrangements. In the event that the agreement expired
with neither ContiFinancial nor the Company electing to terminate the
arrangements, the fee would have been 20% of the fair market value of the
Company. If the Company made any distributions to the partners other than those
made as tax distributions and returns of partnership equity, the Company would
have been required to distribute an amount to ContiFinancial equal to 25% of
these other distributions. At December 31, 1995, the Company accrued $5,893,000
(based on an appraisal of the fair market value of the Company) representing the
estimated amount that would have been payable to ContiFinancial had
ContiFinancial elected to terminate the 1995 Agreement as of December 31, 1995.
The increase in the amount of the accrual at December 31, 1995 related to the
1995 Agreement over the amount accrued at December 31, 1994 related to the 1993
Agreement has been recorded as a charge to earnings for 1995.
In March 1996, the Company and ContiFinancial replaced the 1995 Agreement
with an agreement (the '1996 Agreement') which eliminated the ability of
ContiFinancial to obtain or require a cash payment as provided for in the 1993
and 1995 Agreements and provided ContiFinancial options to acquire an interest
in the Company for a nominal amount. The interest is subject to dilution for
options granted to key employees and non-employee advisors as described in Note
13. The option automatically converts into warrants for a proportionate number
of shares in any corporation into which the Company may be converted. The option
also contains normal anti-dilution provisions. In the event of a public offering
of interest in the Company or its successors, ContiFinancial has certain rights
to join in registration of additional shares of the Company's stock and under
certain conditions after the expiration of a four-year time period, to require
that shares subject to ContiFinancial's warrants be registered by the Company or
its successor. The liability that had been established under the 1995 Agreement
was reclassed to paid in capital in March 1996 in conjunction with the issuance
of the ContiFinancial option. The fair value of the option at the date of grant
(March 26, 1996) was estimated to be $8,448,000 based on an independent
appraisal of the option. The Company recorded expense of $2,555,000 for the
three months ended March 31, 1996 representing the excess of the estimated fair
F-14
<PAGE>
<PAGE>
IMC MORTGAGE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
value of the option at the date of grant over the amount accrued at December 31,
1995 pursuant to the 1995 Agreement.
5. ACQUISITION OF ASSETS OF MORTGAGE CENTRAL CORPORATION
On January 1, 1996, the Company acquired certain assets of Mortgage Central
Corp., a Rhode Island corporation ('MCC'), a mortgage banking company which did
business under the name 'Equitystars', primarily in Rhode Island, New York,
Connecticut and Massachusetts. The Partnership acquired MCC through a wholly
owned subsidiary, IMC Acquisitions, Inc., a Florida corporation
('Acquisitions'), which was formed for that purpose and which was subsequently
renamed IMC Mortgage Company. The purchase price ($2,006,000) for certain assets
of MCC was paid by delivery to MCC of Series A voting, convertible preferred
stock of Acquisitions, with contingency payments (capped at $2,550,000) over two
years based on performance. The preferred stock has a liquidation preference of
$100 per share plus preferred dividends accruing at 8% per annum from the date
of issuance until redemption or liquidation. The preferred stock is mandatorily
convertible into common shares of the Company upon closing of a public offering.
If no public offering occurs prior to June 30, 1996, the preferred stockholders
have the right to require the Company to purchase their shares at the
liquidation preference. If the Company fails to complete a public offering prior
to January 2, 2001, the Company may redeem the outstanding shares of the
convertible preferred stock at the liquidation preference.
The acquisition has been accounted for using the purchase method of
accounting, and, accordingly, the purchase price of $2,006,000 has been
allocated to the assets purchased and the liabilities assumed based upon the
fair values at the date of acquisition. The excess of the purchase price of
$2,006,000 over the fair values of the net assets was approximately $1,730,000
and was recorded as goodwill.
The operating results of these acquired businesses have been included in
the consolidated statement of income from the date of acquisition on January 1,
1996. On the basis of a pro forma consolidation of the results of operations as
if the acquisition had taken place at the beginning of 1995, consolidated total
revenues would have been $4,560,000 for the three months ended March 31, 1995.
Consolidated income would not have been materially different from the reported
amount for the three months ended March 31, 1995. Such amounts are not
necessarily indicative of what the actual consolidated results of operations
might have been if the acquisition had been effective at the beginning of 1995.
6. JOINT VENTURE
In March 1996, the Company entered into an agreement to form a joint
venture (Preferred Mortgages Limited) in the United Kingdom to originate and
purchase mortgages made to borrowers who may not otherwise qualify for
conventional loans for the purpose of securitization and sale. The Company and a
second party each own 45% of the joint venture, and a third party owns the
remaining 10%. The investment in the joint venture represents the acquisition of
675,000 shares of the joint venture stock and a $1,031,737 note from the joint
venture bearing interest at 3% per annum above LIBOR. Principal repayment on the
note is to begin when the joint venture's Board of Directors determine the joint
venture has sufficient available profits. To the extent not previously repaid,
all principal is due December 31, 2040.
The investment in the joint venture accounted for under the equity method,
through March 31, 1996, was not material in relation to the financial position
or results of operations of the Company.
In addition, the Company issued a $1,800,000 convertible debenture due
September 1996, bearing interest at one percent per annum in excess of LIBOR, to
Rotch Property Group Limited, an affiliate of the other 45% joint venture
partner. The convertible debenture is convertible into common stock of the
Company during or after the initial public offering at 93% of the public
offering price per share.
F-15
<PAGE>
<PAGE>
IMC MORTGAGE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. COLLATERALIZED OBLIGATIONS:
<TABLE>
<CAPTION>
BALANCE
OUTSTANDING
DECEMBER 31, ------------
TOTAL AVAILABLE --------------------------- MARCH 31,
AT MARCH 31, 1996 1994 1995 1996
----------------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Warehouse finance facilities........ $ 592,256,873 $27,731,859 $114,820,450 $208,674,066
Warehouse finance facilities --
under Repurchase Agreement........ 52,743,127 0 74,998,596 52,743,127
----------------- ----------- ------------ ------------
645,000,000 27,731,859 189,819,046 261,417,193
Term debt........................... 34,879,297 0 11,120,642 21,879,297
----------------- ----------- ------------ ------------
$ 679,879,297 $27,731,859 $200,939,688 $283,296,490
----------------- ----------- ------------ ------------
----------------- ----------- ------------ ------------
</TABLE>
WAREHOUSE FINANCE FACILITIES
The Company has available numerous lines of credit totaling $645,000,000 of
which $125,000,000 was through ContiFinancial, at March 31, 1996, for financing
the acquisition of mortgage loans held for sale. Of the total available,
$645,000,000 matures within 1 year. Interest rates ranged from 6.3% to 6.9% as
of March 31, 1996. Outstanding borrowing under these lines of credit are
collateralized by mortgage loans held for sale and warehouse financing due from
stockholders at March 31, 1996. Upon the sale of these loans and repayment of
warehouse financing due from stockholders, the lines will be repaid.
REPURCHASE AGREEMENT
At March 31, 1996, the Company had sold mortgage loans with a principle
balance of $49,993,485 to Conti under a repurchase agreement in exchange for a
premium of $2,749,642, which is included in warehouse notes.
TERM DEBT
The Company has available an additional line of credit under a Standby
Agreement with ContiFinancial for $15,000,000, the entire amount of which was
outstanding at March 31, 1996. Outstanding borrowings under this line are
accruing interest, based on LIBOR plus 1.70%, which was 7.1% at March 31, 1996
and collateralized by the Company's interest in the excess servicing
receivables. This agreement terminates in January, 2000. On March 26, 1996,
ContiFinancial agreed to lend the Company an additional $10,000,000 under the
Standby Agreement, bearing interest at LIBOR plus 8% per annum, which amounts
would be repaid with a portion of the net proceeds from the proposed public
offering. At March 31, 1996, no amounts were outstanding under this additional
Standby Agreement.
The Company also has available a $7,000,000 credit facility which matures
January 1, 1998 and bears interest at 12% per annum from an affiliate of a
stockholder. The outstanding balance of this line of credit is to be repaid from
the proceeds of the proposed initial public offering. In the event the line is
still outstanding at September 30, 1996, the lender has the right to require
that the Company grant a second lien on the Company's excess servicing
receivables. At March 31, 1996, $4,000,000 was outstanding under this credit
Facility.
The Company borrowed $2,879,297 under a one-year agreement bearing interest
at 1.25% per annum in excess of LIBOR to finance certain excess servicing
receivables which was collateralized by those excess servicing receivables.
The warehouse notes and term debt have requirements that the Company
maintain certain debt to equity ratios. Additionally, distributions (other than
tax distributions) cannot exceed the total equity.
F-16
<PAGE>
<PAGE>
IMC MORTGAGE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Capital expenditures are limited by certain agreements. Management believes they
are in compliance with all such covenants of these agreements.
8. OTHER ASSETS:
Other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Prepaid expenses............................... $ 21,742 $214,206 $320,824
Real estate owned.............................. 0 141,840 402,889
Organization costs, net........................ 74,880 54,014 48,797
Other assets................................... 52,239 88,602 78,582
-------- -------- --------
$148,861 $498,662 $851,092
-------- -------- --------
-------- -------- --------
</TABLE>
9. SERVICING PORTFOLIO:
The total servicing portfolio of loans was approximately $92,003,000,
$535,798,000 and $783,367,153 at December 31, 1994 and 1995 and March 31, 1996,
respectively. The Company did not service any loans at December 31, 1993.
10. FINANCIAL INSTRUMENTS AND OFF BALANCE SHEET ACTIVITIES:
FINANCIAL INSTRUMENTS
SFAS 105 'Disclosure of Information about Financial Instruments with
Concentrations of Credit Risk' and SFAS 119, 'Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments' requires the
disclosure of the notional amount or contractual amounts of financial
instruments.
The Company regularly securitizes and sells fixed and variable rate
mortgage loan receivables. As part of its interest rate risk management
strategy, the Company may choose to hedge its interest rate risk related to its
mortgage loans held for sale by utilizing treasury securities. The Company
classifies these transactions as hedges. The gains and losses derived from these
financial securities are deferred and included in the carrying amounts of the
mortgage loans held for sale and ultimately recognized in income when the
related mortgage loans are sold. Deferred losses on the treasuries used to hedge
the anticipated transactions amounted to approximately $1,140,000 at December
31, 1995, and deferred gains on the treasuries used to hedge the anticipated
transactions amounted to approximately $2,355,000 at March 31, 1996. There was
no unrecognized hedge position at December 31, 1994.
MARKET RISK
The Company is subject to market risk from financial instruments including
short sales in that changes in market conditions can unfavorably affect the
market value of such contracts.
FAIR VALUES OF FINANCIAL INSTRUMENTS
SFAS No. 107, 'Disclosures about Fair Values of Financial Instruments,'
requires disclosure of fair value information about financial instruments,
whether or not recognized in the financial statements, for which it is
practicable to estimate that value. In cases where quoted market prices are not
available, fair values are based upon estimates using present value or other
valuation techniques. Those techniques are significantly affected by the
assumptions used, including the discount rate and the estimated future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to
F-17
<PAGE>
<PAGE>
IMC MORTGAGE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
independent markets and, in many cases, could not be realized in immediate
settlement of the instrument. SFAS No. 107 excludes certain financial
instruments and all non-financial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts do not represent the underlying
value of the Company.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
the value:
Cash and cash equivalents: The carrying amount of cash on hand and on
deposit at financial institutions is considered to be a reasonable estimate
of fair market value.
Accrued interest receivable and accounts receivable: The carrying
amounts are considered to approximate fair value. All amounts that are
assumed to be uncollectible within a reasonable time are written off.
Mortgage loans held for sale: The estimate of fair values was based on
current pricing of whole loan transactions that a purchaser unrelated to
the seller would demand for a similar loan. The fair value of the mortgage
loans held for sale approximated $29,831,000, $196,577,000 and $266,444,000
at December 31, 1994, 1995, and March 31, 1996, respectively.
Excess servicing receivables: The fair value was determined by
discounting the estimated cash flow over the life of the receivable using
prepayment, default, and interest rate assumptions that market participants
would use for similar financial instruments subject to prepayment, credit
and interest rate risk. The carrying amount is considered to be a
reasonable estimate of fair market value.
Collateralized borrowings: Collateralized borrowings consist of
warehouse finance facilities and term debt. The warehouse finance
facilities have maturities of less than one year and bear interest at
market interest rates and therefore, the carrying value is a reasonable
estimate of fair value. The carrying amount of outstanding term debt, which
bear market rates of interest, approximates its fair value.
Convertible debenture: The convertible debenture has a maturity of
less than one year and bears a market rate of interest. Therefore, the
carrying value is a reasonable estimate of fair value.
Capitalized mortgage servicing rights: The fair value was determined
by estimating the present value of future cash flows related to servicing
income. In using this valuation method, the Company incorporated
assumptions that market participants would use in estimating future net
servicing income which included estimates of the cost of servicing per
loan, the discount rate, an inflation rate, ancillary income per loan,
prepayment speeds and default rates. The carrying amount is deemed to be a
reasonable estimate of fair value.
CREDIT RISK
The Company uses securities purchased under agreements to resell as part of
its interest rate management strategy. These instruments expose the Company to
credit risk which is measured as the loss the Company would record if
counterparties failed to perform pursuant to terms of their contractual
obligations and the value of the collateral held, if any, was not adequate to
cover such losses. The Company's policy is to keep the securities at the
financial institution which instituted the trade on behalf of the Company. The
Company monitors the market value of the assets acquired to ensure their
adequacy as compared to the amount at which the securities will be resold. The
interest rate of these instruments depends upon, among other things, the
underlying collateral, the term of the agreement and the credit quality of the
counterparty. The Company transacts these resale agreements with institutional
broker/dealers.
The Company is a party to financial instruments with off-balance sheet
credit risk in the normal course of business. These financial instruments
include commitments to extend credit to borrowers, and
F-18
<PAGE>
<PAGE>
IMC MORTGAGE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
commitments to purchase loans from correspondents. The Company has a first or
second lien position on all of its loans, and the maximum combined loan-to-value
ratio ('CLTV') permitted by the Company's underwriting guidelines is 100%. The
CLTV represents the combined first and second mortgage balances as a percentage
of the lesser of appraised value or the selling price of the mortgaged property,
with the appraised value determined by an appraiser with appropriate
professional designations. A title insurance policy is required for all loans.
As of December 31, 1994, 1995 and March 31, 1996, the Company had
outstanding commitments to extend credit at fixed rates or purchase loans in the
amount of $100,512,000, $92,397,000 and $114,800,000, respectively.
Commitments to extend credit or to purchase a loan are granted for a period
of thirty days and are contingent upon the borrower and the borrower's
collateral satisfying the Company's underwriting guidelines. Since many of the
commitments are expected to expire without being exercised, the total commitment
amount does not necessarily represent future cash requirements or future credit
risk.
The Company is exposed to on-balance sheet credit risk related to its
mortgage loans held for sale and excess servicing receivables. The Company is
also exposed to off-balance sheet credit risk related to loans which the Company
has committed to originate or buy.
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash and cash equivalents
and mortgages held for sale, securities purchased under agreements to resell,
and securities sold but not yet purchased. The Company places its cash and cash
equivalents with what management believes to be high-quality financial
institutions and thereby limits its exposure to credit risk. As of December 31,
1994, 1995 and March 31, 1996, the majority of mortgage loans with on balance
sheet and off balance sheet risks were collateralized by properties located in
the Eastern United States.
WAREHOUSE EXPOSURE
The Company makes available to two stockholders warehouse financing which
bear interest at LIBOR and LIBOR plus 1.75%, respectively. As of March 31, 1996
the Company had $10,000,000 and $8,000,000, respectively, of committed
warehousing available to these stockholders, of which $2,749,862 and $3,927,182,
respectively, was drawn down. Interest income on these warehouse financing
facilities approximated $54,000 for the three months ended March 31, 1996. The
warehouse commitments are for terms of less than one year. Assets from the
stockholders remain in the warehouse for a period of 30 days at which point they
are purchased by the Company or sold by the stockholders to another investor.
There were $57,000 and $53,200 outstanding as of December 31, 1994 and 1995,
respectively, under warehouse facilities, due from stockholders.
F-19
<PAGE>
<PAGE>
IMC MORTGAGE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. FURNITURE, FIXTURES AND EQUIPMENT:
Furniture, fixtures and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1994 1995 1996
-------- -------- ----------
<S> <C> <C> <C>
Computer systems............................. $304,827 $523,150 $ 620,512
Office equipment............................. 104,059 174,107 193,894
Furniture.................................... 96,037 196,283 355,484
Leasehold improvements....................... 8,553 11,068 21,447
Other........................................ 3,487 3,487 3,487
-------- -------- ----------
Total................................... 516,963 908,095 1,194,824
-------- -------- ----------
Less accumulated depreciation................ (85,213) (228,145) (280,099)
-------- -------- ----------
Furniture, fixtures and equipment, net....... $431,750 $679,950 $ 914,725
-------- -------- ----------
-------- -------- ----------
</TABLE>
Depreciation expense was $9,033, $76,662, $142,932 and $51,954 for 1993,
1994, 1995 and the three months ended March 31, 1996, respectively.
13. EMPLOYEE BENEFIT PLANS:
DEFINED CONTRIBUTION PLAN
The partnership adopted a defined contribution plan (401(k)) for all
eligible employees during August 1995. Contributions to the plan are in the form
of employee salary deferrals which may be subject to an employer matching
contribution up to a specified limit at the discretion of the Company. The
Company's contribution to the plan amounted to $107,031 and $65,000 for the year
ended 1995 and the three months ended March 31, 1996, respectively.
KEY EMPLOYEE AND ADVISOR OPTIONS
On December 11, 1995, the Company adopted the Industry Mortgage Company
1995 Incentive Plan (the 'Incentive Plan') pursuant to which the Company was
authorized to grant certain key employees, directors of the General Partner and
certain non-employee advisors (collectively, 'Eligible Persons') options to
acquire an equity interest in the Company. The aggregate equity interest in the
Company available under the Incentive Plan is not to exceed 12% of all equity
interests in the Company. At March 31, 1996, the Company had granted options to
employees and advisors which, if exercised, would aggregate a 7% interest in the
Company. All of those options were granted on December 11, 1995 at an exercise
price of $3,802 representing the estimated fair market value at the date of
grant for each .01% interest in the Company based on an independent appraisal of
the Company. The options vest 60% on the date of their grant, with an additional
20% to vest on each of the first and second anniversary dates of each grant. The
options are exercisable for a ten-year period and all unexercised options become
void in the event the holder of any such option's relationship with the Company
is terminated for cause. The options are not transferable except as a result of
death.
14. COMMITMENTS:
OPERATING LEASES
The Company leases office space in various cities under operating lease
agreements. The lease agreements require monthly rent of approximately $43,000
including sales taxes, and are subject to certain annual increases. The lease
agreements have lease terms ranging from 6 to 48 months.
Rent expense under operating leases was $57,297, $210,063, $362,946 and
$159,683 in 1993, 1994, 1995 and the three months ended March 31, 1996.
F-20
<PAGE>
<PAGE>
IMC MORTGAGE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments under noncancelable lease agreements are as
follows:
<TABLE>
<CAPTION>
YEARS ENDING OPERATING
DECEMBER 31, LEASES
- ------------------------------------------------------------ ----------
<S> <C>
1996..................................................... $ 590,914
1997..................................................... 495,181
1998..................................................... 377,109
1999..................................................... 297,698
----------
$1,760,902
----------
----------
</TABLE>
EMPLOYMENT AGREEMENTS
Certain members of management entered into employment agreements expiring
2001, which among other things, provide for aggregate annual compensation of
approximately $850,000 plus bonuses equal to 15% of base salary in the relevant
year for each one percent by which the increase in net income on an earnings per
share basis of the Company over the prior year exceeds 10%, up to a maximum of
300% of annual compensation. Each employment agreement contains a restrictive
covenant which prohibits the executive from competing with the Company for a
period of 18 months after termination.
F-21
<PAGE>
<PAGE>
PREFERRED MORTGAGES LIMITED
[Map of England]
<PAGE>
<PAGE>
_____________________________ _____________________________
NO DEALER, SALES REPRESENTATIVE, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE
UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 8
Recent Events.................................. 15
The Company.................................... 16
The Reorganization Plan........................ 17
Use of Proceeds................................ 17
Dilution....................................... 18
Dividend Policy................................ 18
Capitalization................................. 19
Selected Consolidated Financial Data........... 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 23
Business....................................... 36
Management..................................... 53
Principal Stockholders......................... 61
Certain Relationships and Related
Transactions................................. 63
Certain Accounting Considerations Relating to
the Conti VSA................................ 67
Description of Capital Stock................... 69
Shares Eligible For Future Sale................ 72
Underwriting................................... 73
Legal Matters.................................. 74
Experts........................................ 74
Additional Information......................... 74
Index to Consolidated Financial Statements..... F-1
</TABLE>
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
3,100,000 SHARES
IMC MORTGAGE COMPANY
[LOGO]
COMMON STOCK
--------------------
PROSPECTUS
--------------------
BEAR, STEARNS & CO. INC.
OPPENHEIMER & CO., INC.
JUNE , 1996
_____________________________ _____________________________
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized statement of the estimated amounts of all
expenses payable by the Registrant in connection with the registration of the
Common Stock offered hereby, other than underwriting discounts and commissions:
<TABLE>
<S> <C>
Registration Fee -- Securities and Exchange Commission.................................... $ 23,357
Nasdaq National Market Listing Fee........................................................ 47,500
NASD Filing Fee........................................................................... 7,274
Blue Sky fees and expenses................................................................ 15,000
Accountants' fees and expenses............................................................ 300,000
Legal fees and expenses................................................................... 350,000
Printing and engraving expenses........................................................... 130,000
Transfer agent and registrar fees......................................................... 10,000
Miscellaneous............................................................................. 116,869
----------
Total................................................................................ $1,000,000
----------
----------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Florida Act authorizes Florida corporations to indemnify any person who
was or is a party to any proceeding (other than an action by, or in the right
of, the corporation), by reason of the fact that he or she is or was a director,
officer, employee, or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee, or agent of another
corporation or other entity, against liability incurred in connection with such
proceeding, including any appeal thereof, if he or she acted in good faith and
in a manner he or she reasonably believed to be in, or not opposed to, the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
In the case of an action by or on behalf of a corporation, indemnification may
not be made if the person seeking indemnification is adjudged liable, unless the
court in which such action was brought determines such person is fairly and
reasonably entitled to indemnification. The indemnification provisions of the
Florida Act require indemnification if a director or officer has been successful
on the merits or otherwise in defense of any action, suit or proceeding to which
he or she was a party by reason of the fact that he or she is or was a director
or officer of the corporation. The indemnification authorized under Florida law
is not exclusive and is in addition to any other rights granted to officers and
directors under the Articles of Incorporation or Bylaws of the corporation or
any agreement between officers and directors and the corporation.
Under the Florida Act, a director is not personally liable for monetary
damages to the Company or any other person for acts or omissions in his or her
capacity as a director except in certain limited circumstances such as certain
violations of criminal law and transactions in which the director derived an
improper person benefit. As a result, shareholders may be unable to recover
monetary damages against directors for actions taken by them which constitute
negligence or gross negligence or which are in violation of their fiduciary
duties, although injunctive or other equitable relief may be available. These
provisions will not limit the liability of the Company's directors under the
Federal securities laws.
The Company's Certificate of Incorporation provides that the Company shall
indemnify officers and directors, and to the extent authorized by the Board of
Directors, employees and agents of the Company, to the full extent permitted by
and in the manner permissible by law in existence either now or hereafter. In
addition, the Certificate of Incorporation also permits the Board of Directors
to authorize the Company to purchase and maintain insurance against any
liability asserted against any director, officer, employee or agent of the
Company arising out of his capacity as such.
The Underwriting Agreement filed as Exhibit 1 hereto contains reciprocal
agreements of indemnity between the Company and the Underwriters as to certain
liabilities, including liabilities under the
II-1
<PAGE>
<PAGE>
Securities Act, and in certain circumstances provides for the indemnification of
the Company's directors, officers, and controlling persons.
Certain registration rights agreements between the Company and certain of
its shareholders contain reciprocal agreements between the Company and such
shareholders as to certain liabilities, including liabilities under the
Securities Act, and in certain circumstances provide for indemnification of the
Company's directors, officers and controlling persons.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In March, 1996, the Partnership issued a debenture due September 18, 1996
to Rotch Property Group Limited for $1.8 million. Pursuant to the debenture,
Rotch Property Group Limited has the right to convert the debenture into shares
of Common Stock of the Registrant and receive shares of Common Stock, $.01 par
value per share, at a price equal to 93% of the public offering price. The
Company will pay all amounts due under the Rotch Debenture from the proceeds of
the Public Offering. The issuance of the Rotch Debenture was exempt from
registration under the Securities Act by virtue of Section 4(2) thereof.
As of December 31, 1995, the Partnership entered into an agreement with
ContiTrade Services Corporation in which the Partnership issued an option to
purchase limited partnership interests which, in connection with the
Reorganization Plan, will become a warrant for 1.5 million shares of the
Registrant's Common Stock, $.01 par value per share. Both the issuance of the
Conti Option and its exchange for the Conti Warrant were transactions exempt
from registration under the Securities Act by virtue of Section 4(2) thereof.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S>
1.1 -- Form of Underwriting Agreement.*
2.1 -- Pre IPO Agreement between the Partnership, the General Partners and each Limited Partner.'ch'
3.1 -- Certificate of Incorporation of the Registrant, as amended.'ch'
3.2 -- Bylaws of the Registrant, as amended.'ch'
4.1 -- Specimen of Certificate for Common Stock.*
4.2 -- Indenture Agreement between the Partnership and Rotch Property Group Limited.
4.3 -- Substitution Agreement between the Partnership and ContiTrade Services Corporation.'ch'
4.4 -- Incentive Plan of the the Company and related assumption agreements.
4.5 -- Outside Directors' Option Plan of the the Company and related assumption agreements.
5.1 -- Opinion of Dewey Ballantine.*
10.1 -- Employment Agreement dated January 1, 1996 between the Partnership and George Nicholas, as amended.'ch'
10.2 -- Employment Agreement dated January 1, 1996 between the Partnership and Thomas G. Middleton, as
amended.'ch'
10.3 -- Employment Agreement dated January 1, 1996 between the Partnership and David MacDonald.'ch'
10.4 -- Lease Agreements between the Partnership and CLW Realty Asset Group Inc.
10.5 -- Share Subscription and Shareholders' Agreement between the Partnership and Foxgard Limited, Financial
Security Assurance Holdings, Inc. and Preferred Mortgages Limited.'ch'
10.6 -- Transfer Agreement between the Partnership and Curzon Equity Finance Corporation Limited, Preferred
Mortgages Limited, Rotch Property Group Limited, Foxgard Limited and Financial Security Assurance Holdings,
Inc.'ch'
10.7 -- Side letter relating to the Share Subscription and Shareholders' Agreement between the Partnership and
Foxgard Limited, Financial Security Assurance Holdings, Inc. and Preferred Mortgage Limited.
10.8 -- Asset Purchase Agreement and Plan of Reorganization between the Partnership, IMC Acquisition, Inc.,
Mortgage Central Corp. and the shareholders of Mortgage Central Corp.'ch'
10.9 -- Registration Rights Agreement between the Partnership and the shareholders of Mortgage Central Corp.'ch'
10.10 -- Investment Banking Services Agreement between the Partnership and ContiTrade Services Corporation.'ch'
10.11 -- Standby Facility Agreement between the Partnership and ContiTrade Services Corporation and Supplement
thereto.'ch'
</TABLE>
II-2
<PAGE>
<PAGE>
<TABLE>
<C> <S>
10.12 -- Amended and Restated Loan and Security Agreement between the Partnership and ContiTrade Services
Corporation.'ch'
10.13 -- Secured Note from the Partnership to ContiTrade Services Corporation.'ch'
10.14 -- Amended and Restated Custodial Agreement among the Partnership, ContiTrade Services Corporation and Bank
of Boston.'ch'
10.15 -- 1995 Agreement between the Partnership and ContiTrade Services Corporation.'ch'
10.16 -- Assignment, Assumption and Consent Agreement among the Partnership, ContiTrade, ContiTrade Services LLC
and First National Bank of Boston.'ch'
10.17 -- Master Repurchase Agreement Governing Purchase and Sales of Mortgage Loans between the Partnership and
Nomura Asset Capital Corporation and related Power of Attorney.*`D'
10.18 -- Master Repurchase Agreement between the Partnership and Nomura Securities International, Inc.*`D'
10.19 -- Global Master Repurchase Agreement between the Partnership and Nomura Grand Cayman, Ltd.'ch'
10.20 -- Custodial Agreement among the Partnership, The First National Bank of Boston and Nomura Asset Capital
Corporation.
10.21 -- Loan and Security Agreement between the Partnership and First National Bank of Boston and amendments
thereto.*`D'
10.22 -- Interim Loan and Security Agreement between the Partnership and National Westminster Bank PLC, New York
Branch.*`D'
10.23 -- Custodial Agreement among the Partnership, National Westminster Bank PLC and First National Bank of
Boston.
10.24 -- Promissory Note between the Partnership and Lakeview Savings Bank.'ch'
10.25 -- Security Agreement Collateralizing Promissory Note between the Partnership and Lakeview Savings Bank.'ch'
10.26 -- Master Repurchase Agreement among the Partnership and Bear Stearns Home Equity Trust 1996-1.*`D'
10.27 -- Custody Agreement among the Partnership, IMC Corporation of America, Bear Stearns Home Equity Trust 1996-1
and Bank of Boston.
10.28 -- Warehousing Credit and Security Agreement among the Partnership, IMC Corporation of America and
Residential Funding Corporation, as amended.'ch'
10.29 -- Custodial Agreement among the First National Bank of Boston, the Partnership, IMC Corporation of America
and Residential Funding Corporation.
10.30 -- Loan and Security Agreement between the Partnership and American Industrial Loan Association, Approved
Residential Mortgage, Inc. and Armada Residential Mortgage, LLC.*
10.31 -- Loan and Security Agreement between the Partnership and Mortgage Central Corp.*
10.32 -- Custodial Agreement among the Partnership, Mortgage Central Corp. and the First National Bank of Boston.*
11.1 -- Statement re computation of earnings per share (See Note 1 to the Consolidated Financial Statements).
16.1 -- Letter dated April, 1996 from Deloitte & Touche, LLP to the Registrant.
21.1 -- Subsidiaries of the Registrant.'ch'
23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2 -- Consent of Dewey Ballantine (contained in Exhibit 5.1).*
24.1 -- Power of Attorney (included on page II-4).'ch'
27.1 -- Financial Data Schedule
99.1 -- Third Amended and Restated Agreement of Limited Partnership.'ch'
</TABLE>
- ------------
* To be filed by amendment.
`D' Confidential treatment will be requested.
'ch' Previously filed.
(b) Financial Statement Schedules
None
II-3
<PAGE>
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the
Underwriters, at the closing specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Tampa, state of Florida,
on June 3, 1996.
IMC MORTGAGE COMPANY
By /S/ THOMAS MIDDLETON
..................................
THOMAS MIDDLETON,
PRESIDENT, CHIEF OPERATING OFFICER,
ASSISTANT SECRETARY AND DIRECTOR
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
* Chairman of the Board, Chief June 3, 1996
......................................... Executive Officer and Assistant
(GEORGE NICHOLAS) Secretary (Principal Executive Officer)
* Director June 3, 1996
.........................................
(JOSEPH P. GORYEB)
* Director June 3, 1996
.........................................
(ALLEN D. WYKLE)
* Director June 3, 1996
.........................................
(MITCHELL W. LEGLER)
By: /S/ THOMAS G. MIDDLETON President, Chief Operating Officer, June 3, 1996
......................................... Assistant Secretary and Director
(THOMAS G. MIDDLETON
AS ATTORNEY-IN-FACT)
* Chief Financial Officer (Principal June 3, 1996
......................................... Accounting Officer and Principal
(GEORGE FREEMAN) Financial Officer
</TABLE>
II-5
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
LOCATION OF EXHIBIT
EXHIBIT IN SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT NUMBERING SYSTEM
- ------- --------------------------------------------------------------------------------------- -------------------
<C> <S> <C>
1.1 -- Form of Underwriting Agreement*.....................................................
2.1 -- Pre IPO Agreement between the Partnership, the General Partners and each Limited
Partner'ch'..........................................................................
3.1 -- Certificate of Incorporation of the Registrant, as amended'ch'......................
3.2 -- Bylaws of the Registrant, as amended'ch'............................................
4.1 -- Specimen of Certificate for Common Stock*...........................................
4.2 -- Indenture Agreement between the Partnership and Rotch Property Group Limited........
4.3 -- Substitution Agreement between the Partnership and ContiTrade Services
Corporation'ch'......................................................................
4.4 -- Incentive Plan of the Company and related assumption agreements.....................
4.5 -- Outside Directors Option Plan of the Company and related assumption agreements......
5.1 -- Opinion of Dewey Ballantine*........................................................
10.1 -- Employment Agreement dated January 1, 1996 between the Partnership and George
Nicholas, as amended.'ch'............................................................
10.2 -- Employment Agreement dated January 1, 1996 between the Partnership and Thomas G.
Middleton, as amended.'ch'...........................................................
10.3 -- Employment Agreement dated January 1, 1996 between the Partnership and David
MacDonald............................................................................
10.4 -- Lease Agreements between the Partnership and CLW Realty Asset Group, Inc............
10.5 -- Share Subscription and Shareholders' Agreement between the Partnership and Foxgard
Limited, Financial Security Assurance Holdings, Inc. and Preferred Mortgages
Limited'ch'..........................................................................
10.6 -- Transfer Agreement between the Partnership and Curzon Equity Finance Corporation
Limited, Preferred Mortgages Limited, Rotch Property Group Limited, Foxgard Limited
and Financial Security Assurance Holdings, Inc'ch'...................................
10.7 -- Side Letter relating to the Share Subscription and Shareholders Agreement between
the Partnership and Foxgard Limited, Financial Security Assurance Holdings, Inc. and
Preferred Mortgage Limited...........................................................
10.8 -- Asset Purchase Agreement and Plan of Reorganization between the Partnership, IMC
Acquisition, Inc., Mortgage Central Corp. and the shareholders of Mortgage Central
Corp.'ch'............................................................................
10.9 -- Registration Rights Agreement between the Partnership and the shareholders of
Mortgage Central Corp.'ch'...........................................................
10.10 -- Investment Banking Services Agreement between the Partnership and ContiTrade
Services Corporation'ch'.............................................................
10.11 -- Standby Facility Agreement between the Partnership and ContiTrade Services
Corporation and Supplement thereto'ch'...............................................
10.12 -- Amended and Restated Loan and Security Agreement between the Partnership and
ContiTrade Services Corporation'ch'..................................................
10.13 -- Secured Note from the Partnership to ContiTrade Services Corporation'ch'............
10.14 -- Amended and Restated Custodial Agreement among the Partnership, ContiTrade Services
Corporation and Bank of Boston'ch'...................................................
10.15 -- 1995 Agreement between the Partnership and ContiTrade Services Corporation'ch'......
10.16 -- Assignment, Assumption and Consent Agreement among the Partnership, ContiTrade,
ContiTrade Services LLC and First National Bank of Boston'ch'........................
10.17 -- Master Repurchase Agreement Governing Purchase and Sales of Mortgage Loans between
the Partnership and Nomura Asset Capital Corporation and related Power of
Attorney.*`D'........................................................................
10.18 -- Master Repurchase Agreement between the Partnership and Nomura Securities
International, Inc.*`D'..............................................................
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<C> <S> <C>
10.19 -- Global Master Repurchase Agreement between the Partnership and Nomura Grand Cayman,
Ltd.*`D'.............................................................................
10.20 -- Custodial Agreement between the Partnership and The First National Bank of Boston...
10.21 -- Loan and Security Agreement between the Partnership and First National Bank of
Boston and amendments thereto*`D'....................................................
10.22 -- Interim Loan and Security Agreement between the Partnership and National Westminster
Bank PLC, New York Branch*`D'........................................................
10.23 -- Custodial Agreement among the Partnership, National Westminster Bank PLC and First
National Bank of Boston..............................................................
10.24 -- Promissory Note between the Partnership and Lakeview Savings Bank'ch'...............
10.25 -- Security Agreement Collateralizing Promissory Note between the Partnership and
Lakeview Savings Bank'ch'............................................................
10.26 -- Master Repurchase Agreement among the Partnership and Bear Stearns Home Equity Trust
1996-1*`D'...........................................................................
10.27 -- Custody Agreement among the Partnership, IMC Corporation of America, Bear Stearns
Home Equity Trust 1996-1 and Bank of Boston..........................................
10.28 -- Warehousing Credit and Security Agreement between the Partnership, IMC Corporation
of America and Residential Funding Corporation, as amended*'D'.......................
10.29 -- Custodial Agreement among the First National Bank of Boston, the Partnership, IMC
Corporation of America and Residential Funding Corporation...........................
10.30 -- Loan and Security Agreement between the Partnership and American Industrial Loan
Association, Approved Residential Mortgage, Inc. and Armada Residential Mortgage,
LLC.*
10.31 -- Loan and Security Agreement between the Partnership and Mortgage Central Corp.*
10.32 -- Custodial Agreement among the Partnership, Mortgage Central Corp. and the First
National Bank of Boston.*
11.1 -- Statement re computation of earnings per share (See Note 1 to the Consolidated
Financial Statements)................................................................
16.1 -- Letter dated April, 1996 from Deloitte & Touche, LLP to the Registrant'ch'..........
21.1 -- Subsidiaries of the Registrant'ch'..................................................
23.1 -- Consent of Coopers & Lybrand L.L.P..................................................
23.2 -- Consent of Dewey Ballantine (contained in Exhibit 5.1)..............................
24.1 -- Power of Attorney (included on page II-4)...........................................
27.1 -- Financial Data Schedules............................................................
99.1 -- Third Amended and Restated Agreement of Limited Partnership'ch'.....................
</TABLE>
- ------------
* To be filed by amendment.
`D' Confidential treatment to be requested.
'ch' Previously filed.
STATEMENT OF DIFFERENCES
The dingbat checkmark symbol shall be expressed as........................ 'ch'
The dagger symbol shall be expressed as .................................. 'D'
<PAGE>
<PAGE>
INDUSTRY MORTGAGE COMPANY, L.P.
CONVERTIBLE SECURED DEBENTURE
DUE SEPTEMBER 18, 1996
$1,800,000 March 20, 1996
Tampa, Florida
FOR VALUE RECEIVED, INDUSTRY MORTGAGE COMPANY, L.P., a Delaware limited
partnership (which entity and any successor corporation into the common shares
of which the equity interest in Industry Mortgage Company, L.P. are converted is
called the "Company"), hereby promises to pay to the order of ROTCH PROPERTY
GROUP LIMITED, a company registered in England with number 2993061, the address
of which is Leconfield House, 7th Floor, Curzon Street, London WlY 7FB (the
"Holder"), the principal sum of ONE MILLION EIGHT HUNDRED THOUSAND DOLLARS
($1,800,000), together with interest on the unpaid principal amount hereof at
the floating rate of one percent per annum in excess of LIBOR (as hereafter
defined) (the "Regular Rate") from the date hereof until this debenture (the
"Debenture") is paid in full. Interest shall be calculated for the actual number
of days elapsed, using a daily rate determined by dividing the annual rate by
360. Principal and interest on this Debenture shall be paid in the following
manner, unless sooner accelerated in accordance with the terms hereof:
(i) Principal shall be paid in a single payment at maturity on
September 18, 1996, unless sooner converted by the Holder or redeemed by the
Company as provided below; and
(ii) Interest at the foregoing Regular Rate shall accrue from
the date of issuance of this Debenture and to the extent accrued shall be paid
on the first Business Day of each calendar month hereafter commencing April 1,
1996, and upon maturity hereof. The term "Business Day" shall mean any day on
which the London interbank market is open.
NOTWITHSTANDING the foregoing, if there shall not have occurred an Event of
Default, the Company shall have the option to extend the maturity of this
Debenture from September 18, 1996, to March 18, 1997, upon providing written
notice of such election to the Holder not later than September 1, 1996,
accompanied by payment of an extension fee equal to one percent (1%) of the
then outstanding principal balance due hereunder.
"LIBOR" shall mean the rate of interest per annum which is equal to the
arithmetic mean of the U.S. Dollar London Interbank Offered Rates for one (1)
month periods as of 11:00 a.m. London time on the first Business of each month,
as published by Knight-Ridder, Inc. on its MoneyCenter system or, if such system
is not operational, on a suitable alternative system. The
<PAGE>
<PAGE>
rate in effect on the first Business Day of each month shall be the LIBOR rate
for purposes of this instrument until the first business day of the following
month.
Payment of the interest on and principal of this Debenture shall be
made without any set off, deduction or counterclaim at the office of the Holder
or at such other address as the Holder may designate in writing to the Company
from time to time, in such currency of the United States of America as at the
time of payment is legal tender for the payment of public and private debts.
Upon and from maturity of this Debenture, whether upon acceleration or
otherwise, the unpaid principal of this Debenture shall bear interest at a rate
(the "Default Rate") equal to the lesser of (i) the higher of five percent (5%)
in excess of the Regular Rate at which interest accrues hereon, or five percent
(5%) over the then-prevailing prime rate as published in the Wall Street
Journal, or (ii) the highest rate permitted by applicable law, until this
Debenture is paid in full.
If the Company is obligated by law to make any deductions or
withholdings from any payment hereunder ("Mandatory Withholdings), the amount
payable hereunder shall be increased to the extent necessary to provide that the
Holder receives a net amount equal to the amount it would have received had no
such deduction or withholding been required to be made. To prevent Holder from
receiving a windfall and to seek to bring the economic positions of Holder and
the Company as closely as possible to the position they would have held had
there been no Mandatory Withholdings, Holder agrees (i) to promptly file such
returns for refunds and credits and to take all such other reasonable actions to
obtain a refund, credit or other benefit ("Tax Benefit") against Holder's other
taxes as a result of the Mandatory Withholding, and (ii) to immediately upon
receipt of any Tax Benefit pay over to the Company an amount equal to the value
of such Tax Benefit.
1. Conversion.
(a) Conversion Privilege and Conversion Price. Subject to the
following terms and conditions and at the option of the Holder hereof after both
of the following have occurred:
(i) the equity interests in Industry Mortgage Company, L.P. are
converted into fully paid and non-assessable shares of common stock of the
Corporation ("Common Stock"), and
(ii) the Corporation successfully completes an initial public offering
of its Common Stock that is registered with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Act"), and that
results in the Common Stock being traded on a national securities exchange, the
Nasdaq National Market or in the over-the-counter market (the "IPO"),
then this Debenture or any portion of the principal amount hereof may, at any
time at or before the maturity date hereof, or in the case of this Debenture or
a portion thereof called for redemption prior to that date, then in respect of
this Debenture or such portion hereof until and
2
<PAGE>
<PAGE>
including, but (unless the Company shall default in payment due upon the
redemption thereof) not after, the close of business on the fifth day prior to
the Redemption Date (as defined below), be converted into Common Stock (the
"Conversion Rights) based on the conversion price determined as follows:
(i) if the conversion occurs substantially simultaneously with
the effectiveness of the IPO, then based upon a conversion price (the "IPO
Conversion Price") arrived at by multiplying .93 by the initial public offering
price per share; and
(ii) if the conversion occurs other than pursuant to subclause
(i) above, then based on a conversion price (the "Conversion Price") equal to
the IPO Conversion Price and as adjusted from time to time as provided below.
(b) Number of Shares. The number of shares of Common Stock issued to
the Holder in a conversion hereunder shall be the number arrived at by dividing
the principal amount of the Debenture being converted by the Conversion Price.
(c) Exercise of Conversion. In order to receive the certificates
evidencing the Common Shares into which this Debenture is converted, the Holder
shall surrender this Debenture to the Company at the office or agency of the
Company maintained for that purpose, accompanied by instruments of transfer in
form satisfactory to the Company, acting reasonably, duly executed by the Holder
or by its duly authorized attorney. No payment adjustment shall be made upon any
conversion on account of any interest accrued on the Debenture surrendered for
conversion or on account of any dividends on the Common Stock issued upon
conversion but any accrued and unpaid interest shall be paid at the time of
conversion. If the conversion option is exercised (and/or to the extent that it
is), this Debenture shall be deemed to have been converted upon its surrender,
and at such time the rights of the Holder of this Debenture as the Holder shall
cease, and the person or persons entitled to receive the Common Stock issuable
upon conversion shall be treated for all purposes as the record holder or
holders of such Common Stock at such time. As promptly as practicable on or
after the conversion date, the Company shall issue and shall deliver to the
Holder a certificate or certificates for the number of full shares of Common
Stock issuable upon conversion, together with payment in lieu of any fraction of
a share, as provided below, against delivery to the Company of this Debenture as
described above. The Holder agrees that the exercise of conversion rights
hereunder is subject to compliance with the Act and any state securities laws,
as applicable. The Holder shall not dispose of the shares of Common Stock issued
upon conversion in violation of such laws and agrees that the certificate(s)
representing such shares may bear appropriate legends to such effect.
(d) Fractions of Shares. No fractional shares of Common Stock shall be
issued upon conversion of this Debenture. If more than one Debenture shall be
surrendered for conversion at one time by the same Holder, the number of full
shares which shall be issuable upon conversion thereof shall be computed on the
basis of the aggregate principal amount of the Debentures (or specified portions
thereof) so surrendered. Instead of any fractional share of
3
<PAGE>
<PAGE>
Common Stock which would otherwise be issuable upon conversion of this Debenture
(or specified portions thereof), the Company shall pay a cash adjustment in
respect of such fraction in an amount equal to the same fraction of the
Conversion Price per share of Common Stock on the date of conversion.
(e) Adjustment of Conversion Price.
(i) In the event that the Company shall pay or make a dividend
or other distribution on any class of capital stock of the Company in Common
Stock or its equivalent, subdivide its outstanding Common Stock (by stock split
or otherwise) into a greater number of shares, or combine its outstanding shares
of Common Stock (by reverse stock split or otherwise) into a smaller number of
shares, the Conversion Price shall be proportionately adjusted, such adjustment
to become effective on the record date of such dividend or distribution or on
the effective date of such subdivision or combination, as the case may be. For
purposes of this subparagraph l.(e)(i), the number of shares of Common Stock at
any time outstanding shall not include shares held in treasury of the Company.
(ii) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at least $.10 in
such price; provided, however, that any adjustments which by reason of this
subparagraph l.(e)(ii) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment period. All calculations under
this subparagraph l.(e) shall be made to the nearest cent.
(f) Notice of Adjustments of Conversion Price. Whenever the Conversion
Price is adjusted as herein provided, a notice stating the basis for adjusting
the Conversion Price shall be mailed by the Company to the Holder at its last
address as it shall appear on the books of the Company.
(g) Notice of Certain Corporation Action. In case:
(i) The Company shall declare a dividend (or any other
distribution) on its Common Stock payable otherwise than normal, periodic
dividends in cash out of its earned surplus; or
(ii) The Company shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any other rights; or
(iii) Of any reclassification of the Common Stock of the Company
(other than a subdivision or combination of its outstanding shares of Common
Stock), or of any consolidation or merger to which the Company is a party and
for which approval of any stockholders of the Company is required, or of the
sale or transfer of all or substantially all of the assets of the Company; or
4
<PAGE>
<PAGE>
(iv) Of the voluntary or involuntary dissolution or winding up
of the Company;
then the Company shall cause to be mailed to the Holder at its last addresses as
it shall appear on the records of the Company, at least twenty (20) days (or ten
(10) days in any case specified in clause l.(g)(i) or l.(g)(ii) above) prior to
the applicable record date hereinafter specified, a notice stating (A) the date
on which a record is to be taken for purpose of such dividend, distribution,
rights or warrants, or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution,
rights or warrants are to be determined, or (B) the date on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up.
(h) Company to Reserve Common Stock. The Company shall at all times
reserve and keep available, free from preemptive rights, out of its authorized
but unissued Common Stock, for the purpose of effecting the conversion of this
Debenture, the full number of shares of Common Stock then issuable upon
conversion of this and all other outstanding Debentures.
(i) Taxes on Conversions. The Company shall pay any and all excise
taxes (including document stamps) that may be payable in respect of the issue or
delivery of shares of Common Stock upon conversion of this Debenture. The
Company shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of shares of Common
Stock in a narne other than that of the Holder of this Debenture, and no such
issue or delivery shall be made unless and until the person requesting such
issue has paid to the Company the amount of any such tax, or has established to
the reasonable satisfaction of the Company that such tax has been paid.
(j) Covenant as to Common Stock. The Company covenants that all shares
of Common Stock which may be issued upon conversion of this Debenture will upon
issue be fully paid and nonassessable and, except as provided in subsection 2(j)
above, the Company will pay all taxes, liens and charges with respect to the
issue thereof.
(k) Cancellation of Converted Debentures. Upon surrender for
conversion, this Debenture shall be canceled.
(1) Legends; Investment Representations. Any certificate evidencing the
securities issued upon exercise of the Conversion Rights shall bear a legend in
substantially the following form:
5
<PAGE>
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT").
SUCH SECURITIES MAY NOT BE TRANSFERRED EXCEPT (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR (B) UPON RECEIPT BY THE ISSUER OF AN OPINION
OF COUNSEL, WHICH OPINION OF COUNSEL SHALL BE REASONABLY SATISFACTORY
TO THE ISSUER, TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT FROM
REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.
2. Registration
(a) Definitions. The following additional definitions shall
apply for purposes of this Section 2:
(i) The term "Abbreviated Registration Statement" means a
registration statement on Form S-3 or any similar or successor form in which
financial statements and other detailed information about the issuer are
incorporated by reference from the issuer's periodic reports filed under
Securities Exchange Act of 1934.
(ii) The term "Act" means the Securities Act of 1933, as
amended, or any successor legislation thereto.
(iii) The terms "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration statement or
document.
(iv) The term "Registrable Securities" means (1) the
shares of Common Stock ("Shares") issuable or issued upon exercise of the
Conversion Rights, and (2) any securities of the Company issued as (or issuable
upon the conversion or exercise of any Conversion Rights, right or other
security which is issued as) a dividend or other distribution with respect to,
or in exchange for or in replacement of, such Shares, excluding in all cases,
however, any Registrable Securities sold by a person in a transaction in which
his rights under this Section are not assigned and any such securities as to
which restrictive legends restricting transfer under the Act are lifted pursuant
to Rule 144(k) under the Act (or any successor rule) or any other exemption from
registration under the Act in which the subsequent disposition of such
securities by the Holder does not require registration under the Act.
(b) Right to Include Registrable Stock. If the Company proposes to
register any of its securities under the Act for its own account for sale for
cash (other than a registration on Form S-4 or Form S-8, or any successor or
similar forms) (the "Offering"), it will each such time promptly give written
notice to the Holder. Upon the written request of the Holder made within
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15 days after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such Holder and the
intended method of distribution thereof), the Company will use its reasonable
efforts to effect the registration under the Act of all Registrable Securities
which the Company has been requested to register by the Holder in accordance
with the intended methods of distribution specified in such request; provided
that (i) if, at any time after giving written notice of its intention to
register any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company determines for
any reason not to register any securities and to withdraw the registration
statement, the Company may, at its election, give written notice of such
determination to the Holder and, thereupon, will be relieved of its obligation
to register any Registrable Securities in connection with such registration,
(ii) in case of a determination by the Company to delay registration of its
securities, the Company will be permitted to delay the registration of
Registrable Securities for the same period as the delay in registering such
other securities, and (iii) the amount of Registrable Securities of the Holder
which will be registered shall not exceed a pro rata portion of Share owned by
persons other than the Company and its affiliates then being registered.
(c) Demand Registration. At any time commencing six months after there
has been a closing of an initial public offering of securities of the Company
under the Securities Act of 1933, and from time to time thereafter, the Holder
shall have the right to demand the registration of all Registrable Securities
then held by the Holder. If the Holder makes such request, the COmpany shall, in
accordance with Section 2, register for sale such Registrable Securities under
the Act, provided that the Company shall be able to delay the filing (but not
the preparation) of any such registration statement for a period of not more
than one hundred and twenty days from the date it would otherwise be required to
be filed (but in any event not later than the next filing of the Company's Form
10-K); provided that the Company shall have the right to delay such filing only
once in any 12-month period.
(d) Priority. If the managing underwriter for a registration involving
an underwritten offering advises the Company in writing that, in its opinion,
the number of securities of the Company (including Registrable Securities)
requested to be included in such registration by the holders thereof exceeds the
number of securities of the Company (the "Sale Number") which can be sold in an
orderly manner in such offering within a price range acceptable to the Company,
the Company will include (i) first, all securities of the Company that the
Company proposes to register for its own account and (ii) second, to the extent
that the number of securities of the Company to be included by the Company is
less than the Sale Number, a number of the Registrable Securities equal to the
number derived by multiplying (a) the difference between the Sale Number and the
securities proposed to be sold by the Company, and (b) a fraction the numerator
of which is the number of Registrable Securities originally requested to be
registered by the Holder and the denominator of which shall be the sum of (y)
the aggregate number of all securities requested to be registered by all holders
of Company Securities (other than securities being registered by the Company
itself) and (z) the securities proposed to be registered by the Company.
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(e) Obligations of the Company. Whenever required under this Agreement
to effect the registration of any Registrable Securities, the Company will, as
expeditiously as reasonably possible:
(i) Prepare and file with the SEC a registration statement with
respect to such of the Registrable Securities as are set forth in the request as
promptly as practicable following the date such obligation arises (but in any
event not later than 90 days following such date), use its reasonable best
efforts to cause such registration statement to become effective and use its
reasonable best efforts to keep such registration statement effective for up to
one year (nine months in the case of a registration statement that is not an
Abbreviated Registration Statement) but not after such securities cease being
Registrable Securities.
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all Registrable
Securities covered by such registration statement.
(iii) Furnish to the Holder such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as it may reasonably request
in order to facilitate the disposition of Registrable Securities owned by such
Holder.
(iv) Use its efforts to register and qualify the securities
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions as shall be reasonably requested by the Holder,
provided that the Company shall not be required to qualify to do business,
subject itself to taxation or to file a general consent to service of process in
any such states or jurisdictions.
(v) Notify the Holder, at any time when a prospectus relating
thereto is required to be delivered under the Act, of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(vi) Cause the securities of the Holder to be listed or
designated for trading on such securities exchange or automated quotation system
as any securities of the same class of the Company are then listed or quoted or,
if no such listing or quotation then exists, as reasonably determined by the
Company.
(vii) Make documents, files, books, records, officers, directors
and employees of the Company available to the Holder and provided the Holder's
underwriters, if any, shall have agreed to be bound by the provisions of this
Section, to such underwriters, and make
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such other accommodations as are reasonably necessary for the Holder and the
Holder's undenvriters, if any, to perform a due diligence review of the Company;
provided, however, that all such information ("Confidential Information") will
be kept confidential and not utilized by Holder. The term "Confidential
Information" does not include information which (i) is already in possession of
such other party (other than that which is subject to another confidentiality
agreement), (ii) becomes generally available to the public, or (iii) becomes
available on a non-confidential basis from a source other than the Company.
(viii) Provide such opinions, certifications, indemnifications,
and take such other actions, as are reasonably required and appropriate, to
permit the Holder to make a public offering of the Registrable Securities
requested to be registered.
(f) Furnish Information. The Company's obligation to cause any
registration statement to become effective in connection with distribution of
any Registrable Securities pursuant to this Agreement is contingent upon the
Holder, with reasonable promptness, furnishing to the Company such information
regarding itself, the Registrable Securities held by it, and the intended method
of disposition of such securities, as is required to effect the registration of
the Registrable Securities.
(g) Indemnification. In the event of any registration under this
Agreement:
(i) To the extent permitted by law, the Company will indemnify
and hold harmless the Holder and its officers, directors and Affiliates (and
their officers and directors), any underwriter (as defined in the Act) for the
Holder and each person (and its officers and directors), if any, who controls
the Holder or underwriter within the meaning of the Act or the Securities
Exchange Act of 1934, as amended (the "1934 Act"), against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Act, or the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, or (iii) any violation or alleged violation by
the Company of the Act, the 1934 Act, any state securities law or any rule or
regulation promulgated under the Act, or the 1934 Act or any state securities
law, and the Company will pay to the Holder, underwriter or controlling person,
as incurred, any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this subsection (a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability, or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld),
nor will the Company be liable in any such case for any such loss, claim,
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damage, liability, or action to the extent that it arises out of or is based
upon (1) a Violation which occurs solely as the result of the written
information furnished expressly for use in connection with such registration by
the Holder, underwriter or controlling person or (2) with respect to the
Underwriter and controlling person of such Underwriter (and their respective
officers and directors), a Violation which results from the fact that there was
not sent or given to a person who bought Registrable Securities, at or prior to
the written confirmation of the sale, a copy of the final prospectus, as then
amended or supplemented, if the Company had previously furnished copies of such
prospectus hereunder and such prospectus corrected the misstatement or omission
forming the basis of the Violation.
(ii) To the extent permitted by law, the Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers who
has signed the registration statement, each person, if any, who controls the
Company within the meaning of the Act, any underwriter and any controlling
person of any such underwriter or other holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, or the 1934 Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or action in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs solely as a
result of the written information furnished by the Holder expressly for use in
connection with such registration; and such Holder will pay, as incurred, any
legal or other expenses reasonably incurred by any person intended to be
indemnified pursuant to this subsection, in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the Holder's liability pursuant to this Section shall be limited to the
amount of the net proceeds received by the Holder from the sale of the
Registrable Securities sold by it, and further provided that the indemnity
agreement contained in this subsection does not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld.
(iii) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section, deliver to the
indemnifying party a written notice of the commencement of such action and the
indemnifying party will have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) will have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of the indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between the indemnified party and any other party represented by such
counsel in the same proceeding. If the indemnifying party shall fail to defend
the action, or conducts a defense which is not reasonably adequate in light of
the circumstances, the indemnified party may conduct its own defense and shall
be entitled to reimbursement for the costs of such defense. The failure to
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deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the indemnified party under this Section, except to the extent that
the indemnifying party is materially prejudiced by such failure. The omission so
to deliver written notice to the indemnifying party does not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section. No indemnifying party under this Agreement will enter into any
settlement or consent to any entry of judgment which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to the
indemnified party of a release from all liability in respect of such claim or
litigation.
(iv) If the indemnification provided for in this Section is held
by a court of competent jurisdiction to be unavailable to an indemnified party
or is insufficient to indemnify an indemnified party with respect to any loss,
liability, claim, damage, or expense referred to therein, then the indemnifying
party, in lieu of indemnifying such indemnified party hereunder, will contribute
to the amount paid or payable by such indemnified party as a result of such
loss, liability, claim, damage, or expense in such proportion as is appropriate
to reflect the relative fault of the indemnifying party on the one hand and of
the indemnified party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage, or expense as
well as any other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party will be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission. The obligation of the Holder to make a
contribution pursuant to this Section shall be limited to the net proceeds
received by the Holder from the sale of the Registrable Securities sold by it,
less any amounts paid pursuant to Section.
(v) The obligations of the Company and the Holder under this
Section will survive the completion of any offering of Registrable Securities in
a registration statement under this Agreement, and otherwise.
(h) Expenses of Registration. All expenses incurred in connection with
any registration, qualification or compliance pursuant to Section 2 of this
Debenture, including, without limitation, all registration, filing and
qualification fees, printing expenses, fees and disbursements of counsel for the
Company and expenses of any special audits incidental to or required by such
registration, qualification or compliance will be borne by the Company, except
that the Company will not be required to pay underwriters' discounts,
commissions, or stock transfer taxes relating to the Registrable Securities or
the fees and disbursements of counsel to the Holder.
(i) Amendments and Waivers. Any term of this Section 2 may be
amended only with the written consent of the Company and the holders of a
majority of the Registrable
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Securities then outstanding. Any amendment effected in accordance with this
paragraph will be binding upon each holder of any Registrable Securities then
outstanding, each future holder of all such Registrable Securities, and the
Company.
3. Redemption of Debentures.
(a) Right of Redemption. This Debenture may be redeemed from time to
time at the election of the Company, as a whole or a part, at any time at a
redemption price equal to one hundred percent (100%) of the principal amount,
together with accrued interest to the date fixed for redemption of this
Debenture by or pursuant to the terms of the Debenture (the "Redemption Date").
(b) Selection of Debentures to be Redeemed. If this Debenture is part
of a series of Debentures, and if less than all the Debentures are to be
redeemed, the particular Debentures to be redeemed shall be selected not more
than sixty (60) days prior to the Redemption Date by the Company from the
outstanding Debentures not previously called for redemption, by such method as
the Company shall deem fair and appropriate and which may provide for the
selection for redemption of portions (equal to $1,000 or any integral multiple
thereof) of the principal amount of Debentures of a denomination larger than
$1,000. The Company shall notify each Holder in writing of the Debentures
selected for redemption and, in the case of any Debenture selected for partial
redemption, the principal amount thereof to be redeemed.
(c) Notice of Redemption. Notice of redemption shall be given by
first-class mail, postage pre-paid, mailed not less than thirty (30) nor more
than sixty (60) days prior to the Redemption Date, to each Holder of the
Debentures to be redeemed, at such Holder's address appearing on the books of
the Company. All notices of redemption shall state:
(i) The Redemption Date;
(ii) If this Debenture is part of a series of Debentures, and if
less than all the outstanding Debentures are to be redeemed, the identification
and, in the case of partial redemption, the respective principal amounts, of the
particular Debentures to be redeemed;
(iii) That on the Redemption Date the redemption price will
become due and payable upon each Debenture to be redeemed and that interest
thereof will cease to accrue on and after such date except to the extent that
the Debenture is not redeemed as anticipated;
(iv) In the event that the Holder has decided to exercise the
conversion option, the Conversion Price, the date on which the right to convert
the principal of the Debentures to be redeemed will terminate and the place or
places where such Debentures may be surrendered for conversion: and
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(v) The place or places which such Debentures are to be
surrendered for payment of the redemption price.
Failure to give such notice to the holder of any Debenture to be
redeemed as a whole or in part, or any defect therein, shall not affect the
validity of the proceedings for redemption of any other Debenture.
(d) Debentures Payable on the Redemption Date. Notice of redemption
having been given as provided above, the Debentures so to be redeemed shall, on
the Redemption Date, become due and payable as herein provided unless
theretofore converted, and from and after such date (unless the Company shall
default in the payment of the redemption price and accrued interest) such
Debenture shall cease to bear interest. Upon surrender of any such Debenture for
redemption in accordance with such notice, such Debenture shall be paid on the
Redemption Date by the Company at the redemption price, together with accrued
interest to the Redemption Date. If any Debenture called for redemption shall
not be so paid upon surrender thereof for redemption, the principal shall, until
paid, bear interest from the Redemption Date at the Default Rate.
Notwithstanding the foregoing, if such notice is mailed as aforesaid, and if on
or before the Redemption Date, funds sufficient to redeem the Debentures called
for redemption are set aside by the Company in trust for the account of the
holders of the Debentures to be redeemed, even if a Debenture called for
redemption shall not have been surrendered, from and after the Redemption Date,
the Debenture so called for redemption shall be deemed to be no longer
outstanding, interest thereon shall cease to accrue, and all rights of the
holders of such Debentures shall cease except the right to receive the
redemption price, together with accrued interest to the Redemption Date, upon
surrender of the Debenture.
(e) Debentures Redeemed in Part. Any Debenture which is to be redeemed
only in part shall be surrendered at any office or agency of the Company
designated for that purpose (with, if the Company so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company duly
executed by, the Holder or its duly authorized attorney), and the Company shall
execute and deliver to the Holder of such Debenture without service charge, a
new Debenture or Debentures, of any authorized denomination as requested by such
Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Debenture so surrendered.
4. Events of Default.
(a) Defined. The term "Event of Default" as used herein shall mean any
one of the following events:
(i) Default in the payment on the required due date of principal
on this Debenture;
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(ii) Default in the payment on the required due date of interest
on this Debenture which continues for ten (10) days without being cured;
(iii) Default under the provision of any material indenture,
loan agreement or other instrument under which any evidence of indebtedness
(other than this Debenture) of the Company has been or may be issued;
(iv) Default shall occur in the observance or performance by the
Company of any material term, covenant or other provision of this Debenture or
any instrument creating a lien, security interest or charge to secure the
performance hereof, which is not remedied to the Holder's satisfaction, acting
reasonably, within fourteen (14) days after written notice thereof to the
Company;
(v) Any representation or warranty made by the Company herein or
furnished to the Holder in connection herewith (including, without limitation,
any instrument creating a lien, security interest or charge to secure the
performance hereof) proves untrue in any material respect as of the date of the
making thereof;
(vi) The Company shall (A) become insolvent; or (B) be unable,
or admit in writing its inability, to pay its debts as they mature; or (C) make
a general assignment for the benefit of creditors or to an agent authorized to
liquidate any substantial amount of its property; or (D) become the subject of
an "order for relief" within the meaning of the United States Bankruptcy Code;
or (E) become a subject of a creditor's petition for liquidation, reorganization
or to effect a plan or other arrangement with creditors which is not set aside
within sixty (60) days thereafter; or (F) apply to a court for the appointment
of a custodian or receiver for any of its assets; or (G) have a custodian or
receiver appointed for any of its assets (with or without its consent), or (H)
otherwise become a subject of any insolvency proceedings or propose or enter
into any formal or informal composition or arrangement with its creditors; or
(I) commence, approve or consent to any case or proceeding under any bankruptcy,
reorganization or similar law.
(b) Acceleration. When any Event of Default has occurred and for so
long as such Event of Default is continuing, the Holder, at its option and
without notice, may declare this Debenture to be due and payable in full, and it
shall thereupon become immediately due and payable.
(c) Expenses. The Company agrees to pay to the Holder all reasonable
expenses incurred by it, including reasonable compensation to its attorneys for
all services rendered, in connection with the preparation, registration and
negotiation of this document and all related documents and amendments, as well
as all expenses (including legal expenses) incurred in collection of this
Debenture.
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5 . Transferability.
(a) Transfer. Transfer of this Debenture shall be made only on the
books of the Company by the holders of record hereof or by their legal
representatives who shall furnish proper evidence of authority to transfer, or
by their attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the Company, subject to the restrictions set forth
below. The Holder in whose name this Debenture stands on the books of the
Company shall be deemed by the Company to be the owner(s) hereof for all
purposes.
(b) Restriction on Transfer Period. The Holder shall not transfer this
Debenture until it has first given written notice to the Company describing
briefly the manner of any such proposed transfer and until the Company has
received from the Holder's counsel an opinion (reasonably satisfactory in form
and substance to the Company's counsel) that such transfer can be made without
compliance with the registration provisions of the Act or any state securities
act.
6. Collateral. The payment by the Company of the indebtedness evidenced
hereby and the performance by the Company of its other obligations hereunder is
secured by the grant by the Company of a legal charge over all of the common
shares owned by the Company in Preferred Mortgages Limited, a corporation
incorporated under the laws of England and Wales, United Kingdom.
7. Warranties. and Representations. The Company hereby warrants and
represents to the Holder that:
(a) Formation. The Company is duly formed and validly existing as a
limited partnership in Delaware; and
(b) Validity. The Company has all requisite power and authority to
execute and deliver this Debenture and all instruments securing the Company's
obligations hereunder; the execution and delivery of this Debenture and such
other instruments, and the Company's performance thereof, has been duly
authorized and each of this Debenture and such other instruments constitutes the
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with their respective terms.
8. Miscellaneous.
(a) Mutilated or Missing Certificates. In case this instrument or any
other document evidencing a Debenture issued to the Holder shall be mutilated,
lost, stolen or destroyed, the Company shall issue and deliver in exchange and
substitution for, and upon cancellation of the mutilated instrument or other
document or in lieu of or substitution for the instrument or certificate lost,
stolen or destroyed, a new debenture or other instrument of like tenor and
representing an equivalent right or interest, but only upon receipt of evidence
reasonably satisfactory to the Company of such mutilation, loss, theft or
destruction and adequate security;
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the affidavit of the Holder of record, with indemnity bond, shall be
satisfactory. The applicant for such replacement shall also comply with such
other reasonable regulations as the Company may prescribe.
(b) Severability. If any provision of this Debenture is held for any
reason to be unenforceable by a court of competent jurisdiction, the remainder
ofthis Debenture shall, nonetheless, remain in full force and effect.
(c) Headings. The headings in this Debenture are intended solely for
convenience of reference and shall be given no effect in the construction or
interpretation hereof.
(d) Governing Law. This Debenture is made in the State of Florida and
shall be governed by and construed in accordance with the internal laws of the
State of Florida.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed this 20th day of March, 1996.
INDUSTRY MORTGAGE COMPANY, L.P.
By: GEORGE NICHOLAS
Title: CEO
Attest: [SIGNATURE]
Title: SOLICITOR
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IMC MORTGAGE COMPANY
INCENTIVE PLAN
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IMC MORTGAGE COMPANY
INCENTIVE PLAN
Table of Contents
Page
----
Article I Purpose...................................................... 1
Article II Definitions.................................................. 1
2.1 Affiliate.................................................... 1
2.2 Award........................................................ 1
2.3 Award Agreement.............................................. 1
2.4 Code......................................................... 1
2.5 Committee.................................................... 1
2.6 Exchange Act................................................. 1
2.7 Fair Market Value............................................ 1
2.8 Incentive Stock Option....................................... 1
2.9 Insider...................................................... 1
2.10 Key Employee................................................. 2
2.11 Non-Employee Advisor......................................... 2
2.12 Non-Qualified Stock Option................................... 2
2.13 Option....................................................... 2
2.14 Participant.................................................. 2
2.15 Performance Award............................................ 2
2.16 Plan......................................................... 2
2.17 Rule 16b-3................................................... 2
2.18 Shares....................................................... 2
2.19 Stock Appreciation Rights.................................... 2
2.20 Ten Percent Shareholder...................................... 2
Article III Administration............................................... 2
3.1 Committee.................................................... 2
3.2 Indemnification.............................................. 3
Article IV Shares....................................................... 3
4.1 Number of Shares Available................................... 3
4.2 Shares Subject to Terminated Awards.......................... 3
4.3 Adjustments.................................................. 3
4.4 Assumption of Industry Mortgage Company, L.P. Awards......... 4
Article V Stock Options and Stock Appreciation Rights...................... 4
5.1 Grant of Option.............................................. 4
5.2 Stock Appreciation Rights.................................... 5
5.3 Compliance With Code Section 162(m).......................... 5
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Article VI Other Share-Based Awards....................................... 6
6.1 Grant of Other Awards........................................ 6
Article VII Terms Applicable to All Awards Granted Under the Plan......... 6
7.1 Award Agreement.............................................. 6
7.2 Awards May Be Granted Separately or Together; No Limitations
on Other Awards.............................................. 6
7.3 Acceleration................................................. 6
7.4 Limitations on Transfer of Awards............................ 6
7.5 Taxes........................................................ 7
7.6 Rights and Status of Recipients.............................. 7
7.7 Awards Not Includable for Benefit Purposes................... 7
7.8 Share Certificates; Representation by Participants;
Registration Requirements.................................... 7
Article VIII Amendment and Termination.................................... 7
8.1 Amendment.................................................... 7
8.2 Termination.................................................. 8
Article IX General Provisions........................................... 8
9.1 Effective Date of the Plan................................... 8
9.2 Unfunded Status of Plan...................................... 8
9.3 Miscellaneous................................................ 8
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IMC MORTGAGE COMPANY
INCENTIVE PLAN
Article I Purpose
1.1 The purpose of the IMC Mortgage Company Incentive Plan ("Plan") is to
assist IMC Mortgage Company (the "Company"), together with any successor
thereto, and its Affiliates in attracting and retaining highly competent
individuals to serve as Key Employees and Non-Employee Advisors who will
contribute to the Company's success, and in motivating such persons to achieve
long-term objectives which will inure to the benefit of all shareholders of the
Company.
Article II Definitions
2.1 Affiliate means (a) any corporation that is defined as a subsidiary
corporation in Section 424(f) of the Code, or (b) any corporation that is
defined as a parent corporation in Section 424(e) of the Code.
2.2 Award means any award made under the Plan.
2.3 Award Agreement means a written agreement or other document
specifically setting forth the terms and conditions of an Award.
2.4 Code means the Internal Revenue Code of 1986, as amended from time to
time. Any reference to a particular section of the Code shall include any
subsequently enacted successor provision thereto.
2.5 Committee means a committee of the Board of Directors of the Company
designated by such Board to administer the Plan, which committee (i) shall be
composed of not less than two directors who shall qualify as outside directors,
as defined in Section 162(m) of the Code, in the event that and so long as the
Company shall be subject to such provision, and (ii) shall be constituted and
operated so as to permit grants of Awards to Key Employees who are Insiders to
qualify as exempt transactions under Rule 16b-3 in the event that and so long as
the Company shall have a class of securities registered under Section 12 of the
Exchange Act.
2.6 Exchange Act means the Securities Exchange Act of 1934, as amended.
2.7 Fair Market Value means, with respect to any property (including,
without limitation, any Shares or other securities), the fair market value of
such property determined by such methods as shall be established from time to
time by the Committee.
2.8 Incentive Stock Option means an Option designated as an incentive
stock option as defined in Code Section 422.
2.9 Insider means a Key Employee Participant who is subject to Sections
16(a) and (b) of the Exchange Act.
2.10 Key Employee means any officer or other key employee of the Company
or of any Affiliate who is in a position to make a significant contribution to
the management, growth, or profitability of the business of the Company or any
Affiliate, as determined by the Committee.
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2.11 Non-Employee Advisor means any consultant or independent contractor
who is not an employee of the Company or any Affiliate but is in a position to
make a significant contribution to the management, growth, or profitability of
the business of the Company or any Affiliate, as determined by the Committee.
2.12 Non-Qualified Stock Option means an Option that is not an Incentive
Stock Option as defined in Code Section 422.
2.13 Option means any option to purchase Shares granted pursuant to the
Plan.
2.14 Participant shall mean any Key Employee (referred to as a Key
Employee Participant) or any Non-Employee Advisor (referred to as a Non-Employee
Advisor Participant) receiving an Award.
2.15 Performance Award means the right to receive a payment (measured by
(i) the Fair Market Value of a specified number of Shares at the end of the
Award period or (ii) the increase in the Fair Market Value of a specified number
of Shares during the Award period or (iii) a fixed cash amount payable at the
end of the Award period) contingent upon the extent to which certain
predetermined performance targets have been met during an Award period.
2.16 Plan means the IMC Mortgage Company Incentive Plan as set forth
herein, and as the same may be amended from time to time.
2.17 Rule 16b-3 means Rule 16b-3 as promulgated by the Securities and
Exchange Commission under Section 16(b) of the Exchange Act, as such rule may be
amended from time to time, and any successor rule.
2.18 Shares mean the shares of common stock of the Company and such other
securities or property as may become subject to Awards pursuant to an adjustment
made under Section 4.3 of the Plan.
2.19 Stock Appreciation Rights mean Awards granted in accordance with
Article V.
2.20 Ten Percent Shareholder means a person owning common stock of the
Company or an Affiliate possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company as defined in
Section 422 of the Code.
Article III Administration
3.1 Committee. The Plan shall be administered by the Committee. Subject to
the terms of the Plan and applicable law, the Committee shall have full power
and sole authority to: (i) designate persons to be Participants; (ii) determine
the type, amount, duration, and other terms and conditions of Awards to be
granted to each Participant (including whether, to what extent, and under what
circumstances Awards may be settled or exercised in cash, Shares, other
securities, other Awards, or other property and whether, to what extent, and
under what circumstances cash, Shares, other securities, other Awards, other
property, and other amounts payable with respect to an Award shall be deferred
either automatically or at the election of the holder thereof or of the
Committee); (iii) interpret and administer the Plan and any instrument or
agreement relating to, or Award made under, the Plan; (iv) waive any conditions
or other restrictions with respect to (including, without limitation, conditions
regarding the exercise of a Option), amend, alter, suspend, discontinue, or
terminate any Award, prospectively or retroactively, but no such action shall
impair the rights of any Participant without his or her
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consent except as provided in Section 4.3, 4.4, and correct any defect, supply
any omission, or reconcile any inconsistency in any Award or Award Agreement in
the manner and to the extent it shall deem desirable to carry the Plan into
effect; (v) establish, amend, suspend, or waive such rules and regulations and
appoint such agents as it shall deem appropriate for the proper administration
of the Plan; and (vi) make any other determination and take any other action
that the Committee deems necessary or desirable for the administration of the
Plan. Unless otherwise expressly provided in the Plan, all determinations,
interpretations, and other decisions under or with respect to the Plan or any
Award shall be within the sole discretion of the Committee, may be made at any
time, and shall be final, conclusive, and binding upon all persons. Anything in
the Plan to the contrary notwithstanding, no term of this Plan relating to
Incentive Stock Options shall be interpreted, amended or altered, nor shall any
discretion or authority granted under the Plan be so exercised, so as to
disqualify any outstanding Incentive Stock Option under Section 422 of the Code,
without the consent of the affected Participant.
3.2 Indemnification. No member or former member of the Committee shall be
liable for any action or inaction or determination made in good faith with
respect to the Plan or any Award. To the maximum extent permitted by applicable
law and by the Company's Articles of Incorporation and Bylaws, each such person
shall be indemnified and held harmless by the Company against any cost or
expense and liability (including any sum paid in settlement of a claim with the
approval of the Company), arising out of any act or omission to act in
connection with the Plan. Costs and expenses to be indemnified hereunder shall
include reasonable attorney's fees and expenses as incurred, provided that the
person being indemnified agrees to repay in full amounts advanced hereunder in
the event of a final determination by a court that such person is not entitled
to indemnification hereunder.
Article IV Shares
4.1 Number of Shares Available. Subject to Section 4.3, the maximum number
of Shares which may be issued under the Plan and as to which Awards may be
granted is 957,727 Shares.
4.2 Shares Subject to Terminated Awards. The (i) Shares covered by any
unexercised portions of terminated Options, and (ii) Shares subject to any
Awards which are otherwise surrendered by the Participant and as to which Shares
no Participant has received any payment or other benefit of ownership with
respect thereto, may again be subject to new Awards. In the event the exercise
price of an Option is paid in whole or in part through the delivery of Shares or
the surrender of an unexercised Option, the gross number of Shares issuable in
connection with the exercise of the Option shall not again be available for the
grant of Awards under the Plan. Shares used to measure the amount payable to a
Participant in respect of an earned Performance Award and Shares issued in
payment of Performance Awards which are denominated in cash amounts shall not
again be available for the grant of Awards under the Plan.
4.3 Adjustments. In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of securities of the Company, or other similar corporate
transaction or event affects the Shares such that an adjustment is determined by
the Committee to be appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan,
then the Committee may, in such manner as it may deem equitable, adjust any or
all of (i) the number and type of Shares subject to the Plan and which
thereafter may be made the subject of Awards, including Incentive Stock Options
and Stock Appreciation Rights, (ii) the number and type of Shares subject to
outstanding Awards, and (iii) the grant, purchase, or exercise price with
respect to any Award, or, if deemed appropriate, make provisions for a cash
payment to the holder of
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an outstanding Award. In addition, in the event the Company or any Affiliate
shall assume outstanding awards or the right or obligation to make future awards
in connection with the acquisition of another business or another corporation or
business entity, the Committee may make such adjustments, not inconsistent with
the terms of the Plan, in the terms of Awards granted to Participants as it
shall deem appropriate in order to achieve reasonable comparability or other
equitable relationship between the assumed awards and the Awards granted to
Participants. The Committee also may make such other adjustments as it deems
necessary to take into consideration any other event (including accounting
changes) if the Committee determines that such adjustment is appropriate to
avoid distortion in the operation of the Plan. However, in each case, no
adjustment with respect to Awards of Incentive Stock Options shall be authorized
hereunder to the extent that such authority would cause the Plan to violate
Section 422(b)(1) of the Code, and in each case, Awards shall only be subject to
such adjustments as shall be necessary to maintain the proportionate interest of
the Participant and preserve, without exceeding, the value of the Awards.
4.4 Assumption of Industry Mortgage Company, L.P. Awards. By the adoption
of the Plan, the Company hereby agrees to assume the options granted to Key
Employees and Non-Employee Advisors by Industry Mortgage Company. L.P., a
Delaware limited partnership (the "Partnership"), as set forth in Exhibit 4.4-
1, such assumption to be effective simultaneously with the acquisition by the
Company of all the limited partnership interests in the Partnership and all the
stock of the Partnership's general partner; provided, however, that such
assumption shall be rescinded in the event of, and simultaneously with, the
rescission of such acquisition by the Partnership pursuant to the terms of a
Pre-IPO Agreement dated as of March 28, 1996 among the partners of the
Partnership and the sole shareholder of the Partnership's general partner. The
options so assumed shall be Non-Qualified Stock Options to purchase the number
of Shares set forth opposite each grantee's name. Such Options shall have the
same expiration date, vesting schedule and termination provisions as the
Partnership options so assumed, shall have an exercise price (adjusted pursuant
to Section 4.3) as set forth on Exhibit 4.4-1 and shall be evidenced by Award
Agreements in the form attached as Exhibit 4.4-2. Each Participant whose
Partnership options are so assumed by the Company shall be deemed to have
released the Partnership from the Partnership's obligations with respect to such
options, and the Partnership's option plan shall be deemed terminated.
Article V Stock Options and Stock Appreciation Rights
5.1 Grant of Option. The Committee is hereby authorized to grant Options
to Key Employees and Non-Qualified Stock Options to Non-Employee Advisors with
such terms and conditions, in either case not inconsistent with the provisions
of the Plan, as the Committee shall determine.
(a) Exercise Price. The exercise price per Share purchasable under an
Option shall be determined at the time of grant and shall be not less than 100%
of the Fair Market Value of the Share on the date of grant of such Option;
provided, however if an Incentive Stock Option is granted to a Ten Percent
Shareholder, the exercise price per share shall be no less than 110% of the Fair
Market Value of a Share on the date of grant.
(b) Exercisability and Method of Exercise. An Option Award may contain
such performance targets and waiting periods, and shall become exercisable in
such manner and within such period or periods and in such installments or
otherwise, as shall be determined at the time of grant. The Committee shall also
determine the method by which, and the form (including, without limitation,
cash, Shares, other securities, other Awards, or other property, or any
combination thereof, having a Fair Market Value on the exercise date equal to
the relevant exercise price), in which payment of the Option exercise price may
be made (including payment in accordance with a cashless exercise program under
which, if so instructed by the Participant, Shares may be
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issued directly to the Participant's broker or dealer upon receipt of the
purchase price in cash from the broker or dealer).
(c) Incentive Stock Options. The terms of any Incentive Stock Option
granted under the Plan shall comply in all respects with the provisions of Code
Section 422 and any regulations promulgated thereunder.
(d) Incentive Stock Option Limitations. To the extent that the aggregate
Fair Market Value (determined as of the time of grant) of the Shares with
respect to which Incentive Stock Options are exercisable for the first time by
the Participant during any calendar year under the Plan and/or any other stock
option plan of the Company or any Affiliate exceeds $100,000, such Options shall
be treated as Options which are not Incentive Stock Options. Should any of the
foregoing provisions not be necessary in order for the Options to quality as
Incentive Stock Options, or should any additional provisions be required, the
Board of Directors may amend the Plan accordingly, without the necessity of
obtaining the approval of the shareholders of the Company, except as otherwise
required by law.
5.2 Stock Appreciation Rights. The Committee is hereby authorized to grant
Stock Appreciation Rights to Key Employee Participants and Non-Employee Advisors
in such amounts and having such grant price, term, methods of exercise, methods
of settlement (including whether Stock Appreciation Rights will be settled in
cash, Shares, other securities, other Awards, or other property, or any
combination thereof), and any other terms and conditions as it shall determine,
including, without limitation, restrictions on the time of exercise of Stock
Appreciation Rights to specified periods as may be necessary to satisfy the
requirements of Rule 16b-3.
5.3 Compliance With Code Section 162(m). Notwithstanding any other
provision of the Plan, the maximum number of Shares with respect to which
Options and Stock Appreciation Rights, in the aggregate, may be awarded to any
individual Key Employee Participant during any twelve-month period is 300,000
Shares. For purposes of this limitation, Shares subject to Options and Stock
Appreciation Rights which are cancelled shall be counted against the maximum
number of Shares with respect to which Options and Stock Appreciation Rights may
be awarded to any individual Key Employee Participant under the Plan, and if the
Exercise Price of Options or the base amount of Stock Appreciation Rights is
changed (other than pursuant to an adjustment under Section 4.3 hereof), the
transaction shall be treated as a cancellation of the Option or Stock
Appreciation Right and a grant of a new Option or Stock Appreciation Right, as
the case may be. The Committee at any time may in its sole discretion limit the
number of Options and/or Stock Appreciation Rights that can be exercised in any
taxable year of the Company, to the extent necessary to prevent the application
of Section 162(m) of the Code (or any similar or successor provision), provided
that the Committee may not postpone the earliest date on which Options or Stock
Appreciation Rights can be exercised beyond the last day of the stated term of
such Options or Stock Appreciation Rights.
Article VI Other Share-Based Awards
6.1 Grant of Other Awards. Other Awards, valued in whole or in part by
reference to, or otherwise based on, Shares, including but not limited to
Performance Awards and restricted stock, may be granted either alone or in
addition to or in conjunction with other Awards for such consideration, if any,
and in such amounts and having such terms and conditions as the Committee may
determine.
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Article VII Terms Applicable to All Awards Granted Under the Plan
7.1 Award Agreement. No person shall have any rights under any Award
granted under the Plan unless and until the Company and the Participant to whom
such Award shall have been granted shall have executed and delivered an Award
Agreement or received any other Award acknowledgment authorized by the Committee
expressly granting the Award to such person and containing provisions setting
forth the terms of the Award. If there is any conflict between the provisions of
an Award Agreement and the terms of the Plan, the terms of the Plan shall
control.
7.2 Awards May Be Granted Separately or Together; No Limitations on Other
Awards. Awards may be granted either alone or in addition to, in tandem with, or
in substitution for any other Award or any award granted under any other plan of
the Company or any Affiliate, and the terms and conditions of an Award need not
be the same with respect to each Participant.
7.3 Acceleration. The Committee is authorized to accelerate the
exercisability of any Option or the vesting of any Award in its discretion,
including, without limitation, upon a change of control of the Company (as
determined by the Committee), the sale by the Company of all or substantially
all its assets to an unrelated party, or the liquidation and dissolution of the
Company.
7.4 Limitations on Transfer of Awards. Except as determined otherwise by
the Committee, the rights and interest of a Participant under the Plan may not
be assigned, alienated, sold, or transferred other than by will or the laws of
descent and distribution; provided, however, that a Participant may at the
discretion of the Committee be entitled to designate a beneficiary or
beneficiaries to exercise his or her rights, to receive any property
distributable, with respect to any Award upon the death of the Participant, and
to transfer an Award other than an Incentive Stock Option without consideration
to such Participant's children, grandchildren and/or spouse (or to one or more
trusts for the benefit of any such family members or to one or more partnerships
in which any such family members are the only partners). Except as determined
otherwise by the Committee or except to the extent that a transfer of an Award
has been permitted hereunder by the Committee, during the lifetime of a
Participant, only the Participant personally, or if permissible under applicable
law, such individual's guardian or legal representative, may exercise rights
under the Plan. No Award, and no right under any such Award, may be pledged,
alienated, attached, or otherwise encumbered, and any purported pledge,
alienation, attachment, or encumbrance thereof shall be void and unenforceable
against the Company or any Affiliate.
7.5 Taxes. The Company shall be entitled, if the Committee deems it
necessary or desirable, to withhold (or secure payment from the Participant in
lieu of withholding) the amount of any withholding or other tax required by law
to be withheld or paid by the Company in connection with such Participant's
Award, and the Company may defer payment or issuance of the cash or Shares upon
the grant, exercise or vesting of an Award unless indemnified to its
satisfaction against any liability for any such tax. The Committee may prescribe
in each Award Agreement one or more methods by which the Participant will be
permitted or required to satisfy his or her tax withholding obligation, which
methods may include, without limitation, the payment of cash by the Participant
to the Company and the withholding from the Award, at the appropriate time, of a
number of Shares sufficient, based upon the Fair Market Value of such Shares, to
satisfy such tax withholding requirements.
7.6 Rights and Status of Recipients. No Employee, participant or other
person shall have any right to be granted an Award. Neither the Plan nor any
action taken hereunder shall be construed as giving any employee any right to be
retained in the employ of the Company or any Affiliate, and the grant of an
Award to
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a Non-Employee Advisor shall not confer any right on such Non-Employee Advisor
to continue as a Non-Employee Advisor.
7.7 Awards Not Includable for Benefit Purposes. Income recognized by a
Participant pursuant to the Plan shall not be included in the determination of
benefits under any employee pension benefit plan (as such term is defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended)
or group insurance or other benefit plans applicable to the Participant which
are maintained by the Company or any Affiliate, except as may be provided under
the terms of such plans or determined by resolution of the Board of Directors of
the Company.
7.8 Share Certificates; Representation by Participants; Registration
Requirements. All certificates for Shares delivered pursuant to any Award or the
exercise thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the rules,
regulations, and other requirements of the Securities Exchange Commission and
any applicable federal or state securities laws, and legends may be put on any
such certificates to make appropriate reference to such restrictions. The
Committee may require each Participant to represent to the Company in writing
that such Participant is acquiring Shares without a view to the distribution
thereof. Each Award shall be subject to the requirement that, if at any time (i)
the registration or qualification of Shares relating to such Award on any
securities exchange or under any state or federal securities laws, or (ii) the
approval of any securities exchange or regulatory body is necessary or desirable
as a precondition thereto, the Award or the issuance of Shares in connection
therewith may not be consummated unless such listing, registration,
qualification or approval shall have been effected.
Article VIII Amendment and Termination
8.1 Amendment. The Board of Directors of the Company may amend, alter,
suspend, discontinue, or terminate the Plan at any time; provided, however, that
(i) no amendment, alteration, suspension, discontinuation or termination of the
Plan shall in any manner (except as otherwise provided in this Article VIII)
adversely affect any Award, without the consent of the Participant, and (ii) no
amendment shall be made without shareholder approval if such approval would be
required to comply with Rule 16b-3. It is intended that the Plan be administered
in compliance with Rule 16b-3 and Section 162(m) of the Code so long as the
Company shall have a class of equity securities registered under Section 12 of
the Exchange Act. If any provision of the Plan would be in violation of Rule
16b-3 or Section 162(m) of the Code if applied as written, such provision shall
not have effect as written and shall be given effect so as to comply therewith.
The Board of Directors of the Company is authorized to amend the Plan and to
make any modifications to Award Agreements to comply with Rule 16b-3 and Section
162(m) of the Code, and to make any other amendments or modifications deemed
necessary or appropriate to better accomplish the purposes of the Plan in light
of any amendments made to Rule 16b-3 and Section 162(m) of the Code. Without
limiting the foregoing, the Board of Directors of the Company may amend the
qualifications of the Committee if amendments to Rule 16b-3 would permit it to
do so and may otherwise amend the Plan or any Award Agreement to take advantage
of any simplifications or liberalizing provisions added by amendment to Rule
16b-3.
8.2 Termination. The Plan shall terminate at the close of business on the
tenth anniversary of the effective date, provided, however, the Board of
Directors of the Company shall have the right and the power to terminate the
Plan at any time prior thereto. No Award shall be granted under the Plan after
such termination, but such termination shall not have any other effect, and any
Award outstanding at the time of such termination may be exercised after
termination at any time prior to the expiration date of such Award to the same
extent such Award would have been exercisable had the Plan not terminated.
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Article IX General Provisions
9.1 Effective Date of the Plan. The Plan shall be effective as of the date
of its adoption by the Board of Directors of the Company, subject to approval of
the Plan by the Company's shareholders within one year thereafter by a majority
of the votes cast at a duly held meeting of the shareholders of the Company at
which a quorum representing a majority of all outstanding stock is present,
either in person or by proxy, and in a manner that satisfies the requirements of
Rule 16b-3. In the event that the Plan is not so approved within such one-year
period, all Awards granted under the Plan shall be null and void.
9.2 Unfunded Status of Plan. The Plan shall be unfunded and shall not
create (or be construed to create) a trust or a separate fund or funds. The Plan
shall not establish any fiduciary relationship between the Company and any
Participant or other person. To the extent any person holds any right by virtue
of a grant under the Plan, such right shall be no greater than the right of an
unsecured general creditor of the Company.
9.3 Miscellaneous. The Plan and all determinations made and actions taken
pursuant to the Plan shall be governed by the laws of the state of Florida and
applicable federal laws. Section headings are used in the Plan for convenience
only, do not constitute a part of the Plan, and shall not be deemed in any way
to be relevant to the interpretation of the Plan or any provision thereof.
Whenever possible, each provision in the Plan and every Award shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of the Plan or any Award shall be held to be prohibited by
or invalid under applicable law, then (i) such provision shall be deemed amended
to accomplish the objectives of the provision as originally written to the
fullest extent permitted by law and (ii) all other provisions of the Plan and
every other Award shall remain in full force and effect.
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IMC MORTGAGE COMPANY
KEY EMPLOYEE
NON-QUALIFIED STOCK OPTION AGREEMENT
(Assumption Agreement)
THIS AGREEMENT, dated as of this _____ day of _______________, 1996,
between IMC Mortgage Company, a Florida corporation (the "Company"), and the
person whose signature is set forth on the signature page hereof ("Key
Employee").
RECITALS
WHEREAS, the Company has adopted the IMC Mortgage Company Incentive Plan
(the "Plan") which provides for the grant of options to certain key employees of
the Company or any Affiliate;
WHEREAS, Key Employee is a key employee and in such capacity is in a
position to contribute materially to the continued growth and development and
the future financial success of the Company;
WHEREAS, the Company wishes to grant to Key Employee an option to purchase
common stock of the Company on the terms and conditions specified herein to
provide a means for the Key Employee to participate in the future growth of the
Company and to increase the Key Employee's incentive and personal interest in
the continued success and growth of the Company; and
WHEREAS, Key Employee holds an option to purchase a limited partnership
interest in Industry Mortgage Company, L.P., a Delaware limited partnership (the
"Partnership") which has been acquired by the Company, and the Company wishes to
grant Key Employee an option to acquire an equity interest in the Company
through the Company's assumption of Key Employee's existing option from the
Partnership (the "Partnership Option");
NOW, THEREFORE, the parties agree as follows (any capitalized terms used
herein but not defined herein shall have the respective meanings given in the
Plan):
1. Option.
(a) Assumption. Subject to the terms and conditions of this
Agreement and the Plan, the Company hereby assumes the Partnership Option, as
modified herein, and agrees that from the date hereof Key Employee shall have a
Non-Qualified Stock Option to purchase all or any part of the Shares set forth
on the signature page hereof, at the exercise price set forth on the signature
page hereof. By the acceptance hereof, Key Employee hereby releases the
Partnership from its obligations under the Partnership Option and agrees that
from and after the
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date of this Agreement, the Partnership Option shall be null and void, provided,
however, that this Agreement shall be rescinded and the Partnership Option shall
be deemed to have remained in full force and effect in the event that the
Company's acquisition of the Partnership shall be rescinded, as provided in
Section 4.4 of the Plan.
(b) Term. The term of the Option shall expire at 11:59 p.m. on
December 2, 2005, which is the tenth anniversary of the date of grant of the
Partnership Option.
(c) Vesting. The Option shall be exercisable only prior to the
expiration date, and then only as set forth in the following table:
Cumulative Number of Shares
Date as to which Option is Exercisable
- ---- ---------------------------------
Date of this Agreement 60%
December 2, 1996 80%
December 2, 1997 100%
2. Exercise.
Key Employee may, subject to the limitations of this Agreement and
the Plan, exercise all or any portion of the Option by providing written notice
of exercise to the Company specifying the number of Shares with respect to which
the Option is being exercised accompanied by payment of the exercise price for
such Shares. The exercise price shall be paid in cash, by the surrender of
Shares having a Fair Market Value equal to the exercise price, by the surrender
of the unexercised, vested portion of the Option as to which the Spread (as
hereinafter defined) is equal to the exercise price, or any combination of the
foregoing. "Spread" means the Fair Market Value of the underlying Shares less
the exercise price.
3. Termination of Employment.
(a) If the employment of Key Employee terminates by reason of
disability, Key Employee (or his legal representative) may exercise any portion
of the Option which has vested pursuant to Section 1 hereof for a period of one
year after the date of such termination of employment and not thereafter;
provided, however, that no Option or portion thereof shall be exercisable after
it has expired pursuant to Section 1 hereof. For purposes of this Agreement, the
term "disability" shall mean a total and permanent disability as determined by
the Committee in its sole discretion.
(b) If the employment of Key Employee terminates by reason of death,
any unvested portion of the Option shall vest in full upon Key Employee's death
and Key Employee's personal representative may exercise the Option for a period
of one year after the date of death and not thereafter; provided, however, that
no Option or portion thereof shall be exercisable after it has expired pursuant
to Section 1 hereof.
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(c) If the employment of Key Employee is terminated by the Company
without Cause (as hereinafter defined), any unvested portion of the Option shall
vest in full upon such termination of employment and Key Employee (or his or her
personal representative) may exercise the Option for a period of six months
after the date of such termination of employment and not thereafter; provided,
however, that no Option or portion thereof shall be exercisable after it has
expired pursuant to Section 1 hereof.
(d) If Key Employee terminates his or her employment for any reason
other than death or disability, Key Employee (or his or her legal
representative) may exercise any portion of the Option which has vested pursuant
to Section 1 hereof for a period of six months after the date of such
termination of employment and not thereafter; provided, however, that no Option
or portion thereof shall be exercisable after it has expired pursuant to Section
1 hereof.
(e) If the employment of the Key Employee terminates for Cause, the
entire Option (whether vested or non-vested) shall immediately be forfeited and
become null and void. For purposes hereof, "Cause" shall mean material
nonfeasance, material malfeasance or material misfeasance on the part of the Key
Employee which, if susceptible of cure, shall continue after notice of the
default and a reasonable opportunity to cure.
4. Change of Control. In the event of a Change of Control, any unvested
portion of the Option shall vest in full. Change of Control means: (i) the
adoption of a plan of reorganization, merger, share exchange or consolidation of
the Company with one or more other corporations or other entities as a result of
which the holders of the Shares as a group would receive less than fifty percent
(50%) of the voting power of the capital stock or other interests of the
surviving or resulting corporation or entity; (ii) the adoption of a plan of
liquidation or the approval of the dissolution of the Company; (iii) the
approval by the Board of an agreement providing for the sale or transfer of the
assets of the Company; or (iv) the acquisition of more than [twenty percent
(20%)] of the outstanding shares by any person within the meaning of Rule
13(d)(3) under the Securities Exchange Act of 1934 if such acquisition is not
preceded by a prior expression of approval by the Board.
5. Withholding. The Company may deduct and withhold from any cash payable
to Key Employee such amount as may be required for the purpose of satisfying the
Company's obligation to withhold federal, state or local taxes in connection
with any exercise of this Option. The Key Employee may elect to satisfy such
withholding obligation, in whole or in part, (a) by causing the Company to
withhold Shares otherwise issuable pursuant to the exercise of the Option or (b)
by delivering to the Company Shares already owned by the Key Employee. The
Shares so delivered or withheld shall have a Fair Market Value equal to such
withholding obligation as of the date that the amount of tax to be withheld is
to be determined.
6. Nonalienation. Key Employee shall have no rights to sell, assign,
transfer, pledge, assign or otherwise alienate the Option under this Agreement,
except by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I of ERISA,
or the rules thereunder, and any such attempted sale, assignment, transfer,
pledge
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or other conveyance shall be null and void. The Option shall be exercisable
during the Key Employee's lifetime only by the Key Employee (or his or her legal
representative).
7. Limited Interest.
(a) The grant of the Option shall not be construed as giving Key
Employee any interest other than as provided in this Agreement.
(b) Key Employee shall have no rights as a shareholder as a result
of the grant of the Option, until the Option is exercised, the exercise price is
paid, and the Shares issued thereunder.
(c) The grant of the Option shall not confer on Key Employee any
right to continue in his or her Key Employee Relationship nor interfere in any
way with the right of the Company to terminate the Key Employee Relationship of
the Key Employee at any time.
(d) The grant of the Option shall not affect in any way the right or
power of the Company to make or authorize any or all adjustments,
recapitalizations, reorganizations, or other changes in the Company's capital
structure or its business, or any merger, consolidation or business combination
of the Company, or any issuance or modification of any term, condition, or
covenant of any bond, debenture, debt, preferred stock or other instrument ahead
of or affecting the Shares or the rights of the holders thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business or any other Company act or proceeding, whether
of a similar character or otherwise.
8. Incorporation by Reference. The terms of the Plan to the extent not
stated herein are expressly incorporated herein by reference and in the event of
any conflict between this Agreement and the Plan, the Plan shall govern.
9. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida.
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10. Amendment. This Agreement may not be amended, modified, terminated or
otherwise altered except by the written consent of the parties thereto.
IMC MORTGAGE COMPANY
By:____________________________________
Its:___________________________________
("Company")
_______________________________________
Name:__________________________________
("Key Employee")
Number of Shares issuable upon exercise
of Option in full: ___________
Exercise price: $4.70 per Share
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IMC MORTGAGE COMPANY
NON-EMPLOYEE ADVISOR
NON-QUALIFIED STOCK OPTION AGREEMENT
(Assumption Agreement)
THIS AGREEMENT, dated as of this _____ day of _______________, 1996,
between IMC Mortgage Company, a Florida corporation (the "Company"), and the
person whose signature is set forth on the signature page hereof ("Advisor").
RECITALS
WHEREAS, the Company has adopted the IMC Mortgage Company Incentive Plan
(the "Plan") which provides for the grant of options to certain non-employee
advisors to the Company;
WHEREAS, Advisor is a key outside consultant to the Company and in such
capacity ("Advisor Relationship") is in a position to contribute materially to
the continued growth and development and the future financial success of the
Company;
WHEREAS, the Company wishes to grant to Advisor an option to purchase
common stock of the Company on the terms and conditions specified herein to
provide a means for the Advisor to participate in the future growth of the
Company and to increase the Advisor's incentive and personal interest in the
continued success and growth of the Company; and
WHEREAS, Advisor holds an option to purchase a limited partnership
interest in Industry Mortgage Company, L.P., a Delaware limited partnership (the
"Partnership") which has been acquired by the Company, and the Company wishes to
grant Advisor an option to acquire an equity interest in the Company through the
Company's assumption of Advisor's existing option from the Partnership (the
"Partnership Option");
NOW, THEREFORE, the parties agree as follows (any capitalized terms used
herein but not defined herein shall have the respective meanings given in the
Plan):
1. Option.
(a) Assumption. Subject to the terms and conditions of this
Agreement and the Plan, the Company hereby assumes the Partnership Option, as
modified herein, and agrees that from the date hereof Advisor shall have a
Non-Qualified Stock Option to purchase all or any part of the Shares set forth
on the signature page hereof, at the exercise price set forth on the signature
page hereof. By the acceptance hereof, Advisor hereby releases the Partnership
from its obligations under the Partnership Option and agrees that from and after
the date of this Agreement, the Partnership Option shall be null and void,
provided, however, that this Agreement
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shall be rescinded and the Partnership Option shall be deemed to have remained
in full force and effect in the event that the Company's acquisition of the
Partnership shall be rescinded, as provided in Section 4.4 of the Plan.
(b) Term. The term of the Option shall expire at 11:59 p.m. on
December 2, 2005, which is the tenth anniversary of the date of grant of the
Partnership Option.
(c) Vesting. The Option shall be exercisable only prior to the
expiration date, and then only as set forth in the following table:
Cumulative Number of Shares
Date as to which Option is Exercisable
- ---- ---------------------------------
Date of this Agreement 60%
December 2, 1996 80%
December 2, 1997 100%
If Advisor's Advisor Relationship is terminated for any reason other than death
or disability, all unvested Options held by Advisor shall thereupon be
automatically canceled.
2. Exercise.
Advisor may, subject to the limitations of this Agreement and the
Plan, exercise all or any portion of the Option by providing written notice of
exercise to the Company specifying the number of Shares with respect to which
the Option is being exercised accompanied by payment of the exercise price for
such Shares. The exercise price shall be paid in cash, by the surrender of
Shares having a Fair Market Value equal to the exercise price, by the surrender
of the unexercised, vested portion of the Option as to which the Spread (as
hereinafter defined) is equal to the exercise price, or any combination of the
foregoing. "Spread" means the Fair Market Value of the underlying Shares less
the exercise price.
3. Termination of Advisor Relationship by Reason of Death or Disability.
If the Advisor's Advisor Relationship terminates by reason of death or
disability, Advisor (or his or her personal representative) may exercise any
portion of the Option which has vested pursuant to Section 1 hereof for a period
of one year after the date of such termination and not thereafter; provided,
however, that no Option or portion thereof shall be exercisable after it has
expired pursuant to Section 1 hereof. For purposes of this Agreement, the term
"disability" shall mean a total and permanent disability as determined by the
Committee in its sole discretion.
4. Change of Control. In the event of a Change of Control, any unvested
portion of the Option shall vest in full. Change of Control means: (i) the
adoption of a plan of reorganization, merger, share exchange or consolidation of
the Company with one or more other corporations or other entities as a result of
which the holders of the Shares as a group would receive
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less than fifty percent (50%) of the voting power of the capital stock or other
interests of the surviving or resulting corporation or entity; (ii) the adoption
of a plan of liquidation or the approval of the dissolution of the Company;
(iii) the approval by the Board of an agreement providing for the sale or
transfer of the assets of the Company; or (iv) the acquisition of more than
[twenty percent (20%)] of the outstanding shares by any person within the
meaning of Rule 13(d)(3) under the Securities Exchange Act of 1934 if such
acquisition is not preceded by a prior expression of approval by the Board.
5. Nonalienation. Advisor shall have no rights to sell, assign, transfer,
pledge, assign or otherwise alienate the Option under this Agreement, except by
will or by the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code or Title I of ERISA, or the
rules thereunder, and any such attempted sale, assignment, transfer, pledge or
other conveyance shall be null and void. The Option shall be exercisable during
the Advisor's lifetime only by the Advisor (or his or her legal representative).
6. Limited Interest.
(a) The grant of the Option shall not be construed as giving Advisor
any interest other than as provided in this Agreement.
(b) Advisor shall have no rights as a shareholder as a result of the
grant of the Option, until the Option is exercised, the exercise price is paid,
and the Shares issued thereunder.
(c) The grant of the Option shall not confer on Advisor any right to
continue in his or her Advisor Relationship nor interfere in any way with the
right of the Company to terminate the Advisor Relationship of the Advisor at any
time.
(d) The grant of the Option shall not affect in any way the right or
power of the Company to make or authorize any or all adjustments,
recapitalizations, reorganizations, or other changes in the Company's capital
structure or its business, or any merger, consolidation or business combination
of the Company, or any issuance or modification of any term, condition, or
covenant of any bond, debenture, debt, preferred stock or other instrument ahead
of or affecting the Shares or the rights of the holders thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business or any other Company act or proceeding, whether
of a similar character or otherwise.
7. Incorporation by Reference. The terms of the Plan to the extent not
stated herein are expressly incorporated herein by reference and in the event of
any conflict between this Agreement and the Plan, the Plan shall govern.
8. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida.
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9. Amendment. This Agreement may not be amended, modified, terminated or
otherwise altered except by the written consent of the parties thereto.
IMC MORTGAGE COMPANY
By:___________________________________
Its:__________________________________
("Company")
Name:_________________________________
("Advisor")
Number of Shares issuable upon exercise
of Option in full: ___________
Exercise price: $___________ per Share
4
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IMC MORTGAGE COMPANY
OUTSIDE DIRECTORS' OPTION PLAN
<PAGE>
<PAGE>
IMC MORTGAGE COMPANY
OUTSIDE DIRECTORS' OPTION PLAN
Table of Contents
Page
----
Article I Purpose...................................................... 1
Article II Definitions.................................................. 1
2.1 Affiliate.................................................... 1
2.2 Award........................................................ 1
2.3 Award Agreement.............................................. 1
2.4 Board........................................................ 1
2.5 Code......................................................... 1
2.6 Fair Market Value............................................ 1
2.7 Non-Employee Director........................................ 1
2.8 Option....................................................... 1
2.9 Participant.................................................. 1
2.10 Plan......................................................... 1
2.11 Rule 16b-3................................................... 2
2.12 Shares....................................................... 2
2.13 Spread....................................................... 2
Article III Administration............................................... 2
3.1 Self-Governing Plan.......................................... 2
Article IV Shares....................................................... 2
4.1 Number of Shares Available................................... 2
4.2 Shares Subject to Terminated Awards.......................... 2
4.3 Adjustments.................................................. 2
4.4 Assumption of Industry Mortgage Company, L.P. Awards......... 3
Article V Stock Options.................................................... 3
5.1 Automatic Grant.............................................. 3
Article VI Terms Applicable to All Awards Granted Under the Plan.......... 4
6.1 Award Agreement.............................................. 4
6.2 Acceleration................................................. 4
6.3 Limitations on Transfer of Awards............................ 4
6.4 Taxes........................................................ 4
6.5 Rights and Status of Recipients.............................. 5
6.6 Awards Not Includable for Benefit Purposes................... 5
6.7 Share Certificates; Representation by Participants;
Registration Requirements ................................... 5
i
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Article VII Amendment and Termination.................................... 5
7.1 Amendment.................................................... 5
7.2 Termination.................................................. 5
Article VIII General Provisions........................................... 6
8.1 Effective Date of the Plan................................... 6
8.2 Unfunded Status of Plan...................................... 6
8.3 Miscellaneous................................................ 6
ii
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IMC MORTGAGE COMPANY
OUTSIDE DIRECTORS' OPTION PLAN
Article I Purpose
1.1 The purpose of the IMC Mortgage Company Outside Directors' Option Plan
("Plan") is to assist IMC Mortgage Company (the "Company"), together with any
successor thereto, in attracting and retaining highly competent individuals to
serve as Non-Employee Directors who will contribute to the Company's success,
and in motivating such persons to achieve long-term objectives which will inure
to the benefit of all shareholders of the Company.
Article II Definitions
2.1 Affiliate means any person controlling, controlled by or under common
control with the Company.
2.2 Award means any award made under the Plan.
2.3 Award Agreement means a written agreement or other document
specifically setting forth the terms and conditions of an Award.
2.4 Board means the Board of Directors of the Company.
2.5 Code means the Internal Revenue Code of 1986, as amended from time to
time. Any reference to a particular section of the Code shall include any
subsequently enacted successor provision thereto.
2.6 Fair Market Value means if the Shares are then listed and traded on a
registered national or regional securities exchange, or quoted on The National
Association of Securities Dealers' Automated Quotation System (including The
Nasdaq Stock Market's National Market), the average closing price of a Share on
such exchange or quotation system for the five trading days immediately
preceding the date of grant of an Option, or, if Fair Market Value is used
herein in connection with any event other than the grant of an Option, then such
average closing price for the five trading days immediately preceding the date
of such event. If the Shares are not traded on a registered securities exchange
or quoted in such a quotation system, the Board shall determine the Fair Market
Value of a Share.
2.7 Non-Employee Director means a member of the Board who is not an
employee of the Company or any Affiliate.
2.8 Option means an option granted under the Plan, which Option shall not
be an incentive stock option within the meaning of Section 422 of the Code.
2.9 Participant shall mean any Non-Employee Director receiving an Award.
2.10 Plan means the IMC Mortgage Company Outside Directors' Option Plan as
set forth herein, and as the same may be amended from time to time.
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2.11 Rule 16b-3 means Rule 16b-3 as promulgated by the Securities and
Exchange Commission under Section 16(b) of the Securities Exchange Act of 1934,
as amended, as such rule may be amended from time to time, and any successor
rule.
2.12 Shares mean the shares of common stock of the Company and such other
securities or property as may become subject to Awards pursuant to an adjustment
made under Section 4.3 of the Plan.
2.13 Spread means the Fair Market Value of a Share as of the date of
exercise of an Option less the exercise price of the Option.
Article III Administration
3.1 Self-Governing Plan. The Plan is intended to meet the requirements of
Rule 16b-3(c)(2)(ii), and accordingly is intended to be self-governing. To this
end, the Plan requires no discretionary action by any administrative body with
regard to any grant of Options under the Plan. To the extent, if any, that any
questions of interpretation arise, these shall be resolved by the Board.
Article IV Shares
4.1 Number of Shares Available. Subject to Section 4.3, the maximum number
of Shares which may be issued under the Plan and as to which Awards may be
granted is 65,000 Shares.
4.2 Shares Subject to Terminated Awards. The Shares covered by any
unexercised portions of terminated Options may again be subject to new Awards.
In the event the exercise price of an Option is paid in whole or in part through
the delivery of Shares or the surrender of an unexercised Option, the gross
number of Shares issuable in connection with the exercise of the Option shall
not again be available for the grant of Awards under the Plan.
4.3 Adjustments. In the event that the Board shall determine that any
dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of securities of the Company, or other similar corporate
transaction or event affects the Shares such that an adjustment is determined by
the Board to be appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan,
then the Board may, in such manner as it may deem equitable, adjust any or all
of (i) the number and type of Shares subject to the Plan and which thereafter
may be made the subject of Awards, (ii) the number and type of Shares subject to
outstanding Awards, and (iii) the exercise price with respect to any Award. In
addition, in the event the Company or any Affiliate shall assume outstanding
awards or the right or obligation to make future awards in connection with the
acquisition of another business or another corporation or business entity, the
Board may make such adjustments, not inconsistent with the terms of the Plan, in
the terms of Awards granted to Participants as it shall deem appropriate in
order to achieve reasonable comparability or other equitable relationship
between the assumed awards and the Awards granted to Participants. The Board
also may make such other adjustments as it deems necessary to take into
consideration any other event (including accounting changes) if the Board
determines that such adjustment is appropriate to avoid distortion in the
operation of the Plan. However, in each case, Awards shall only be
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subject to such adjustments as shall be necessary to maintain the proportionate
interest of the Participant and preserve, without exceeding, the value of the
Awards.
4.4 Assumption of Industry Mortgage Company, L.P. Awards. By the adoption
of the Plan, the Company hereby agrees to assume the options granted to
Non-Employee Directors by Industry Mortgage Company. L.P., a Delaware limited
partnership (the "Partnership"), as set forth in Exhibit 4.4-1, such assumption
to be effective simultaneously with the acquisition by the Company of all the
limited partnership interests in the Partnership and all the stock of the
Partnership's general partner; provided, however, that such assumption shall be
rescinded in the event of, and simultaneously with, the rescission of such
acquisition by the Partnership pursuant to the terms of a Pre-IPO Agreement
dated as of March 28, 1996 among the partners of the Partnership and the sole
shareholder of the Partnership's general partner. The options so assumed shall
be Options to purchase the number of Shares set forth opposite each grantee's
name. Such Options shall have the same expiration date, vesting schedule and
termination provisions as the Partnership options so assumed, shall have an
exercise price (adjusted pursuant to Section 4.3) as set forth on Exhibit 4.4-1
and shall be evidenced by Award Agreements in the form attached as Exhibit
4.4-2. Each Participant whose Partnership options are so assumed by the Company
shall be deemed to have released the Partnership from the Partnership's
obligations with respect to such options, and the Partnership's option plan
shall be deemed terminated.
Article V Stock Options
5.1 Automatic Grant. Options shall be granted as follows:
(a) Grant. On the date on which a Non-Employee Director, other than a
Non-Employee Director whose Options have been assumed by the Company pursuant to
Section 4.4, first becomes a member of the Board, such Non-Employee Director
shall automatically be granted an Option to purchase 6,466 Shares.
(b) Exercise Price. The exercise price per Share purchasable under an
Option shall be 100% of the Fair Market Value of the Share as of the date of
grant of such Option.
(c) Term. Each Option shall expire and all rights thereunder shall end at
the expiration of ten years after the date on which it was granted, subject to
early termination as provided herein. If the Participant ceases to be a member
of the Board for any reason other than death or disability, the Participant's
Option shall be automatically canceled as of the date that the Participant
ceases to be a director of the Company. If a Participant ceases to be a member
of the Board by reason of death or disability, the Participant (or the
Participant's personal representative) may exercise the Participant's Option for
a period of one year after the date of such termination to the extent it was
vested on the date of termination; provided, however, that such Option has not
expired prior to such exercise. For purposes hereof, "disability" shall mean a
total and permanent disability as determined by the Board.
(d) Exercise. A Participant may exercise an Option in whole or in part
from time to time as follows: (i) the Option may be exercised to the extent of
60% of the Shares subject to the Option beginning on the date of grant and may
be exercised to the extent of an additional 20% of the Shares subject to such
Option beginning on each of the first and second anniversaries of the date of
grant. The Participant shall deliver written notice of exercise to the Company
stating the number of Shares as to which the Option is being exercised, together
with the exercise price.
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(e) Payment of Exercise Price. No Shares shall be delivered upon the
exercise of an Option until the exercise price therefor shall have been paid in
full. The exercise price of an Option shall be paid in cash, by the surrender of
that number of Shares having a Fair Market Value as of the date of exercise
equal the exercise price, by the surrender of the unexercised, vested portion of
the Option as to that number of underlying Shares for which the Spread is equal
to the exercise price, or any combination of the foregoing. Payment also may be
made in accordance with a cashless exercise program under which, if so
instructed by the Participant, Shares may be issued directly to the
Participant's broker upon receipt of the option price in cash from the broker.
Article VI Terms Applicable to All Awards Granted Under the Plan
6.1 Award Agreement. No person shall have any rights under any Award
granted under the Plan unless and until the Company and the Participant to whom
such Award shall have been granted shall have executed and delivered an Award
Agreement containing provisions setting forth the terms of the Award. If there
is any conflict between the provisions of an Award Agreement and the terms of
the Plan, the terms of the Plan shall control.
6.2 Acceleration. The Board is authorized to accelerate the exercisability
of any Option in its discretion, including, without limitation, upon a change of
control of the Company (as determined by the Board), the sale by the Company of
all or substantially all its assets to an unrelated party, or the liquidation
and dissolution of the Company.
6.3 Limitations on Transfer of Awards. Except as determined otherwise by
the Board, the rights and interest of a Participant under the Plan may not be
assigned, alienated, sold, or transferred other than by will or the laws of
descent and distribution; provided, however, that a Participant may at the
discretion of the Board be entitled to designate a beneficiary or beneficiaries
to exercise his or her rights with respect to any Award upon the death of the
Participant and to transfer an Award without consideration to such Participant's
children, grandchildren and/or spouse (or to one or more trusts for the benefit
of any such family members or to one or more partnerships in which any such
family members are the only partners). Except as determined otherwise by the
Board or except to the extent that a transfer of an Award has been permitted
hereunder by the Board, during the lifetime of a Participant, only the
Participant personally, or if permissible under applicable law, such
individual's guardian or legal representative, may exercise rights under the
Plan. No Award, and no right under any such Award, may be pledged, alienated,
attached, or otherwise encumbered, and any purported pledge, alienation,
attachment, or encumbrance thereof shall be void and unenforceable against the
Company or any Affiliate.
6.4 Taxes. The Company shall be entitled, if the Board deems it necessary
or desirable, to withhold (or secure payment from the Participant in lieu of
withholding) the amount of any withholding or other tax required by law to be
withheld or paid by the Company in connection with such Participant's Award, and
the Company may defer the issuance of Shares upon the exercise of an Award
unless indemnified to its satisfaction against any liability for any such tax.
The Board may prescribe one or more methods by which the Participant will be
permitted or required to satisfy his or her tax withholding obligation, which
methods may include, without limitation, the payment of cash by the Participant
to the Company and the withholding, at the appropriate time, of a number of
Shares sufficient, based upon the Fair Market Value of such Shares, to satisfy
such tax withholding requirements.
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6.5 Rights and Status of Recipients. Neither the Plan nor the grant of an
Award to a Non-Employee Director shall confer any right on such Non-Employee
Director to continue as a director of the Company.
6.6 Awards Not Includable for Benefit Purposes. Income recognized by a
Participant pursuant to the Plan shall not be included in the determination of
benefits under any benefit plans applicable to the Participant which are
maintained by the Company or any Affiliate, except as may be provided under the
terms of such plans or determined by resolution of the Board.
6.7 Share Certificates; Representation by Participants; Registration
Requirements. All certificates for Shares delivered pursuant to the exercise of
any Award shall be subject to such stop transfer orders and other restrictions
as the Board may deem advisable under the Plan or the rules, regulations, and
other requirements of the Securities Exchange Commission and any applicable
federal or state securities laws, and legends may be put on any such
certificates to make appropriate reference to such restrictions. The Board may
require each Participant to represent to the Company in writing that such
Participant is acquiring Shares without a view to the distribution thereof. Each
Award shall be subject to the requirement that, if at any time (i) the
registration or qualification of Shares relating to such Award on any securities
exchange or under any state or federal securities laws, or (ii) the approval of
any securities exchange or regulatory body is necessary or desirable as a
precondition thereto, the exercise of such Award may not be consummated unless
such listing, registration, qualification or approval shall have been effected.
Article VII Amendment and Termination
7.1 Amendment. The Board may amend, alter, suspend, discontinue, or
terminate the Plan at any time; provided, however, that (i) no amendment,
alteration, suspension, discontinuation or termination of the Plan shall in any
manner (except as otherwise provided in this Article VII) adversely affect any
Award, without the consent of the Participant, (ii) no amendment shall be made
without shareholder approval if such approval would be required to comply with
Rule 16b-3 and (iii) the provisions of Sections 5.1(a) and 5.1(b) shall not be
amended more than once every six months, other than to comport with changes in
the Code, the Employee Retirement Income Security Act of 1974, as amended, or
the rules and regulations promulgated thereunder. It is intended that the Plan
be administered in compliance with Rule 16b-3 so long as the Company shall have
a class of equity securities registered under Section 12 of the Exchange Act. If
any provision of the Plan would be in violation of Rule 16b-3 if applied as
written, such provision shall not have effect as written and shall be given
effect so as to comply therewith. The Board is authorized to amend the Plan and
to make any modifications to Award Agreements to comply with Rule 16b-3 and to
make any other amendments or modifications deemed necessary or appropriate to
better accomplish the purposes of the Plan in light of any amendments made to
Rule 16b-3. Without limiting the foregoing, the Board may amend the Plan or any
Award Agreement to take advantage of any simplifications or liberalizing
provisions added by amendment to Rule 16b-3.
7.2 Termination. The Plan shall terminate at the close of business on the
tenth anniversary of the effective date, provided, however, the Board shall have
the right and the power to terminate the Plan at any time prior thereto. No
Award shall be granted under the Plan after such termination, but such
termination shall not have any other effect, and any Award outstanding at the
time of such termination may be exercised after termination at any time prior to
the expiration date of such Award to the same extent such Award would have been
exercisable had the Plan not terminated.
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Article VIII General Provisions
8.1 Effective Date of the Plan. The Plan shall be effective as of the date
of its adoption by the Board, subject to approval of the Plan by the Company's
shareholders within one year thereafter by a majority of the votes cast at a
duly held meeting of the shareholders of the Company at which a quorum
representing a majority of all outstanding stock is present, either in person or
by proxy, and in a manner that satisfies the requirements of Rule 16b-3. In the
event that the Plan is not so approved within such one-year period, all Awards
granted under the Plan shall be null and void.
8.2 Unfunded Status of Plan. The Plan shall be unfunded and shall not
create (or be construed to create) a trust or a separate fund or funds. The Plan
shall not establish any fiduciary relationship between the Company and any
Participant or other person. To the extent any person holds any right by virtue
of a grant under the Plan, such right shall be no greater than the right of an
unsecured general creditor of the Company.
8.3 Miscellaneous. The Plan and all determinations made and actions taken
pursuant to the Plan shall be governed by the laws of the state of Florida and
applicable federal laws. Section headings are used in the Plan for convenience
only, do not constitute a part of the Plan, and shall not be deemed in any way
to be relevant to the interpretation of the Plan or any provision thereof.
Whenever possible, each provision in the Plan and every Award shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of the Plan or any Award shall be held to be prohibited by
or invalid under applicable law, then (i) such provision shall be deemed amended
to accomplish the objectives of the provision as originally written to the
fullest extent permitted by law and (ii) all other provisions of the Plan and
every other Award shall remain in full force and effect.
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EXHIBIT 4.4-1
OPTIONS ASSUMED FROM
INDUSTRY MORTGAGE COMPANY, L.P.
No. of Shares
Non-Employee Director Subject to Options
--------------------- ------------------
Joseph P. Goryeb, Sr. 6,466
Mitchell W. Legler 6,466
Allen D. Wykle 6,466
All Options listed hereon have an exercise price of $4.70 per share.
7
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EXHIBIT 4.4-2
FORM OF AWARD AGREEMENT
8
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IMC MORTGAGE COMPANY
NON-EMPLOYEE DIRECTOR
NON-QUALIFIED STOCK OPTION AGREEMENT
(Assumption Agreement)
THIS AGREEMENT, dated as of this _____ day of _______________, 1996,
between IMC Mortgage Company, a Florida corporation (the "Company"), and the
person whose signature is set forth on the signature page hereof ("Director").
RECITALS
WHEREAS, the Company has adopted the IMC Mortgage Company Outside
Directors' Option Plan (the "Plan") which provides for the automatic grant of
options to non-employee directors of the Company;
WHEREAS, Director is an outside director of the Company and in such
capacity is in a position to contribute materially to the continued growth and
development and the future financial success of the Company;
WHEREAS, the Plan provides for the grant to outside directors of options
to purchase common stock of the Company on the terms and conditions specified
therein to provide a means for outside directors to participate in the future
growth of the Company and to increase their incentive and personal interest in
the continued success and growth of the Company; and
WHEREAS, Director holds an option to purchase a limited partnership
interest in Industry Mortgage Company, L.P., a Delaware limited partnership (the
"Partnership") which has been acquired by the Company, and the Company wishes to
grant Director an option to acquire an equity interest in the Company through
the Company's assumption of Director's existing option from the Partnership (the
"Partnership Option");
NOW, THEREFORE, the parties agree as follows (any capitalized terms used
herein but not defined herein shall have the respective meanings given in the
Plan):
1. Option.
(a) Assumption. Subject to the terms and conditions of this
Agreement and the Plan, the Company hereby assumes the Partnership Option, as
modified herein, and agrees that from the date hereof Director shall have a
Non-Qualified Stock Option to purchase all or any part of the Shares set forth
on the signature page hereof, at the exercise price set forth on the signature
page hereof. By the acceptance hereof, Director hereby releases the Partnership
from its obligations under the Partnership Option and agrees that from and after
the date of this Agreement,
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the Partnership Option shall be null and void, provided, however, that this
Agreement shall be rescinded and the Partnership Option shall be deemed to have
remained in full force and effect in the event that the Company's acquisition of
the Partnership shall be rescinded, as provided in Section 4.4 of the Plan.
(b) Term. The term of the Option shall expire at 11:59 p.m. on
December 2, 2005, which is the tenth anniversary of the date of grant of the
Partnership Option.
(c) Vesting. The Option shall be exercisable only prior to the
expiration date, and then only as set forth in the following table:
Cumulative Number of Shares
Date as to which Option is Exercisable
- ---- ---------------------------------
Date of this Agreement 60%
December 2, 1996 80%
December 2, 1997 100%
If Director's term of office as a director is terminated for any reason other
than death or disability, all unvested Options held by Director shall thereupon
be automatically canceled.
2. Exercise.
Director may, subject to the limitations of this Agreement and the
Plan, exercise all or any portion of the Option by providing written notice of
exercise to the Company specifying the number of Shares with respect to which
the Option is being exercised accompanied by payment of the exercise price for
such Shares. The exercise price shall be paid in cash, by the surrender of
Shares having a Fair Market Value equal to the exercise price, by the surrender
of the unexercised, vested portion of the Option as to which the Spread (as
hereinafter defined) is equal to the exercise price, or any combination of the
foregoing. "Spread" means the Fair Market Value of the underlying Shares less
the exercise price.
3. Termination by Reason of Death or Disability.
If Director's term of office as a director terminates by reason of
death or disability, Director (or his or her personal representative) may
exercise any portion of the Option which has vested pursuant to Section 1 hereof
for a period of one year after the date of such termination and not thereafter;
provided, however, that no Option or portion thereof shall be exercisable after
it has expired pursuant to Section 1 hereof. For purposes of this Agreement, the
term "disability" shall mean a total and permanent disability as determined by
the Committee in its sole discretion.
4. Change of Control. In the event of a Change of Control, any unvested
portion of the Option shall vest in full. Change of Control means: (i) the
adoption of a plan of reorganization, merger, share exchange or consolidation of
the Company with one or more other corporations or other entities as a result of
which the holders of the Shares as a group would receive
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less than fifty percent (50%) of the voting power of the capital stock or other
interests of the surviving or resulting corporation or entity; (ii) the adoption
of a plan of liquidation or the approval of the dissolution of the Company;
(iii) the approval by the Board of an agreement providing for the sale or
transfer of the assets of the Company; or (iv) the acquisition of more than
[twenty percent (20%)] of the outstanding shares by any person within the
meaning of Rule 13(d)(3) under the Securities Exchange Act of 1934 if such
acquisition is not preceded by a prior expression of approval by the Board.
5. Nonalienation. Director shall have no rights to sell, assign, transfer,
pledge, assign or otherwise alienate the Option under this Agreement, except by
will or by the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code or Title I of ERISA, or the
rules thereunder, and any such attempted sale, assignment, transfer, pledge or
other conveyance shall be null and void. The Option shall be exercisable during
the Director's lifetime only by the Director (or his or her legal
representative).
6. Limited Interest.
(a) The grant of the Option shall not be construed as giving
Director any interest other than as provided in this Agreement.
(b) Director shall have no rights as a shareholder as a result of
the grant of the Option, until the Option is exercised, the exercise price is
paid, and the Shares issued thereunder.
(c) The grant of the Option shall not confer on Director any right
to continue as a director of the Company nor interfere in any way with the right
of the Company's shareholders to remove the Director at any time.
(d) The grant of the Option shall not affect in any way the right or
power of the Company to make or authorize any or all adjustments,
recapitalizations, reorganizations, or other changes in the Company's capital
structure or its business, or any merger, consolidation or business combination
of the Company, or any issuance or modification of any term, condition, or
covenant of any bond, debenture, debt, preferred stock or other instrument ahead
of or affecting the Shares or the rights of the holders thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business or any other Company act or proceeding, whether
of a similar character or otherwise.
7. Incorporation by Reference. The terms of the Plan to the extent not
stated herein are expressly incorporated herein by reference and in the event of
any conflict between this Agreement and the Plan, the Plan shall govern.
8. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida.
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9. Amendment. This Agreement may not be amended, modified, terminated or
otherwise altered except by the written consent of the parties thereto.
IMC MORTGAGE COMPANY
By:_______________________________
Its:______________________________
("Company")
__________________________________
Name:_____________________________
("Director")
Number of Shares issuable upon exercise
of Option in full: 6,466
Exercise price: $4.70 per Share
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BUSCHWOOD CENTER
Office Lease Agreement
THIS LEASE AGREEMENT, hereinafter referred to as "Lease", made and entered
into this __ day of August, 1993, by and between CLW REALTY ASSET GROUP, INC.,
or its Assigns, hereinafter referred to as "Lessor" and INDUSTRY MORTGAGE
COMPANY, L. P. (IMC) hereinafter referred to as "Lessee";
W I T N E S S E T H
1. Premises: Lessor, in consideration of the covenants to be performed by
Lessee, and upon the terms and conditions hereinafter stated, does hereby rent
and lease to Lessee, and Lessee does hereby rent and lease from Lessor the
following described area, hereinafter referred to as "Premises," located within
the property known as BUSCHWOOD PARK hereinafter referred to as the "Office
Park"; more particularly described in Exhibit "B":
Address: 3450 W. Busch Boulevard, Tampa, FL 33618
Floor: Second Suite Number: 250
Rentable Square Feet: 9,104
2. Term: To have and to occupy the Premises for a Twenty-Four (24) month
term of rental payments (the "Lease Term"), beginning on October 1, 1993, or
later as hereinafter provided on Exhibit B "Work Letter".
3. Commencement Date: The Commencement Date shall be the earlier of (i)
September 1, 1993 or (ii) the date upon which the Building, other improvements
on the Property and the leased premises have been substantially completed in
accordance with the plans and specifications of Lessor (other than any work
which cannot be completed on such date provided which incompletion will not
substantially interfere with Lessee's use of the leases premises), or (iii) the
date on which Lessee takes possession of a portion of or all of the leased
premises; provided, however, that if Lessor shall be delayed in such substantial
completion as a result of; (1) Lessee's failure to agree to plans,
specifications, or cost estimates before the date referred to in the separate
Office Lease Improvement Agreement attached hereto as Exhibit "B" and made a
part hereof; (2) Lessee's request for materials, finishes or installations other
than Lessor's standard; (3) Lessee's changes in plans; or (4) the performance or
completion by a party employed by Lessee, the Commencement Date and the payment
of rent hereunder shall be accelerated by the number of days of such delay.
If substantial completion of the leased premises or possession thereof by
Lessee is delayed because any tenant or other occupant thereof holds over and
Lessor is delayed, using good faith efforts in Lessor's discretion, in acquiring
possession of the leased premises, Lessor shall not be deemed in default, nor in
anyway liable to Lessee because of such delay, and Lessee agrees to accept
possession of the leased premises at such time as Lessor is able to tender the
same, which date shall thenceforth be deemed the Commencement Date
notwithstanding any other provision hereof to the contrary. However, it is
agreed that if said period exceeds 30 days, then at the Lessee's option and upon
written notice to Lessor, said Lease may be terminated immediately.
The taking of possession by Lessee shall be deemed conclusively to
establish that the Office Park, other improvements, and the Premises have been
completed in accordance with the plans and specifications and are in good and
satisfactory condition as of when possession was so taken, except for those
terms listed as exceptions, as of the date of possession.
4. Notices: Any notices required to be given hereunder shall be in writing
and shall be mailed to the parties by registered or certified mail,
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return receipt requested at the following address:
If to Lessor: If to Lessee:
CLW Realty Asset Group, Inc. Industry Mortgage Company, L, P.
111 Madison Street 3450 W. Busch Boulevard
Suite 2410 Suite 250
Tampa, FL 33602 Tampa, FL 33618
Notices shall be effective upon receipt or refusal of receipt.
5. Rental: Lessee agrees to pay to Lessor at its offices set forth above,
or at such other place as Lessor may designate from time to time in writing, a
"Base Annual Rent" of $ SEE EXHIBIT "C" for each calendar year of the Lease
term, payable in equal installments of $ SEE EXHIBIT "C" per month. One such
monthly installment shall be due and payable on the date hereof, and a like
monthly installment shall be due and payable without demand in advance on or
before the first day of each calendar month succeeding the Commencement Date
during the term of this Lease. If the Commencement Date shall be a date other
than the first day of a calendar month, rental for the portion of that month
shall be prorated, and paid on or before the date on which lessee takes
possession of the Premises. Rental shall be deemed paid only when received by
Lessor at its offices as above set forth.
The Lessor will receive monthly from Lessee the equivalent of 6.5% of the
monthly rental rate which is paid to the State of Florida by the Lessor. This
6.5% rate is accountable by the Lessor to the State of Florida under the Florida
Sales Tax Statute. The Lessor receives no monetary benefit from the collection
and disbursement of this charge. Therefore, to satisfy this obligation, Lessee
shall forward to Lessor 6.5% of the base rental rate, as set forth under the
terms and conditions of this Lease Agreement or any subsequent Lease Renewal
Option, in addition to the base rental rate agreed to by the parties. Should
such tax rate change under the Florida Sales Tax Statute the Lessee will pay
accordingly.
In the event Lessee fails to pay any installment of rent or other payment
due hereunder as and when such installment is due to help defray additional cost
to Lessor for processing such late payments, Lessee shall pay to Lessor on
demand a late charge in an amount equal to five percent (5%) of such
installment; and the failure to pay such amount within ten (10) days after
demand therefore shall be an event of default hereunder. The provision for such
late charge shall be in addition to all of Lessor's other rights and remedies
hereunder or at law and shall not be construed as liquidated damages or as
limiting Lessor's remedies in any manner.
6. Additional Rental: Commencing on the first day of January following the
execution of this Lease, and each January 1st thereafter, the Base Annual Rent
provided hereinabove in Paragraph five, shall be adjusted in accordance with the
provisions of the addendum attached hereto as Exhibit "A" and by reference made
a part hereof, and the additional sums thereby payable shall constitute
"Additional Rental" payable by Lessee to Lessor according to the provisions of
Exhibit "A".
7. Use of Premises: (a) The Premises shall be used for general office
purposes; and shall not be used for any retail business inviting the general
public, nor for any illegal purposes, nor in violation of any regulation of any
governmental body having jurisdiction thereof, nor in any manner to create a
nuisance to other tenants, nor trespass. The foregoing shall not limit Lessee's
rights to sell at retail, consumer type goods to its own employees. Lessee
agrees to obtain at Lessee's expense any and all licenses and permits necessary
for its use and occupancy of the Premises. Lessee agrees not to receive, store
or otherwise handle any product, material or merchandise which is explosive or
highly inflammable, nor in any manner to violate the insurance on the Premises.
In no event shall any activity be carried out on the Premises which shall omit
smoke, noxious odors, dust, or loud noises, unless the Premises are properly
designed and approved by Lessor in writing to provide adequate protection for
same. Lessee agrees that at the expiration of the term hereof, Lessee will
return the keys and deliver possession of the Premises to Lessor in the same
condition as on the commencement of the term hereof, reasonable wear and tear
excepted.
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(b) Provided Lessee is not in default under this Lease at the expiration of
the Lease term, Lessee shall have the right to remove any of Lessee's fixtures,
machines, or equipment from the Premises, provided, however, that Lessee agrees
to repair and restore any damage caused to the Premises by the installation,
removal and/or use of said fixtures, machines or equipment. Lessor may at any
time upon reasonable notice inspect the Premises during normal business hours to
determine compliance with the terms and provisions of this Lease, or to show the
Premises to prospective purchasers or mortgagees of the Premises, or to
prospective lessees during the last six (6) months of the term of this Lease, or
any renewals thereof.
8. Alterations: Any alterations, additions or improvements in or to the
Premises shall not be made without the prior written consent of Lessor, which
consent shall not be unreasonably withheld. Upon the expiration of this Lease,
Lessee may, if Lessor so elects in writing, remove any or all additions or
improvements erected by Lessee and Lessee shall restore the Premises to their
original condition. Any such removal shall be accomplished in a good and
workmanlike manner. Lessee shall keep the Premises free of liens and
encumbrances due to Lessee's alterations, additions, improvements, or the
removal thereof. Unless Lessor elects in writing to the contrary, all
alterations, additions or improvements made in or upon the Premises by the
Lessee, shall become the sole property of Lessor, and shall remain in or upon
the Premises at the expiration of the Lease term.
9. Repairs: Lessor agrees, at its expense, to maintain the roof, HVAC,
structural and mechanical parts, the exterior walls of the building which
includes the Premises. After possession has been delivered to the Lessee, Lessor
shall not be required to make any improvements or repairs to the Premises except
for normal maintenance and repairs necessary for the safety and tenantability of
the Premises and grounds maintenance. Lessee shall notify Lessor in writing of
any defective condition which Lessor is required to repair, after which Lessor
shall have a reasonable time to repair said defective condition. Should Lessee
fail to provide Lessor with such written notice, Lessor shall be relieved of all
liability for any injury or damage resulting from said defective condition.
Lessor shall have the right to enter the Premises at reasonable times to examine
the defective condition and to make such repairs as required herein which Lessor
deems necessary, for the safety of, comfortable habitation in or preservation of
the Premises using reasonable diligence not to disturb the normal business
operations of Lessee. Lessor shall not be required to make any repairs caused by
Lessee. Lessee shall keep the Premises in good order and shall promptly make all
repairs required to be made by Lessee at its expense.
10. Damage Or Destruction: (a) If the Premises or the Office Park are
totally destroyed or so substantially damaged as to be untenantable by fire,
lightning, earthquake, windstorm, or other casualty, to the degree whereby
Lessor determines that it cannot be repaired to substantially the same condition
as before such damage or destruction within a reasonable time, this Lease may be
terminated by either party upon thirty (30) days written notice and rent shall
be accounted for between Lessor and Lessee as of the casualty date.
(b) If the Premises, or any part thereof, are damaged but not rendered
untenantable by any above mentioned casualty, Lessor shall repair the Premises
within a reasonable time after receipt of written notice thereof to the extent
and availability of insurance proceeds; provided, however, that Lessor shall not
be required to rebuild, repair or replace any part of the alterations,
additions, improvements, equipment or machinery which may have been placed on
the Premises by Lessee. Until such repairs are made, the rent shall be reduced
in proportion to the area of the Premises which cannot be used or occupied by
Lessee as a result of such casualty. In no event shall rent abate nor shall any
termination occur if damage to or destruction of the Premises is the result of
negligence of Lessee, or its representative, agents, employees or invitees.
(c) Any insurance which may be carried by Lessor or Lessee against loss or
damage to the Office Park, and/or the Premises, or contents within the Premises,
shall be for the sole benefit of the party carrying such insurance.
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(d) Lessee shall not make any use of the Premises which would make void or
voidable any policy of fire or extended coverage insurance insuring the
Premises, and if by Lessee of the Premises the premiums on the insurance
policies maintained by Lessor shall be increased over normal rates for this type
of building, the amount of the increase in the premiums shall be paid by Lessee
to Lessor upon receipt of a statement from Lessor and verification of the
increased premium.
11. Eminent Domain: If part of the Premises is taken by any legally
constituted authority for public or quasi-public use eminent domain or by
private purchase in lieu thereof, then in either of said events, this Lease
shall terminate at Lessor's or Lessee's option on the date that actual
possession thereof is taken by public authorities, and rental shall be accounted
for between Lessor and Lessee as of that date. If the portion of the Premises
remaining after such condemnation proceedings shall be suitable for Lessee's
use, the rent payable by Lessee after the taking shall be reduced by the same
percentage as the rentable area of the space taken bears to the total rentable
area originally in the Premises. It is agreed that Lessee shall not have any
right or claim to any part of any award or compensation made to or received by
Lessor for such taking. Nothing herein shall be construed to preclude Lessee
from prosecuting any claim directly against the condemning authority for loss of
business, damage to, and cost of removal of property belonging to Lessee;
provided, however that no such claim shall diminish or adversely affect Lessor's
award.
12. Insurance and Liability: (a) Lessee does hereby agree to indemnify and
save Lessor harmless from and against liability for injury to any person or
persons, or damage to property, in any way arising out of, or connected with the
use or occupancy of the Premises, or in any way arising out of the activities of
Lessee, its agents, employees, licensees, or invitees on the Premises, and/or
the Office Park, and from all costs, expenses and liabilities, including but not
limited to, reasonable attorney's fees incurred by Lessor in connection
therewith.
(b) Unless Lessor has been declared by a court of competent jurisdiction to
have been willfully negligent, Lessor shall not be liable to Lessee for injury
to any person or persons or for damage to any property of Lessee, or any person
claiming through Lessee, arising out of any accident or occurrence in the Office
Park, or within the Premises for injury or-damage caused by any defective
condition, or failure of equipment, pipes, or wiring, or caused by broken glass,
stoppage of drains, or caused by gas, water, steam, or oil leaking, escaping, or
flowing into the Premises, or caused by fire or smoke, or by the acts or
omissions of other tenants located in or about the Premises.
(c) During the term of this Lease, Lessee shall keep in effect with
insurance companies satisfactory to Lessor, legally authorized to transact
business in the State of Florida, public liability insurance, including personal
injury coverage, for the benefit of Lessor and Lessee, with limits for personal
injury or death or not less than $1,000,000, and with limits for property damage
of not less than $300,000 for each occurrence. A certificate of insurance shall
be furnished to Lessor and shall provide that all Lessor's losses resulting from
Lessee's negligence, to the limit of the policy, will be reimbursed by any
insurance proceeds, and all liability claims against Lessor resulting from
Lessee's business will be defended by Lessee or his insurance carrier at no cost
to Lessor. Lessee agrees that it will not cancel any of the above-mentioned
policies, or allow any policy to lapse without delivering to Lessor a
certificate indicating equal or greater coverage written by an insurance company
acceptable to Lessor. Lessee, prior to occupancy of the Premises, shall cause to
be delivered to Lessor such certificates of insurance as above set forth to be
held by Lessor.
13. Waiver of Subrogation: In the event either Lessor or Lessee sustains a
loss by reason of fire or other casualty which is or could have been covered by
a fire and extended coverage or insurance policy, and such fire or other
casualty is caused in whole or in part by acts or omissions of the other party,
its agents, employees, licensees, or invitees, then the party incurring such
loss agrees to look solely to its fire and extended coverage insurance proceeds
(if any), and such party shall have no right of
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action against the other party to this Lease, its agents, employees, licensees,
or invitees of such other party, and no third party shall have any right by way
of assignment, subrogation or otherwise. If the inclusion in this Lease of this
"Waiver of Subrogation" results in an increase in the fire insurance premiums of
either party, then the other party, within ten (10) days after written request,
will either pay the amount of such increase or be deemed to have waived the
benefits of this provision.
14. Subordination: (a) This Lease and all the rights of Lessee hereunder
are and shall be subject and subordinate to the lien of any mortgage, deed to
secure debt, deed of trust or other security instrument which may now or
hereafter affect Lessor's or its successor's interest in the fee title or
leasehold estate to the Premises. In confirmation of such subordination, Lessee
shall upon request execute, acknowledge and deliver to Lessor, without expenses
to Lessor, all instruments that may be requested by Lessor to evidence the
subordination of this Lease and all rights hereunder to the lien of any such
mortgage, deed to secure debt, deed of trust or other security instrument.
(b) If the holder of any mortgage, deed to secure debt, deed or trust, or
other security instrument/ or any other purchaser at a sale, whether such sale
shall be pursuant to the exercise of any power of sale contained in any security
instrument or through judicial proceedings, or otherwise, shall hereafter
succeed to the rights of Lessor under this Lease, at the option of such
purchaser, purchaser may deliver a new lease containing the same terms and
conditions as this Lease except that the Commencement Date of such new lease
shall be the date of execution of such new lease by all parties, and the
expiration date of such new Lease shall be the expiration date stated in this
Lease. In the event any such purchaser does not request execution of a new
lease, then and in that event Lessee shall attorn to and recognize such
successor as Lessee's lessor under this Lease, and upon receipt shall promptly
execute and deliver any instrument that may be necessary to evidence such
attornment. Upon attornment provided herein, this Lease shall continue in full
force and effect as a direct lease between such successor lessor and Lessee,
subject to all of the terms, covenants and conditions of this Lease, and
Lessee's terms and conditions shall not be changed, modified, or amended due to
subordination or attornment.
15. Subletting Or Assignment: Lessee may not, without the prior written
consent of Lessor, assign this Lease or any interest hereunder; or sublet the
Premises, which consent shall not be unreasonably withheld. Notwithstanding any
permitted assignment or subletting, Lessee shall at all times remain fully
responsible and liable for the payment of the rent and other herein specified
charges, and for compliance with all of Lessee's obligations under the terms,
and conditions of this Lease.
16. Substituted Space: Notwithstanding any other provisions of this Lease
to the contrary, if the Premises demised by this Lease contains less than 2,000
square feet of office space, Lessor, at its option and at any time during the
term of this Lease, may require that Lessee move to another location within the
Office Park, upon giving Lessee ninety (90) days written notice of such
relocation, which notice shall be accompanied by a space plan showing the
relocated premises. This substituted space shall contain not less than the
number of square feet contained in the Premises under this Lease, and Lessee may
continue to occupy and lease such substituted space for the rentals and under
the same terms and conditions as herein provided. Lessor shall reimburse Lessee
for the cost of relocation to said substituted space and will also reimburse
Lessee for the value, as of the date of written notice, for Lessee's printed
materials by reason of this relocation. Notwithstanding the foregoing, if Lessee
is not desirous of relocating to said substituted space, then Lessee shall have
the right to cancel and terminate this lease by giving Lessor written notice of
termination within fifteen (15) days after Lessee receives such notice to
relocate from Lessor. If Lessee so elects to terminate this Lease, the
termination shall be effective upon the expiration of the ninety (90) day
written notice of relocation from Lessor.
17. Security Deposit: Lessee has simultaneously with the execution of this
Lease, deposited the sum of $ 18,208.00 as a security for the performance of
Lessee's obligations hereunder. Said sum shall be returned to
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Lessee at the expiration of the term here, provided Lessee has fully performed
all of its obligations hereunder. Lessor retains the right to apply all or any
part of said deposit to cure any default of Lessee other than normal wear and
tear on space under the terms and conditions of the Lease provided that Lessee
has failed to cure said default within ten (10) business days of Lessee's actual
receipt of written notice from Lessor that Lessor intends to draw upon the
security deposit.
18. Holding Over: If Lessee remains in possession of the Premises at the
expiration of the term of this Lease, without a written extension or a renewal
lease agreement between the parties, Lessee shall be deemed to be a tenant at
will from month to month. Rental during the holdover period shall be at a rental
rate equal to 150% of the effective rental rate at the end of the term hereof,
and there shall be no renewal of this Lease by operation of law.
19. Defaults and Remedies: (a) the following events shall be deemed to be
events of default by Lessee under this Lease: (I) Lessee shall fail to pay any
installment of Base Annual Rent, Additional Rental or any other charge or
assessment against Lessee pursuant to the terms hereof within ten (l0) days
after the said date thereof; (II) Lessee shall fail to comply with any term,
provision, covenant or warranty made under this Lease by Lessee, other than the
payment of Base Annual Rent or additional rental or any other charge or
assessment payable by Lessee, and shall not cure such failure within fifteen
(15) days after notice thereof to Lessee; (III) Lessee or any guarantor of this
Lease shall become insolvent, or shall make a transfer in fraud of creditors or
shall make an assignment for the benefit of creditors; (IV) Lessee or any
guarantor of this Lease shall file a petition under any Section or Chapter of
the National Bankruptcy Act, as amended, or under any similar law or statute of
the United States or any state thereof, or there shall be filed against the
Lessee or any guarantor of this Lease a petition in bankruptcy or insolvency or
a similar proceeding, or Lessee or any guarantor shall be judged bankrupt or
insolvent in proceedings filed against Lessee or any guarantor hereunder; (V) a
receiver or trustee shall be appointed for the Premises or for all or
substantially all of the assets of Lessee or of any guarantor of this Lease;
(VI) Lessee shall abandon or vacate all or any portion of the Premises or fail
to take possession thereof as provided in this Lease; or (VII) Lessee shall not
do or permit to be done anything which creates a lien upon the Premises
(b) Upon the occurrence of any of the aforesaid events of default, Lessor
shall have the option to pursue any one or more of the following remedies
without any notice or demand whatsoever; (I) terminate this Lease, in which
event Lessee shall immediately surrender the Premises to Lessor and, if Lessee
fails to do so, Lessor may without prejudice to any other remedy which it may
have for possession or arrearages in rent, enter upon and take possession of the
Premises and expel or remove Lessee and any other person who may be occupying
said Premises or any part thereof, by force if necessary, without being liable
for prosecution or any claim of damages therefor, Lessee hereby agreeing to pay
to Lessor on demand the amount of all loss and damage which Lessor may suffer by
reason of such termination, whether through inability to relet the Premises on
satisfactory terms or otherwise; (II) enter upon and take possession of the
Premises and expel or remove Lessee and any other person who may be occupying
said Premises or any part thereof, by force, if necessary, without being liable
for prosecution of any claim for damages thereof and, if Lessor so elects, relet
the Premises on such terms as Lessor may deem advisable, in a reasonable
commercial manner and receive the rent therefor, Lessee hereby agreeing to pay
to Lessor on demand any deficiency that may arise by reason of such reletting;
(III) enter upon the Premises, by force if necessary, without being liable for
prosecution or any claim of damages therefor, and do whatever Lessee is
obligated to do under the terms of this Lease and Lessee agrees to reimburse
Lessor on demand for any expenses, including, without limitation, reasonable
attorney's fees, which Lessor may incur in thus affecting compliance with
Lessee's obligations under this Lease, and Lessee further agrees that Lessor
shall not be liable for any damages resulting to Lessee for such action, whether
caused by negligence of Lessor or otherwise; or (IV) declare immediately due and
payable all Base Annual Rent, additional rent and other charges and assessments
against Lessee due or to become due under this Lease.
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(c) Pursuit by Lessor of any of the foregoing remedies shall not preclude
pursuit of any other remedy herein provided or any other remedy provided by law
or at equity, nor shall pursuit by Lessor of any remedy herein provided
constitute; (I) an election of remedies thereby excluding the later election of
an alternate remedy or (II) forfeiture or waiver of any Base Annual Rent,
additional rental or other charges and assessments payable by Lessee and due to
Lessor hereunder or of any damages accruing to Lessor by reason of the violation
of any of the terms, covenants, warranties and provisions herein contained. No
action taken by or on behalf of Lessor shall be construed to be an acceptance or
a surrender of this Lease. Forbearance by Lessor to enforce one or more of the
remedies herein provided upon an event of default shall not be deemed or
construed to constitute a waiver of such default. In determining the amount of
loss or damage which Lessor may suffer by reason of termination of this Lease or
the deficiency arising by reason of any reletting of the Premises by Lessor as
above provided, allowance shall be made for expense of repossession and any
repairs or remodeling undertaken by Lessor following repossession and there
shall be added to the minimum Base Annual Rent herein provided, for the period
from the time of any event of default until the end of the Lease term, a sum
equal to the highest Base Annual Rent required to be paid hereunder by Lessee
during any preceding lease year multiplied by the number of lease years
remaining in the Lease term. Lessee agrees to pay to Lessor all costs and
expenses incurred by Lessor in the enforcement of this Lease, including, without
limitation, the reasonable fees of Lessor's attorneys where such attorneys are
employed by Lessor's to effect collection of any sums due hereunder or to
enforce any right or remedy of Lessor.
(d) Lessee hereby appoints as its agent to receive service of all
dispossessory or distress proceedings and notices hereunder, the person in
charge of the Premises, then such service or notice may be made by attaching
same to the entrance of the Premises, provided that copy of such service,
proceedings, or notices, shall be mailed to Lessee at the address of the home
office as indicated herein.
20. Lessor Services: Lessor hereby agrees that it will, during normal
business hours, furnish heating and air conditioning sufficient to reasonably
heat or cool the Premises, automatic elevator service (where applicable), and
will cause the Premises to be cleaned daily, after normal business operation
hours, Monday through Friday, and the exterior grounds area cared for
periodically by its service personnel. Lessor will furnish water and electric
power for reasonable use on the Premises for normal office equipment. Electric
power will be furnished for normal business machines only. Lessor shall not be
liable for damages arising for the failure to furnish any of the above services
or utilities, and cessation caused by strike, accident, or reasonable necessity,
beyond the control of Lessor, shall not be considered a default by Lessor. For
the purposes of this lease agreement normal business operation hours shall be
from 8:00 AM to 6:00 PM Monday through Friday inclusive: and Saturday from 8:00
AM to 12:00 Noon.
21. Miscellaneous Provisions: (a) Lessee agrees that all personal property
brought into the Premises shall at the risk of the Lessee only, and that the
Lessor shall not be liable for theft thereof or any damage thereto occasioned
from any acts of co-tenants, or other occupants of said building or any other
person.
(b) If the Lessee fails to remove all goods, wares, equipment, fixtures,
inventory, records, files or other personal property situated on the Premises at
the termination of this Lease, Lessor may, at its option, remove all or part of
said property in any manner that Lessor shall choose and store or dispose of
same without liability for loss thereof. Lessee shall be liable to Lessor for
all expenses incurred in such removal and/or storage of said property.
(c) Upon termination of this Lease wherein Lessee shall be liable in any
amount to Lessor, in addition to the statutory lien for rent in Lessor's favor,
Lessor shall have and Lessee hereby grants to Lessor a continuing security
interest in all rentals and any other sums becoming due hereunder from Lessee
upon all property described in subparagraph 21(b) above. Such property shall not
be removed from the Premises without the prior written consent of Lessor until
all arrearages in rent, as well as any
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and all other sums of money then due to Lessor hereunder, shall first have been
paid and discharged.
(d) Upon Lessor's or any mortgagee's request, Lessee agrees to furnish to
Lessor its most current available annual report or financial statement. Lessee
shall not be required to furnish more than one such statement in any calendar
year. Upon request, Lessee, within fifteen (15) days from date of request by
Lessor, agrees to execute, acknowledge, and deliver at no cost to Lessor an
estoppel certificate evidencing the following:
(1) that this Lease is in full force and effect;
(2) that this Lease has not been amended in any way (and if so
stipulate the amendments);
(3) that to the best knowledge of Lessee, there are not any
existing defaults by the Lessor (or if there are defaults,
the nature of such defaults);
(4) the date to which rent has been paid: and that there has not
been any prepaid rental, other than the security deposit set
forth herein: Each estoppel certificate delivered pursuant
to this paragraph may be relied on by certified public
accountants, mortgagees, fee owners, prospective purchasers,
or transferees of Lessor's interest hereunder.
(e) The words "terminate" or "termination" as used herein shall refer to
the end of this Lease whether due to the expiration of the term hereof or the
earlier ending of this Lease in accordance with the terms and provisions hereof.
(f) All rights, powers and privileges conferred upon the parties hereto
shall be cumulative but not restrictive of those given by law.
(g) The captions used in this Lease are for convenience only and do not in
any way limit or amplify the terms and provision hereof.
(h) One or more waiver of any covenant, term or condition of this Lease by
either party shall not be construed as waiver of subsequent breach of the same
covenant, term or condition. The consent or approval by either party to or of
any act by the other party requiring such consent or approval, shall not be
deemed to waive or render unnecessary consent to or approval of any subsequent
similar act.
(i) The rules and regulations attached to this Lease and any amendments and
additions hereto as may be reasonably made by Lessor from time to time shall be
and are hereby made a part of this Lease. Lessee, its employees and agents agree
to perform and abide by said rules and regulations, and any amendments or
additions to said rules and regulations.
(j) This Lease contains the entire agreement of the parties and no
representation or agreements, oral or otherwise, between the parties not
embodied herein shall be of any force or effect.
(k) Time is of the essence of this agreement.
(l) This agreement shall create the relationship of Lessor and Lessee
between Lessor and Lessee; no estate shall pass out of Lessor; Lessee has only
an usufruct, not subject to levy and sale.
(m) The term "Lessor" as used in this lease refers solely to the owner of
the Premises so that in the event of any sale or sales or foreclosure thereof,
Lessor, who is grantor in any such sale or foreclosure shall be and is hereby
entirely relieved of all of the obligations of Lessor hereunder. Any such sale
of the Premises or any interest therein shall be subject to this Lease, and it
shall be deemed and construed without further agreement that the purchaser at
any such sale has assumed and agreed to carry out any and all obligations of
Lessor in this Lease so long as such purchaser shall be the owner of the
Premises. Any and all references to Lessor shall equally apply to its successors
in interest. The term "Lessee" shall include the second party, its heirs,
representatives, successors and assigns and if
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this Lease shall be validly assigned or sublet, shall include also Lessee's
assignees or sub-lessees as to the Premises covered by such assignment or
sub-lease. "Lessor" and "Lessee", shall include male and female, singular and
plural, corporation, partnership or individual, as may fit the particular
parties.
(n) No termination of this Lease prior to the normal ending thereof, by
lapse of time or otherwise, shall effect Lessor's right to collect rent for the
period prior to the termination thereof.
(o) Lessee agrees, at its own expense, to promptly comply with all
requirements of any legally constituted public authority made necessary by
reason of Lessee's occupancy of said Premises.
(p) Lessor, upon notice, may enter premises at reasonable hours to exhibit
the same to prospective purchasers, to inspect the premises to see that the
Lessee is complying with all his obligations hereunder, and to make repairs
required to Lessor under the terms hereof or repairs to Lessor's adjoining
property.
(q) Lessee hereby waives the benefits of all existing and future Rent
Control Legislation and similar government regulations (which may be applicable
with respect to this Lease, or Lessee's rights hereunder), whether in time of
war or not, to the extent permitted by law.
(r) Lessee represents and warrants to Lessor that no broker, agent,
commission salesman or other person other than Virginia M. Jopek of Grubb &
Ellis has represented Lessee in the negotiations for and procurement of this
Lease and of the Premises and Lessee does and shall agree to indemnify and hold
Lessor harmless from and against any and all loss, cost, damage, claim and
demand, meritorious or otherwise, for or from any fees, commissions, payments or
expenses due or alleged to be due to any broker, agent, commission salesman or
other person purporting to represent Lessee in connection with this Lease, the
Premises, or the negotiations therefor.
(s) The submission of this Lease for examination does not constitute an
offer to lease, and this Lease shall be effective only upon execution hereof by
Lessor and Lessee.
(t) This Lease is made and intended as a contract under and pursuant to
the laws of the State of Florida and shall be construed and enforced in
accordance therewith.
(u) If any clause or provision of this Lease is or becomes illegal, invalid
or unenforceable because of present or future laws, rules or regulations of any
governmental body, or becomes unenforceable for any reason, the intention of the
parties hereto is that the remaining parts of this Lease shall not be thereby
affected.
22. Quiet Enjoyment: Lessor agrees that so long as Lessee pays the rent
hereunder and performs the covenants herein on its part to be performed, Lessee
shall and may peaceably have, hold and enjoy the Premises for the term of this
Lease and all renewal terms thereof.
23. Special Stipulations: Additional special stipulations, if any, are
attached hereto and made a part hereof as Exhibit "C". In the event of a
conflict between terms contained in the body of the lease and Exhibit "C",
Exhibit "C" shall prevail.
IN WITNESS WHEREOF, the parties herein have hereunto set their hands the
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day and year set forth below.
As to Lessor: LESSOR:
CLW Realty Asset Group, Inc.,
as agent for Buschwood Center
This _____ day of BY: Mark H. Wilkins, President
__________________, 1993
_________________________________ BY:_______________________________________
Witness
_________________________________
Witness
As to Lessee: LESSEE:
This 20 day of Industry Mortgage Company L.P.
August, 1993
PHYLLIS A. BLAIR BY: GEORGE NICHOLAS, PRESIDENT
- --------------------------------- ----------------------------------------
Witness Title President
[SIGNATURE]
- ---------------------------------
Witness
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RULES AND REGULATIONS
Attached To And Made A Part of Lease Agreement made and entered into by and
between CLW REALTY ASSET GROUP, INC. and INDUSTRY MORTGAGE COMPANY, L, P.
1. Lessor will furnish keys for each office (approximately one per 1,000
square feet) to Lessee without charge. No additional locks or latches shall be
installed upon any door without the written consent of Lessor. At the
termination of this Lease, Lessee shall return to Lessor all keys to doors of
the office suite, whether furnished by Lessor, or others.
2. During the hours from 6:00 PM to 8:00 AM, Monday through Friday and from
12:00 noon Saturday to 8:00 AM Monday, the buildings are the responsibility of
the Lessor's on-site representative and every person entering or leaving the
building is expected to be registered as to his business in the building if
unknown to the representative.
3. All parking spaces, drives, approaches, ingress and egress are for joint
use of all tenants. No tenant shall permit its employees, visitors, customers,
owners, or principals to store any vehicles or other items on the Premises, or
allow any vehicle to remain in the parking area or approach area for a period
exceeding one (1) normal working day without the written permission of the
Lessor. No parking will be permitted on public streets near the Premises, in
driveways, or parallel to curbs, or within grass areas on the property. All
vehicles shall be parked within the confines of the painted parking spaces, and
Lessee shall be required to instruct their employees, customers, and visitors to
obey the ordinances, and rules and regulations of local governmental authorities
having proper jurisdiction regarding public street right-of-way parking and
driveway areas.
4. Lessee shall not place or permit to be placed any outdoor storage
facility or trash containers outside the building, or on the property. Lessor
will furnish trash containers which shall be effectively screened and shall be
kept in a neat and clean condition. There shall be no obstruction of sidewalks,
entrance passages, corridors, hallways, elevators (if any), or stairways, nor
shall they be used for any purpose other than ingress or egress. Exterior doors,
skylights, and windows that reflect or admit light into the building, shall not
be covered or obstructed by anyone, other than by draperies, blinds, or other
normal window treatments approved by Lessor. If the drapes are to be installed
within the Premises, Lessee will be responsible for the cost and installation
thereof, including a standard white drapery liner on all exterior windows.
5. The restroom facilities and fixtures, including water closets and other
water apparatus, shall not be used for any purpose other than those for which
they are intended, and no sweepings, rubbish, or other obstructing substances
shall be thrown therein. Damage resulting from any misuse shall be at the
expense of the lessee whose employees, agents, or invitees shall have caused
same.
6. No tenant shall do or permit to be done anything within the Premises or
on the property which would in any way conflict with the regulations of the Fire
Department, Board of Health, or any governmental agency having proper
jurisdiction. In this respect, Lessee agrees not to cause any additional wiring
to be installed within the building, or the Premises, or any type intercom
system, music system, bell or buzzer system, communications systems, or
electrical systems, unless and until a diagram of same is submitted to and
approved in writing by Lessor or its authorized agents. Diagrams submitted
should indicate any borings or cuttings that may be required in conjunction with
requested installation. The use of any inflammable material or product shall be
used in, or stored in, the building or the Premises without prior written
approval by Lessor. No area of the Premises shall be occupied or used as
sleeping or lodging quarters at any time and shall not be used in any way
appropriated for gambling, immoral and other unlawful practices, and no
intoxicating liquors shall be sold on the Premises.
7. There shall be no boring, or fastening devices, used or done to any
doors within the Premises, and the doors and windows of the Premises and
building shall be kept whole. If any part thereof shall become broken, the same
shall be immediately replaced or repaired to the satisfaction of Lessor by the
party responsible. Lessees shall not injure, overload or deface the
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<PAGE>
Premises, or the building, the woodwork, or the walls. Lessee shall obtain
Lessor's permission before placing safes, or other heavy articles or equipment,
indicating the prescribed weight of same, and Lessor or Lessor's structural
engineer shall retain the sole and final decision as the placement thereof.
8. Lessee shall not erect, paint, or place signs, advertising media,
company names, or any type numerals or letters upon the windows or exterior
walls of the Premises, including, but not limited to, all trees, shrubbery,
bushes, sign posts, fixtures or lighting fixtures, except with the prior written
consent of the Lessor. Building exterior tenant identification signs shall be of
such order, size and style, and at locations, as shall be designated by Lessor.
Exterior signs will be furnished by Lessor for Lessee, and the cost of
furnishings and installing same be charged to and paid for by Lessee.
9. Lessees shall not employ any persons other than the janitors of Lessor
(who will be provided with pass-keys to the offices) for the purpose of cleaning
or taking charge of the Premises without the express written permission of
Lessor.
<PAGE>
<PAGE>
EXHIBIT "A"
In accordance with the provisions of Paragraphs 5 and 6 of the Lease to which
this Exhibit is attached, the rental payable by Lessee to Lessor pursuant to
this Lease shall be subject to adjustment as follows, to wit:
The Base Annual Rent as described in Paragraph 5 of this Lease as the same may
have been previously escalated or increased as herein provided shall be
escalated or increased on January 1 of each year during the lease term by an
amount equal to Lessee's Proportionate Share of the increase in Operating
Expenses for the immediately preceding calendar year over either (y) the
Lessee's proportionate share of the Base Operating Expenses (in the case of the
first adjustment to the Base Rental) or (z) the Lessee's proportionate share of
the Operating Expenses for the next preceding calendar year (in the case of all
adjustments to the Base Annual Rent subsequent to the first such adjustment
thereto). As used in the immediately preceding sentence the following terms
shall have the following meanings or definitions, to wit:
(i) The term "Base Annual Rent" shall mean and be defined as the Base
Rental specified in Paragraph 5 of this Lease.
(ii) The term "Proportionate Share" shall mean and be defined, for any
period, as that fraction determined by multiplying the Operating
Expenses for the Building and Property by a fraction, the
numerator of which shall be the total number of square feet of
space included within the leased Premises (9,104 rentable square
feet) and the denominator of which shall be 86,928 square feet
(the total amount of square feet in the Building).
(iii) The term "Operating Expenses" shall mean and be defined, for any
period, as all costs, charges and expenses of any kind, nature
or description incurred by Lessor with respect and which are
directly attributable to the operation, management, maintenance
and normal repair of the Building and Property in accordance with
generally accepted accounting principles and sound property
management practices applicable to similar type first-class
office facilities and complexes, including, without limitation,
real estate taxes and special assessments, hazard and liability
insurance, janitorial service, landscaping and grounds
maintenance, window washing services, etc. The term "Operating
Expenses" shall specifically exclude structural maintenance and
repair, improvements, alterations and additions to the Building
or its equipment, interest on the retirement of capital debt,
rental commissions and decoration of any Lessee's space.
(iv) The term "Base Operating Expense" shall mean and be defined as
the actual Operating Expense for the calendar year 1993.
As soon as practicable following the first day of each January during the lease
term, Lessor shall promptly prepare and transmit to Lessee a written statement
reflecting the calculation of the aforesaid adjustment to the Base Rental as so
adjusted. Within ten (10) days following Lessee's receipt of such statement from
Lessor, Lessee shall pay to Lessor the aggregate amount of any such increase in
the Base Rental which may have accrued on rental installments due between the
first day of January and the date of Lessee's receipt of such statement. Rental
installments due subsequent to Lessee's receipt of such statement shall be in
such amount as to reflect the new Base Rental as so adjusted.
The increase in base annual rent contemplated pursuant to this Exhibit "A" shall
be prorated during the first and last years of this lease to account for any
partial lease years.
Notwithstanding the above, Lessor agrees that in any calendar year, Lessee's
share of increased operating expenses, exclusive of real estate taxes and all
utilities, shall not exceed a four percent (4%) increase over the previous
calendar year's Lessee's share of increased operating expenses exclusive of real
estate taxes and all utilities.
<PAGE>
<PAGE>
EXHIBIT "B"
(Page 1 of 2)
Work Letter
Lessee shall occupy the premises in an "as is" condition. Notwithstanding
the above, Lessor shall provide Lessee with a building improvement allowance in
the amount of $27,312.00.
Lessee may apply any unused building improvements allowance toward rental
abatement. Notwithstanding the above, it is expressly understood that Lessee
shall always have two (2) full years of rental payments due outside of rental
abatement to Lessor under this Lease Agreement. For example, if Lessee has a
$10,000 credit from the unused building improvements allowance. Lessee may use
this credit for one (1) full month of rent abatement ($12/square foot X 10,000
rsf / 12 months = $10,000 a month for 1st year). Therefore, the base rent
schedule as shown on Exhibit "C" of the Lease would commence with the following
month and continue for the next 24 consecutive months of lease payments.
This allowance shall be utilized for building improvements within the space
using building standard improvements to comply with all building codes and to
include all working drawing permits and construction management fees.
Notwithstanding the above, Lessor shall be responsible for refinishing the
common hallway area to include vinyl cove base and touch up paint where needed.
<PAGE>
<PAGE>
EXHIBIT "C"
Special Stipulations
The following are special stipulations which are included in the Lease to which
this Exhibit "C" is attached by and between CLW REALTY ASSET GROUP, INC. and
INDUSTRY MORTGAGE COMPANY, L, P. (the "Lease"). Except as otherwise indicated
herein, capitalized terms used herein shall have the same meaning as given to
such terms in the Lease. In the event of a conflict or inconsistency between the
terms of the Lease and the special stipulations included in this Exhibit "C" the
terms of this Exhibit "C" shall be deemed controlling.
1. Radon Gas: Pursuant to Florida Statute, all leases entered into after
January 1, 1989 are required to provide the following notification:
Radon is a naturally occurring radioactive gas that, when it has
accumulated in a building in sufficient quantities, may present
health risks to persons who are exposed to it over time. Levels of
Radon that exceed federal and state guidelines have been found in
buildings in Florida. Additional information regarding Radon and
Radon testing may be obtained from your county public health unit.
2. After Hours HVAC: After hours HVAC shall be available at a cost of
$18.00 per hour, per floor, subject to increase with changes in
energy ratios. Lessee shall be required to provide 24 hour notice of
its desire for after hours HVAC; however, in the event Lessee is not
able to provide such notice, Lessor will use its reasonable efforts
to accommodate Lessee.
3. Base Rent: Notwithstanding any provision to the contrary, Base Rent
during the term of this Lease shall be accounting to the following
schedule:
Period Base Rental Rate Base Annual Rent Monthly Rent
Year 1 $12.00/rsf $109,248.00 $9,104.00
Year 2 $12.50/rsf $113,799.96 $9,483.33
plus applicable sales tax.
In addition to the foregoing amounts of Base Rent, such amounts of
Base Rent shall be subject to escalation, or increase in accordance
with the provisions of Exhibit "A" attached to the Lease.
4. Health Club Memberships: Lessor shall grant Lessee the use of five
(5) Health Club Memberships to the building exercise room, free of
charge, for the term of the Lease.
5. Right of First Refusal: Lessee shall have a Right of First Refusal on
contiguous space on the second floor of the Building as of the date
of this Agreement, or any contiguous space which becomes available
during the term of the Lease. This Right of First Refusal shall
remain in effect for the entire term of the Lease and shall at all
times be subject to the rights of occupancy of tenants existing as of
September 1, 1993. Lessee shall have ten (10) business days after
receiving written notice from Lessor to exercise such right under the
same terms and conditions of the bonafide offer. Said notice shall
indicate that Lessor has a bona fide Tenant to whom Lessor is willing
to let the contiguous area, setting forth the name and address of
said Tenant and the terms and conditions for the proposed contiguous
area. If Lessee duly and timely exercises in writing to Lessor the
First Refusal Right, then Lessee will promptly (and in any event
within ten (10) business days after Lessor's notice) enter into a
Lease for the First Refusal space. If for any reason (except Lessor's
fault) Lessee does not timely enter into a Lease, Lessor will be free
to rent the First Refusal space to another Tenant and the First
Refusal Right
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and Lessor's obligations with regard to that space will be null and
void and without further force and effect throughout the remainder of
this Lease unless said space shall again become available during the
term of the Lease. Provided Lessee is not in default of this Lease,
the terms and conditions of this on-going Right of First Refusal
shall remain in full force and effect during the term of this Lease.
<PAGE>
<PAGE>
Grubb & Ellis of Florida, Inc.
2nd Floor/Buschwood Center
3450 W. Busch Blvd. Tampa, FL
SALE/LEASE AMERICANS WITH DISABILITIES ACT DISCLOSURE
AND HAZARDOUS MATERIALS DISCLOSURE
The United States Congress has enacted the Americans With Disabilities Act.
Among other things, this act is intended to make many business establishments
equally accessabile to persons with a variety of disabilities; modifications to
real property may be required. State and local laws also may mandate changes.
The real estate brokers in this transaction are not qualified to advise you as
to what, if any, changes may be required now, or in the future. Owners and
tenants should consult the attorneys and qualified design professionals of their
choice for information regarding these matters. Real estate brokers cannot
determine which attorneys or design professionals have the appropriate expertise
in this area.
Various construction materials may contain items that have been or may be in the
future be determined to be hazardous (toxic) or undesirable and may need to be
specially treated/handled or removed. For example, some transformers and other
electrical components contain PCB's, and asbestos has been used in components
such as fire proofing, heating and cooling systems, air duct insulation,
spray-on and tile acoustical materials, linoleum, floor tiles, roofing, dry wall
and plaster. Due to prior or current uses of the Property or in the area, the
Property may have hazardous or undesirable metals, minerals, chemicals,
hydrocarbons, or biological or radioactive items (including electric and
magnetic fields) in soils, water, building components, above or below-ground
containers or elsewhere in areas that may or may not be accessible or
noticeable. Such items may leak or otherwise be released. Real estate agents
have no expertise in the detection or correction of hazardous or undesirable
items. Expert inspections are necessary. Current or future laws may require
clean up by past, present and/or future owners and/or operators. It is the
responsibility of the Seller/Lessor and Buyer/Tenant to retain qualified experts
to detect and correct such matters and to consult with legal counsel of their
choice to determine what provisions, if any, they may wish to include in
transaction documents regarding the Property.
SELLER/LESSOR BUYER/TENANT
Prudential Life Insurance Company of America Industry Mortgage Company, LP
By:_________________________________________ By: GEORGE NICHOLAS
Title:______________________________________ Title: President
Date:_______________________________________ Date: 8/20/93
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<PAGE>
Grubb & Ellis of Florida, Inc.
Prudential Life Insurance Company of America
Industry Mortgage Company, L.P.
NOTICE TO PROSPECTIVE PURCHASER/TENANT
Re: Buschwood Center, 2nd Floor, 3450 W. Busch Blvd.
----------------------------------------------------------------------
(Property Description)
Radon is a naturally occurring radioactive gas that, when it has accumulated in
a building in sufficient quantities, may present health risks to persons who are
exposed to it over time. Levels of radon that exceed federal and state
guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public health
unit. Pursuant to 'ss' 404.056(8), Florida Statutes.
[SIGNATURE] 8-10-93
- ---------------------------------------- -----------------------------------
Associate Date
Grubb & Ellis of Florida, Inc.
<PAGE>
<PAGE>
DISCLOSURE STATEMENT
Re: 2nd Floor/Buschwood Center
-----------------------------------------------
3450 W. Busch Blvd., Tampa, FL
-----------------------------------------------
Pursuant to Florida Statutes, Ch. 475, Grubb & Ellis of Florida, Inc. makes the
following disclosures:
I. In the above transaction, Grubb & Ellis represents:
X (a) the Lessee/Buyer exclusively
---
(b) the Landlord/Seller exclusively
---
(c) the Lessee/Buyer and Landlord/Seller jointly and such
--- dual agency is expressly consented to the parties by
their execution hereof.
I. In the above transaction, Grubb & Ellis represents:
(a) the Lessee/Buyer exclusively
---
X (b) the Landlord/Seller exclusively
---
(c) both the Lessee/Buyer and Landlord/Seller and such
--- payment is expressly consented to by the parties by
their execution hereof.
The Parties named below acknowledge, agree with and consent to the
representation disclosed above.
Seller/Lessor: Prudential Life Insurance Buyer/Lessee: Industry Mortgage
--------------------------- ----------------------
Company of America Company, LP
- ----------------------------------------- -----------------------------------
By: By: GEORGE NICHOLAS
-------------------------------------- --------------------------------
Title: Title: President
----------------------------------- -----------------------------
Date: Date: 8/30/93
------------------------------------ ------------------------------
Presented to the Lessee/Buyer 8/10/93
---------------------------------------------------
(date)
Presented to the Lessor/Sellor 8/10/93
--------------------------------------------------
(date)
GRUBB & ELLIS OF FLORIDA, INC.
BY: Virginia M. Jopek
----------------------------------
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<PAGE>
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE, is made as of this 22 day of February, 1995,
by and between WHC-SIX Real Estate Limited Partnership, By: JER WHC-SIX
Services, Inc., General Partner, hereinafter referred to as "Lessor" and
INDUSTRY MORTGAGE COMPANY, L.P., (IMC), hereinafter referred to as "Lessee"
WITNESSETH:
WHEREAS, CLW REALTY ASSET GROUP, INC., as Lessor, and Lessee were parties
to that certain Lease Agreement dated August 25, 1993; and
WHEREAS, The interest of CLW REALTY ASSET GROUP, INC., as Lessor under the
Lease has now been transferred to WHC-SIX Real Estate Limited Partnership, By:
JER WHC-SIX Services, Inc., General Partner; and
WHEREAS, Notwithstanding anything in the Lease to the contrary, Lessor and
Lessee desire to modify and amend the Lease in order to provide for the
expansion of the Premises to include certain expansion space consisting of
approximately 5543 rentable square feet as depicted in red on Exhibit "A"
attached hereto (the "Expansion Space").
NOW THEREFORE, in consideration of Ten and No/100ths Dollars ($10.00) and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. Recitals: The foregoing recitals are true and correct and hereby
incorporated by reference.
2. Expansion Space and Premises: Effective as of March 1, 1995 the term
"Premises" as defined in the Lease is hereby modified and amended to include the
Expansion Space consisting of approximately 5543 rentable square feet as
depicted on Exhibit "A" attached hereto. Accordingly, from and after March 1,
1995, the term "Premises" as referenced in the Lease shall include the Premises
as originally defined in the Lease, together with the Expansion Space, and
accordingly, consist of a total of approximately 14,647 rentable square feet.
3. Term: The term of the Lease is hereby extended so that it shall expire
on September 30, 1999.
4. Base Rental Rate: (a) Effective March 1, 1995, the Base Rental Rate as
stated in the Lease shall be amended and modified as follows:
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PERIOD MONTHLY BASE RENT TOTAL BASE RENT
-------------------------------------------------------------------
<S> <C> <C>
03/01/95-09/30/95 $12,254.83 $ 85,783.81 (7 months)
10/01/95-09/30/96 $16,477.88 $197,734.56
10/01/96-09/30/97 $16,783.02 $201,396.24
10/01/97-09/30/98 $17,088.17 $205,058.04
10/01/98-09/30/99 $17,393.31 $208,719.72
</TABLE>
(b) In addition, Lessee agrees to pay any applicable sales and use tax,
currently at the rate of six and a half percent (6.5%).
(c) Effective March 1, 1995, Exhibit "A" paragraph (iv) shall be amended to
read "The Term"Base Operating Expense" shall mean and be defined as the actual
Operating Expense for the calendar year 1995."
5. Lessee Improvements: Lessor agrees to build out the expansion space and
renovate the existing premises with building standard improvements at Lessor's
sole cost not to exceed $80,000. Any unused portion of this allowance shall be
credited to the Lessee in the form of rental abatement.
Commencing October 1, 1997, if Lessee is not in default of the Lease,
Lessee shall be credited $40,000 for any additional building standard
improvements. Any unused portion of this allowance shall be credited to the
Lessee in the form of rental abatement.
Commencing October 1, 1988, if Lessee is not in default of the Lease,
Lessee shall be credited $26,460 for any additional building standard
improvements. Any unused portion of this allowance shall be credited to the
Lessee in the form of rental abatement.
6. Security Deposit: Lessee has deposited the sum of $18,208 as a security
for the performance of Lessee's obligations hereunder. Said sum shall be
returned to Lessee at the expiration of the term here, provided Lessee has fully
performed all of its obligations hereunder. Lessor retains the right to apply
all or any part of said deposit to cure any default of Lessee other normal wear
and tear on space under the terms and conditions of the Lease provided that
Lessee has failed to cure said default within ten (10) business days of Lessee's
actual receipt of written notice from Lessor that Lessor intends to draw upon
the security deposit.
7. Brokerage Commission: Lessor and Lessee represent and warrant that they
have not dealt with any broker, finder or agent in the negotiation for or the
obtaining of this Lease Amendment other than CLW REALTY ASSET GROUP, INC. Each
party agrees to indemnify and hold each other harmless from any and all cost or
liability for compensation claimed by broker, finder or agent engaged by it or
claiming to have been engaged by it in connection with this Lease Amendment.
<PAGE>
<PAGE>
8. Renewal Option: Provided Lessee is not in default of this Lease, Lessee
shall receive one five year option to renew the Lease at 95% of the then current
market rental rate. Lessee must give written notice to the Lessor ninety (90)
days prior to Lease Termination of Lessee's intent to exercise said option.
9. Right of First Refusal: Lessee shall have a Right of First Refusal on
space on the first and second floor of the Building as of the date of this
Agreement, or any space on the first and second floor which becomes available
during the term of the Lease. This Right of First Refusal shall remain in effect
for the entire term of the Lease and shall at all times be subject to the rights
of occupancy of tenants existing as of March 1, 1995. Lessee shall have (5) days
business days after receiving written notice from Lessor to exercise such right
under the same terms and conditions of the bonafide offer. Said notice shall
indicate that Lessor has a bona fide Tenant to whom Lessor is willing to let the
contiguous area, setting forth the name and address of said Tenant and the terms
and conditions for the proposed contiguous area. If Lessee duly and timely
exercises in writing to Lessor the First Refusal Right, then Lessee will
promptly (and in any event within (5) business days after Lessor's notice) enter
into a Lease for the First Refusal space. If for any reason (except Lessor's
fault) Lessee does not timely enter into a Lease, Lessor will be free to rent
the First Refusal space to another Tenant and the First Refusal Right and
Lessor's obligations with regard to that space will be null and void and without
further force and effect throughout the remainder of this Lease unless said
space shall again become available during the term of the Lease. Provided Lessee
is not in default of this Lease, the terms and conditions of this on-going Right
of First Refusal shall remain in full force and effect during the term of this
Lease.
10. Radon Gas: Radon is a naturally occurring radioactive gas that, when it
has accumulated in a building in sufficient quantities, may present health risks
to persons who are exposed to it over time. Levels of radon that exceed federal
and state guidelines have been found in buildings in Florida. Additional
information regarding radon and radon testing may be obtained from your county
public health unit.
11. Full Force and Effect: Other than as set forth herein, all of the terms
and conditions of the Lease, Exhibit "A" and Exhibit "C" to the Lease shall
remain unamended and in full force and effect and are hereby ratified and
confirmed in all respects. All capitalized terms used in this Lease Amendment
and not otherwise defined shall have the same meaning ascribed to them under the
Lease. The parties hereby agree that this Lease Amendment represents the entire
agreement between the parties with respect to the matters herein contained and
may not be changed, modified, or altered except by a written agreement signed by
the parties thereto. Except for those which are set forth in this Lease
Amendment, no representations, warranties, or agreements have been made by
Lessor or Lessee to one another with respect to this Lease Amendment.
IN WITNESS WHEREOF, the parties hereto have executed this FIRST AMENDMENT TO
LEASE under their respective seals as of the day and year first above written.
<PAGE>
<PAGE>
"LESSOR"
WHC-SIX Real Estate Limited Partnership
By: JER WHC-SIX Services, Inc., General Partner
LYNN S. VILMAR LAWRENCE A. CORSON
- ------------------------------ -------------------------------------------
Lawrence A. Corson, Vice President
WILLIAM J. FLYNN 3/31/95
- ------------------------------ -------------------------------------------
Date
"LESSEE"
INDUSTRY MORTGAGE CO., L.P.
BY: Industry Mortgage Corporation
Its: General Partner
[SIGNATURE] THOMAS G. MIDDLETON
- ------------------------------ -------------------------------------------
Thomas G. Middleton, Chief Operating Officer
[SIGNATURE] 2/22/95
- ------------------------------ -------------------------------------------
Date
<PAGE>
<PAGE>
EXHIBIT A
[BUSCHWOOD CENTER SECOND FLOOR PLAN]
BUSCHWOOD CENTER
3450 WEST BUSCH BLVD.
TAMPA, FLORIDA 33618
[LEGEND]
[ ] RENEWALS 1993
[ ] RENEWALS 1994
[ ] NEW LEASES OR EXPANSION 1993 9103 R.S.F.
[ ] NEW LEASES OR EXPANSION 1994 7085 R.S.F.
CLW REALTY ASSET GROUP, INC.
SECOND FLOOR PLAN
SCALE: N.T.S.
<PAGE>
<PAGE>
LEASE MODIFICATION AGREEMENT
Lease Modification Agreement, dated this 23 day of August, 1995, between
WHC-SIX Real Estate Limited Partnership, By: JER WHC-SIX Services, Inc., General
Partner, ("Landlord"), and INDUSTRY MORTGAGE COMPANY, L.P. (IMC), ("Tenant").
Witnesseth:
Whereas, Landlord's predecessor, CLW REALTY ASSET GROUP, INC., and Tenant
entered into an Office Lease Agreement dated the 25th day of August, 1993,
modified by that certain First Amendment to Lease entered into between Landlord
and Tenant dated the 22nd day of February, 1995, (collectively called the
"Prime Lease"); and
Whereas, Landlord and Tenant desire to modify the Prime Lease by this Lease
Modification Agreement to provide for expansion of the Premises to include
approximately 1,744 square feet.
Now, therefore, in consideration of the mutual covenants herein contained
and other good and valuable consideration, it is covenanted and agreed between
Landlord and Tenant that the Prime Lease is modified to read as follows:
1. The above recitals are incorporated as if fully set forth herein.
2. All words and phrases, unless otherwise defined herein, have the meanings
attributed to them in the Prime Lease.
3. Effective September 1, 1995, the term "Premises" as defined in the Prime
Lease is hereby modified to include the space located and commonly known as
Suite 220, Buschwood Center, 3450 Buschwood Park Drive, Tampa, Florida
consisting of approximately 1,744 rentable square feet as depicted on Exhibit
"A" attached hereto, ("Expansion Space").
4. The term for the Expansion Space shall expire on August 31, 1998.
5. As to the Expansion Space:
(a) Effective September 1, 1995, and ending on August 31, 1998, the Base
Rental Rate as stated in the Prime Lease shall be increased as follows:
<TABLE>
<CAPTION>
Period Annual Base Rental Rate
------ -----------------------
<S> <C>
09/01/95-8/31/96 $24,416.00 plus tax
09/01/96-08/31/97 $25,288.00 plus tax
09/01/97-8/31/98 $26,160.00 plus tax
</TABLE>
<PAGE>
<PAGE>
(b) In addition, Tenant agrees to pay all applicable state of Florida sales
and use taxes due with each installment of Monthly Base Rent.
(c) Effective September 1, 1995, Exhibit "A" paragraph (iv) shall be
amended to provide "The Term 'Base Operating Expense' shall mean and be defined
as the actual Operating Expense for the calendar year 1995 only as to the
Expansion Space."
6. Landlord shall, when able, only as to the Expansion Space, provide after
hours ("After Hours") heat, ventilation and cooling ("HVAC"). After Hours shall
be defined as those times before and after normal business hours, which are
Monday through Friday, 7:00 a.m. to 6:00 p.m. and Saturday, 8:00 a.m. to 12:00
noon. After Hours HVAC shall be charged as additional rental at the initial
hourly rate of $25.50 per floor. The said hourly rate may increase or decrease
based upon market conditions. After Hours HVAC shall be provided only after
reasonable notice to Landlord in conformance with Landlord's normal policies
regarding such notice. Landlord will not be in default under the Prime Lease as
modified herein as to the Expansion Space, or be liable to Tenant or any other
person for direct or consequential damage, or otherwise, for any failure to
supply any heat, air conditioning, elevator, cleaning, lighting, security; for
surges or interruptions of electricity; or for other services Landlord has
agreed to supply during any period when Landlord uses reasonable efforts to
diligently remedy any interruption in the furnishing of such services. Landlord
reserves the right temporarily to discontinue such services at such times as may
be necessary by reason of accident; repairs, alterations or improvements;
stakes; lockouts; riots; acts of God; governmental preemption in connection with
a national or local emergency; any rule, order, or regulation of any
governmental agency; conditions of supply and demand that make any product
unavailable; Landlord's compliance with any mandatory governmental energy
conservation or environmental protection program, or any voluntary governmental
energy conservation program at the request of or with consent or acquiescence of
Tenant; mandatory or prohibitive injunction issued in connection with the
enforcement of the Americans with Disabilities Act of 1990; or any other
happening beyond the control of Landlord. Landlord will not be liable for
damages to person or property or for injury to, or interruption of, business or
any discontinuance permitted under this paragraph nor will such discontinuance
in any way be construed as an eviction of Tenant or cause an abatement of rent
or operate to release Tenant from any of Tenant's obligations under this lease.
7. Landlord agrees to build out the Expansion Space with building standard
improvements at a cost not to exceed an allowance of $5,319.20.
8. Upon Tenant's execution of this Lease Modification Agreement, Tenant shall
pay Landlord the sum of $2,107.33 as an additional Security Deposit, and the
first and last month's Base Monthly Rental for the Expansion Space.
9. Force Majeure. As to the Expansion Space, Landlord will have no liability to
Tenant, nor will Tenant have any right to terminate this lease or abate rent or
assert a
<PAGE>
<PAGE>
claim of partial or total actual or constructive eviction, because of Landlord's
failure to perform any of its obligations in the lease if the failure is due to
reasons beyond Landlord's reasonable control, including without limitation
strikes or other labor difficulties; inability to obtain necessary governmental
permits and approvals (including building permits or certificates of occupancy);
unavailability or scarcity of materials; war; riot, civil insurrection;
accidents; acts of God; and governmental preemption in connection with a
national emergency. If Landlord fails to perform its obligations because of any
reasons beyond Landlord's reasonable control (including those enumerated above),
the period for Tenant's performance will be extended day for day for the
duration of the cause of Landlord's failure.
10. Landlord and Tenant represent and warrant that they have not dealt with any
broker, finder or agent in the negotiation for or the obtaining of this Lease
Modification Agreement other than Arnold Associates, Inc., which fees shall be
paid by Landlord. Each party agrees to indemnify and hold each other harmless
from any and all cost or liability for compensation claimed by broker, finder or
agent engaged by it or claiming to have been engaged by it in connection with
this Lease Modification Agreement.
11. Except as set forth herein, the Prime Lease as modified remains in full
force and effect in accordance with their terms and provisions and Landlord and
Tenant do hereby ratify, adopt, and confirm their terms and provisions and their
terms and provisions shall remain in full force and effect.
12. Tenant acknowledges and agrees that through the date hereof, to the best
knowledge and belief of Tenant, Landlord has fully and completely performed all
of the obligations on Landlord's part to be performed under the Prime Lease as
modified and amended, and thus Tenant has no claim or cause of action against
Landlord under the Lease or otherwise.
13. The Prime Lease as modified is intended by the parties as the final
expression of their agreement and as a complete and exclusive statement of the
terms thereof, all negotiations, considerations and representations between the
parties having been incorporated herein or therein. No course of prior dealings
between the parties, their officers, employees, agents, or affiliates shall be
deemed relevant or admissible to supplement, explain or vary any of the terms
and provisions of the Prime Lease as modified and amended. No representations,
understandings or agreements have been made or relied upon in the making of the
Lease Modification Agreement other than set forth herein or therein.
14. Landlord and Tenant agree that should any provision in this Lease
Modification Agreement disagree or conflict with any provision in the Prime
Lease, the provision in this Lease Modification Agreement will control as to the
Expansion Space.
15. This Lease Modification Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an
<PAGE>
<PAGE>
original; and all such counterparts shall together constitute but one and the
same Lease Modification Agreement.
16. No Offer. This Lease Modification Agreement is submitted to Tenant on the
understanding that it will not be considered an offer and will not bind Landlord
in any way until Tenant has duly executed and delivered duplicate originals to
Landlord and Landlord has executed and delivered one of such originals to
Tenant.
Witnesses as to Landlord: LANDLORD:
WHC-SIX Real Estate Limited Partnership,
a Delaware limited partnership
By: JER WHC-SIX Services, Inc., a Virginia
corporation, its Managing General Partner
JOAN F. CROUSE By: LAWRENCE A. CORSON
- ---------------------------------- ----------------------------------------
Lawrence A. Corson, Vice President
Dated: 9/6 , 1995
-----------
Witnesses as to Tenant: TENANT:
Industry Mortgage Company, L.P. (IMC)
BY: INDUSTRY MORTGAGE CORPORATION
[SIGNATURE] By: THOMAS G. MIDDLETON
- ---------------------------------- ----------------------------------------
(signature)
Its: CHIEF OPERATING OFFICER
----------------------------------------
CATHERINE M. ARELER Name: Thomas G. Middleton
- ---------------------------------- Dated: August 23 , 1995
-------
<PAGE>
<PAGE>
EXHIBIT A
[FLOOR PLAN]
BUSCHWOOD CENTER
3450 Buschwood Park Drive
Suite 220
1,744 RSF
<PAGE>
<PAGE>
[ARNOLD ASSOCIATES LETTERHEAD]
November 15, 1995
Ms. Phyllis Blair
Industry Mortgage Company
3450 W. Busch Blvd., Suite 250
Tampa, FL 33618
Re: Buschwood Center Expansion Suite 175
Dear Phyllis:
Enclosed please find your executed copy of the Lease Modification Agreement for
the above-referenced property.
As always, it was a pleasure to work with you. I will look forward to providing
assistance to you and your company in the future.
Sincerely,
MERCEDES ANGELL
Mercedes Angell
Office Specialist
MA:jfc
<PAGE>
<PAGE>
LEASE MODIFICATION AGREEMENT
Lease Modification Agreement, dated this 6th day of October, 1995, between
WHC-SIX Real Estate Limited Partnership, By: JER WHC-SIX Services, Inc., General
Partner, ("Landlord"), and INDUSTRY MORTGAGE COMPANY, L.P. (IMC), ("Tenant").
Witnesseth:
Whereas, Landlord's predecessor, CLW REALTY ASSET GROUP, INC., and Tenant
entered into an Office Lease Agreement dated the 25th day of August, 1993,
modified by that certain First Amendment to Lease entered into between Landlord
and Tenant dated the 22nd day of February, 1995, and modified by that certain
Lease Modification Agreement entered into between Landlord and Tenant dated
August 23, 1995 (collectively called the "Prime Lease"); and
Whereas, Landlord and Tenant desire to modify the Prime Lease by this
Second Lease Modification Agreement to provide for expansion of the Premises to
include approximately 2,007 rentable square feet.
Now, therefore, in consideration of the mutual covenants herein contained
and other good and valuable consideration, it is covenanted and agreed between
Landlord and Tenant that the Prime Lease is modified to read as follows:
1. The above recitals are incorporated as if fully set forth herein.
2. All words and phrases, unless otherwise defined herein, have the meanings
attributed to them in the Prime Lease.
3. Effective November 1, 1995, the term "Premises" as defined in the Prime Lease
is hereby modified to include the space located and commonly known as Suite 175,
Buschwood Center, 3450 Buschwood Park Drive, Tampa, Florida, consisting of
approximately 2,007 rentable square feet as depicted on Exhibit "A" attached
hereto, ("Expansion Space").
4. The term for the Expansion Space shall expire on September 30, 1999.
5. As to the Expansion Space:
(a) Effective November 1, 1995, and ending on September 30, 1999, the Base
Rental Rate as stated in the Prime Lease shall be increased as follows:
<TABLE>
<CAPTION>
YEAR SQ. FT. RATE TOTAL $ MONTHLY $*
---- ------- ---- ------- ----------
<S> <C> <C> <C> <C>
11-01-95 thru 10-31-96 2,007 $14.25 $28,599.75 $2,383.31
11-01-96 thru 10-31-97 2,007 $14.75 $29,603.25 $2,466.94
11-01-97 thru 10-31-98 2,007 $15.25 $30,606.75 $2,550.56
11-01-98 thru 9-30-99 2,007 $15.75 $28,976.06 $2,634.19
</TABLE>
*Monthly payments shown above do not include applicable state sales tax.
<PAGE>
<PAGE>
(b) In addition, Tenant agrees to pay all applicable state of Florida sales
and use taxes due with each installment of Monthly Base Rent.
(c) Effective November 1, 1995, Exhibit "A" paragraph (iv) shall be amended
to provide "The Term 'Base Operating Expense' shall mean and be defined as the
actual Operating Expense for the calendar year 1995 only as to the Expansion
Space."
6. Landlord shall, when able, only as to the Expansion Space, provide after
hours ("After Hours") heat, ventilation and cooling ("HVAC"). After Hours shall
be defined as those times before and after normal business hours, which are
Monday through Friday, 7:00 a.m. to 6:00 p.m. and Saturday, 8:00 a.m. to 12:00
noon. After Hours HVAC shall be charged as additional rental at the initial
hourly rate of $25.50 per floor. The said hourly rate may increase or decrease
based upon market conditions. After Hours HVAC shall be provided only after
reasonable notice to Landlord in conformance with Landlord's normal policies
regarding such notice. Landlord will not be in default under the Prime Lease as
modified herein as to the Expansion Space, or be liable to Tenant or any other
person for direct or consequential damage, or otherwise, for any failure to
supply any heat, air conditioning, elevator, cleaning, lighting, security; for
surges or interruptions of electricity; or for other services Landlord has
agreed to supply during any period when Landlord uses reasonable efforts to
diligently remedy any interruption in the furnishing of such services. Landlord
reserves the right temporarily to discontinue such services at such times as may
be necessary by reason of accident; repairs, alterations or improvements;
strikes; lockouts; riots; acts of God; governmental preemption in connection
with a national or local emergency; any rule, order, or regulation of any
governmental agency; conditions of supply and demand that make any product
unavailable; landlord's compliance with any mandatory governmental energy
conservation or environmental protection program, or any voluntary governmental
energy conservation program at the request of or with consent or acquiescence of
Tenant; mandatory or prohibitive injunction issued in connection with the
enforcement of the Americans with Disabilities Act of 1990; or any other
happening beyond the control of Landlord. Landlord will not be liable for
damages to person or property or for injury to, or interruption of, business or
any discontinuance permitted under this paragraph nor will such discontinuance
in any way be construed as an eviction of Tenant or cause an abatement of rent
or operate to release Tenant from any of Tenant's obligations under this lease.
7. Landlord agrees to build out the Expansion Space with building standard
improvements as shown in Exhibit B at a cost not to exceed $6,900.00.
8. Upon Tenant's execution of this Lease Modification Agreement, Tenant shall
pay Landlord the sum of $5,046.98 which represents the first month's Base
Monthly Rental including applicable sales tax; ($2538.23) and an additional
Security Deposit of $2,508.75 for the Expansion Space.
<PAGE>
<PAGE>
9. Force Majeure. As to the Expansion Space, Landlord will have no liability to
Tenant, nor will Tenant have any right to terminate this lease or abate rent or
assert a claim of partial or total actual or constructive eviction, because of
Landlord's failure to perform any of its obligations in the lease if the failure
is due to reasons beyond Landlord's reasonable control, including without
limitation strikes or other labor difficulties; inability to obtain necessary
governmental permits and approvals (including building permits or certificates
of occupancy); unavailability or scarcity of materials; war; riot, civil
insurrection; accidents; acts of God; and governmental preemption in connection
with a national emergency. If Landlord fails to perform its obligations because
of any reasons beyond Landlord's reasonable control (including those enumerated
above), the period for Tenant's performance will be extended day for day for the
duration of the cause of Landlord's failure.
10. Landlord and Tenant represent and warrant that they have not dealt with any
broker, finder or agent in the negotiation for or the obtaining of this Lease
Modification Agreement other than Arnold Associates, Inc., which fees shall be
paid by Landlord. Each party agrees to indemnify and hold each other harmless
from any and all cost or liability for compensation claimed by broker, finder or
agent engaged by it or claiming to have been engaged by it in connection with
this Lease Modification Agreement.
11. Except as set forth herein, the Prime Lease as modified remains in full
force and effect in accordance with their terms and provisions and Landlord and
Tenant do hereby ratify, adopt, and confirm their terms and provisions and their
terms and provisions shall remain in full force and effect.
12. Tenant acknowledges and agrees that through the date hereof, to the best
knowledge and belief of Tenant, Landlord has fully and completely performed all
of the obligations on Landlord's part to be performed under the Prime Lease as
modified and amended, and thus Tenant has no claim or cause of action against
Landlord under the Lease or otherwise.
13. The Prime Lease as modified is intended by the parties as the final
expression of their agreement and as a complete and exclusive statement of the
terms thereof, all negotiations, considerations and representations between the
parties having been incorporated herein or therein. No course of prior dealings
between the parties, their officers, employees, agents, or affiliates shall be
deemed relevant or admissible to supplement, explain or vary any of the terms
and provisions of the Prime Lease as modified and amended. No representations,
understandings or agreements have been made or relied upon in the making of the
Lease Modification Agreement other than set forth herein or therein.
14. Landlord and Tenant agree that should any provision in this Lease
Modification Agreement disagree or conflict with any provision in the Prime
Lease, the provision in this Lease Modification (Agreement will control as to
the Expansion Space.
<PAGE>
<PAGE>
15. This Lease Modification Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original; and all such counterparts shall together constitute but one and
the same Lease Modification Agreement.
16. No Offer. This Lease Modification Agreement is submitted to Tenant on the
understanding that it will not be considered an offer and will not bind Landlord
in any way until Tenant has duly executed and delivered duplicate originals to
Landlord and Landlord has executed and delivered one of such originals to
Tenant.
Witnesses as to Landlord: LANDLORD:
WHC-SIX Real Estate Limited Partnership,
a Delaware limited partnership
By: JER WHC-SIX Services, Inc., a Virginia
corporation, its Managing General Partner
JOAN F. CROUSE By: LAWRENCE A. CORSON
- ---------------------------------- ----------------------------------------
Lawrence A. Corson, Vice President
Dated: 11/8 , 1995
-----------
Witnesses as to Tenant: TENANT:
Industry Mortgage Company, L.P. (IMC)
BY: INDUSTRY MORTGAGE CORPORATION
ELIZABETH CATS By: PHYLLIS A. BLAIR
- ---------------------------------- ----------------------------------------
(signature)
Its: Vice President
----------------------------------------
[SIGNATURE] Name: Phyllis A. Blair
- ---------------------------------- Dated: October 6 , 1995
-------
<PAGE>
<PAGE>
EXHIBIT A
[FLOOR PLAN]
SUITE 175
BUSCHWOOD CENTER
3450 WEST BUSCH BLVD.
TAMPA, FLORIDA
ARNOLD ASSOCIATES
Commercial
Real Estate
Services
<PAGE>
<PAGE>
EXHIBIT B
Tenant Improvements to be provided at Landloard's expense
1. Demolition of offices
Construction of demising wall between Suite 175 and net management office.
Rewiring existing electrical to one switch.
Demolition of existing flooring and replacement with Tenant's choice of building
standard carpet or economical equivalent vinyl composite tile (VCT).
[FLOOR PLAN]
SUITE 175
BUSCHWOOD CENTER
3450 WEST BUSCH BLVD.
TAMPA, FLORIDA
ARNOLD ASSOCIATES
Commercial
Real Estate
Services
<PAGE>
<PAGE>
FOURTH LEASE MODIFICATION AGREEMENT
Lease Modification Agreement, dated this 22nd day of March, 1996, between
HYACINTH PROPERTIES, LIMITED PARTNERSHIP, By: ROSEBUD PROPERTIES, INC., GENERAL
PARTNER, successor landlord to CLW REALTY ASSET GROUP, INC. and WHC- SIX REAL
ESTATE, LIMITED PARTNERSHIP, By: JER WHC-SIX SERVICES, INC., GENERAL PARTNER
("Landlord"), and INDUSTRY MORTGAGE COMPANY, L.P. (IMC), ("Tenant").
Witnesseth:
Whereas, CLW Realty Asset Group, Inc., and Tenant entered into an Office
Lease Agreement dated August 25, 1993, modified by that certain First Amendment
to Lease entered into between WHC-SIX Real Estate, Limited Partner, By: JER
WHC-Six Services, Inc., General Partner and Tenant dated February 22, 1995, and
modified by that certain Lease Modification Agreement dated August 23, 1995, and
modified by that certain Lease Modification Agreement dated October 6, 1995
(collectively called the "Prime Lease");.
Whereas, Landlord and Tenant desire to modify the Prime Lease by this
Fourth Lease Modification Agreement to provide for expansion of the Premises to
include approximately 2,902 rentable square feet.
Now, therefore, in consideration of the mutual covenants herein contained
and other good and valuable consideration, it is covenanted and agreed between
Landlord and Tenant that the Prime Lease is modified to read as follows:
1. The above recitals are incorporated as if fully set forth herein.
2. All words and phrases, unless otherwise defined herein, have the meanings
attributed to them in the Prime Lease.
3. Effective April 1, 1996, the term "Premises" as defined in the Prime Lease
is hereby modified to include the space located and commonly known as Suite
165, Buschwood Center, 3450 Buschwood Park Drive, Tampa, Florida,
consisting of approximately 2,902 rentable square feet as depicted on
Exhibit "A" attached hereto, ("Expansion Space").
4. The term for the Expansion Space shall expire on September 30, 1999.
5. As to the Expansion Space:
(a) April 1, 1996, and ending on September 30, 1999, the Base Rental Rate
as stated in the Prime Lease shall be increased as follows:
<TABLE>
<CAPTION>
YEAR SQ. FT. RATE TOTAL $ MONTHLY $*
<S> <C> <C> <C> <C>
04-01-96 thru 09-30-96 2,902 $15.00 $21,765.00 $3,627.50
10-01-96 thru 09-30-97 2,902 $15.50 $44,981.00 $3,748.42
10-01-97 thru 09-30-98 2,902 $16.00 $46,432.00 $3,869.33
10-01-98 thru 09-30-99 2,902 $16.50 $47,883.00 $3,990.25
</TABLE>
*Monthly payments shown above do not include applicable state sales tax.
<PAGE>
<PAGE>
(b) In addition, Tenant agrees to pay all applicable state of Florida sales
and use taxes due with each installment of Monthly Base Rent.
(c) Effective April 1, 1996, Exhibit "A" paragraph (iv) shall be amended to
provide "The Term 'Base Operating Expense' shall mean and be defined
as the actual Operating Expense for the calendar year 1996 only as
to the Expansion Space."
6. Landlord shall, when able, only as to the Expansion Space, provide after
hours ("After Hours") heat, ventilation and cooling ("HVAC"). After Hours
shall be defined as those times before and after normal business hours,
which are Monday through Friday, 7:00 a.m. to 6:00 p.m. and Saturday, 8:00
a.m. to 12:00 noon. After Hours HVAC shall be charged as additional rental
at the initial hourly rate of $25.50 per floor. The said hourly rate may
increase or decrease based upon market conditions. After Hours HVAC shall
be provided only after reasonable notice to Landlord in conformance with
Landlord's normal policies regarding such notice. Landlord will not be in
default under the Prime Lease as modified herein as to the Expansion Space,
or be liable to Tenant or any other person for direct or consequential
damage, or otherwise, for any failure to supply any heat, air conditioning,
elevator, cleaning, lighting, security; for surges or interruptions of
electricity; or for other services Landlord has agreed to supply during any
period when Landlord uses reasonable efforts to diligently remedy any
interruption in the furnishing of such services. Landlord reserves the
right temporarily to discontinue such services at such times as may be
necessary by reason of accident; repairs, alterations or improvements;
strikes; lockouts; riots; acts of God; governmental preemption in
connection with a national or local emergency; any rule, order, or
regulation of any governmental agency; conditions of supply and demand that
make any product unavailable; Landlord's compliance with any mandatory
governmental energy conservation or environmental protection program, or
any voluntary governmental energy conservation program at the request of or
with consent or acquiescence of Tenant; mandatory or prohibitive injunction
issued in connection with the enforcement of the Americans with
Disabilities Act of 1990; or any other happening beyond the control of
Landlord. Landlord will not be liable for damages to person or property or
for injury to, or interruption of, business or any discontinuance permitted
under this paragraph nor will such discontinuance in any way be construed
as an eviction of Tenant or cause an abatement of rent or operate to
release Tenant from any of Tenant's obligations under this lease.
7. Landlord agrees to build out the Expansion Space with building standard
improvements at a cost not to exceed $12,885.00 ($4.44 per rentable square
foot). In the event, improvements exceed $4.44 per rentable square foot,
Tenant shall be responsible to pay any and all overages. Payment for
overage shall be due fifty percent (50%) upon construction contract
execution and the remaining fifty-percent (50%) balance due upon occupancy
of the Premises.
8. Upon Tenant's execution of this Lease Modification Agreement, Tenant shall
pay Landlord the sum of $11,921.78 which represents the first and last
month's Base Monthly Rental including applicable sales tax ($8,112.90) and
an additional Security Deposit of $3,808.88 for the Expansion Space.
<PAGE>
<PAGE>
9. Force Majeure. As to the Expansion Space, Landlord will have no liability
to Tenant, nor will Tenant have any right to terminate this lease or abate
rent or assert a claim of partial or total actual or constructive eviction,
because of Landlord's failure to perform any of its obligations in the
lease if the failure is due to reasons beyond Landlord's reasonable
control, including without limitation strikes or other labor difficulties;
inability to obtain necessary governmental permits and approvals (including
building permits or certificates of occupancy); unavailability or scarcity
of materials; war; riot, civil insurrection; accidents; acts of God; and
governmental preemption in connection with a national emergency. If
Landlord fails to perform its obligations because of any reasons beyond
Landlord's reasonable control (including those enumerated above), the
period for Tenant's performance will be extended day for day for the
duration of the cause of Landlord's failure.
10. Landlord and Tenant represent and warrant that they have not dealt with any
broker, finder or agent in the negotiation for or the obtaining of this
Lease Modification Agreement other than Cushman and Wakefield of Florida,
Inc., which fees shall be paid by Landlord. Each party agrees to indemnify
and hold each other harmless from any and all cost or liability for
compensation claimed by broker, finder or agent engaged by it or claiming
to have been engaged by it in connection with this Lease Modification
Agreement.
11. Except as set forth herein, the Prime Lease as modified remains in full
force and effect in accordance with their terms and provisions and Landlord
and Tenant do hereby ratify, adopt, and confirm their terms and provisions
and their terms and provisions shall remain in full force and effect
12. Tenant acknowledges and agrees that through the date hereof, to the best
knowledge and belief of Tenant, Landlord has fully and completely performed
all of the obligations on Landlord's part to be performed under the Prime
Lease as modified and amended, and thus Tenant has no claim or cause of
action against Landlord under the Lease or otherwise.
13. The Prime Lease as modified is intended by the parties as the final
expression of their agreement and as a complete and exclusive statement of
the terms thereof, all negotiations, considerations and representations
between the parties having been incorporated herein or therein. No course
of prior dealings between the parties, their officers, employees, agents,
or affiliates shall be deemed relevant or admissible to supplement, explain
or vary any of the terms and provisions of the Prime Lease as modified and
amended. No representations, understandings or agreements have been made or
relied upon in the making of the Lease Modification Agreement other than
set forth herein or therein.
14. Landlord and Tenant agree that should any provision in this Lease
Modification Agreement disagree or conflict with any provision in the Prime
Lease, the provision in this Lease Modification Agreement will control as
to the Expansion Space.
15. This Lease Modification Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed
to be an original; and all such counterparts shall together constitute but
one and the same Lease Modification Agreement.
<PAGE>
<PAGE>
16. No Offer. This Lease Modification Agreement is submitted to Tenant on the
understanding that it will not be considered an offer and will not bind
Landlord in any way until Tenant has duly executed and delivered duplicate
originals to Landlord and Landlord has executed and delivered one of such
originals to Tenant.
17. Except as otherwise provided herein, time remains of the essence.
IN WITNESS OF THIS LEASE MODIFICATION AGREEMENT, Landlord and Tenant have
properly executed it as on the dates set out below.
WITNESSES AS TO LANDLORD: LANDLORD:
Hyacinth Properties, Limited Partnership,
By: Rosebud Properties, Inc., General Partner
By:
- -------------------------------- ----------------------------------------
Name: Joseph Wenk
- -------------------------------- Its: President
Dated: , 1996
-----------
WITNESSES AS TO TENANT: TENANT:
Industry Mortgage Company, L.P. (IMC)
By: THOMAS G. MIDDLETON
--------------------------------------
[SIGNATURE] Name: Thomas G. Middleton
- -------------------------------- --------------------------------------
Its: President
SUSAN SEMPLE --------------------------------------
- -------------------------------- Dated: March 26 , 1995
------
<PAGE>
<PAGE>
EXHIBIT 'A'
[FLOOR PLAN]
BUSCHWOOD Park II
3450 Buschwood Park Drive
Suite 165
2,902 RSF
<PAGE>
<PAGE>
March 22, 1996
Rotch Property Group Limited
Leconfield House, 7th Floor
Curzon Street
London W1Y 7FB
Foxgard Limited
Fourth Floor, Dollard House
Wellington Quay
Dublin 2, Ireland
Industry Mortgage Company LP
3450 Buschwood Park Drive, Suite 250
Tampa Florida 33618
Preferred Mortgages Limited
Leconfield House, 7th Floor
Curzon Street
London W1Y 7FB
Dear Sirs:
Reference is made to the Share Subscription and Shareholders'
Agreement (the "Shareholders' Agreement") dated as of March 18, 1996, among
Foxgard Limited ("Foxgard''), Industry Mortgage Company LP ("IMC"), Financial
Security Assurance Holdings Ltd. ("FSA") and Preferred Mortgages Limited
("Newco"). Capitalized terms used in this letter agreement that are not defined
herein shall have the meaning given to them in the Shareholders' Agreement.
Foxgard and IMC have requested that FSA execute a waiver (the
"Waiver") of Clause 5 of the Shareholders' Agreement to (i) permit IMC to charge
Shares held by it to Rotch Property Group Limited ("Rotch") as security for a
loan by Rotch to IMC of $1,800,000, the proceeds of which IMC proposes to use to
refinance its investment in Newco under the Shareholders' Agreement and (ii) to
permit Rotch to enforce its security over such Shares in the event of a default
by IMC on such loan.
To induce FSA to execute the Waiver (i) Rotch and Foxgard agree that,
if at any time Rotch, Foxgard or any affiliate of either of them takes title to,
or exercises voting rights with respect to, any portion of the Shares pledged by
IMC (but subject as provided below), Rotch and Foxgard will so notify FSA and,
if thereafter requested to do so in a written notice delivered by FSA to both
Rotch and Foxgard, will purchase the Shares owned by FSA
<PAGE>
<PAGE>
at their fair market value, determined in accordance with Clause 5.6 of the
Shareholders' Agreement but so that in determining such fair market value, full
account shall be taken of the impact of any change in the FSA Arrangements
related to such purchase, and (ii) IMC and Newco hereby waive the provisions of
Clause 5 of the Shareholders' Agreement in respect of any purchase pursuant to
(i). The obligations of Rotch and Foxgard under the preceding sentence shall be
joint and several. Rotch, Foxgard, IMC and Newco understand that FSA is
executing the Waiver in reliance on the foregoing agreements. Completion of a
purchase of FSA's shares as provided for above shall take place within 30 days
after the notice requesting such purchase has been received by both of Rotch
and Foxgard. For the purposes of this letter it is acknowledged that Rotch will
not be deemed to hold title to the shares of IMC merely because, as a result of
the fact that its charge is a legal charge, it will be the registered holder of
IMC's shares, provided always that IMC continues to exercise effective voting
control in respect of those shares.
If the foregoing correctly reflects our understanding, please execute
the enclosed counterpart of this letter and return it to us.
Sincerely,
FINANCIAL SECURITY ASSURANCE HOLDINGS, LTD.
By: Bruce E. Stern
--------------------------------------
Name: Bruce E. Stern
Title: Managing Director
ACKNOWLEDGED AND AGREED:
ROTCH PROPERTY GROUP LIMITED INDUSTRY MORTGAGE COMPANY LP
By: By:
------------------------------ -----------------------------
Name: Name:
Title: Title:
FOXGARD LIMlTED PREFERRED MORTGAGES LIMITED
By: By:
-------------------------- -----------------------------
Name: Name:
Title: Title:
2
<PAGE>
<PAGE>
at their fair market value, determined in accordance with Clause 5.6 of the
Shareholders' Agreement but so that in determining such fair market value, full
account shall be taken of the impact of any change in the FSA Arrangements
related to such purchase, and (ii) IMC and Newco hereby waive the provisions of
Clause 5 of the Shareholders' Agreement in respect of any purchase pursuant to
(i). The obligations of Rotch and Foxgard under the preceding sentence shall be
joint and several. Rotch, Foxgard, IMC and Newco understand that FSA is
executing the Waiver in reliance on the foregoing agreements. Completion of a
purchase of FSA's shares as provided for above shall take place within 30 days
after the notice requesting such purchase has been received by both of Rotch
and Foxgard. For the purposes of this letter it is acknowledged that Rotch will
not be deemed to hold title to the shares of IMC merely because, as a result of
the fact that its charge is a legal charge, it will be the registered holder of
IMC's shares, provided always that IMC continues to exercise effective voting
control in respect of those shares.
If the foregoing correctly reflects our understanding, please execute
the enclosed counterpart of this letter and return it to us.
Sincerely,
FINANCIAL SECURITY ASSURANCE HOLDINGS, LTD.
By:
--------------------------------------
Name:
Title:
ACKNOWLEDGED AND AGREED:
ROTCH PROPERTY GROUP LIMITED INDUSTRY MORTGAGE COMPANY LP
By: Vincent A. Tchenguiz By:
------------------------------ -----------------------------
Name: Vincent A. Tchenguiz Name:
Title: Joint Managing Director Title:
FOXGARD LIMITED PREFERRED MORTGAGES LIMITED
By: By: Vincent A. Tchenguiz
-------------------------- -----------------------------
Name: Name: Vincent A. Tchenguiz
Title: Title: Director
2
<PAGE>
<PAGE>
at their fair market value, determined in accordance with Clause 5.6 of the
Shareholders' Agreement but so that in determining such fair market value, full
account shall be taken of the impact of any change in the FSA Arrangements
related to such purchase, and (ii) IMC and Newco hereby waive the provisions of
Clause 5 of the Shareholders' Agreement in respect of any purchase pursuant to
(i). The obligations of Rotch and Foxgard under the preceding sentence shall be
joint and several. Rotch, Foxgard, IMC and Newco understand that FSA is
executing the Waiver in reliance on the foregoing agreements. Completion of a
purchase of FSA's shares as provided for above shall take place within 30 days
after the notice requesting such purchase has been received by both of Rotch
and Foxgard. For the purposes of this letter it is acknowledged that Rotch will
not be deemed to hold title to the shares of IMC merely because, as a result of
the fact that its charge is a legal charge, it will be the registered holder of
IMC's shares, provided always that IMC continues to exercise effective voting
control in respect of those shares.
If the foregoing correctly reflects our understanding, please execute
the enclosed counterpart of this letter and return it to us.
Sincerely,
FINANCIAL SECURITY ASSURANCE HOLDINGS, LTD.
By:
--------------------------------------
Name:
Title:
ACKNOWLEDGED AND AGREED:
ROTCH PROPERTY GROUP LIMITED INDUSTRY MORTGAGE COMPANY LP
By: By:
------------------------------ -----------------------------
Name: Name:
Title: Title:
FOXGARD LIMITED PREFERRED MORTGAGES LIMITED
By: Peter Buxton By:
-------------------------- -----------------------------
Name: Peter Buxton Name:
Title: Director Title:
2
<PAGE>
<PAGE>
at their fair market value, determined in accordance with Clause 5.6 of the
Shareholders' Agreement but so that in determining such fair market value, full
account shall be taken of the impact of any change in the FSA Arrangements
related to such purchase, and (ii) IMC and Newco hereby waive the provisions of
Clause 5 of the Shareholders' Agreement in respect of any purchase pursuant to
(i). The obligations of Rotch and Foxgard under the preceding sentence shall be
joint and several. Rotch, Foxgard, IMC and Newco understand that FSA is
executing the Waiver in reliance on the foregoing agreements. Completion of a
purchase of FSA's shares as provided for above shall take place within 30 days
after the notice requesting such purchase has been received by both of Rotch
and Foxgard. For the purposes of this letter it is acknowledged that Rotch will
not be deemed to hold title to the shares of IMC merely because, as a result of
the fact that its charge is a legal charge, it will be the registered holder of
IMC's shares, provided always that IMC continues to exercise effective voting
control in respect of those shares.
If the foregoing correctly reflects our understanding, please execute
the enclosed counterpart of this letter and return it to us.
Sincerely,
FINANCIAL SECURITY ASSURANCE HOLDINGS, LTD.
By:
--------------------------------------
Name:
Title:
ACKNOWLEDGED AND AGREED:
ROTCH PROPERTY GROUP LIMITED INDUSTRY MORTGAGE COMPANY LP
By: By: George Nicholas
------------------------------ -----------------------------
Name: Name: George Nicholas
Title: Title: Chief Executive Officer
FOXGARD LIMITED PREFERRED MORTGAGES LIMITED
By: By:
-------------------------- -----------------------------
Name: Name:
Title: Title:
2
<PAGE>
<PAGE>
[LOGO]
Industry Mortgage Company LP ("IMC")
3450 Buschwood Park Drive
Suite 250
Tampa
Florida, 33618
USA: and
Rotch Property Group Limited ("Rotch")
7th Floor
Laconfield House
Curzon Street
London W1Y 7FB
March 1996
Dear Sirs,
We refer to the shareholders agreement (the "Shareholders Agreement") dated as
of March 18, 1996 between Preferred Mortgages Limited ("Preferred") and the
shareholders of Preferred, namely IMC, ourselves and Foxgard Limited.
We understand that it is proposed that IMC will create a charge (the "Charge")
in favour of Rotch over all shares in Preferred now or in future issued to IMC
and over the rights of IMC under the Shareholders Agreement relating to such
shares as security for certain finance raised by IMC from Rotch.
We write to confirm that it is agreed between us as follows:
1. We understand that it is intended that the Charge will be a legal charge and
we agree to the registration of the shares of IMC in Preferred into the name
of Rotch under the Charge. We will procure that the directors of Preferred
appointed by us vote in favour of any board resolution in respect of such
registration.
2. We further understand that, under the terms of the Charge, notwithstanding
your registered holding of the shares of IMC, unless and until an event
entitling you to enforce the security thereby created shall occur, IMC will
be given effective voting rights in respect of its shares under standing
proxy agreements.
3. We write to confirm that, notwithstanding any provisions to the contrary in
the Shareholders Agreement or any other document, we hereby consent to the
creation of the Charge and to the enforcement by Rotch of the security
thereby created.
Yours faithfully,
BRUCE STERN
For and on behalf of
Financial Security Assurance Holdings Ltd.
350 Park Avenue.New York, New York 10022.Tel: 212.826.0100.Fax: 212.688.3101
New York.London.Sydney
<PAGE>
<PAGE>
THIS AGREEMENT, dated as of December 8, 1995 by and among Nomura Asset
Capital Corporation (the "Buyer"), having an address at Two World Financial
Center, Building B, 21st floor, New York, New York 10281-1198, INDUSTRY MORTGAGE
COMPANY, L.P. (the "Seller"), having an address at 3450 Buschwood Park Drive,
Suite 250, Tampa, Florida 33618, and THE FIRST NATIONAL BANK OF BOSTON (the
"Custodian"), having an address at 100 Federal Street, Boston, Massachusetts
02106.
W I T N E S S E T H
WHEREAS, the Buyer and the Seller may, from time to time, enter into
transactions (each, a "Transaction") in which the Buyer shall purchase from the
Seller certain Purchased Mortgage Loans, with a simultaneous agreement by the
Seller to repurchase such Purchased Mortgage Loans as provided in that certain
Master Repurchase Agreement Governing Purchases and Sales of Mortgage Loans
dated as of December 8, 1995 between the Seller and the Buyer (the "Master
Repurchase Agreement") and a Confirmation between the Seller and the Buyer (the
"Confirmation"; as to each Transaction, the related Confirmation and the Master
Repurchase Agreement are referred to collectively as the "Repurchase
Agreement").
WHEREAS, Buyer has requested Custodian to act as custodian on behalf of
Buyer for purposes of holding the Purchased Mortgage Loans purchased pursuant to
the Repurchase Agreement;
WHEREAS, the Custodian is a national banking association, is otherwise
authorized to act as Custodian pursuant to this Agreement, and has agreed to act
as custodian/bailee for hire for Buyer, all as more particularly set forth
herein; and
WHEREAS, the Seller shall from time to time deliver Purchased Mortgage
Loans to the Custodian that are subject to a Transaction, and has agreed to
deliver or cause to be delivered to the Custodian certain documents with respect
to the Purchased Mortgage Loans subject to each Transaction in accordance with
the terms and conditions hereof;
NOW, THEREFORE, in consideration of the mutual undertakings herein
expressed, the parties hereto hereby agree as follows:
Section 1. Definitions.
Capitalized terms used but not defined herein shall have the meanings
assigned to them in the Master Repurchase Agreement.
Additional Collateral: Shall have the meaning set forth in Section 7
hereof.
Agreement: This Custodial Agreement and all amendments and attachments
hereto and supplements hereof.
<PAGE>
<PAGE>
Assignment of Mortgage: An assignment of the Mortgage, notice of transfer
or equivalent instrument in recordable form, sufficient under the laws of the
jurisdiction wherein the related Mortgaged Property is located to reflect the
transfer of the Mortgage to the party indicated therein, which assignment,
notice of transfer or equivalent instrument may be in the form of one or more
blanket assignments covering the Mortgage Loans secured by Mortgaged Properties
located in the same jurisdiction, if effective under applicable law.
Authorized Representative: Shall have the meaning set forth in Section 29
hereof.
Bailee Letter: The letter delivered by Custodian to the Takeout Investor
together with the related mortgage loan documents, a form of which is attached
hereto as Exhibit 9.
Business Day: Any day excluding Saturday, or Sunday and any day on which
the New York Stock Exchange and the Federal Reserve are authorized or permitted
to close for business.
Buyer: Nomura Asset Capital Corporation, or its successor in interest or
assigns.
Collateral Receipt: A collateral receipt issued by the Custodian evidencing
the Purchased Mortgage Loans it holds, in the form attached hereto as Exhibit 1,
and delivered to Buyer by the Custodian in accordance with Section 4 hereof.
Custodial Delivery: The form executed by the Seller in order to deliver the
Mortgage Files to the Custodian pursuant to this Agreement prior to the related
Purchase Date, a form of which is attached hereto as Exhibit 7.
Custodian: Means the Custodian as set forth in the introductory paragraph
to this Agreement, or any successor in interest or permitted assigns, or any
successor to the Custodian under this Agreement as herein provided.
Escrow Letter: The letter executed by a Settlement Agent and delivered to
the Custodian pursuant to the purchase by Buyer of a Wet Ink Mortgage Loan.
Initial Collateral Receipt: A form of collateral receipt, in the form of
Exhibit 1-A attached hereto, which shall be executed by Custodian and delivered
to Buyer prior to the purchase by Buyer of a Wet Ink Mortgage Loan.
Mortgage: A mortgage, deed of trust, deed to secure debt or other
instrument, creating a valid and enforceable first or second lien on or first or
second priority ownership interest in an estate in fee simple in real property
and the improvements thereon, securing a mortgage note or similar evidence of
indebtedness.
Mortgage File: Shall have the meaning set forth in Annex A attached hereto.
2
<PAGE>
<PAGE>
Mortgage Loans: Non-securitized whole loans, namely: (i) residential
mortgage loans, including but not limited to, conventional, FHA-insured, and VA
guaranteed and other non-conventional mortgage loans; (ii) FHA-insured project
mortgage loans; (iii) conventional multifamily or commercial mortgage loans;
(iv) no more than 1% mixed use mortgage loans and (v) such other types of
non-securitized whole loans as may be agreed upon by the parties hereto in
writing from time to time.
Mortgage Loan Schedule: A schedule of Purchased Mortgage Loans,
substantially in the form of Exhibit 6 attached hereto and acceptable to Buyer,
attached to each Collateral Receipt and Custodial Delivery.
Mortgage Note: The note or other evidence of the indebtedness of a
Mortgagor secured by a Mortgage.
Mortgaged Property: The real property securing repayment of the debt
evidenced by a Mortgage Note.
Notice of Default: Written notice delivered by Buyer to Custodian and
Seller, or by Seller to Custodian and Buyer, identifying the defaulting party
and the Event of Default.
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof.
PMI Policy: A policy of primary mortgage guaranty insurance issued by a
Qualified Insurer, as represented in the Master Repurchase Agreement with
respect to certain Mortgage Loans.
Purchase Date: With respect to each Purchased Mortgage Loan, the date on
which such Purchased Mortgage Loan is purchased by the Buyer pursuant to the
Repurchase Agreement.
Purchased Mortgage Loans: Each Mortgage Loan, and/or any other evidence of
ownership of a Mortgage Loan mutually agreed upon by the Buyer and the Seller
and identified to the Custodian, transferred or caused to be transferred by the
Seller to the Buyer or its designee (including the Custodian) in a Transaction
under the Master Repurchase Agreement, any Additional Collateral and any
Substituted Collateral delivered pursuant to this Agreement.
Qualified Insurer: A mortgage guaranty insurance company duly authorized
and licensed where required by law to transact mortgage guaranty insurance
business and approved as an insurer by FNMA or FHLMC.
Request for Release: Shall have the meaning set forth in Section 6 hereof.
Seller: Industry Mortgage Company, L.P., or its successors in interest or
permitted assigns.
3
<PAGE>
<PAGE>
Seller Release: If there is no Warehouse Lender with respect to a Mortgage
Loan, a letter from the Seller to Buyer, substantially in the form of Exhibit 10
hereto, confirming such fact and releasing any and all right, title and interest
of the Seller in such Mortgage Loan.
Settlement Agent: An entity acceptable to Buyer who is responsible for the
disbursement of the Purchase Price relating to a Wet Ink Mortgage Loan purchased
by Buyer and who has executed the Escrow Letter in the form attached hereto as
Exhibit 13.
Substituted Collateral: Shall have the meaning set forth in Section 6
hereof.
Takeout Investor: An institution reasonably acceptable to Buyer that has
agreed to purchase on a date certain and at a given price a Purchased Mortgage
Loan.
Warehouse Lender: Any lender providing financing to the Seller for the
purpose of originating Mortgage Loans and having a security interest in or lien
on the Mortgage Loans as collateral for the obligations of the Seller to such
lender with respect to the financing.
Warehouse Lender Release: A letter from each Warehouse Lender, or the
collateral or credit agent on behalf of each Warehouse Lender, as applicable,
having a security interest in or lien on a Mortgage Loan, substantially in the
form of Exhibit 11 hereto, addressed to Buyer, releasing any and all right,
title and interest of the Warehouse Lender in such Mortgage Loan.
Wet Funding Notice: A request by the Seller to Buyer to purchase Wet Ink
Mortgage Loans, in the form substantially as set forth as Exhibit 7-A hereto.
Wet Ink Mortgage Loans: Mortgage Loans purchased by Buyer subject to a Wet
Funding Notice and not in the possession of the Custodian.
Written Instructions: Written communications received by the Custodian from
an Authorized Representative of the Buyer or the Seller, including
communications received by telex or other telecommunications device capable of
transmitting or creating a written record.
Section 2. Appointment of Custodian; Deposit of Mortgage Loans; Effecting
Transactions.
(a) Buyer hereby appoints Custodian, and Custodian hereby accepts its
appointment, to act as the agent and bailee of Buyer, for the purpose of taking
custody of, and confirming certain information regarding, the Purchased Mortgage
Loans (or substitutions thereof) as may be delivered to Custodian by Seller and
designated by Seller as collateral for its obligations pursuant to the Master
Repurchase Agreement.
(b) No later than 10:00 a.m. (New York time) on the Business Day prior to
each Purchase Date, Seller shall deliver or cause to be delivered to Custodian
the Custodial Delivery and the Mortgage Loan Schedule in printed form (or, if
later agreed to by the parties hereto, in computer readable form) (with a copy
to Buyer) and the Mortgage files together with a Warehouse Lender
4
<PAGE>
<PAGE>
Release or Seller Release, in the form of Exhibit 10 or 11 attached hereto (with
respect to the related Purchased Mortgage Loans).
(c) No later than 10:00 a.m. (New York time) on each Purchase Date,
Custodian shall deliver by facsimile transmission (with a copy of the original
to be delivered via overnight courier) to Buyer with a copy to Seller a
Collateral Receipt with respect to the Purchased Mortgage Loans. If there are no
exceptions stated thereon which have not been previously agreed to by Buyer,
then no later than 4:00 p.m. (New York time) on each Purchase Date, the Buyer
shall transfer to Seller or designee of Seller cash in an amount equal to the
related Purchase Price.
(d) Buyer and Seller agree that in effecting each Transaction, the transfer
of the cash and the Purchased Mortgage Loans between Buyer and Seller is
intended to be, and shall be deemed to be, simultaneous. During any period that
cash and/or the Purchased Mortgage Loans are held by or for Buyer or Seller,
until such transfer has been completed, the party holding such cash and/or
Purchased Mortgage Loans shall be deemed to be holding such cash and/or
Purchased Mortgage Loans in trust for the benefit of the delivering party and
shall be obligated to return such cash and/or Purchased Mortgage Loans upon the
delivering party's request.
(e) On and after the date on which each Transaction is consummated until
the Repurchase Date or as extended by written notice signed by both Buyer and
Seller and delivered to Custodian, or until Custodian shall receive a Notice of
Default, Custodian shall hold the Purchased Mortgage Loans related to such
Transaction in trust for the exclusive benefit of Buyer and shall not act upon
Written Instructions of Buyer or Seller to deliver the Purchased Mortgage Loans
other than as expressly provided in this Agreement.
(f) In the case of the purchase by Buyer of a Wet Ink Mortgage Loan,
Seller, prior to 10:00 a.m. (New York time) on the Business Day at least two (2)
Business Days prior to such purchase, shall deliver to both the Buyer and the
Custodian a Wet Funding Notice which shall set forth for each Wet Ink Mortgage
Loan: (i) the expected Purchase Date; (ii) the Settlement Agent; (iii) the
information required on the Mortgage Loan Schedule; and (iv) wire transfer
instructions. In addition, the Seller shall also deliver to the Settlement Agent
a completed Escrow Letter and instruct the Settlement Agent to deliver an
executed copy of such Escrow Letter to the Custodian. Prior to the purchase by
Buyer of a Wet Ink Mortgage Loan, Custodian shall execute and deliver to Buyer
an Initial Collateral Receipt, as more fully described in Section 4 (b) below.
Section 3. Repurchase Date.
Prior to the Repurchase Date, Seller shall complete a draft of the written
notice set forth on Exhibit 12 which notice shall set forth the Purchased
Mortgage Loans being repurchased by Seller, the Repurchase Price therefor and
the place or entity to which the Purchased Mortgage Loans shall be delivered.
Seller shall deliver such draft notice to Buyer. Upon receipt of payment by
Buyer of the Repurchase Price, Buyer shall acknowledge such receipt of payment
and deliver to Custodian a completed and executed written notice in the form of
Exhibit 12. Buyer shall release its lien in and
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to the Purchased Mortgage Loans upon receipt of the Repurchase Price. Custodian
shall only be entitled to rely on the notice in the form of Exhibit 12 which has
been executed by Buyer.
Section 4. Collateral Receipt.
(a) No later than 10:00 a.m. (New York time) on each Purchase Date
(provided Custodian has timely received the items required pursuant to Section
2(b) herein), the Custodian shall issue to Buyer a Collateral Receipt to the
effect that with respect to the related Purchased Mortgage Loans that are
Mortgage Loans, (i) all of the documents in paragraphs (a), (c), (e), (i), (j)
and, to the extent required, (b), (d), (f), (g), (h), (k), (l), (m), (n), (o)
and (p) of the definition of "Mortgage File" are in its possession, except as
set forth on a schedule of exceptions attached to the Collateral Receipt; (ii)
such documents have been reviewed by it and appear regular on their face and
relate to such Mortgage Loan and neither the Mortgage Note, the Mortgage nor the
Assignment of Mortgage contains any notations on their face which appears in the
good faith judgment of the Custodian to evidence any claims, liens, security
interests, encumbrances or restrictions on transfer; (iii) based on its
examination and only as to the foregoing documents, the information set forth in
the Mortgage Loan Schedule respecting such Mortgage Loan accurately reflects the
information contained in the documents in the Mortgage File as to (A) the name
of the mortgagor, (B) the address of the Mortgaged Property, (C) the interest
rate on the Mortgage Note, (D) the original principal amount of the Mortgage
Note, and (E) the maturity date of the Mortgage Note; (iv) the Mortgage Note and
the Mortgage each bears an original signature or signatures purporting to be the
signature or signatures of the person or persons named as the maker and
mortgagor or grantor or, in the case of certified copies of the Mortgage, such
copies bear a reproduction of such signature or signatures; (v) the original
principal amount of the indebtedness secured by the Mortgage is identical to the
original principal amount of the Mortgage Note and is not greater than the
amount of insurance set forth in paragraphs (i) and (j) of the definition of
Mortgage File; (vi) if the Mortgage Note does not name "Seller" as the holder or
payee, the Mortgage Note bears all intervening original endorsements that
complete the chain of ownership from the original holder or payee to the Seller;
(vii) if the Mortgage does not name "Seller" as the mortgagee or beneficiary,
the original of the Assignment of Mortgage from the named mortgagee or
beneficiary bears the original signature purporting to be the signature of the
named mortgagee or beneficiary (and any other necessary party including
subsequent assignors) or in the case of certified copies, that such copies bear
a reproduction of such signature or signatures and that the Assignment of
Mortgage and any intervening assignments of mortgage complete the chain of title
from the originator to the Seller; (viii) each Mortgage Note in its possession
has been endorsed as provided in the definition of "Mortgage File"; and (ix)
each Assignment of Mortgage has been executed as provided in the definition of
"Mortgage File". With respect to each Collateral Receipt that the Custodian has
executed evidencing its certification as provided herein, the Custodian shall,
on each Purchase Date as specified above, deliver to the Buyer by facsimile
transmission and by overnight courier such original Collateral Receipt with the
related Mortgage Loan Schedule attached thereto. Receipt by the Buyer of a
facsimile transmission of the executed Collateral Receipt with the Mortgage Loan
Schedule attached hereto shall be enforceable to the same extent as if the Buyer
had received the original thereof.
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(b) Upon receipt of both a Wet Funding Notice and an Escrow Letter executed
by Seller and Settlement Agent and acknowledged by Custodian, Custodian shall
deliver to Buyer an Initial Collateral Receipt. Upon receipt of the Initial
Collateral Receipt executed by Custodian, Buyer shall wire transfer to Seller
funds in the amount set forth in the Wet Funding Notice. Seller is required to
cause the Custodian to have in its possession the Mortgage File (including a
copy of the original Mortgage) relating to the Wet Ink Mortgage Loans no later
than three (3) Business Days after disbursement by the Settlement Agent of the
Purchase Price of the Wet Ink Mortgage Loans (and, with respect to the original
Mortgage, no later than one (1) Business Day after recordation thereof, and in
any event, no later than one hundred eighty (180) days after disbursement by the
Settlement Agent of the related Purchase Price unless such document has not yet
been returned from the appropriate recording office in which case Seller shall
notify Custodian and Buyer thereof. Custodian shall notify Buyer of its receipt
of the Mortgage File relating to the Wet Ink Mortgage Loan by delivering a final
Collateral Receipt as provided in Section 4(a) above. Custodian shall notify
Buyer if the Mortgage File contains information different from that set forth on
the Mortgage Loan schedule attached to the Wet Funding Notice. Custodian shall
also notify Buyer if it does not receive the Mortgage File within three (3)
Business Days after disbursement by the Settlement Agent of the Purchase Price
of the Wet Ink Mortgage Loans. Upon receipt of the Collateral Receipt as set
forth in this paragraph, the Wet Ink Mortgage Loans shall be deemed to be
Purchased Mortgage Loans.
(c) The Custodian shall examine the documents received by the Custodian
hereunder. However, the Custodian shall not be responsible for (i) the value,
form, substance, validity, perfection, priority, recordability, genuineness,
effectiveness or enforceability of any such Mortgage Loan documents or (ii) the
collectability, insurability, effectiveness or suitability of an Mortgage Loan.
The Custodian may accept but shall not be responsible for examining, determining
the meaning or effect of any item or document in a Mortgage File that is not one
of the documents listed in the definition of "Mortgage File" set forth in Annex
A, clauses (a) through (h). The Seller shall be solely responsible for providing
each and every document required for each Mortgage File to the Custodian in a
timely manner and for completing or correcting any missing, incomplete or
inconsistent documents, and the Custodian shall not be responsible or liable for
taking any such action, causing the Seller or any other Person or entity to do
so or notifying any Person (other than Buyer to the extent specifically required
in this Agreement) that any such action has or has not been taken.
(d) Upon issuance of a Collateral Receipt and purchase by Buyer of the
related Purchased Mortgage Loans, title to such Purchased Mortgage Loans passes
to Buyer, and Buyer has free and unrestricted use of all Purchased Mortgage
Loans, including the right to pledge, repledge, hypothecate and rehypothecate
all Purchased Mortgage Loans, in accordance with the Repurchase Agreement.
Section 5. Obligations of the Custodian; Certain Representations and Warranties.
(a) With respect to the Mortgage Files and other documents delivered to the
Custodian or which come into the possession of the Custodian, and for which the
Seller has been paid the Purchase Price, the Custodian is the custodian for
Buyer, exclusively. The Custodian shall hold such documents received by it for
the exclusive use and benefit of Buyer, and shall make disposition
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thereof only in accordance with this Agreement and the instructions furnished by
Buyer. The Custodian shall segregate and maintain continuous custody of the
Mortgage Files in secure and fireproof facilities in accordance with customary
standards for such custody. To the extent that the Custodian is unable to locate
or produce any document contained in the Mortgage File as required under this
Agreement, Custodian shall, upon the request of Buyer, replace such document at
its own cost and expense.
(b) The Custodian shall promptly notify the Buyer if (i) Seller fails to
pay any amount due to the Custodian under this Agreement or otherwise and such
failure results in acceleration by such party; (ii) the Custodian has actual
knowledge that any mortgage, pledge, lien, security interest or other charge or
encumbrance has been placed on the Mortgage Files other than in the ordinary
course of business; (iii) the representation, warranty and covenant contained in
Section 5(c) below were to become untrue or incorrect at any time during the
term of this Agreement, or (iv) Custodian has held any Mortgage Loan pursuant to
this Agreement for more than one hundred eighty (180) days.
(c) The Custodian hereby represents, warrants and covenants to the Buyer
that, as of the date hereof, it is not controlled by, under common control with
or otherwise affiliated with or related to Seller.
(d) The Custodian, the Buyer and the Seller each hereby represents and
warrants to each other party that this Agreement has been duly authorized,
executed and delivered by such party and constitutes the legal, valid and
binding obligation of such party enforceable in accordance with its terms.
Section 6. Substitution.
(a) Upon the Custodian's receipt of a Request for Release of Documents and
Receipt in the form of Exhibit 2 ("Request for Release") attached hereto that
has been acknowledged and agreed to in writing by Buyer, Custodian will
transfer, or cause to be transferred, Purchased Mortgage Loans to the Seller or
its designee in exchange for the simultaneous transfer by the Seller to the
Custodian of Mortgage Loans ("Substituted Collateral"). Seller must deliver or
cause to be delivered to Custodian, the Mortgage Files for the Substituted
Collateral together with a Custodial Delivery and Mortgage Loan Schedule.
(b) The Custodian shall deliver to Buyer, no later than one (1) Business
Day after such substitution by the Seller, an amended Mortgage Loan Schedule
with respect to the applicable Collateral Receipt with written notations that
reflect the delivery of the Substituted Collateral and the release of the
applicable Purchased Mortgage Loans.
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Section 7. Additional Collateral.
(a) The Seller may, from time to time, deliver to the Custodian additional
Mortgage Loans (the "Additional Collateral") as an addition to the Purchased
Mortgage Loans already held by the Custodian with respect to a Transaction. In
such event, the Seller shall deliver to the Custodian the Mortgage Files for the
Additional Collateral together with a Custodial Delivery, with a copy to Buyer,
stating that the Additional Collateral is being delivered with respect to an
identified Transaction.
(b) The Custodian shall deliver to Buyer, no later than one (1) Business
Day after receipt of such Additional Collateral, an amended Mortgage Loan
Schedule with written notation with respect to the applicable Collateral Receipt
that reflects the delivery of the Additional Collateral.
Section 8. Future Defects.
During the term of this Agreement, if the Custodian discovers any defect
with respect to the Mortgage Files, the Custodian shall give written
specification of such defect to the Seller and Buyer. For purposes of this
Section, "defect" shall mean a failure of a document to correspond to the
information set forth in the applicable Mortgage Loan Schedule or the absence of
a Mortgage File or any other document required pursuant to this Agreement. The
Seller shall be solely responsible for completing or correcting any missing,
incomplete or inconsistent documents. Nothing contained in this Section 8 shall
be construed to relieve the Custodian of its obligations to perform the review
required pursuant to Section 4 hereof or to maintain the Mortgage Files in
accordance with the requirements of Section 5 hereof.
Section 9. Release for Servicing.
(a) From time to time and as appropriate for the foreclosure or servicing
of any of the Purchased Mortgage Loans, the Custodian is hereby authorized, upon
receipt of a Request for Release with a copy to Buyer, to release or cause to be
released to the Seller or the Seller's subservicer the related Mortgage File or
the documents set forth in such Request for Release to the Seller or the
Seller's subservicer; provided, that any document released to Seller or Seller's
subservicer pursuant to a Request for Release shall be returned to Custodian
when the Seller's or Seller's subservicer's need thereof no longer exits, unless
such Mortgage Loan is liquidated or paid in full.
(b) All documents released by the Custodian to the Seller or the Seller's
subservicer pursuant to this Section 9 shall be held by the Seller or the
Seller's subservicer in trust for the benefit of Buyer. The Seller or the
Seller's subservicer shall return to the Custodian the Mortgage File or other
such documents when the need therefor in connection with such foreclosure or
servicing no longer exists, unless the Mortgage Loan shall be liquidated, in
which case, the Seller or the Seller's subservicer shall deliver to Custodian an
additional Request for Release that has been acknowledged and agreed by Buyer,
certifying such liquidation. Upon receipt of the related Mortgage File or other
such documents from the Seller or the Seller's subservicer, Custodian shall
return the related Request
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for Release to Seller or the Seller's subservicer, with a copy to Buyer,
acknowledging receipt of such Mortgage File or other such documents.
Section 10. Limitation on Release.
Notwithstanding the provisions of Section 9 hereof, the Custodian shall not
release to the Seller or the Seller's subservicer total active Mortgage Files or
documents (including those requested) pertaining to more than ten percent (10%)
of the Mortgage Loans at the time being held by the Custodian under this
Agreement without the prior written authorization of Buyer. The limitations of
this paragraph shall not apply to the release of Mortgage Files under Section 11
below or the release of Mortgage Files to the Seller or the Seller's subservicer
in connection with the payment in full of any Mortgage Loan.
Section 11. Release for Payment.
Buyer hereby authorizes Custodian to deliver some or all of the Mortgage
Files designated by Seller together with a Bailee Letter to a Takeout Investor
designated by Seller, with a copy of such Bailee Letter to Buyer. In connection
with each Bailee Letter delivered by Custodian pursuant to this Agreement,
Seller understands and agrees that (i) any Custodial File (as defined in the
Bailee Letter) delivered to the Takeout Investor, will be held by the Takeout
Investor as agent of Custodian, which holds each Custodial File as custodian and
agent of Buyer; (ii) Seller shall have no right to give any directions or
instructions to a Takeout Investor with respect to any Custodial File; and (iii)
Seller shall not, directly or indirectly, give any instructions or directions to
a Takeout Investor with respect to any Custodial File. In the event that
Mortgage Loans are purchased by a Takeout Investor, Seller shall complete and
deliver to Buyer a written notice, in the form of Exhibit 12 attached hereto.
Upon receipt of the Repurchase Price paid by the Takeover Investor, Buyer shall
execute such written notice and deliver it to the Custodian whereby such
Mortgage Files shall cease to be subject to this Agreement.
Section 12. Fees of Custodian.
The Custodian shall charge such fees for its services under this Agreement
as are set forth in a separate agreement between the Custodian and the Seller,
the payment of which fees, together with the Custodian's expenses in connection
herewith, shall be solely the obligation of the Seller.
Section 13. Removal of Custodian With Respect to Some or All of the Purchased
Loans.
(a) Buyer may from time to time remove and discharge the Custodian from the
performance of its duties under this Agreement with respect to some or all of
the Purchased Mortgage Loans upon written notice from Buyer to the Custodian,
with a copy to the Seller.
(b) In the event that Buyer removes and discharges the Custodian from the
performance of its duties under this Agreement with respect to all of the
Purchased Mortgage Loans, Buyer shall within sixty (60) days, by written
instrument (one original counterpart of which instrument shall be
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delivered to the Seller and an original to any successor custodian) (i) use
reasonable efforts to appoint a successor custodian to replace the Custodian
under this Agreement, provided that the Seller shall approve such successor
custodian and that any appointment of a successor custodian which is an
affiliate of the other party hereto shall be null and void, (ii) designate a
document custodian to receive the Mortgage Files with respect to the Purchased
Mortgage Loans removed from this Agreement, or (iii) take delivery of the
Mortgage Files with respect to the Purchased Mortgage Loans removed from this
Agreement; provided, that if no successor custodian is appointed within 60 days
after notice of removal and discharge is given, the Custodian shall transfer to
Buyer upon the expiration of such 60-day period the applicable Mortgage Files to
be held by Buyer until a successor custodian is appointed as provided in
subsection (i), above.
(c) In the event of any such removal and discharge with respect to some or
all of the Purchased Mortgage Loans, the Custodian shall promptly transfer to
the successor custodian, or Buyer, as the case may be, as directed in writing,
all affected Mortgage Files, and shall assign the affected Mortgages and endorse
without recourse the affected Mortgage Notes in its possession to the successor
custodian or as otherwise directed in writing by Buyer if the endorsements on
the Mortgage Notes and the Assignments of Mortgage have been completed in the
name of the Custodian. Notwithstanding the foregoing, this Agreement shall
remain in full force and effect with respect to any Purchased Mortgage Loans for
which this Agreement has not been terminated hereunder.
Section 14. Examination and Copies of Mortgage Files.
(a) Upon reasonable prior notice to the Custodian, the Seller, the Buyer
and their agents, accountants, attorneys, auditors and prospective purchasers
will be permitted during normal business hours to examine the Mortgage Files and
any other documents, records and papers in the possession of or under the
control of the Custodian relating to any or all of the Purchased Mortgage Loans
at such parties' own expense.
(b) Upon the request of the Seller or the Buyer and at the cost and expense
of the Seller, the Custodian shall provide the Seller or the Buyer, as the case
may be, with copies of the Mortgage Notes, Mortgages, Assignment of Mortgages
and other documents relating to one or more of the Mortgage Loans.
Section 15. Insurance of Custodian.
At its own expense, the Custodian shall maintain at all times during the
existence of this Agreement and keep in full force and effect a fidelity bond
and document hazard insurance naming Seller and Buyer, as their interests may
appear, as loss payees under such document hazard insurance. All such insurance
shall be in amounts, with standard coverage and subject to the lowest allowable
deductibles, all as is customary for insurance typically maintained by
institutions which act as custodian with insurance companies reasonably
acceptable to Buyer. The minimum coverage under any such bond and insurance
policies shall be at least equal to the corresponding amounts required by FNMA
in the FNMA Mortgaged-Backed Securities Selling Guide and the FNMA Servicing
Guide
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or by FHLMC in the FHLMC Seller's & Servicer's Guide. A certificate of an
authorized officer of the Custodian shall be furnished to the Seller, upon
request, stating that such insurance shall not terminate prior to receipt by the
Custodian, by registered mail, of thirty (30) days' prior written notice
thereof.
Section 16. Covenants of Seller.
Seller covenants to Buyer as of the date that any Mortgage File documents
are released to the Seller or the Seller's subservicer pursuant to a Request for
Release that:
(a) if item No. 1 has been checked on the Request for Release, all amounts
received in connection with the payment in full of the Purchased Mortgage Loan
have been credited to the Buyer as provided in the Repurchase Agreement;
(b) if item No. 2 has been checked on the Request for Release, the
Purchased Mortgage Loan is in foreclosure and upon receipt of all proceeds of
foreclosure, insurance. condemnation or other liquidation proceeds such will be
credited to the Buyer pursuant to the Repurchase Agreement;
(c) if item No. 3 has been checked on the Request for Release, a Custodial
Delivery has been delivered simultaneously therewith listing the Substituted
Collateral to be delivered in lieu of the Purchased Mortgage Loan; and
(d) if item No. 4 has been checked on the Request for Release, the
repurchase price for the applicable Purchased Mortgage Loan has been credited to
the Buyer as provided in the Repurchase Agreement.
Section 17. Periodic Statements.
Within ten (10) days of each anniversary of the date of this Agreement, or
upon the reasonable request of the Buyer or the Seller at any other time, the
Custodian shall provide to the Buyer or the Seller, as the case may be, a list
of all the Purchased Mortgage Loans for which the Custodian holds a Mortgage
File. Such list may be in the form of a copy of a Mortgage Loan Schedule, if
applicable, with manual deletions to specifically denote any Purchased Mortgage
Loans paid off, repurchased, substituted or added since the date of this
Agreement.
Section 18. Governing Law; Counterparts.
This Agreement shall be governed by the internal laws of the State of New
York, without giving effect to the conflict of laws principles thereof. For the
purpose of facilitating the execution of this Agreement as herein provided and
for other purposes, this Agreement may be executed simultaneously in any number
of counterparts, each of which counterparts shall be deemed to be an original,
and such counterparts shall constitute and be one and the same instrument.
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Section 19. No Adverse Interest of Custodian.
By execution of this Agreement, The First National Bank of Boston solely in
its capacity as Custodian represents and warrants that it currently holds, and
during the existence of this Agreement shall hold, no adverse interest, by way
of security or otherwise, in any Purchased Mortgage Loan, and hereby waives and
releases any such interest which it may have in any Purchased Mortgage Loan as
of the date hereof. The Purchased Mortgage Loans shall not be subject to any
security interest, lien or right of set-off by Custodian or any third party
claiming through Custodian (other than in the ordinary course of business), and
Custodian shall not pledge, encumber, hypothecate, transfer, dispose of, or
otherwise grant any third party interest in, the Purchased Mortgage Loans.
Section 20. Termination by Custodian.
After the expiration of the 60-day period commencing on the initial
Purchase Date, the Custodian may terminate its obligations under this Agreement
upon at least 60 days' notice to the Buyer and the Seller. The costs associated
with the termination of this Agreement by the Custodian, including all
reasonable costs associated with the transfer of the Mortgage Files, shall be
borne by the Custodian, provided that such costs shall not include any custodial
fees paid by the Seller to a successor custodian. In the event of such
termination, the Seller shall appoint a successor custodian, subject to the
approval of the Buyer, which consent shall not be unreasonably withheld. The
payment of such successor custodian's fees and expenses with respect to each
Purchased Mortgage Loan shall be solely the responsibility of the Seller. Upon
such appointment the Custodian shall (i) promptly transfer to the successor
custodian, as directed in writing, all Mortgage Files being administered under
this Agreement, and (ii) if the endorsements on the Mortgage Notes and the
Assignments of Mortgage have been completed in the name of the Custodian, assign
the Mortgages and endorse without recourse the Mortgage Notes to the successor
custodian or as otherwise directed by the Buyer in writing, provided, that if no
successor custodian is appointed within sixty (60) days after notice of
termination is given, the Custodian shall transfer to the Buyer upon the
expiration of such period all Mortgage Files then being administered under this
Agreement.
Section 21. Transfer of Purchased Mortgage Loans Upon Termination of a
Transaction.
If the Custodian is furnished with written notice in the form of Exhibit 8
attached hereto (i) from the Buyer and the Seller that a Transaction with
respect to the Repurchase Agreement has been terminated, or (ii) from the Buyer
that an Event of Default under the Repurchase Agreement has occurred as to any
or all of the Purchased Mortgage Loans, the Custodian shall release to such
Persons as designated in such notice, the Mortgage Files relating to the
Purchased Mortgage Loans that are no longer subject to the Transaction, and
shall deliver to Buyer an amended Collateral Receipt with a Mortgage Loan
Schedule attached thereto, listing all of the Purchased Mortgage Loans still
subject to a Transaction.
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Section 22. Notices.
All demands, notices and communications hereunder (including, without
limitation, Collateral Receipts) shall be in writing and shall be deemed to have
been duly given if mailed, by registered or certified mail, return receipt
requested, or, if by other means, including telex or other telecommunication
device capable of transmitting or creating a written record directly to the
office of the recipient, when received by the recipient party at the address
shown on the first page hereof, or at such other addresses as may hereafter be
furnished to the other parties by like notice. Any such demand, notice or
communication hereunder shall be deemed to have been received on the date
delivered to or received at the premises of the addressee (as evidenced, in the
case of registered or certified mail, by the date noted on the return receipt,
or in the case of telex or other telecommunication device, the date noted on the
confirmation of such transmission).
Section 23. Successors and Assigns.
This Agreement shall inure to the benefit of the successors and assigns of
the parties hereto. This Agreement shall not be assigned by the Seller, the
Buyer or the Custodian without the prior written consent of the other parties,
provided, however that Buyer may assign this Agreement to any affiliate of Buyer
without the prior written consent of any other party hereto.
Section 24. Concerning the Custodian.
(a) If the Custodian shall at any time receive conflicting instructions
from the Buyer and the Seller with respect to any of the Mortgage Files, the
Custodian shall be entitled to rely on the instructions of the Buyer. The
Custodian may consult with counsel nationally recognized in the area of
commercial repurchase transactions and reasonably acceptable to Buyer with
regard to legal questions arising out of or in connection with this Agreement,
and the advice or opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken, omitted or suffered
by the Custodian in reasonable reliance, in good faith, and in accordance
therewith; provided, however, if Buyer gives instruction to the Custodian or
(ii) provides an opinion of counsel selected by Buyer, then the Custodian shall
follow such instructions of Buyer or such opinion of counsel selected by Buyer,
and shall be fully protected in acting or refraining to act thereon. The payment
of the fees and expenses of counsel consulted in connection herewith shall be
solely the responsibility of the Custodian.
(b) Neither the Custodian nor any of its directors, officers, agents or
employees shall be liable for any action taken or omitted to be taken by it or
them hereunder or in connection herewith in good faith and believed by it or
them to be within the purview of this Agreement, except for its or their own
negligence, lack of good faith or willful misconduct.
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Section 25. Indemnification.
(a) Custodian hereby agrees to indemnify and hold Seller and Buyer, their
shareholders, directors, officers, employees, agents, successors and assigns,
harmless from and against any and all losses, claims, demands, causes of action,
or other legal proceedings, judgments, costs, liabilities and/or expenses,
including all reasonable attorney's fees incurred by Buyer and/or Seller and
caused by, resulting from or related to Custodian's negligence or willful
misconduct in performing its obligations hereunder, or a breach of any
representation or warranty by Custodian contained in this Agreement. Seller
hereby agrees, notwithstanding any transfer to an Assignee as permitted hereby,
to indemnify and hold Buyer, its shareholders, directors, officers, employees,
agents, successors and assigns, harmless from and against any and all losses,
claims, demands, causes of action, or other legal proceedings, judgments, costs,
liabilities and/or expenses, including all reasonable attorney's fees, incurred
by Buyer and caused by, resulting from or related to Seller's negligence in
performing its obligations hereunder.
(b) Seller hereby agrees, notwithstanding any transfer to an Assignee as
permitted hereby, to indemnify and hold Custodian, its shareholders, directors,
officers, employees, agents, successors and assigns, harmless from and against
any and all losses, claims, demands, causes of action, or other legal
proceedings, judgments, costs, liabilities and/or expenses, including all
reasonable attorney's fees (except for such losses, claims, demands, causes of
action, or other legal proceedings, judgments, costs, liabilities and/or
expenses including all reasonable attorney's fees caused by or related to
Custodian's negligence or willful misconduct).
(c) If any third party makes a claim for which any party indemnified under
the terms hereof ("Indemnified Party") intends to seek indemnity from any other
party hereto ("Indemnitor"), the Indemnified Party shall as soon as practicable
notify the Indemnitor of the details of such claim (each, an "Indemnified
Claim"). Without limitation on any of the foregoing, the failure to give notice
pursuant to this subsection will not constitute a waiver of the right to
indemnification. An Indemnified Party shall use reasonable efforts to defend or
settle an Indemnified Claim, and the Indemnified Party may make or accept an
offer of settlement for an Indemnified Claim for a reasonable sum after notice
to and consultation with the Indemnitor.
Section 26. Obligations of the Custodian With Respect to the Collateral
Receipts.
(a) Each Collateral Receipt, upon initial issuance or reissuance, shall be
dated the date of such issuance or reissuance and shall evidence the receipt and
possession by the Custodian on behalf of Buyer of the Collateral Receipt of the
Mortgage Files and Buyer's right to possess those Mortgage Files. The Custodian
shall treat Buyer as the person or entity entitled to possession of the Mortgage
Files evidenced by such Collateral Receipt for all purposes whatsoever, subject
to the terms of this Agreement, and the Custodian shall not be affected by
notice of any facts to the contrary. No Collateral Receipt shall be valid for
any purpose unless substantially in the form set forth in Exhibit 1 to this
Agreement and executed by manual signature of an authorized officer of the
Custodian. Such signature upon any Collateral Receipt shall be conclusive
evidence, and the only evidence, that such Collateral Receipt has been duly
delivered under this Agreement. Collateral Receipts bearing
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the manual signatures of individuals who were, at the time when such signatures
were affixed, authorized to sign on behalf of the Custodian shall bind the
Custodian, notwithstanding that such individuals have ceased to be so authorized
prior to the delivery of those Collateral Receipts. Each Collateral Receipt
shall have attached thereto a Mortgage Loan Schedule with respect to the
applicable Purchased Mortgage Loans.
(b) Upon issuance of a Collateral Receipt and purchase by Buyer of the
related Purchased Mortgage Loans, Buyer may assign its interest in the Mortgage
Files covered by any Collateral Receipt by assignment in the form of Exhibit 1
hereto to an assignee (the "Assignee") of such Collateral Receipt.
(c) In the event that (i) any mutilated Collateral Receipt is surrendered
to the Custodian, or the Custodian receives evidence to its satisfaction of the
destruction, loss or theft of any Collateral Receipt and (ii) there is delivered
to the Custodian such security or indemnity as may be required by it to save it
harmless, then, in the absence of notice to the Custodian that such Collateral
Receipt has been acquired by a bona fide purchaser, the Custodian shall execute
and deliver a new Collateral Receipt to Buyer in exchange for or in lieu of any
such mutilated, lost or stolen Collateral Receipt.
(d) Simultaneously with the relinquishment of a Collateral Receipt to the
Custodian by Buyer and the delivery by the Custodian of the related Mortgage
Files to the Seller or its designee pursuant to Section 3 above or to Buyer, the
Collateral Receipt shall be canceled and the related Mortgage Files will no
longer be subject to this Agreement.
Section 27. Obligations of Custodian Regarding Genuineness of Documents.
In the absence of bad faith on the part of the Custodian, the Custodian may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon any request, instructions, certificate, opinion
or other document or, to the extent permitted hereby, oral communication,
furnished to the Custodian, reasonably believed by the Custodian to be genuine
and to have been signed or presented or, to the extent permitted hereby, orally
communicated by the proper party or parties and conforming to the requirements
of this Agreement.
Section 28. Shipment of Documents.
Written instructions as to the method of shipment and shipper(s) that
Custodian is directed to utilize in connection with transmission of Mortgage
Files in the performance of the Custodian's duties hereunder shall be delivered
by the party authorized to give such instructions under this Agreement to
Custodian prior to any shipment of any Mortgage Files hereunder. Such party will
reimburse Custodian for all reasonable costs and expenses incurred by Custodian
consistent with such instructions and will maintain such insurance against loss
or damage to the Mortgage Files as the Buyer deems appropriate. Without limiting
the generality of the provisions of Section 24 above, it is expressly agreed
that in no event shall Custodian have any liability for any losses or damages to
any Person arising out of actions of Custodian taken strictly in accordance with
instructions of the Person authorized to give such instructions (including,
without limitation, losses or damages arising out of
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non-performance or faulty performance by a shipper), unless in performing such
instructions the Custodian's actions constitute negligence, lack of good faith
or willful misconduct on the part of the Custodian or any of its directors,
officers, agents or employees.
Section 29. Authorized Representatives.
Each individual designated as an authorized representative of the
Custodian, the Seller and the Buyer (each, an "Authorized Representative") is
authorized to give and receive notices, requests and instructions and to deliver
certificates and documents in connection with this Agreement on behalf of the
Custodian, the Seller and the Buyer, respectively, and the specimen signature
for each such Authorized Representative of the Custodian, the Seller and the
Buyer initially authorized hereunder is set forth on Exhibits 3, 4 and 5,
respectively. From time to time, Custodian, the Seller and the Buyer may, by
delivering to the others a revised exhibit, change the information previously
given pursuant to this Section, but each of the parties hereto shall be entitled
to rely conclusively on the then current exhibit until receipt of a superseding
exhibit.
Section 30. Reproduction of Documents.
This Agreement and all documents relating thereto, including, without
limitation, (i) consents, waivers and modifications which may hereafter be
executed, and (ii) certificates and other information previously or hereafter
furnished, may be reproduced by any photographic, photostatic, microfilm,
microcard, miniature photographic or other similar process. The parties agree
that any such reproduction shall be admissible in evidence as the original
itself in any judicial or administrative proceeding, whether or not the original
is in existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
Section 31. Confidentiality.
This Agreement and its terms and contents are proprietary to Buyer and
shall be held by Seller and Custodian in strict confidence and shall not be
disclosed to any third party without the consent of Buyer except for (i)
disclosure to attorneys or accountants, provided that such attorneys and
accountants likewise agree to be bound by this covenant of confidentiality or
(ii) disclosure as required by law, rule, regulation or order of a court or
other regulatory body.
Section 32. Entire Agreement.
No amendment or waiver of any provision of this Agreement nor consent to
any departure herefrom shall in any event be effective unless the same shall be
in writing and signed by all the parties hereto, and then such amendment, waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given. This Agreement, together with the Exhibits, Annexes and
other writings referred to herein or delivered pursuant hereto, constitute the
entire agreement and understanding of the parties with respect to the matters
and transactions contemplated by this
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Agreement and supersedes any prior agreement and understandings with respect to
those matters and transactions.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Buyer, the Seller and the Custodian have caused
their names to be duly signed hereto by their respective officers thereunto duly
authorized, all as of the date first above written.
NOMURA ASSET CAPITAL CORPORATION,
Buyer
By:______________________________
Name:____________________________
Title:___________________________
INDUSTRY MORTGAGE COMPANY, L.P.,
Seller
By:______________________________
Name:____________________________
Title:___________________________
THE FIRST NATIONAL BANK OF BOSTON,
Custodian
By:______________________________
Name:____________________________
Title:___________________________
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ANNEX A
ADDITIONAL DEFINITIONS
In addition to the Definitions set forth in Section 1, the following words
and phrases, unless the context otherwise requires, shall have the following
meaning:
Mortgage File: With respect to each Mortgage Loan, the following original
documents constituting an original mortgage file:
(a) the original Mortgage Note bearing all intervening endorsements or note
allonge, endorsed "Pay to the order of ___________, without recourse" and
signed in the name of the Seller by an authorized officer (in the event
that the Mortgage Loan was acquired in a merger, the signature must be in
the following form: "[owner], successor by merger to [name of
predecessor]"; in the event that the Mortgage Loan was acquired or
originated while doing business under another name, the signature must be
in the following form: "[owner], formerly known as [previous name]";
(b) the original of any guarantee executed in connection with the Mortgage
Note (if any);
(c) the original Mortgage with evidence of recording thereon or copies
certified by Seller or the recording agent to have been sent for
recording;
(d) the originals of all assumption, modification, consolidation or
extension agreements, with evidence of recording thereon, if any;
(e) the original Assignment of Mortgage in blank for each Mortgage Loan,
in form and substance acceptable for recording and signed in the name
of the Seller; in the event that the Mortgage Loan was acquired in a
merger, the signature must be in the following form: "[owner],
successor by merger to [name of predecessor]"; in the event that the
Mortgage Loan was acquired or originated while doing business under
another name, the signature must be in the following form: "[owner],
formerly known as [previous name]";
(f) the originals of all intervening assignments of mortgage that complete
the chain of ownership from the original owner to the Seller, with
evidence of recording thereon or copies certified by Seller to have
been sent for recording;
(g) the original of any security agreement, chattel mortgage or equivalent
document executed in connection with the Mortgage, if any; and
(h) the original power of attorney, if any, or a copy thereof certified by
an authorized officer of the Seller for any document described above.
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(i) the original fire and casualty insurance policy covering the mortgaged
property which is an amount at least equal to the outstanding
principal balance of the Mortgage Loan, as well as the original
insurance against flood hazards if the Mortgaged Property is an area
identified by the Federal Emergency Management Agency as having
special flood hazards, or copies thereof, certified by Seller to be
true and accurate;
(j) attorney's opinion of title and abstract of title or the original
mortgagee title insurance policy, or if the original mortgagee title
insurance policy has not been issued, a copy of the preliminary title
report, binder or commitment to insure certified by Seller to be true
and correct;
(k) the original of any security agreement, chattel mortgage or equivalent
document executed in connection with the Mortgage;
(l) with respect to FHA insured Mortgage Loans, the original FHA Insurance
Contract; provided however, if the original FHA Insurance Contract is
not available on the related Purchase Date, then within a reasonable
period of time after receipt by Seller;
(m) with respect to FHA insured Mortgage Loans, a completed HUD Form 92080
"Mortgage Record Change" with the purchasing mortgagee's name left
blank. Such form shall be completed and filed by the Servicer upon
instructions from the Seller;
(n) with respect to VA guaranteed Mortgage Loans, the original VA Loan
Guaranty Certificate;
(o) the original PMI Policy or certificate, if any; and
(p) either a Seller Release or a Warehouse Lender Release from any
Warehouse Lender having a security interest in a Mortgage Loan, as
appropriate.
From time to time, the Seller shall forward to the Custodian additional
original documents or additional documents evidencing an assumption,
modification, consolidation or extension of a Mortgage Loan.
With respect to any documents which have been delivered or are being
delivered to recording offices for recording and have not been returned to the
Seller in time to permit their delivery hereunder at the time of such transfer,
in lieu of delivering such original documents, Seller shall deliver to Custodian
a true copy thereof with a certification by the Seller on the face of such copy
substantially as follows: "I [name and title of signatory] of [Seller] do hereby
certify that this is a true, correct and complete copy of the original, which
has been transmitted for recordation." The Seller shall deliver such original
documents to the Custodian promptly after they are received.
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EXHIBIT 1
FORM OF COLLATERAL RECEIPT
[To be addressed to Buyer]
Re: The Custodial Agreement, dated as of December __, 1995 (the
"Custodial Agreement"), among Nomura Asset Capital Corporation
("Buyer"), Industry Mortgage Company, L.P. ("Seller") and The
First National Bank of Boston ("Custodian")
Ladies and Gentlemen:
The Custodian hereby acknowledges that the above named addressee has been
identified to Custodian as the holder of this Collateral Receipt and has the
rights under the Custodial Agreement with respect to the Purchased Mortgage
Loans identified in the Mortgage Loan Schedule attached hereto. Pursuant to the
Custodial Agreement, the Custodian shall hold the Purchased Mortgage Loans,
identified in the Mortgage Loan Schedule attached hereto for the exclusive
benefit of the above addressee, which were delivered to the Custodian for
purchase by Buyer from Seller on the Purchase Date of
_______________________________.
In accordance with the provisions of Section 4 of the Custodial Agreement,
the undersigned, as the Custodian, hereby certifies that as to each Purchased
Mortgage Loan identified in the Mortgage Loan Schedule attached hereto (other
than any Mortgage Loan paid in full or any Mortgage Loan listed on the
attachment hereto) it has received the Mortgage Files and, it has reviewed the
Mortgage Files and has determined that, except as noted (i) all documents in
paragraphs (a), (c), (e), (i), (j) and, to the extent required to be in the
Mortgage Files, (b), (d), (f), (g), (h), (k), (l), (m), (n), (o) and (p) of the
definition of "Mortgage File" are in its possession, except as set forth on a
schedule of exceptions attached to this Collateral Receipt; (ii) all documents
in paragraphs (a), (c), (e), (i) and (j) have been reviewed by it and appear
regular on their face and relate to such Mortgage Loan and neither the Mortgage
Note, the Mortgage nor the Assignment of Mortgage contains any notations on
their face which in the good faith judgment of the Custodian appears to evidence
any claims, liens, security interests, encumbrances or restrictions on transfer;
(iii) based on its examination and only as to the foregoing documents, the
information set forth in the Mortgage Loan Schedule respecting such Mortgage
Loan accurately reflects the information contained in the documents in the
Mortgage File as to (A) the name of the mortgagor, (B) the address of the
Mortgaged Property, (C) the interest rate on the Mortgage Note, (D) the original
principal amount of the Mortgage Note, and (E) the maturity date of the Mortgage
Note; (iv) the Mortgage Note and the Mortgage each bears an original signature
or signatures purporting to be the signature or signatures of the person or
persons named as the maker and mortgagor or grantor or, in the case of certified
copies of the Mortgage, that such copies bear a reproduction of such signature
or signatures; (v) the original principal amount of the indebtedness secured by
the Mortgage is identical to the original principal amount of the Mortgage Note
and is no greater than the amount of insurance set forth in paragraphs (i) and
(j) of the definition of Mortgage File; (vi) if the Mortgage Note does not name
"Seller" as the holder or payee, the
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Mortgage Note bears all intervening original endorsements that complete the
chain of ownership from the original holder or payee to the Last Endorsee; (vii)
if the Mortgage does not name "Seller" as the mortgagee or beneficiary, the
original of the Assignment of Mortgage from the named mortgagee or beneficiary
bears the original signature purporting to be the signature of the named
mortgagee or beneficiary (and any other necessary party including subsequent
assignors) or in the case of certified copies, that such copies bear a
reproduction of such signature or signatures and that the Assignment of Mortgage
and any intervening assignments of mortgage complete the chain of title from the
originator to the Last Endorsee; and (viii) each Mortgage Note in its possession
has been endorsed as provided in the definition of "Mortgage File"; and (ix)
each Assignment of Mortgage has been executed as provided in the definition of
"Mortgage File". The Custodian makes no representations as to (i) the value,
form, substance, validity, perfection, priority, recordability, genuineness,
effectiveness or enforceability of any of the Purchased Mortgage Loans
identified on the Mortgage Loan Schedule, or (ii) the collectability,
insurability, effectiveness or suitability of any such Purchased Mortgage Loan.
Capitalized terms used but not otherwise defined herein shall have the
meanings set forth in the above-referenced Custodial Agreement.
THE FIRST NATIONAL BANK OF BOSTON,
Custodian
By:_____________________________
Name:___________________________
Title:__________________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee.)
the interests evidenced by the within Collateral Receipt.
Dated:
_______________________________________________________
Signature by or on behalf of assignor
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EXHIBIT 1-A
FORM OF INITIAL COLLATERAL RECEIPT
(date)
[To be addressed to Buyer]
Re: The Custodial Agreement, dated as of December ___, 1995 (the
"Custodial Agreement"), among Nomura Asset Capital Corporation
("Buyer"), Industry Mortgage Company, L.P. ("Seller"), and The
First National Bank of Boston ("Custodian")
Ladies and Gentlemen:
The Custodian hereby acknowledges that the above named addressee has been
identified to Custodian as the Holder of this Collateral Receipt and has the
rights under the Custodial Agreement with respect to the Wet Ink Mortgage Loans
identified in the Wet Funding Notice and Mortgage Loan Schedule attached hereto.
In accordance with the provisions of Section 4(b) of the Custodial
Agreement, the undersigned, as the Custodian, hereby certifies that as to each
Wet Ink Mortgage Loan identified in the Wet Funding Notice and Mortgage Loan
Schedule attached hereto it has received an executed Escrow Letter from the
Settlement Agent named therein, whereby the Settlement Agent has acknowledged
that, except as noted, (i) all documents in paragraphs (a), (c), (e), (i), (j)
of the definition of "Mortgage File" are in its possession and do not contain
any notations on their face which evidence any claims, liens, security
interests, encumbrances or restrictions on transfer; (ii) based on its
examination and only as to the foregoing documents, the information set forth in
the Mortgage Loan Schedule respecting such Mortgage Loan accurately reflects the
information contained in the documents in the Mortgage File as to (A) the name
of the mortgagor, (B) the address of the Mortgaged Property, (C) the interest
rate on the Mortgage Note, (D) the original principal amount of the Mortgage
Note, and (E) the maturity date of the Mortgage Note; (iii) the Mortgage Note
and the Mortgage each bears an original signature or signatures of the person or
persons named as the maker and mortgagor or grantor; and (iv) the original
principal amount of the indebtedness secured by the Mortgage is identical to the
original principal amount of the Mortgage Note and is no greater than the amount
of insurance set forth in paragraphs (i) and (j) of the definition of Mortgage
File. The Custodian makes no representations as to (i) the value, form,
substance, validity, perfection, priority, recordability, genuineness,
effectiveness or enforceability of any of the Purchased Mortgage Loans
identified on the Mortgage Loan Schedule, or (ii) the collectability,
insurability, effectiveness or suitability of any such Purchased Mortgage Loan.
Upon receipt of the mortgage loan documents set forth above, Custodian
shall review such documents in accordance with the terms of the Custodial
Agreement and shall promptly deliver to Buyer a final Collateral Receipt
pursuant to Section 4(a) of the Custodial Agreement. Custodian shall
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notify Buyer if it does not receive the mortgage loan documents set forth above
within three Business Days from the date of the Escrow Letter.
Capitalized terms used but not otherwise defined herein shall have the
meanings set forth in the above-referenced Custodial Agreement.
THE FIRST NATIONAL BANK OF BOSTON,
Custodian
By:________________________________
Name:______________________________
Title:_____________________________
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EXHIBIT 2
FORM OF REQUEST FOR RELEASE OF DOCUMENTS AND RECEIPTS
To: THE FIRST NATIONAL BANK OF BOSTON
Re: The Custodial Agreement, dated as of December ___, 1995 (the "Custodial
Agreement"), among Nomura Asset Capital Corporation ("Buyer"), Industry
Mortgage Company, L.P. ("Seller"), and The First National Bank of Boston
("Custodian")
In connection with the administration of the Purchased Mortgage Loans held
by you as the Custodian on behalf of Buyer, we request the release, and
acknowledge receipt, of the (Mortgage File/[specify documents]) for the
Purchased Mortgage Loan described below, for the reason indicated.
Mortgagor's Name, Address & Zip Code:
Mortgage Loan Number:
Reason for Requesting Documents (check one)
___1. Purchased Mortgage Loan Paid in Full. (The Custodian shall
delete the Purchased Mortgage Loan from the applicable
Mortgage Loan Schedule and send the amended Mortgage Loan
Schedule to Buyer.)
___2. Mortgage Loan in Foreclosure or otherwise released for
servicing.
___3. Delivery of Substituted Collateral pursuant to Section 6 of
the Custodial Agreement. (The Custodian is hereby authorized
to delete the Purchased Mortgage Loan from the applicable
Mortgage Loan Schedule attached hereto and send the amended
Mortgage Loan Schedule to Buyer.)
___4. Repurchase of Purchased Mortgage Loan due to a breach of a
Representation under the Repurchase Agreement. (The Custodian
is hereby authorized to delete Purchased Mortgage Loan from
the applicable Mortgage Loan Schedule attached hereto and send
the amended Mortgage Loan Schedule to Buyer.)
___5. Other (explain).
If box 1, 3 or 4 above is checked, and if all or part of the Mortgage Files
were previously released to us, please release to us our previous request and
receipt on file with you, as well as any additional documents in your possession
relating to the specified Purchased Mortgage Loan.
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If box 2 or 5 above is checked, upon our return of all of the above
documents to you as the Custodian please acknowledge your receipt by signing in
the space indicated below, and returning this form.
The Seller understands and agrees that all documents delivered to Seller or
Seller's subservicer pursuant to this Request for Release (other than with
respect to Items 1, 3 or 4) shall be returned to the Custodian no later than
twenty-one (21) days from the date hereof. Capitalized terms used and not
otherwise defined herein shall have the meanings set forth in the Custodial
Agreement.
INDUSTRY MORTGAGE COMPANY, L.P.,
Seller
By:______________________________
Name:____________________________
Title:___________________________
Acknowledged and Agreed:
NOMURA ASSET CAPITAL CORPORATION,
Buyer
(Required if documentation relating to more than three (3) Mortgage Files are
outstanding or the release of a Mortgage Note or Assignment of Mortgage is
requested.)
By:______________________________
Name:____________________________
Title:___________________________
Acknowledgment of Documents returned to the Custodian, for the reasons listed in
Items 2 or 5, as applicable:
THE FIRST NATIONAL BANK OF BOSTON,
Custodian
By:______________________________
Name:____________________________
Title:___________________________
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EXHIBIT 3
AUTHORIZED REPRESENTATIVES OF THE CUSTODIAN
Name/Title: Specimen Signature:
- ----------- -------------------
______________________________ __________________________________
______________________________ __________________________________
______________________________ __________________________________
______________________________ __________________________________
______________________________ __________________________________
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EXHIBIT 4
AUTHORIZED REPRESENTATIVES OF THE SELLER
Name/Title: Specimen Signature:
- ----------- -------------------
______________________________ __________________________________
______________________________ __________________________________
______________________________ __________________________________
______________________________ __________________________________
______________________________ __________________________________
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EXHIBIT 5
AUTHORIZED REPRESENTATIVES OF THE BUYER
Name/Title: Specimen Signature:
- ----------- -------------------
______________________________ __________________________________
______________________________ __________________________________
______________________________ __________________________________
______________________________ __________________________________
______________________________ __________________________________
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EXHIBIT 6
Mortgage Loan Schedule
Original Outstanding
Property Note Loan Principal
Loan ID Name Address Rate Amount Amount Maturity ARM/Fixed
ARM Loans LTV or Lien 1st Due
Type Type CLTV Position Date
Next Rate
Change P&I Takeout Takeout Settlement Funding
PDTHUDT Date constant Price Investor Agent Date
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EXHIBIT 7
Form of Custodial Delivery
On this ________ day of ____________, 19___, Industry Mortgage Company,
L.P. (the "Seller"), as the Seller under that certain Master Repurchase
Agreement Governing Purchases and Sales of Mortgage Loans, dated as of December
___, 1995 (the "Repurchase Agreement") between the Seller and Nomura Asset
Capital Corporation (the "Buyer"), does hereby deliver to The First National
Bank of Boston ("Custodian"), as custodian under that certain Custodial
Agreement, dated as of December ___, 1995 among Buyer, Seller and Custodian, the
Mortgage Files with respect to the Mortgage Loans to be purchased by the Buyer
on ________ pursuant to the Repurchase Agreement, which Mortgage Loans are
listed on the Mortgage Loan Schedule attached hereto and which Mortgage Loans
shall be subject to the terms of the Custodial Agreement on the date hereof.
With respect to the Mortgage Files delivered hereby, for the purposes of
issuing the Collateral Receipt, the Custodian shall review the Mortgage Files to
ascertain delivery of the documents listed in Annex A attached to the Custodial
Agreement. Please review the Mortgage Files in accordance with the standards set
forth in the Custodial Agreement and deliver to Buyer (with a copy to Seller) a
Collateral Receipt promptly upon completion of your review.
Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Custodial Agreement.
IN WITNESS WHEREOF, the Seller has caused its name to be signed hereto by
its officer thereunto duly authorized as of the day and year first above
written.
INDUSTRY MORTGAGE COMPANY, L.P.
By:_______________________________
Name:_____________________________
Title:____________________________
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EXHIBIT 7-A
Form of Wet Funding Notice
On this ________ day of ____________, 19___, Industry Mortgage Company,
L.P. (the "Seller"), as the Seller under that certain Master Repurchase
Agreement Governing Purchases and Sales of Mortgage Loans, dated as of December
___, 1995 (the "Repurchase Agreement") between the Seller and Nomura Asset
Capital Corporation (the "Buyer"), does hereby deliver to The First National
Bank of Boston ("Custodian"), as custodian under that certain Custodial
Agreement, dated as of December ___, 1995 among Buyer, Seller and Custodian (the
"Custodial Agreement"), a schedule of the Wet Ink Mortgage Loans to be purchased
by the Buyer on ________ pursuant to the Repurchase Agreement, which Wet Ink
Mortgage Loans are listed on the Mortgage Loan Schedule attached hereto and
which Wet Ink Mortgage Loans shall be subject to the terms of the Custodial
Agreement on the date hereof.
With respect to the Escrow Letter delivered by the Settlement Agent, for
the purposes of issuing the Initial Collateral Receipt, the Custodian shall
review the Mortgage Loan Schedule attached to the Escrow Letter to ascertain
delivery to the Settlement Agent of the documents listed in Annex A attached to
the Custodial Agreement. Please review the Escrow Letter in accordance with the
standards set forth in the Custodial Agreement and deliver to Buyer (with a copy
to Seller), an Initial Collateral Receipt promptly upon completion of your
review. We shall cause the Settlement Agent to deliver the Mortgage Files to you
within three business days of the date of Buyer's purchase of the Wet Ink
Mortgage Loans. Upon receipt of the Wet Ink Mortgage Loans, you shall review the
Mortgage Files in accordance with the standards set forth in the Custodial
Agreement and deliver to Buyer (with a copy to Seller) a Collateral Receipt
promptly upon completion of your review. You shall notify Buyer if you do not
receive the Mortgage Files within three business days of the Buyer's purchase of
the Wet Ink Mortgage Loans.
Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Custodial Agreement.
IN WITNESS WHEREOF, the Seller has caused its name to be signed hereto by
its officer thereunto duly authorized as of the day and year first above
written.
INDUSTRY MORTGAGE COMPANY, L.P.
By:_______________________________
Name:_____________________________
Title:____________________________
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EXHIBIT 7-B
Mortgage Loan Schedule to Wet Funding Notice
Original Outstanding
Property Note Loan Principal
Loan ID Name Address Rate Amount Amount Maturity ARM/Fixed
ARM Loans LTV or Lien 1st Due
Type Type CLTV Position Date
Next Rate
Change P&I Takeout Takeout Settlement Funding
PDTHUDT Date constant Price Investor Agent Date
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EXHIBIT 8
FORM OF NOTICE TO THE CUSTODIAN
To: THE FIRST NATIONAL BANK OF BOSTON
From:
Date:
You are hereby notified that as of [date] [________ Transaction under the
Repurchase Agreement has been terminated by ________. The Purchased Mortgage
Loans with respect to such Transaction are identified in the schedule attached
hereto] [the undersigned has declared an Event of Default under the Repurchase
Agreement]. You are hereby instructed to [hold such Purchased Mortgage Loans
pursuant to the terms of the Custodial Agreement, dated as of December ___, 1995
among Nomura Asset Capital Corporation, Industry Mortgage Company, L.P. and The
First National Bank of Boston (the "Custodial Agreement"), for the sole and
exclusive benefit of [name of transferee] subject to the terms of the Custodial
Agreement by which [name of transferee] hereby agrees to be bound] [deliver such
Purchased Mortgage Loans to [name] at [address]].
[_____________________________]
By:_______________________________
Name:_____________________________
Title:____________________________
Dated:____________________________
Agreed and Acknowledged:
THE FIRST NATIONAL BANK OF BOSTON,
Custodian
By:_______________________________
Name:_____________________________
Title:____________________________
Dated:____________________________
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EXHIBIT 9
FORM OF BAILEE LETTER
Date:_______________
[addressee]
Ladies and Gentlemen:
At the request of Industry Mortgage Company, L.P. (the "Seller"), Nomura Asset
Capital Corporation (the "Buyer") has caused The First National Bank of Boston
(the "Custodian"), as custodian of the mortgage loan documents pertaining to the
mortgage loans described on the attached schedule (the "Mortgage Loans") for the
benefit of the Buyer, to enclose herewith the original promissory notes in the
aggregate original principal amount set forth in the attached schedule
("Mortgage Notes") evidencing the Mortgage Loans, along with other documents
comprising the related files (the "Custodial Files"), for inspection by
________________ (the "Takeout Investor") prior to purchase pursuant to a
commitment ("Commitment") to purchase such Mortgage Loans from the Seller for an
amount at least equal to the release amounts set forth in the attached schedule.
A 100% ownership interest in the Mortgage Loans and proceeds thereof has been
conveyed to the Buyer in accordance with that certain Master Repurchase
Agreement Governing Purchases and Sales of Mortgage Loans (the "Agreement"),
dated as of December ___, 1995 between Seller and the Buyer.
The Custodial Files now delivered to the Takeout Investor are to be held by the
Takeout Investor, as agent of Custodian (which holds the Custodial Files as a
custodian, bailee and agent for the benefit of the Buyer) and subject only to
the Buyer's direction and control until released as provided herein. Proceeds of
the Mortgage Loans accepted for purchase must be remitted immediately, by wire
transfer, upon settlement by the Takeout Investor, to the Buyer, in immediately
available funds to: Mellon Bank, Account No. 109-2525, Acct. Name: NACC; ABA
043000261; Attn: John Lavanco; Re: *SELLER*. The Takeout Investor shall be
responsible for making certain that all of the proceeds from the sale of the
Mortgage Loans are received in accordance with the wire transfer instructions
set forth above.
The Buyer has no obligation to release its ownership interest in the Mortgage
Loans unless the Buyer receives the release amounts set forth in the attached
schedule. Upon the Buyer's receipt of such amounts, its ownership interest in
the related Mortgage Loans shall terminate without further action.
The Custodial Files together with all other related Mortgage Loan papers,
documents and records held by the Takeout Investor which have been received by
the Takeout Investor from either Custodian or Seller (the Custodial Files,
together with such other papers, documents and records being hereinafter
referred to as, the "Document Files") with respect to any Mortgage Loan that is
not purchased must be returned immediately to Custodian at the address listed
below. The Buyer
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reserves the right at any time, until the Mortgage Loans have been purchased by
the Takeout Investor, to demand the return of the related Document Files to
Custodian, and the Takeout Investor agrees to return to Custodian such Document
Files if the Mortgage Loans are not purchased by the Takeout Investor
immediately upon such demand by the Buyer. Notwithstanding the foregoing, the
Takeout Investor shall return unpurchased Mortgage Loans to the Custodian no
later than fourteen days after receipt thereof.
The undersigned Custodian executes this Bailee Letter solely for purposes of
appointing the Takeout Investor its agent to hold the Custodial Files enclosed
herewith in accordance with the terms of this Bailee Letter.
NOTE: BY ACCEPTING THE MORTGAGE LOANS DELIVERED HEREBY TO YOU WITH THIS LETTER,
YOU CONSENT TO BE THE CUSTODIAN, AGENT AND BAILEE FOR THE CUSTODIAN ON BEHALF OF
THE BUYER ON THE TERMS DESCRIBED IN THIS LETTER. THE UNDERSIGNED REQUESTS THAT
YOU ACKNOWLEDGE RECEIPT OF THE ENCLOSED MORTGAGE LOANS AND THIS LETTER BY
SIGNING AND RETURNING THE ENCLOSED COPY OF THIS LETTER TO THE UNDERSIGNED AT THE
ADDRESS BELOW; HOWEVER, YOUR FAILURE TO DO SO DOES NOT NULLIFY SUCH CONSENT.
THE FIRST NATIONAL BANK OF BOSTON,
Custodian
By:_______________________________
Name:_____________________________
Title:____________________________
Dated:____________________________
Address for Redelivery of Document File:
ACKNOWLEDGMENT OF RECEIPT
[addressee]
By:_______________________________
Name:_____________________________
Title:____________________________
Dated:____________________________
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EXHIBIT 10
FORM OF SELLER RELEASE
Nomura Asset Capital Corporation
2 World Financial Center
Building B
New York, New York 10281
Facsimile No.: (212) 667-1044
Attention:
Re: Master Repurchase Agreement Governing Purchases and Sales of
Mortgage Loans, dated as of December ___, 1995 ("Agreement"),
between Nomura Asset Capital Corporation ("Buyer") and Industry
Mortgage Company, L.P. ("Seller")
Dear Ladies and Gentlemen:
In connection with a transaction under the above-referenced Agreement, the
undersigned hereby confirms its release of all of its right, title and interest
to, including any security interest in or lien on the mortgage loans referenced
in the attached schedule ("Scheduled Mortgage Loans"), such release to be
effective automatically without any further action by any party, upon payment by
or on behalf of Buyer to Seller of the Purchase Price for the related
Transaction. Until such payment, the Scheduled Mortgage Loans and all related
Mortgage Files are to be held by you as bailee for Seller and, in the event that
payment of the Purchase Price for the related Transaction is not made, returned
to Seller or its designee upon written request therefor from Seller. We further
confirm that there is no Warehouse Lender with respect to such mortgage loans.
Capitalized terms used herein but not defined herein shall have the
respective meanings set forth in the Agreement.
Very truly yours,
INDUSTRY MORTGAGE COMPANY, L.P.
By:_______________________________
Name:_____________________________
Title:____________________________
Date:____________________________
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EXHIBIT 11
FORM OF WAREHOUSE LENDER'S RELEASE LETTER
(Date)
Nomura Asset Capital Corporation
2 World Financial Center
Building B, 21st Floor
New York, New York 10281-1198
Attention:
Facsimile No.: (212) 667-1391
Re: Master Repurchase Agreement Governing Purchases and Sales of
Mortgage Loans, dated as of December ___, 1995 ("Agreement"),
between Nomura Asset Capital Corporation ("Buyer") and Industry
Mortgage Company, L.P. ("Seller")
Mortgage Loans ____________________
The undersigned [as credit or collateral agent on behalf of ] hereby
releases all right, interest, lien or claim of any kind with respect to the
mortgage loans referenced above ("Scheduled Mortgage Loans"), as may be further
described in the attached schedule, such release to be effective automatically
without any further action by any party upon payment for the account of Seller
of $____________ in immediately available funds to account number __________ at
(Bank) for the account of Seller. Until such payment, the Scheduled Mortgage
Loans and all related Mortgage Files are to be held by you as bailee for the
undersigned and, in the event that payment of the Purchase Price for the related
Transaction is not made, returned to the undersigned or its designee upon
written request therefor from the undersigned.
Very truly yours,
[WAREHOUSE LENDER] [CREDIT OR
COLLATERAL AGENT]
By:_____________________________________
Name:___________________________________
Title:__________________________________
Copy to:
INDUSTRY MORTGAGE COMPANY, L.P.
Note: The above dollar amount should be EQUAL TO or LESS THAN the Purchase
Price.
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EXHIBIT 12
FORM OF NOTICE OF PAYMENT
Today's Date:____________________
To: THE FIRST NATIONAL BANK OF BOSTON
Re: Notice of Purchased or Repurchased Mortgage Loans in accordance with
Custodial Agreement dated as of December ___, 1995 (the "Agreement") among
Industry Mortgage Company, L.P. ("Seller"), Nomura Asset Capital
Corporation ("Buyer") and The First National Bank of Boston ("Custodian")
___ Notice to Custodian of receipt of the Repurchase Price for Purchased
Mortgage Loans in the amount of $_______________ on _______________ (the
"Repurchase Date"). The Purchased Mortgage Loans and Mortgage Loan
documents related thereto to be released are specified on the attached
listing to this Notice. Custodian is hereby instructed to release such
Purchased Mortgage Loans and Mortgage Loan documents to Seller or its
designee on the above-referenced Repurchase Date.
___ Notice to Custodian of receipt of the purchase price for Purchased Mortgage
Loans in the amount of $_______________ on _______________ (the "Takeout
Date"). The Purchased Mortgage Loans and Mortgage Loan documents related
thereto to be released are specified on the attached listing to this
Notice. Custodian is hereby instructed to release such Purchased Mortgage
Loans and Mortgage Loan documents on the above-referenced Takeout Date.
Capitalized terms used herein but not defined herein shall have the
respective meanings set forth in the Agreement.
NOMURA ASSET CAPITAL CORPORATION
By:_______________________________
Title:____________________________
Acknowledgment:
Notice received on , 199__.
THE FIRST NATIONAL BANK OF BOSTON
By:________________________________
Title:_____________________________
40
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SCHEDULE TO NOTICE
Listing of Purchased Mortgage Loans
41
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EXHIBIT 13
ESCROW LETTER
[Seller's Letterhead]
[Date]
[Name and Address of Settlement Agent]
Attention _______________
Re: [Name of Mortgagor]
[Mortgage Loan No.]
Dear _______________:
This letter shall constitute the escrow instructions for the closing of the
above-referenced loan ("Loan") to be made by Industry Mortgage Company, L.P.
("Lender") to [Name of Borrower] ("Borrower") with funds thereof provided by
Nomura Asset Capital Corporation ("NACC"). You are hereby notified that upon
closing, the Loan will be subject to a first security interest of NACC pursuant
to that certain Master Repurchase Agreement Governing Purchases and Sales of
Mortgage Loans dated as of December _, 1995 between NACC and Lender.
A. You shall have in your possession with respect to each Loan:
1. the original Mortgage Note given by Borrower to Lender in the
amount set forth on the Mortgage Loan Schedule attached hereto;
2. the original Mortgage given by Borrower to Lender and in form ready
to be sent for recording;
3. the original Assignment of Mortgage in blank from Lender, with
assignee in blank, in form and substance acceptable for recording;
4. the original fire and casualty insurance policy covering the
Mortgaged Property as well as the original insurance against flood
hazards if the Mortgaged Property is an area identified by the Federal
Emergency Management Agency as having special flood hazards:
5. an appraisal of the related Mortgaged Property signed prior to the
approval of the Mortgage Loan application by a qualified appraiser,
duly appointed by the originator of the Mortgage Loan; and
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6. an attorney's opinion of title and abstract of title or the
original mortgagee title insurance policy, or if the original
mortgagee title insurance policy has not been issued, a copy of the
preliminary title report, binder or commitment to insure certified by
Seller to be true and correct, any of which shall contain no material
exceptions.
B. On or before the closing date of the Loan, you shall send an executed
copy of this letter, via telecopier, to The First National Bank of Boston (the
"Custodian"), Attn: _______________, which shall acknowledge that (i) you have
received all of the documents referred to in paragraph A above and they do not
contain any notations on their face which evidence any claims, liens, security
interests, encumbrances or restrictions on transfer, (ii) all such documents
have been properly executed and witnessed and the Mortgage Note and the Mortgage
each bears an original signature or signatures of the person or persons named as
the maker and mortgagor or grantor; (iii) the mortgage note, mortgage and
assignments of mortgage are in proper recordable form; (iv) the information set
forth on the attached mortgage loan schedule accurately reflects (A) the name of
the mortgagor, (B) the address of the Mortgaged Property, (C) the interest rate
on the Mortgage Note, (D) the original principal amount of the Mortgage Note,
and (E) the maturity date of the Mortgage Note and (v) the original principal
amount of the indebtedness secured by the Mortgage is identical to the original
principal amount of the Mortgage Note and is no greater than the amount of
insurance set forth in paragraphs A4 and A6 above. Upon receipt of this letter
executed by you, Custodian will wire transfer the amount of $_______________
(the "Loan Proceeds") to your account (the "Escrow Account").
C. Upon satisfaction of all the above requirements and upon instructions
from the Custodian by telephone that all other requirements have been satisfied,
you shall disburse the Loan Proceeds in accordance with the settlement statement
attached hereto. Upon the disbursement of the Loan Proceeds and prior to the
delivery of the documents to the Custodian, all of the documents listed in
paragraph A above shall be held subject to the first priority security interest
of NACC.
D. All costs and expenses incurred in carrying out these instructions shall
be borne by Borrower, and you shall not look to any other party for
reimbursement of, or liability for, such costs and expenses. In this connection,
you shall have obtained whatever assurances you deem necessary from the
appropriate parties to firmly bind yourself to fully and completely carry out
these escrow instructions.
E. If for any reason the Loan Proceeds are funded by NACC and are not
disbursed by you pursuant to these instructions within twenty-four hours of the
scheduled closing date, you shall immediately return such funds via federal
funds wire to Mellon Bank; Account No. 109-2525; Acct. Name: NACC; ABA
043000261; Attn: John Lavanco; Re: Industry Mortgage Company. If the closing of
the Loan is delayed, and such delay is acceptable to NACC, it is understood by
the Lender that interest shall accrue on the principal amount wired to the
Escrow Account, at the interest rate specified in the note secured by the
Mortgage, from
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the time such amount is received in the Escrow Account and Lender shall be
liable for all such accrued interest.
Sincerely,
INDUSTRY MORTGAGE COMPANY, L.P.
By:__________________________________
ACCEPTED AND AGREED TO
[Settlement Agent]
By:__________________________________
THE FIRST NATIONAL BANK OF BOSTON
By:__________________________________
44
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ADDENDUM TO ESCROW INSTRUCTIONS
Dated: __________, 199
Escrow #/Name: ________________
Re: INDUSTRY MORTGAGE COMPANY, L.P.
The funds to be used for closing this transaction may be provided via wire
transfer from The First National Bank of Boston ("Custodian") on behalf of
Nomura Asset Capital Corporation ("Nomura").
You are to hold the closing funds in trust for the Custodian for the
benefit of Nomura until such time as the funds are disbursed in accordance with
the escrow instructions. If the lien is not funded within two (2) business days
of receipt of the funds, you are to return such funds via federal funds wire to
Nomura as follows: Mellon Bank, Account No. 109-2525, Acct. Name: NACC; ABA
043000261; Attn: John Lavanco; Re: Industry Mortgage Company.
Upon your receipt of the funds, you are to accept instructions regarding
the use of the funds that are in conflict with the escrow instructions only in
writing from The First National Bank of Boston as directed by Nomura. Upon the
funding of the loan, all documents related thereto, including the mortgage note,
shall be subject to the security interest of Nomura.
This Addendum to Escrow Instructions shall be irrevocable and can only be
modified with the express approval of Nomura.
Agreed and Acknowledged:
Name of Title Company/Closing Agent: ___________________________________
Name of Escrow Officer: ___________________________________
Signature: ___________________________________
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EXHIBIT 14
FORM OF NOTICE OF PURCHASE PRICE
Today's Date:____________
To: THE FIRST NATIONAL BANK OF BOSTON
Re: Notice of Purchase Price for Mortgage Loans in accordance with Custodial
Agreement dated as of December __, 1995 (the "Agreement") among Industry
Mortgage Company, L.P. ("Seller"), Nomura Asset Capital Corporation
("Buyer") and The First National Bank of Boston ("Custodian").
Please be advised that upon Nomura's receipt of the Collateral Receipt
executed by Custodian with respect to the Mortgage Loans listed on the attached
Mortgage Loan Schedule, Nomura will purchase such Mortgage Loans for the
Purchase Price of $__________. Please wire transfer in immediately available
funds the Purchase Price to Seller. Nomura will fully reimburse Custodian in the
amount of the Purchase Price set forth in the preceding sentence. To the extent
any reimbursement occurs on any day other than the day of Custodian's
disbursement, Nomura further agrees to pay Custodian interest on the amount to
be at such rate as agreed between Nomura and Custodian. Nomura further agrees to
reimburse Custodian for all costs and expenses suffered or incurred by Custodian
in enforcement of its rights hereunder, including the reasonable fees and
expenses of counsel.
Capitalized terms used herein but not defined herein shall have the
respective meanings set forth in the Agreement.
NOMURA ASSET CAPITAL CORPORATION
By:___________________________________
Title:________________________________
Acknowledgement:
Notice received on ____________, 199_
THE FIRST NATIONAL BANK OF BOSTON
By:___________________________________
Title:________________________________
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NATIONAL WESTMINSTER BANK PLC,
Lender
and
INDUSTRY MORTGAGE COMPANY, L.P. and
IMC CORPORATION OF AMERICA,
Borrowers
and
FIRST NATIONAL BANK OF BOSTON,
Custodian
-----------------------------
CUSTODIAL AGREEMENT
As of February 28, 1996
-----------------------------
Fixed and Adjustable Rate Mortgage Loans
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1. Definitions................................................................. 1
Section 2. Delivery of Custodial Files................................................. 3
Section 3. Certification of the Custodian; Exceptions in Custodial File................ 5
Section 4. Exceptions in Custodial Files............................................... 6
Section 5. Obligations of the Custodian................................................ 6
Section 6. Future Defects.............................................................. 7
Section 7. Release of Custodial File................................................... 7
Section 8. Limitation on Release....................................................... 7
Section 9. Release Upon Payment, Acknowledgement of Redelivery or Event of
Default..................................................................... 8
Section 10. Fees of Custodian........................................................... 8
Section 11. Removal of Custodian........................................................ 8
Section 12. Transfer of Custodial Files................................................. 9
Section 13. Examination of Custodial Files.............................................. 9
Section 14. Insurance of Custodian...................................................... 9
Section 15. Periodic Statements......................................................... 9
Section 16. Governing Law............................................................... 9
Section 17. Copies of Documents in the Custodial Files.................................. 9
Section 18. No Adverse Interest of Custodian............................................ 10
Section 19. Resignation by and Removal of the Custodian; Successor Custodian............ 10
Section 20. Term of Agreement........................................................... 10
</TABLE>
i
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<TABLE>
<S> <C> <C>
Section 21. Notices..................................................................... 11
Section 22. Successors and Assigns...................................................... 11
Section 23. Indemnification of Custodian................................................ 11
Section 24. Reliance of Custodian....................................................... 12
Section 25. Authorized Representatives.................................................. 12
Section 26. Reproduction of Documents................................................... 12
Section 27. Counterparts................................................................ 13
Section 28. Mutilated Trust Receipts and Certification.................................. 13
Section 29. Limitation of Liability..................................................... 13
Section 30. Transmission of Collateral.................................................. 14
</TABLE>
SCHEDULES
SCHEDULE I MORTGAGE LOAN INFORMATION INCLUDED IN MORTGAGE LOAN SCHEDULE
EXHIBITS
EXHIBIT A FORM OF TRUST RECEIPT AND CERTIFICATION
EXHIBIT B FORM OF REQUEST FOR RELEASE OF DOCUMENTS AND RECEIPT
EXHIBIT C1 AUTHORIZED REPRESENTATIVES OF THE PARENT
EXHIBIT C2 AUTHORIZED REPRESENTATIVES OF THE SUBSIDIARY
EXHIBIT D AUTHORIZED REPRESENTATIVES OF THE LENDER
EXHIBIT E FORM OF CUSTODIAL DELIVERY
EXHIBIT F FORM OF WAREHOUSE LENDER RELEASE
EXHIBIT G FORM OF NOTICE TO THE CUSTODIAN
ii
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THIS CUSTODIAL AGREEMENT, dated as of February 28, 1996, by and
among National Westminster Bank Plc, New York Branch, a Branch duly licensed
under the laws of the State of New York of a public limited company organized
under the laws of the United Kingdom, having an address at 175 Water Street,
20th Floor, New York, New York 10038 (the "Lender"), Industry Mortgage Company,
L.P., a limited partnership organized under the laws of Delaware, having an
address at 3450 Buschwood Park Drive, Suite 250, Tampa, Florida 33618 (the
"Parent"), IMC Corporation of America, a Delaware corporation having an address
at 3450 Buschwood Park Drive, Suite 250, Tampa, Florida 33618 (the "Subsidiary";
the Parent, together with the Subsidiary, the "Borrowers") and First National
Bank of Boston, a national banking association, having an office at 100 Federal
Street, Boston, Massachusetts 02110 (the "Custodian");
W I T N E S S E T H
WHEREAS, the Borrowers are the purchasers and/or originators of
the Mortgage Loans;
WHEREAS, the Lender has agreed to provide interim financing for
the origination or acquisition of the Mortgage Loans by the Borrowers pursuant
to the Interim Loan and Security Agreement; and
WHEREAS, the Custodian is a national banking association
chartered under the laws of the United States and is otherwise authorized to act
as Custodian pursuant to this Agreement. The Lender desires to have the
Custodian take possession of the Mortgage Loan Documents as the custodian for
the Lender and any future purchaser or assignee thereof, on several delivery
dates (each a "Delivery Date"), in accordance with the terms and conditions
hereof.
NOW THEREFORE, in consideration of the mutual undertakings herein
expressed, the parties hereto hereby agree as follows:
Section 1. Definitions.
Capitalized terms used but not defined herein shall have the
meanings assigned to them in the Interim Loan and Security Agreement. The
following capitalized terms shall have the meanings set forth in this Agreement
(terms defined in the singular shall have the same meaning when used in the
plural and vice versa):
AGREEMENT: This Custodial Agreement and all amendments and
attachments hereto and supplements hereof.
AUTHORIZED REPRESENTATIVE: As defined in Section 25 herein.
BORROWER: Each of the Parent and the Subsidiary.
<PAGE>
<PAGE>
-2-
BUSINESS DAY: A day other than Saturday, Sunday or other day on
which banks in New York City are authorized or required by law to be closed or
on which the New York Stock Exchange is closed.
CUSTODIAL DELIVERY: A custodial delivery, in the form annexed
hereto as Exhibit E, delivered by the related Borrower to the Custodian on each
Delivery Date.
CUSTODIAL FILE: As to each Mortgage Loan, the Mortgage Loan
Documents and any other documents relating to such Mortgage Loan that are
delivered to the Custodian or that at any time come into the possession of the
Custodian.
CUSTODIAN: The First National Bank of Boston, or its successor in
interest or assigns, or any successor to the Custodian under this Agreement as
herein provided.
DELIVERY DATE: With respect to each Mortgage Loan, the date on
which the related Mortgage Loan Documents are delivered to the Custodian which
date (except in the case of an Advance which accrues interest at the Federal
Funds Rate) shall be no later than 3:00 p.m. (New York City time) on the second
Business Day immediately preceding the related Funding Date.
EXCEPTION: With respect to any Custodial File, (i) the failure of
a document to correspond to the information on the Mortgage Loan Schedule or
(ii) the absence of a Mortgage Loan Document from such Custodial File, in each
case as so identified in the related Exception Report.
EXCEPTION REPORT: With respect to any Custodial File, a report
prepared by the Custodian setting forth any Exceptions relating to such
Custodial File.
FUNDING DATE: As defined in the Interim Loan and Security
Agreement.
INTERIM LOAN AND SECURITY AGREEMENT: The Interim Loan and
Security Agreement dated as of February 28, 1996 by and between the Lender and
the Borrowers, an executed copy of which shall be delivered to the Custodian.
LENDER: National Westminster Bank Plc, New York Branch, a Branch
duly, licensed under the laws of the State of New York of a public limited
company organized under the laws of the United Kingdom, or its successor in
interest or assigns, or any successor to the Lender under the Interim Loan and
Security Agreement as therein provided.
MORTGAGE LOAN DOCUMENTS: With respect to each Mortgage Loan, the
documents and instruments listed in Section 2 hereof, evidencing and relating to
such Mortgage Loan and delivered to the Custodian pursuant hereto.
<PAGE>
<PAGE>
-3-
MORTGAGE LOAN SCHEDULE: The schedule of Mortgage Loans annexed to
a Custodial Delivery, such schedule setting forth with respect to each Mortgage
Loan, the information set forth in Schedule I annexed hereto, as such may be
amended from time to time.
MORTGAGE: With respect to any Mortgage Loan, the mortgage, deed
of trust or other similar document or instrument securing a Mortgage Note and
creating a lien on the related Mortgaged Property.
MORTGAGED PROPERTY: The real property subject to the lien of a
Mortgage.
MORTGAGE LOANS: As defined in the Interim Loan and Security
Agreement.
MORTGAGE NOTE: The original executed note evidencing the
indebtedness of a Mortgagor under a Mortgage Loan, together with any rider,
addendum or amendment thereto.
MORTGAGOR: The obligor or obligors on a Mortgage Note, including
without limitation, any Person that has acquired the related Mortgaged Property
and assumed the obligations of the original obligor under the Mortgage Note.
PARENT: Industry Mortgage Company, L.P.
SUBSIDIARY: IMC Corporation of America.
TRUST RECEIPT AND CERTIFICATION: A certification, with respect to
any Mortgage Loans being delivered to the Custodian, in the form annexed hereto
as Exhibit A, delivered to the Lender by the Custodian in accordance with
Section 3 hereof.
UCC FINANCING STATEMENT: A financing statement executed and filed
pursuant to the Uniform Commercial Code, as in effect in the relevant
jurisdiction.
Section 2. Delivery of Custodial Files.
On each Delivery Date, the related Borrower shall deliver to the
Custodian a completed Custodial Delivery relating to the Mortgage Loans to be
delivered on such Delivery Date, together with a Mortgage Loan Schedule attached
thereto and, if requested by the Custodian, a computer disk containing such
Mortgage Loan Schedule and shall deliver a copy of the fully executed Custodial
Delivery, with the Mortgage Loan Schedule attached, to the Lender, by facsimile
transmission, on such Delivery Date. As of the related Funding Date, the
Mortgage Loans listed on the related Mortgage Loan Schedule shall become subject
to this Agreement.
Except as otherwise provided for herein, in connection with each
such delivery, the related Borrower shall deliver and release to the Custodian
as custodian for, and agent and bailee of, the Lender the following documents
pertaining to each of the Mortgage Loans:
<PAGE>
<PAGE>
-4-
(a) The original Mortgage Note bearing all intervening
endorsements, endorsed, "Pay to the order of _______________, without
recourse" or "Pay to the order of holder, without recourse" and signed
in the name of the related Borrower by an Authorized Representative (as
defined below) thereof. In the event that the Mortgage Loan was acquired
by the related Borrower in a merger, the endorsement must be by
"(Borrower), successor by merger to (name of predecessor)"; and in the
event that the Mortgage Loan was acquired or originated by the related
Borrower while doing business under another name, the endorsement must
be by "(Borrower), formerly known as (previous name)";
(b) Originals of all intervening assignments, showing a
complete chain of assignment from origination to the related Borrower,
if any, with evidence of recording thereon (or, if an original
intervening assignment has not been returned from the recording office,
a certified copy thereof, the original to be delivered to the Custodian
forthwith after return);
(c) Originals of all assumption and modification
agreements, if any (or, if an original assumption and/or modification
agreement has not been returned from the recording office, a certified
copy thereof, the original to be delivered to the Custodian forthwith
after return);
(d) Either (i) the original Mortgage with evidence of
recording thereon or a certified copy of the Mortgage as recorded, or
(ii) if the original Mortgage has not yet been returned from the
recording office, a certified copy of the Mortgage together with a
receipt from the recording office or from a title insurance company or a
certificate of an Authorized Representative of the related Borrower
indicating that such Mortgage has been delivered for recording;
(e) An assignment of the Mortgage, from the related
Borrower in blank, which assignment shall be in form and substance
acceptable for recording in the state or other jurisdiction where the
Mortgaged Property is located; provided that in the event that the
Mortgage Loan was acquired by the related Borrower in a merger, the
assignment of the Mortgage must be by "(Borrower), successor by merger
to (name of predecessor; and in the event that the Mortgage Loan was
acquired or originated by the related Borrower while doing business
under another name, the assignment of the Mortgage must be by
"(Borrower), formerly known as (previous name)"; and
(f) Evidence of title insurance with respect to the
Mortgaged Property (which may be in the form of a binder or commitment),
together with an adjustable rate mortgage endorsement and other
endorsements or riders, if any, which were issued with or subsequent to
the issuance of such policy.
With respect to documents that were caused to be sent for
recording by the related Borrower, such Borrower shall deliver or cause to be
delivered to the Custodian such original
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documents within two Business Days of receipt thereof. The related Borrower
shall deliver or cause to be delivered to the Custodian the original policy of
lender's title insurance, together with the original endorsements thereto,
within two Business Days of receipt thereof. The Custodian shall hold such
original recorded documents in trust for the benefit of the Lender pursuant to
this Agreement and the Trust Receipt and Certification.
From time to time, each of the Borrower shall forward to the
Custodian additional original documents, including additional original documents
evidencing any assumption, modification, consolidation or extension of a
Mortgage Loan approved by the related Borrower and the Lender. All such mortgage
documents held by the Custodian as to each Mortgage Loan shall constitute the
"Custodial File".
Section 3. Certification of the Custodian; Exceptions in
Custodial File.
(a) Mortgage Loan Documents. On each Delivery Date, the Custodian
shall ascertain (i) whether the Mortgage Loan Documents are in its possession
and (ii) whether any other documents relating to the Mortgage Loan are in its
possession, and shall deliver to the Lender (and the related Borrower), by
facsimile transmission by 5:00 p.m. (New York City time) on the Business Day
prior to such Funding Date, a signed Trust Receipt and Certification in the form
annexed hereto as Exhibit A (and shall deliver to the Lender, by overnight
courier, the signed original of such document), stating that, as to each
Mortgage Loan listed on the Mortgage Loan Schedule (other than any Mortgage Loan
specifically identified on the Exception Report attached thereto): (A) all
Mortgage Loan Documents are in its possession and itemizing which other
documents, if any, are in its possession; and (B) such documents have been
reviewed by it and appear regular on their face and relate to items (a), (b),
(c), (d), (f), (g), (h), (k), (o), (q), (s), (t), (u) and (v) of the definition
of Mortgage Loan Schedule. The Custodian will make no representations as to (i)
the validity, legality, enforceability, recordability or genuineness of any of
the Mortgage Loans identified on the Mortgage Loan Schedule, or (ii) the
collectability, insurability, effectiveness or suitability of any such Mortgage
Loans. The Custodian will not conduct an independent review of the Mortgage Loan
Documents other than as specifically outlined in this Agreement.
(b) Upon the release or transfer of any Custodial File, or any
documents included therein, pursuant to Sections 7, 9 or 12 hereof, if the
Lender shall so request, the Custodian shall issue to the Lender a new Trust
Receipt and Certification (upon surrender by the Lender to the Custodian of the
then existing Trust Receipt and Certification, marked "cancelled") in accordance
with Section 3(a) hereof with respect to the remaining Custodial Files then held
by the Custodian pursuant hereto. If no such replacement Trust Receipt and
Certification is issued, the Trust Receipt and Certification then in effect
shall be deemed to exclude the Custodial Files, or the documents included
therein, that have been released by the Custodian pursuant to Sections 7, 9 or
12 hereof for so long as such Custodial Files, or documents included therein,
shall not have been returned to the Custodian pursuant hereto.
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Section 4. Exceptions in Custodial Files. (a) With respect to any
Exceptions contained in the Exception Report attached to any Trust Receipt and
Certification, the Lender shall promptly notify the Custodian and the related
Borrower that either (i) the related Borrower shall deliver to the Custodian the
missing documents, if any, noted in the Exception Report, within five Business
Days of the delivery of the related Trust Receipt and Certification, (ii) the
Lender has waived the Exceptions noted in the Exception Report, (iii) the
related Borrower shall cure the Exceptions within five (5) Business Days, or
(iv) the related Borrower shall substitute another Mortgage Loan for the
deficient Mortgage Loan and shall deliver to the Custodian the Custodial File
with respect to the substitute Mortgage Loan.
(b) If the Lender's notice states that the related Borrower shall
take the action specified in clause (i) of subsection (a) above and such
Borrower fails to take such action within 5 days after the Custodian's receipt
of such notice then the Custodian shall notify the Lender and the related
Borrower of such failure and release or retain the deficient Custodial File in
accordance with the written instructions of the Lender.
(c) If the Lender's notice state that the related Borrower shall
take the actions specified in clause (iv) of subsection (a) above, then the
Custodian shall return the deficient Custodial File to the related Borrower
promptly following delivery to it of the Custodial File to be substituted
therefor. If the related Borrower fails to deliver the substituted Custodial
File to the Custodian within five days after the Custodian's receipt of such
notice, then the Custodian shall notify the Lender and the related Borrower of
such failure and release or return the Custodial File in accordance with the
written instructions of the Lender.
Section 5. Obligations of the Custodian.
With respect to each Custodial File that is delivered to the
Custodian or that comes into the possession of the Custodian, the Custodian is
the custodian for the Lender exclusively. The Custodian shall hold each
Custodial File for the exclusive use and benefit of the Lender, and shall make
disposition thereof only in accordance with this Agreement and the instructions
furnished by the Lender in accordance with this Agreement and the related Trust
Receipt and Certification. The Custodian shall segregate and maintain continuous
custody of all Custodial Files in secure and fireproof facilities in accordance
with customary standards for such custody. The Custodian shall not be
responsible to verify the validity, sufficiency or genuineness of any document
in any Custodial File.
If the Custodian shall at any time receive conflicting
instructions from the related Borrower and the Lender with respect to a
Custodial File and the conflict between the instructions cannot be resolved with
reference to the terms of this Agreement, the Custodian shall be entitled to
rely on the instructions of the Lender.
In the event that (i) the Lender, one of the Borrowers, or the
Custodian shall be served by a third party with any type of levy, attachment,
writ or court order with respect to any Custodial file or a document included
within a Custodial File or (ii) a third party shall institute
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any court proceeding by which any Custodial File or a document included within a
Custodial File shall be required to be delivered otherwise than in accordance
with the provisions of this Agreement, the party receiving such service shall
promptly deliver or cause to be delivered to the other parties to this Agreement
copies of all such court papers, orders, documents and other materials
concerning such proceedings. The Custodian shall continue to hold and maintain
all the Custodial Files that are the subject of such proceedings pending a
final, nonappealable order of a court of competent jurisdiction permitting or
directing disposition thereof. Upon written request of the related Borrower,
however, which request has been approved by the Lender, the Custodian may
deliver a copy of such Custodial Files to the related Borrower at any time
during the course of such proceedings. Upon final determination of such court,
the Custodian shall dispose of such Custodial File or a document included within
such Custodial File as directed by the Lender. Expenses of the Custodian
incurred as a result of such proceedings shall be borne by the related Borrower.
Section 6. Future Defects.
During the term of this Agreement, if the Custodian discovers any
defect with respect to the Custodial File, the Custodian shall give written
specification of such defect to the related Borrower and the Lender.
Section 7. Release of Custodial File. From time to time and as
appropriate for the foreclosure or servicing of any of the Mortgage Loans, the
Custodian is hereby authorized, upon receipt of a written request of the related
Borrower, acknowledged by the Lender, in substantially the form annexed hereto
as Exhibit B (a "Request for Release and Receipt of Documents"), to release to
the related Borrower within five (5) Business Days, the related Custodial File
or the documents from a Custodial File set forth in such request and receipt.
All documents so released to the related Borrower shall be held by such Borrower
in trust for the benefit of the Lender in accordance with the Interim Loan and
Security Agreement. The related Borrower shall return to the Custodian each and
every document previously requested from the Custodial File when such Borrower's
need therefor in connection with such foreclosure or servicing no longer exists,
unless the Mortgage Loan shall be liquidated, in which case, upon receipt of a
certification to this effect from the related Borrower to the Custodian,
acknowledged by the Lender, in substantially the form annexed hereto as Exhibit
B, such Borrower's prior receipt shall be returned by the Custodian to such
Borrower. The Lender agrees to acknowledge, within three (3) Business Days of
receipt, any Request for Release and Receipt of Documents properly completed and
submitted by the related Borrower, and not to unreasonably withhold any such
acknowledgement.
Section 8. Limitation on Release.
The foregoing provision respecting release to the related
Borrower of the Custodial Files and documents by the Custodian upon request by
the related Borrower shall be operative only to the extent that at any time the
related Borrower shall not have requested of the Custodian active Custodial
Files or documents (including those requested) pertaining to more
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than five (5) Mortgage Loans at the time being held by the Custodian under this
Agreement. Any additional Custodial Files or documents requested by the related
Borrower to be released may be released only upon written authorization of the
Lender. The limitations of this paragraph shall not apply to the release of
Custodial Files to the related Borrower under Section 9 below.
Section 9. Release Upon Payment, Acknowledgement of Redelivery or
Event of Default.
(a) Upon the payment in full of any Advance, which payment shall
be evidenced by the delivery to the Custodian of the related Borrower's Request
for Release and Receipt of Documents in substantially the form annexed hereto as
Exhibit B, acknowledged by the Lender, the Custodian shall promptly release the
related Custodial File to such Borrower.
(b) Upon the redelivery of any Mortgage Loan previously released
to the related Borrower in accordance with the terms and provisions of this
Agreement, which redelivery shall be evidenced by the delivery to the Custodian
of such Borrower's Request for Release and Receipt of Documents in substantially
the form annexed hereto as Exhibit B, the Custodian shall promptly accept
redelivery of the related Custodial File from such Borrower.
(c) Upon notice by the Lender to the Custodian and the Borrowers
of an Event of Default under the Interim Loan and Security Agreement, the
Custodian shall execute, at the Lender's direction, the endorsements on the
Mortgage Loans and the assignments of other Mortgage Loan Documents as are
necessary to transfer legal title thereto to the Lender or its designee.
Section 10. Fees of Custodian.
The Custodian shall charge such fees for its services under this
Agreement as are set forth in a separate agreement between the Custodian and the
Borrowers, the payment of which fees, together with the Custodian's expenses in
connection herewith, shall be solely the obligation of the Borrowers.
Section 11. Removal of Custodian.
The Lender, with or without cause, may upon at least 60 days'
notice to the Custodian and the Borrowers remove and discharge the Custodian
from the performance of its duties under this Agreement by written notice from
the Lender to the Custodian, with a copy to each of the Borrowers. Having given
notice of such removal, the Lender promptly shall appoint a successor custodian
to act on behalf of the Lender by written instrument, one original counterpart
of which instrument shall be delivered to the Lender, with a copy to each of the
Borrowers and an original to the successor custodian. In the event of any such
removal, the Custodian shall promptly transfer to the successor custodian, as
directed by the Lender, all Custodial Files being administered under this
Agreement. The successor custodian shall be
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required to assume all obligations of the Custodian hereunder and shall be bound
by the terms and conditions hereof.
Section 12. Transfer of Custodial Files. If, for any other reason
than the payment in full of the related Advance, the Lender notifies the
Custodian that (i) the Interim Loan and Security Agreement has been terminated
as to any or all of the Mortgage Loans or (ii) the Lender has agreed to release
its security interest in the Custodial Files as to any or all Mortgage Loans,
the Custodian shall, upon written request of the Lender, release to such persons
as the Lender shall designate, such Custodial Files relating to such Mortgage
Loans in accordance with the Lender's request, and the Custodian shall endorse
the Mortgage Notes and complete the assignments of the Mortgage only as, and if,
the Lender shall request in writing.
Section 13. Examination of Custodial Files.
Upon reasonable prior notice to the Custodian, which shall not be
less than one Business Day's notice, the Lender, the related Borrower, and their
respective agents, accountants, attorneys and auditors will be permitted during
normal business hours to examine the Custodial Files, documents, records and
other papers in the possession of or under the control of the Custodian relating
to any or all of the Mortgage Loans held for the benefit of such party at the
expense of the examining party.
Section 14. Insurance of Custodian.
At its own expense, the Custodian shall maintain at all times
during the existence of this Agreement and keep in full force and effect such
insurance in amounts, with standard coverage and subject to deductibles, all as
is customary for insurance typically maintained by banks acting in a custodial
capacity. The minimum coverage under any such insurance policies shall be at
least equal to the corresponding amounts required by FNMA in the FNMA Servicing
Guide or FHLMC in the FHLMC Seller's and Servicer's Guide. A certificate of the
respective insurer as to each such policy shall be furnished to the Lender upon
request.
Section 15. Periodic Statements.
Upon the request of the Lender, the Custodian shall, within two
Business Days of such request, provide to the Lender a list of all the Mortgage
Loans for which the Custodian holds a Custodial File pursuant to this Agreement.
Section 16. Governing Law.
This Agreement shall be 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.
Section 17. Copies of Documents in the Custodial Files.
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Upon reasonable prior notice to the Custodian, the Lender may
request, and the Custodian shall promptly provide to the Lender, at the cost and
expense of the Lender, copies of any documents in the Custodial Files.
Section 18. No Adverse Interest of Custodian.
By execution of this Agreement, the Custodian represents and
warrants that it currently holds, and during the existence of this Agreement
shall hold, no interest adverse to the Lender, by way of security or otherwise,
in any Mortgage Loan and hereby waives and releases any such interest that it
may have in any Mortgage Loan as of the date hereof.
Section 19. Resignation by and Removal of the Custodian;
Successor Custodian.
(a) The Custodian may at any time resign and terminate its
obligations under this Agreement upon at least 60 days prior written notice to
the Borrowers and the Lender. Promptly after receipt of notice of the
Custodian's resignation, the Borrowers shall appoint, by written instrument, a
successor custodian, subject to the prior written approval of the Lender, which
approval shall not be unreasonably withheld. If the Borrowers fail to appoint a
successor within 30 days, the Lender shall appoint a successor custodian. If,
however, a successor custodian is not appointed by the Borrowers or the Lender
within 90 days of the Custodian's notice of resignation, all duties and
obligations of the Custodian (except as described below) shall cease and
terminate. The Custodian's sole responsibility thereafter shall be to safely
maintain all of the Custodial Files and to deliver the same to the Lender's
designee, pursuant to the written instructions of the Lender. If neither the
Borrowers nor the Lender has appointed a successor custodian within 30 days
after the expiration of the aforementioned 90 day period, the Custodian shall
deliver the Custodial Files to the Lender. One original counterpart of any
instrument of appointment shall be delivered to each of the Borrowers, the
Lender, the Custodian and the successor custodian.
(b) In the event of any such resignation pursuant to this Section
19 or removal pursuant to Section 11 hereof, the Custodian shall, as directed by
the Lender and within a reasonable time of such direction, transfer to the
successor custodian all the Custodial Files being administered under this
Agreement and shall, also at the Lender's direction, execute the endorsements on
the Mortgage Notes and assignments of other Mortgage Loan Documents as requested
by the Lender, as custodian for the Lender. Any such transfer arising out of the
resignation of the Custodian shall be at the expense of the Custodian. The
successor custodian shall be required to assume all obligations of the Custodian
hereunder and shall be bound by, the terms and conditions hereof.
(c) In the event of any such resignation pursuant to this Section
19 or removal pursuant to Section 11 hereof, the Lender shall promptly deliver
all Trust Receipt and Certifications to the Custodian immediately following to
the transfer by the Custodian to the successor custodian of the Custodial Files.
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Section 20. Term of Agreement.
Promptly after written notice from the Lender of the termination
of the Interim Loan and Security Agreement and payment in full of all amounts
owing to the Lender thereunder, the Custodian shall (i) deliver all documents
remaining in the Custodial Files to the related Borrower and (ii) at the
Lender's direction, execute the endorsements on the Mortgage Notes and
assignments of other Mortgage Loan Documents as are necessary to transfer legal
title thereto to the related Borrower, and the Lender shall deliver all Trust
Receipt and Certifications to the Custodian, and this Agreement shall thereupon
terminate.
Section 21. Notices.
All demands, notices and communications hereunder shall be in
writing and, unless otherwise expressly provided herein, shall be deemed to have
been duly given when received by the recipient party at: (i) in the case of the
Lender, National Westminster Bank Plc, 175 Water Street, 20th Floor, New York,
New York 10038, Attention: Mortgage and Asset- Backed Securities Group,
facsimile number (212) 602-5726; (ii) in the case of the Parent, 3450 Buschwood
Park Drive, Suite 250, Tampa, Florida 33618, Attention: Mr. George Freeman,
facsimile number: (813) 935-0227; (iii) in the case of the Subsidiary, 3450
Buschwood Park Drive, Suite 250, Tampa, Florida 33618, Attention: Mr. George
Freeman, facsimile number: (813) 935-0227; and (iv) in the case of the
Custodian, First National Bank of Boston, 100 Federal Street, Mail Stop:
01-1B-06, Boston Massachusetts, 02110, Attention: Mortgage Custody, facsimile
number: (617) 434-8295, or as to each such Person at such other address as may
hereafter be furnished by such Person to the parties hereto in writing.
Section 22. Successors and Assigns.
This Agreement shall inure to the benefit of the successors and
assigns of the parties hereto.
Section 23. Indemnification of Custodian.
Neither the Custodian nor any of its directors, officers, agents
or employees, shall be liable for any action taken or omitted to be taken by it
or them hereunder or in connection herewith in good faith and believed by it or
them to be within the purview of this Agreement, except for its or their own
negligence, lack of good faith or willful misconduct. In no event shall the
Custodian or its directors, officers, agents and employees be held liable for
any special, indirect or consequential damages resulting from any action taken
or omitted to be taken by it or them hereunder or in connection herewith in good
faith and reasonably believed by it or them to be within the purview of this
Agreement, even if advised of the possibility of such damages, except for its or
their own negligence, lack of good faith or willful misconduct.
The Borrowers agree to indemnity and hold the Custodian and its
directors, officers, agents and employees harmless against any and all
liabilities, obligations, losses,
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damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever, including reasonable attorney's fees, that may
be imposed on, incurred by, or asserted against it or them in any way relating
to or arising out of this Agreement or any action taken or not taken by it or
them hereunder unless such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements were imposed on,
incurred by or asserted against the Custodian because of negligence, lack of
good faith or willful misconduct on the part of the Custodian or any, of its
directors, officers, agents or employees. The foregoing indemnification shall
survive any termination of this Agreement.
Section 24. Reliance of Custodian.
In the absence of bad faith on the part of the Custodian, the
Custodian may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any request, instructions,
certificate, opinion or other document furnished to the Custodian, reasonably
believed by the Custodian to be genuine and to have been signed or presented by
the proper party or parties and conforming to the requirements of this
Agreement; but in the case of any loan document or other request, instruction,
document or certificate which by any provision hereof is specifically required
to be furnished to the Custodian, the Custodian shall be under a duty to examine
the same to determine whether or not it conforms to the requirements of this
Agreement.
Section 25. Authorized Representatives.
Only each individual designated as an authorized representative
of the Parent, the Subsidiary or the Lender, respectively (an "Authorized
Representative"), is authorized to give and receive notices, requests and
instructions and to deliver certificates and documents in connection with this
Agreement on behalf of the Parent, the Subsidiary or the Lender, as the case may
be, and the specimen signature for each such Authorized Representative of the
Parent, each such Authorized Representative of the Subsidiary and each such
Authorized Representative of the Lender, initially authorized hereunder, is set
forth on Exhibits C1, C2 and D attached hereto, respectively. From time to time,
the Borrowers and the Lender may, by delivering to the other and to the
Custodian a revised exhibit, change the information previously given pursuant to
this Section 25, but each of the parties hereto shall be entitled to rely
conclusively on the then current exhibit until receipt of a superseding exhibit.
Section 26. Reproduction of Documents.
This Agreement and all documents relating thereto except with
respect to any Custodial File, including, without limitation, (i) consents,
waivers and modifications which may hereafter be executed, and (ii) certificates
and other information previously or hereafter furnished, may be reproduced by
any photographic, photostatic, microfilm, microcard, miniature photographic or
other similar process. The parties agree that any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and whether or not such
reproduction was made by a party in
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the regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
Section 27. Counterparts.
For the purpose of facilitating the execution of this Agreement
as herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute and be one
and the same instrument.
Section 28. Mutilated Trust Receipts and Certification.
In the event that (i) any mutilated Trust Receipt and
Certification is surrendered to the Custodian, or the Custodian receives
evidence to its satisfaction of the destruction, loss or theft of any Trust
Receipt and Certification and (ii) there is delivered to the Custodian such
security or indemnity as may be required by it to save it harmless, then, in the
absence of notice to the Custodian that such Trust Receipt and Certification has
been acquired by a bona fide purchaser, the Custodian shall execute and deliver
a new Trust Receipt and Certification to the Lender in exchange for or in lieu
of any such mutilated, lost or stolen Trust Receipt and Certification.
Section 29. Limitation of Liability. (a) The obligations of the
Custodian shall be determined solely by the express provisions of this
Agreement. No representation, warranty, covenant, agreement, obligation or duty
of the Custodian shall be implied with respect to this Agreement or the
Custodian's services hereunder.
(b) In the Custodian's review of documents pursuant to Section 4
of this Agreement, the Custodian shall be under no duty or obligation to
inspect, review or examine the Custodial Files to determine that the contents
thereof are sufficient, legal, in recordable form, valid, duly authorized,
genuine, enforceable or appropriate for the represented purpose or that they
have been actually recorded or that they are other than what they purport to be
on their face.
(c) In the absence of bad faith, gross negligence or willful
misconduct on the part of the Custodian, the Custodian may rely, and shall be
protected in acting or refraining to act, upon and need not verify the accuracy
of, any (i) oral instructions from any persons the Custodian believes to be
authorized to give such instructions, who shall only be persons the Custodian
believes in good faith to be Authorized Representatives, and (ii) any written
instruction, notice, order, request, direction, certificate, opinion or other
instrument or document believed by the Custodian to be genuine and to have been
signed or presented by the proper party or parties, which, with respect to the
Borrowers and to the Lender, shall mean signature and presentation by Authorized
Representatives.
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(d) The Custodian may consult with legal counsel with regard to
legal questions arising out of or in connection with this Agreement, and the
advice or opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken, omitted or suffered by the Custodian
in reasonable reliance, in good faith, and in accordance therewith.
(e) No provision of this Agreement shall require the Custodian to
expend or risk its own funds or otherwise incur financial liability in the
performance of its duties under this Agreement if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity is not
reasonably assured to it.
(f) The Custodian shall not be responsible or liable for, and
makes no representation or warranty with respect to, the validity, legality,
enforceability, recordability genuineness, collectability, insurability,
effectiveness, suitability, adequacy or perfection of any document comprising
part of the Custodial Files or any lien upon, or security interest in, any
Mortgage Loans or Custodial Files purported to be granted at any time to the
Lender.
Section 30. Transmission of Collateral. Written instructions as
to the method of shipment and shipper(s) the Custodian is directed to utilize in
connection with the transmission of Custodial Files or portions thereof by the
Custodian in the performance of its duties hereunder shall be delivered by the
Lender or the related Borrower (the "Requesting Party") to the Custodian prior
to any shipment of Custodial Files or portions thereof hereunder by the
Custodian. The Requesting Party will arrange for the provision of such services
at the expense of the related Borrower (or, at the Custodian's option, such
Borrower shall reimburse the Custodian for all such costs and expenses incurred
by the Custodian) and such insurance against loss or damage to the Custodial
Files or portions thereof as the Lender deems appropriate. In the event the
Custodian does not receive written directions as to the method of shipment and
shipper(s) from the Requesting Party, the Custodian is hereby authorized to
utilize a nationally recognized courier service. The Custodian shall be entitled
to reimbursement from the related Borrower for all costs and expenses incurred
by the Custodian for utilizing such courier service.
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IN WITNESS WHEREOF, the Lender, the Borrowers and the Custodian
have caused their names to be duly signed hereto by their respective officers
thereunto duly authorized, all as of the date first above written.
NATIONAL WESTMINSTER BANK PLC,
NEW YORK BRANCH
(Lender)
By:_______________________________
Name: Joseph N. Walsh III
_____________________________
Title: Managing Director
_____________________________
INDUSTRY MORTGAGE COMPANY, L.P.
(Borrower)
By: Industry Mortgage Corporation, General Partner
By:__________________________________
Name:________________________________
Title:_______________________________
IMC CORPORATION OF AMERICA
(Borrower)
By:__________________________________
Name:________________________________
Title:_______________________________
FIRST NATIONAL BANK OF BOSTON
(Custodian)
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Lender, the Borrowers and the Custodian
have caused their names to be duly signed hereto by their respective officers
thereunto duly authorized, all as of the date first above written.
NATIONAL WESTMINSTER BANK PLC, NEW YORK BRANCH
(Lender)
By:__________________________________
Name:________________________________
Title:_______________________________
INDUSTRY MORTGAGE COMPANY, L.P.
(Borrower)
By: Industry Mortgage Corporation, GeneralPartner
By:__________________________________
Name: George Nicholas
_______________________________
Title: Chief Executive Officer
_______________________________
IMC CORPORATION OF AMERICA
(Borrower)
By:_______________________________
Name: George Nicholas
_______________________________
Title: Chief Executive Officer
_______________________________
FIRST NATIONAL BANK OF BOSTON
(Custodian)
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Lender, the Borrowers and the Custodian
have caused their names to be duly signed hereto by their respective officers
thereunto duly authorized, all as of the date first above written.
NATIONAL WESTMINSTER BANK PLC, NEW YORK BRANCH
(Lender)
By:__________________________________
Name:________________________________
Title:_______________________________
INDUSTRY MORTGAGE COMPANY, L.P.
(Borrower)
By:Industry Mortgage Corporation, General Partner
By:__________________________________
Name:________________________________
Title:_______________________________
IMC CORPORATION OF AMERICA
(Borrower)
By:__________________________________
Name:________________________________
Title:_______________________________
FIRST NATIONAL BANK OF BOSTON
(Custodian)
By:_______________________________
Name: Robert M. Prevoir
_______________________________
Title: Manager
_______________________________
<PAGE>
<PAGE>
EXHIBIT A
FORM OF TRUST RECEIPT AND CERTIFICATION
Fixed and Adjustable Rate Mortgage Loans
Delivery Date
National Westminster Bank Plc
175 Water Street, 20th Floor
New York, New York 10038
Re: Custodial Agreement, dated as of February 28, 1996
("Custodial Agreement"), among National Westminster Bank
Plc, as Lender (the "Lender"), Industry Mortgage Company,
L.P. as borrower and servicer (the "Parent"), IMC
Corporation of America as borrower (the "Subsidiary"; the
Parent, together with the Subsidiary, the "Borrowers")
and First National Bank of Boston, as custodian (the
"Custodian"), executed pursuant to the Interim Loan and
Security Agreement, dated as of February 28, 1996 between
the Lender and the Borrowers
Ladies and Gentlemen:
In accordance with the provisions of Section 3(a) of the
above-referenced Custodial Agreement, the undersigned, as the Custodian, hereby
certifies that, as to each Mortgage Loan listed on the Mortgage Loan Schedule
attached hereto as Schedule 1 (other than any Mortgage Loan listed on the
exception report attached hereto), it has reviewed the Custodial Files and has
determined that (i) all Mortgage Loan Documents are in its possession and the
following other documents are also in its possession____________; (ii) such
documents have been reviewed by it and appear regular on their face and relate
to such Mortgage Loan; and (iii) based on its examination and only as to the
foregoing documents, the information set forth in items (a), (b), (c), (d), (f),
(g), (h), (k), (o), (q), (s), (t), (u) and (v) of the definition of Mortgage
Loan Schedule contained in the Custodial Agreement respecting such Mortgage Loan
reflects the information contained in the Custodial File. The Custodian makes no
representations as to: (a) the validity, legality, enforceability, recordability
or genuineness of any of the Mortgage Loans identified on the related Mortgage
Loan Schedule, or (b) the collectability, insurability, effectiveness or
suitability of any such Mortgage Loan. As provided in the Custodial Agreement,
under certain circumstances, the Lender and the related Borrower have the right
to obtain possession of the Custodial Files and therefore there can be no
assurance at any time following the date hereof of the accuracy of the
Custodian's certification set forth in clause (i) above. The Custodian has not
conducted an independent review of the Mortgage Loan Documents other than as
specifically outlined in the Custodial Agreement.
<PAGE>
<PAGE>
-2-
The Custodian hereby confirms that it is holding such Mortgage
Loan Documents as agent and bailee, and custodian for the exclusive use and
benefit, and subject to the sole direction, of the Lender pursuant to the terms
and conditions of the Custodial Agreement.
The Custodian will accept and act on instructions with respect to
the Mortgage Loans subject hereto upon surrender of this Trust Receipt and
Certification at its office at ________________, Attention: Mortgage Custody.
Capitalized terms used herein shall have the meaning ascribed to
them in the Custodial Agreement.
FIRST NATIONAL BANK OF BOSTON,
Custodian
By:______________________________________
Name:____________________________________
Title:___________________________________
<PAGE>
<PAGE>
SCHEDULE 1
(Mortgage Loan Schedule)
<PAGE>
<PAGE>
SCHEDULE I
MORTGAGE LOAN INFORMATION INCLUDED IN MORTGAGE LOAN SCHEDULE
ELIGIBLE MORTGAGE LOANS
For each Eligible Mortgage Loan, the related Borrower shall
provide the following information:
(a) the mortgage loan identifying number;
(b) the mortgagor's name (if there are multiple mortgagors,
the name of one of the mortgagors and, to the extent
available, the names of the additional mortgagors);
(c) the state in which the mortgaged property is located and,
to the extent available, the mortgaged property's street
address, city and zip code;
(d) the original balance;
(e) the current principal balance;
(f) the original mortgage interest rate,
(g) the maturity date;
(h) the original term;
(i) the amortization term;
(j) the combined loan-to-value ratio at origination;
(k) the origination date of the related Mortgage Note;
(l) the credit-grade for the related mortgagor;
(m) the lien status;
(n) the debt to income ratio or a representation from the
Borrower which indicates the maximum debt to income
ratio for any of the Mortgage Loans relating to the
Advance to which the Eligible Mortgage Loan relates:
and
(o) the first payment date.
<PAGE>
<PAGE>
-2-
For each Eligible Mortgage Loan that is an adjustable rate
Eligible Mortgage Loan, the related Borrower shall provide, in addition
to the information set forth above, the following additional
information:
(p) the index rate;
(q) the gross margin;
(r) the current mortgage interest rate;
(s) the lifetime floor;
(t) the lifetime ceiling;
(u) periodic cap; and
(v) adjustment frequency.
<PAGE>
<PAGE>
(Exception Report)
<PAGE>
<PAGE>
EXHIBIT B
FORM OF REQUEST FOR RELEASE OF DOCUMENTS AND RECEIPT
To: [Custodian's Address]
Re: Custodial Agreement, dated as of February 28, 1996
("Custodial Agreement"), among National Westminster Bank
Plc, as Lender (the "Lender"), Industry Mortgage Company,
L.P. as borrower and servicer (the "Parent"), IMC
Corporation of America as borrower (the "Subsidiary"; the
Parent, together with the Subsidiary, the "Borrowers")
and First National Bank of Boston, as custodian (the
"Custodian"), executed pursuant to the Interim Loan and
Security Agreement, dated as of February 28, 1996 between
the Lender and the Borrowers
In connection with the administration of the Mortgage Loans held
by you as the Custodian on behalf of the Lender, we request the release, and
acknowledge receipt, of the (Custodial File/[specify documents]) for the
Mortgage Loan described below, for the reason indicated.
I. MORTGAGE LOANS
Mortgagor's Name, address & Zip Code:
Mortgage Loan Number:
Reason for Requesting Documents: unless otherwise indicated the Mortgage
Loan was paid in full or rescinded (check only if applicable)
_____ 1. Mortgage Loan paid in full.
_____ 2. Mortgage Loan in Foreclosure.
_____ 3. Mortgage Loan substituted with alternate Mortgage Loan to be
delivered to the Custodian with a revised Mortgage Schedule
indicating substitutions.
_____ 4. Mortgage Loan Liquidated By_________________________.
_____ 5. Non-Liquidation/Other (Explain)_________________________.
<PAGE>
<PAGE>
_____ 6. Mortgage Loan Redelivered pursuant to Section 9 of the Custodial
Agreement.
If this request related to rescission of the Mortgage Loan or if
box 1, 4 or 6 above is checked, and if all or part of the Custodial File was
previously released to us, please release to us our previous request and receipt
on file with you, if any, as well as any additional documents in your possession
relating to the specified Mortgage Loan.
If box 2 or 5 above is checked, upon our return of all of the
above documents to you as the Custodian, please acknowledge your receipt by
signing in the space indicated below, and returning this form.
[INDUSTRY MORTGAGE COMPANY, L.P.
(Borrower)
By: Industry Mortgage Corporation, General Partner
By:____________________________________
Name:__________________________________
Title:_________________________________
Date:__________________________________]
[IMC CORPORATION OF AMERICA
(Borrower)
By:_____________________________________
Name:___________________________________
Title:__________________________________
Date:___________________________________]
ACKNOWLEDGED:
NATIONAL WESTMINSTER BANK PLC,
NEW YORK BRANCH
(Lender)
By:____________________________________
Name:__________________________
Title:_________________________
Date:__________________________
<PAGE>
<PAGE>
Acknowledgment of Documents returned to the Custodian:
FIRST NATIONAL BANK OF BOSTON
(Custodian)
By:______________________________________
Name:____________________________
Title:___________________________
Date:____________________________
<PAGE>
<PAGE>
EXHIBIT C1
AUTHORIZED REPRESENTATIVES OF THE PARENT
NAME SPECIMEN SIGNATURE
_________________________________ _______________________________
_________________________________ _______________________________
_________________________________ _______________________________
_________________________________ _______________________________
_________________________________ _______________________________
<PAGE>
<PAGE>
EXHIBIT C2
AUTHORIZED REPRESENTATIVES OF THE SUBSIDIARY
NAME SPECIMEN SIGNATURE
_________________________________ _______________________________
_________________________________ _______________________________
_________________________________ _______________________________
_________________________________ _______________________________
_________________________________ _______________________________
<PAGE>
<PAGE>
EXHIBIT D
AUTHORIZED REPRESENTATIVES OF THE LENDER
NAME SPECIMEN SIGNATURE
_________________________________ _______________________________
_________________________________ _______________________________
_________________________________ _______________________________
_________________________________ _______________________________
<PAGE>
<PAGE>
EXHIBIT E
FORM OF CUSTODIAL DELIVERY
As of this day of ___________ 199__ (the "Delivery Date"), [Industry
Mortgage Company, L.P.] [IMC Corporation of America] (the "Borrower"), as one of
the Borrowers under that certain Custodial Agreement, dated as of February 28,
1996 (the "Custodial Agreement"), by and among National Westminster Bank Plc,
Industry Mortgage Company, L.P., IMC Corporation of American and First National
Bank of Boston (the "Custodian"), does hereby deliver to the Custodian the
Custodial Files with respect to the Mortgage Loans listed on the Mortgage Loan
Schedule attached hereto, which Mortgage Loans shall be subject to the terms of
the Custodial Agreement as of the Delivery Date.
Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Custodial Agreement.
This Custodial Delivery may be executed simultaneously in any number of
counterparts. Each counterpart shall be deemed an original, and all such
counterparts shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Borrower has caused its name to be signed by
this officer thereunto duly authorized as of the day and year first above
written.
[INDUSTRY MORTGAGE COMPANY, L.P.
(Borrower)
By: Industry Mortgage Corporation, General Partner
By:__________________________________
Name:________________________________
Title:_______________________________
Date: _______________________________]
[IMC CORPORATION OF AMERICA
(Borrower)
By:_____________________________________
Name:___________________________________
Title:__________________________________
Date:__________________________________]
<PAGE>
<PAGE>
Acknowledged and Agreed:
FIRST NATIONAL BANK OF BOSTON,
(Custodian)
By:____________________________________
Name:__________________________________
Title:_________________________________
<PAGE>
<PAGE>
EXHIBIT F
FORM OF WAREHOUSE LENDER'S RELEASE LETTER
(Date)
National Westminster Bank Plc
175 Water Street, 20th Floor
New York, New York 10038
Re: Interim Loan and Security Agreement, dated as of February 28, 1996
("Loan Agreement"), between National Westminster Bank Plc ("Lender")
and Industry Mortgage Company, L.P. and IMC Corporation of America
("Borrowers")
Mortgage Loans ____________________
The undersigned hereby releases all right, interest, lien or claim of
any kind with respect to the mortgage loans referenced above, as may be further
described in the attached schedule, such release to be effective automatically
without any further action by any party upon payment for the account
of__________ [related Borrower] of $__________ in immediately available funds to
account number__________ at __________ [Bank] for the account of [related
Borrower].
Very truly yours,
[WAREHOUSE LENDER]
By:__________________________________
Name:________________________________
Title:_______________________________
Copy to:
_________________ [related Borrower]
<PAGE>
<PAGE>
EXHIBIT G
FORM OF NOTICE TO THE CUSTODIAN
To: [Custodian]
From:__________________________________
Date:__________________________________
You are hereby notified that as of _____________________ the
undersigned has transferred its right, title and interest in and to the Mortgage
Loans identified in the schedule attached hereto to [transferee's name and
address] and the undersigned hereby releases all right, title and interest in
and to such Mortgage Loans. You are hereby instructed to hold such Mortgage
Loans pursuant to the terms of the Custodial Agreement, dated as of February 28,
1996, among National Westminster Bank Plc, Industry Mortgage Company, L.P., IMC
Corporation of America and [custodian] (the "Custodial Agreement"), for the sole
and exclusive benefit of [name of transferee] subject to the terms of the
Custodial Agreement by which [name of transferee] hereby agrees to be bound.
[ ]
(Lender)
By:__________________________________
Name:________________________________
Title:_______________________________
Agreed and Acknowledged:
- -----------------------
(Custodian)
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
<PAGE>
[EXECUTION COPY]
- --------------------------------------------------------------------------------
CUSTODY AGREEMENT
among
INDUSTRY MORTGAGE COMPANY, L.P.,
Obligor
IMC CORPORATION OF AMERICA,
Obligor
BEAR STEARNS HOME EQUITY TRUST 1996-1,
Buyer
and
BANK OF BOSTON,
as Custodian
Dated as of March 29, 1996
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
RECITALS ........................................................................... 1
SECTION 1. Definitions................................................... 1
SECTION 2. Delivery of Mortgage Files to Custodian....................... 4
SECTION 3. The Custodian's Receipt, Examination
and Certification of Mortgage Files and
Issuance of Trust Receipt..................................... 6
SECTION 4. Possession of Mortgage Files.................................. 8
SECTION 5. Release of Custodian's Mortgage Files
for Servicing................................................. 10
SECTION 6. Waiver by the Custodian....................................... 10
SECTION 7. Right of Inspection by Buyer and Third
Persons....................................................... 10
SECTION 8. Custodian's Fees and Expenses................................. 11
SECTION 9. Termination of Agreement...................................... 11
SECTION 10. Resignation and Removal of Custodian.......................... 11
SECTION 11. Limitation on Obligations of the
Custodian..................................................... 12
SECTION 12. Notices....................................................... 13
SECTION 13. Joint and Several Liability of Obligors....................... 14
SECTION 14. No Assignment or Delegation by the
Custodian..................................................... 15
SECTION 15. Controlling Law............................................... 15
SECTION 16. Agreement for the Exclusive Benefit of
Parties....................................................... 15
SECTION 17. Entire Agreement.............................................. 15
SECTION 18. Exhibits...................................................... 15
SECTION 19. Indulgences, Not Waivers...................................... 15
SECTION 20. Titles Not to Affect Interpretation........................... 16
SECTION 21. Provisions Separable.......................................... 16
SECTION 22. Representations and Warranties of the
Custodian..................................................... 16
</TABLE>
i
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 23. Limited Role of Trustee; Successor
Trustee....................................................... 17
SECTION 24. Counterparts.................................................. 18
EXHIBITS
EXHIBIT A - LETTER OF TRANSMITTAL.........................................A-1
EXHIBIT B - NOTICE TO THE CUSTODIAN.......................................B-1
EXHIBIT C - TRUST RECEIPT.................................................C-1
EXHIBIT D - NOTICE OF TERMINATION.........................................D-1
EXHIBIT E - NOTICE OF DEFAULT CERTIFICATE.................................E-1
EXHIBIT F - LETTER TO CUSTODIAN RE:
BUYER'S TRUST RECEIPT.........................................F-1
EXHIBIT G - LETTER TO CUSTODIAN RE:
ENDORSEE'S TRUST RECEIPT......................................G-1
EXHIBIT H - REQUEST FOR RELEASE OF DOCUMENTS..............................H-1
</TABLE>
ii
<PAGE>
<PAGE>
THIS CUSTODY AGREEMENT entered into as of March 29, 1996, by and among
INDUSTRY MORTGAGE COMPANY, L.P. ("IMCLP"), IMC CORPORATION OF AMERICA ("IMCA";
IMCLP and IMCA are each referred to as an "Obligor" and collectively as the
"Obligors"), BEAR STEARNS HOME EQUITY TRUST 1996-1 ("Buyer"), and BANK OF BOSTON
(the "Custodian"), recites and provides:
RECITALS
The Obligors and Buyer have entered into a Master Repurchase Agreement
dated as of March 29, 1996 and a Request/Confirmation between the related
Obligor and Buyer with respect to each transaction thereunder. The Master
Repurchase Agreement and the Request/Confirmations are hereinafter referred to
collectively as the "Repurchase Agreement."
The Obligors are obligated to service the HELs pursuant to the terms and
conditions of the Repurchase Agreement.
Each Obligor desires to deposit with the Custodian all Notes and
Mortgages evidencing the HELs, together with the other documents included in the
Mortgage Files related to the HELs, to be held by the Custodian as custodian for
Buyer and its assigns until otherwise instructed by Buyer, all in connection
with transactions under the Repurchase Agreement (each a "Transaction").
Buyer may transfer its interest in the HELs to one or more Third Persons
and the Custodian shall act as custodian for such Third Persons.
Custodian desires and is able to perform the duties and obligations as
custodian for Buyer as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Definitions. For the purposes of this Agreement, the
following terms shall have the indicated meanings unless the context or use
indicates another or different meaning and intent, the definitions of such terms
are equally applicable to the singular and the plural forms of such terms, the
words "herein," "hereof" and "hereunder" and other words of similar import refer
to this Agreement as a whole and not to any particular section or other
subdivision, and section references refer to sections of this Agreement. All
terms used herein and not defined shall have the respective meanings set forth
in the Repurchase Agreement.
<PAGE>
<PAGE>
"Agreement" shall mean this Custody Agreement, as supplemented or
amended from time to time.
"Business Day" shall mean any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of New York or the
Commonwealth of Massachusetts or any day on which a bank located in the State of
New York or the Commonwealth of Massachusetts or the New York Stock Exchange is
authorized or permitted to close for business.
"Custodial Register" shall mean the register maintained by Custodian
pursuant to Section 4(f), which reflects as to each HEL the Person to whom the
related Trust Receipt has been issued.
"Custodian" shall mean Bank of Boston, or its successor custodian.
"HEL" shall mean a first or second lien home equity loan evidenced by a
Note, which is secured by a Mortgage.
"IMCA" shall mean IMC Corporation of America.
"IMCLP" shall mean Industry Mortgage Company, L.P.
"Lender" shall mean the original lender as set forth in the Note, or any
successor or assignee under such Note.
"Loan Number" shall have the meaning set forth in Section 2(a) of this
Agreement.
"Loan Schedule" shall mean a schedule of HELs identifying each HEL: (1)
in the case of all HELs, by an Obligor's loan number, Mortgagor's name and
address (including the state and zip code) of the mortgaged property, whether
such HEL is a first or second lien home equity loan, whether such HEL bears a
fixed or adjustable interest rate, the loan-to-value ratio, the outstanding
principal amount as of a specified date, the initial interest rate borne by such
HEL, the original principal balance thereof, the current scheduled monthly
payment of principal and interest, the maturity of the related Note, the
property type, the occupancy status, the appraised value, the original term to
maturity and whether or not the HEL (including the related Note) has been
modified; and (2) in the case of adjustable rate HELs, the interest rate borne
by such HEL on the Purchase Date, the index and applicable determination date
for each adjustment period, the gross margin, the payment adjustment period (in
months), months to next payment adjustment, periodic payment adjustment cap,
lifetime payment adjustment cap, lifetime payment cap, interest rate adjustment,
periodic interest
2
<PAGE>
<PAGE>
adjustment cap and lifetime interest rate adjustment cap. Notwithstanding the
foregoing, however, any Loan Schedule not containing, as to any HEL, the address
(including the state and zip code) of the mortgaged property, the initial
interest rate borne by such HEL, the property type and/or the appraised value
shall be sufficient for all purposes hereunder so long as the related Obligor
provides such information as soon as practicable after the productions of such
Loan Schedule.
"Mortgage" means the mortgage, deed of trust or other instrument
creating a first or second lien on an estate in fee simple interest in real
property securing the Note.
"Mortgage Assignment" shall mean an assignment of the Mortgage in
recordable form, sufficient under the laws of the jurisdiction wherein the
related Mortgaged Property is located to reflect the sale of the Mortgage, which
assignment, notice of transfer or equivalent instrument may be in the form of
one or more blanket assignments covering the HELs secured by Mortgaged
Properties located in the same jurisdiction if permitted by law.
"Mortgage File" shall have the meaning set forth in Section 2(b) hereof.
"Mortgaged Property" shall mean the real property securing repayment of
a HEL.
"Mortgagor" shall mean the obliger on a Note.
"Note" shall mean any promissory note or other evidence of indebtedness
evidencing the indebtedness of a Mortgagor under a HEL.
"Notice Loan Schedule" shall have the meaning set forth in Section 4(b)
of this Agreement.
"Notice of Termination" shall mean the notice substantially in the form
of Exhibit D hereto.
"Obligor" shall refer to IMCA and IMCLP individually; the plural shall
refer to IMCA and IMCLP as joint and several obligors.
"Officer's Certificate" shall mean a certificate signed by (i) an
officer, authorized to sign an officer's certificate, of an Obligor or other
Person having officers, submitting a Mortgage File to the Custodian or (ii) the
closing attorney for the HEL. (The text of any particular Officer's Certificate
may be stamped upon a document constituting a portion of a Mortgage File so long
as such
3
<PAGE>
<PAGE>
stamped text is signed by an officer authorized to sign an Officer's
Certificate.)
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or political
subdivision thereof.
"Request/Confirmation" shall mean a written confirmation of a
Transaction substantially in the form attached as an exhibit to the Repurchase
Agreement.
"Servicer" shall mean an Obligor in its capacity as servicer of the
HELs.
"Third Person" shall mean a Person other than an Obligor, Buyer or the
Custodian which Person has acquired an interest in any HELs from Buyer and
continues to have an interest in such HELs.
"Trust Receipt" shall mean an instrument substantially in the form of
Exhibit C hereto.
SECTION 2. Delivery of Mortgage Files to Custodian.
(a) Representations of the Obligors. With respect to each Transaction,
each Obligor represents that it has, prior to the sale of each related HEL to
Buyer pursuant to the Repurchase Agreement, delivered to the Custodian those
documents designated in items 1-7 below that have been so identified by the
related Obligor in a Letter of Transmittal. All documents delivered to the
Custodian shall have been placed by the related Obligor or its representative in
an appropriate file folder, properly secured, and clearly marked with the name
of the Mortgaged Property and the loan number (the "Loan Number").
(b) By delivery of a Letter of Transmittal, substantially in the form of
Exhibit A hereto, each Obligor will from time to time certify that it has
delivered and released to the Custodian the Mortgage File for a HEL and has in
its possession the documents with respect to the HEL identified in the mortgage
loan schedule attached to the Letter of Transmittal as Schedule 1 (the "Loan
Schedule"). The Loan Schedule is the Loan Schedule referred to in the Repurchase
Agreement.
"Mortgage File" means the following documents (all of which together
constitute an original mortgage file):
(1) the original Note, endorsed, "Pay to the order of
______________, without recourse" and signed
4
<PAGE>
<PAGE>
in the name of the related Obligor by an authorized officer. If the Note has
been signed by a Person on behalf of the Mortgagor, the original power of
attorney or other instrument that authorized and empowered such Person to sign
or a copy of such power of attorney together with an Officer's Certificate
certifying that such copy represents a true and correct copy and that such
original has been duly recorded in the appropriate records depository for the
jurisdiction in which the Mortgaged Property is located. Such signature on the
Note shall be an original signature of such authorized officer. To the extent
that there is no room on the face of the Note for endorsements, the endorsement
may be contained on an allonge, if the law by which such Note is governed so
permits. Such allonge shall be firmly affixed to the Note so as to become a part
thereof;
(2) the original of any guarantee(s) executed in connection with
the Note;
(3) the original Mortgage, with evidence of recording thereon,
or, if the original Mortgage has not yet been returned from the
recording office, a copy of the original Mortgage together with a
certificate of either the closing attorney or an officer of the title
insurer which issued the related title insurance policy, certifying that
the copy is a true copy of the original of the Mortgage which has been
delivered by such attorney or officer for recording in the appropriate
recording office of the jurisdiction in which the Mortgaged Property is
located; and if the Note has been signed by a Person on behalf of the
Mortgagor, the original power of attorney or other instrument that
authorized and empowered such Person to sign or a copy of such power of
attorney together with an Officer's Certificate certifying that such
copy represents a true and correct copy and that such original has been
duly recorded in the appropriate records depository for the jurisdiction
in which the Mortgaged Property is located;
(4) the original Mortgage Assignment in blank for each HEL, in
form and substance acceptable for recording and signed in the name of
the last endorsee by an authorized officer;
(5) the originals of all intervening assignments of mortgage, if
any, with evidence of recording thereon or copies thereof certified by
the related recording office or, if the original of any such assignment
has not yet been returned from the recording office, a copy of the
original of any such
5
<PAGE>
<PAGE>
assignment without evidence of recording thereon together with a
certificate of an officer of the related Obligor certifying that the
copy is a true copy of the original of any such assignment which has
been delivered by such Obligor for recording in the appropriate
recording office of the jurisdiction in which the Mortgaged Property is
located;
(6) the originals of all assumption, modification, consolidation
or extension agreements, if any, with evidence of recording thereon; and
(7) as to each HEL, (i) the original mortgagee title insurance
policy or (ii) if such policy has not been issued, (a) a written
commitment or binder for such policy issued by a title insurer and an
officer's certificate of the title insurer certifying that all of the
requirements specified in such commitment have been satisfied or (b) a
preliminary title report issued by a title insurer in anticipation of
issuing a title insurance policy which evidences existing liens and
gives a preliminary opinion as to the absence of any encumbrance on
title to the Mortgaged Property except liens to be removed on or before
purchase by the Mortgagor or which constitute customary exceptions
acceptable to lenders generally.
SECTION 3. The Custodian's Receipt, Examination and Certification of
Mortgage Files and Issuance of Trust Receipt.
(a) The Custodian shall examine the documents received by it and
confirm, as of the date of the Trust Receipt, that on their faces:
(1) the Note and Mortgage each bears an original signature or
signatures purporting to be the signature or signatures of the Person or
Persons named as the maker and mortgagor or grantor or, in the case of
copies of the Mortgage permitted under Section 2, that such copies bear
a reproduction of such signature or signatures;
(2) (a) the principal amount of the indebtedness secured by the
Mortgage is identical to the original principal amount of the Note and
the original principal amount on the Loan Schedule; (b) the Note term is
the same as set forth on the Loan Schedule; and (c) the Note coupon is
the same as set forth on the Loan Schedule;
(3) the Note bears original endorsements which complete the chain
of ownership from the original
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holder or payee to the owner of the related Trust Receipt;
(4) the original of the Mortgage Assignment and any intervening
mortgage assignment bears the original signature purporting to be the
signature of the named mortgagee or beneficiary (and any other necessary
party, including subsequent assignors) or in the case of copies
permitted under Section 2, that such copies bear a reproduction of such
signature or signatures and that the Mortgage Assignment and any
intervening mortgage assignment complete the chain of title from the
originator to the owner of the related Trust Receipt;
(5) the power of attorney (if any), as specified in Sections
2(b)(1) and 2(b)(3), (A) bears an original signature purporting to be
the signature of the maker of the Note and the mortgagor or grantor of
the Mortgage and (B) bears evidence that such power of attorney was
recorded in the appropriate records depository for the jurisdiction
where the Mortgaged Property is located or in case of copies permitted
under Sections 2(b)(1) and (2)(b)(3), that such copies bear a
reproduction of such signatures and such evidence of recordation;
(6) if a Note or a Mortgage was executed by an attorney-in-fact,
the power of attorney specified in Sections 2(b)(1) and 2(b)(3) is
included and conforms to the requirements of such section; and
(7) there exists for each HEL one of the documents required by
clause (7) of the definition of Mortgage File.
(b) If the Custodian has determined that all the required documents are
included in the Mortgage Files delivered to it and that such related documents
on their faces satisfy the requirements enumerated in Sections 3(a)(1) through
3(a)(6) hereof, the Custodian shall (i) sign a copy of the related Letter of
Transmittal and return the Letter of Transmittal to the related Obligor, and
(ii) remit to Buyer or its designee a Trust Receipt with respect to such
Mortgage Files signed by the Custodian. If upon examination of the documents
included in any Mortgage File, the Custodian determines that such documents do
not satisfy the above requirements, or is unable to confirm that such documents
satisfy such requirements, the Custodian shall mark such HEL as an exception on
its Trust Receipt. Except as set forth in the preceding sentence, the Trust
Receipt of the Custodian with respect to each Mortgage File shall be deemed to
include a certification that the documents
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reviewed by the Custodian appear regular on their face and relate to the HEL
described in the Mortgage File and are in the possession and control of the
Custodian.
(c) Under no circumstances shall the Custodian be obligated to verify
the authenticity of any signature on any of the documents received or examined
by it in connection with this Agreement or the authority or capacity of any
person to execute or issue any such document, nor shall the Custodian be
responsible for the value, form, substance, validity, perfection, priority,
effectiveness or enforceability of any of such documents.
(d) Any provision of this Agreement to the contrary notwithstanding, the
related Obligor shall notify the Custodian of the need to examine a Mortgage
File and deliver a related Trust Receipt on the date on which such Trust Receipt
is required to be delivered.
SECTION 4. Possession of Mortgage Files.
(a) Possession of Mortgage Files on Behalf of Buyer. The Custodian shall
segregate and retain possession and custody of the Mortgage Files for the
exclusive use and benefit of Buyer and as agent and bailee of and custodian for
Buyer for all purposes until otherwise notified by Buyer pursuant to subsection
(b) hereof. The Custodian shall also make appropriate notations in the
Custodian's books and records reflecting that the Mortgage Files are owned by
Buyer unless otherwise notified by Buyer pursuant to subsection (b) hereof. The
Custodian shall not release any portion of the Mortgage Files to an Obligor or
to any other party without the prior written authorization of the owner of the
Trust Receipt.
(b) Possession of Mortgage Files on Behalf of Third Persons. The
Custodian acknowledges that Buyer may transfer its interest in the HELs to one
or more Third Persons. Upon receipt of written notice from Buyer, substantially
in the form of Exhibit B hereto, that Buyer has transferred its interest in the
HELs identified on a schedule to such notice (the "Notice Loan Schedule") to a
Third Person together with the Trust Receipt for amendment of the Schedule
attached thereto, the Custodian will promptly issue a Trust Receipt to such
Third Person and shall issue an amended Trust Receipt to Buyer, each of which
will reflect the transfer of Buyer's interest in certain HELs to such Third
Person. The notice sent by Buyer to the Custodian shall be in substantially the
form of Exhibit B hereto and shall (i) specify the name of the Third Person,
(ii) specify the address of the Third Person, which may be an address in care of
Buyer and (iii) have attached the Notice Loan Schedule. Upon receipt of any such
notice from Buyer, the Custodian
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shall (a) segregate and retain possession and custody of the Mortgage Files with
respect to the HELs in the Notice Loan Schedule as agent and bailee of and
custodian for such Third Person, and (b) make appropriate notations in the
Custodian's books and records reflecting that the Mortgage Files identified in
the Notice Loan Schedule are owned by such Third Person. The Custodian shall
segregate and maintain continuous custody of all Mortgage Files for the benefit
of the Person to whom it has issued a Trust Receipt. Buyer's agreements with
each holder of a Trust Receipt other than an affiliate of Buyer (each such
holder, a "Transferee") will specify that the Transferee cannot issue
instructions regarding the HELs or Mortgage Files unless Buyer has defaulted on
Buyer's obligations to such Transferee. Accordingly, the Custodian may not act
on requests from a Transferee to withdraw or otherwise dispose of HELs unless
the Transferee delivers to the Custodian an executed Notice of Default
Certificate in the form of Exhibit E hereto. The Custodian shall be entitled to
presume conclusively that the Notice of Default Certificate is properly executed
and that when delivered to the Custodian an Event of Default exists under
Buyer's agreement with its Transferee.
(c) Upon surrender of the Trust Receipt by Buyer to the Custodian, Buyer
may issue instructions regarding the HELs designated in the applicable Trust
Receipt, including instructions to withdraw HELs.
(d) In the event a Trust Receipt is lost, destroyed or otherwise
unavailable for surrender to the Custodian, Buyer will present to the Custodian
documentation in the form attached as Exhibit F or Exhibit G hereto. Upon
receipt by the Custodian of such documentation, Buyer will have the right to
issue instructions regarding the HELs covered by a Trust Receipt without
surrender of the related Trust Receipt.
(e) The Custodian understands that Buyer may need to examine HELs
subject to a Trust Receipt on a periodic basis. Such examination shall take
place on the premises of the Custodian. Buyer will give the Custodian one
Business Day's notice before Buyer makes an examination. Buyer's agreements with
each Transferee will grant Buyer the right to make such examinations.
(f) The Custodian shall cause to be kept at its corporate trust office a
register (the "Custodial Register") in which, subject to such reasonable
regulations as it may prescribe, the Custodian shall reflect the ownership of
HELs as confirmed by Trust Receipts as herein provided. The Custodial Register
shall be deemed to contain proprietary
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information and only Custodian and Buyer shall have access to such information.
SECTION 5. Release of Custodian's Mortgage Files for Servicing. From
time to time and as appropriate for the servicing of any of the HELs by an
Obligor, the Custodian is hereby authorized, upon written request and receipt of
the related Obligor and consent and acknowledgement of Buyer (to the extent
required by Exhibit H) in the form of Exhibit H, to release to the related
Obligor or its designee the related Mortgage File, or any documents contained
therein, set forth in such receipt to such Obligor. All documents so released to
an Obligor or its designee shall be held by it in trust for the benefit of Buyer
and Third Persons from time to time. The related Obligor or its designee shall
return to the Custodian the Mortgage File or such documents when such Obligor's
need therefor in connection with servicing no longer exists.
Upon the payment in full of any HEL by the mortgagor, and upon receipt
by the Custodian of an Obligor's request for release and acknowledgement by
Buyer in the form of Exhibit H, the Custodian shall promptly release the related
Mortgage File to the related Obligor.
Each Obligor agrees that, at the time any request for release of
Mortgage Files is made to the Custodian under this Agreement, Buyer shall be so
notified and a copy of any written request for release shall be furnished to
Buyer. Upon its receipt of any released Mortgage Files, the Obligor shall so
notify Buyer.
SECTION 6. Waiver by the Custodian. Notwithstanding any other provisions
of this Agreement, the Custodian shall not at any time exercise or seek to
enforce any claim, right or remedy, including any statutory or common law rights
of set-off, if any, that the Custodian might otherwise have against all or any
part of a Mortgage File or the proceeds thereof. The Custodian warrants that it
currently holds, and during the existence of this Agreement shall hold, no
adverse interest, by way of a security interest or otherwise, in any HEL.
SECTION 7. Right of Inspection by Buyer and Third Persons. Upon
reasonable notice to the Custodian, the Person or Persons for whom the Custodian
is acting as custodian, or their duly authorized representatives, may at any
time, during ordinary business hours, inspect and examine the Mortgage Files in
the possession and custody of the Custodian at such place or places where such
Mortgage Files are deposited.
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SECTION 8. Custodian's Fees and Expenses. The Custodian hereby
acknowledges that the Obligors have jointly and severally agreed to pay all fees
due and owing to, and except as otherwise provided herein, any expenses incurred
by the Custodian under this Agreement. The fees due to the Custodian for its
services hereunder shall be as set forth in a separate letter agreement between
the Custodian and the Obligors. Neither Buyer nor any Third Person shall have
any liability or obligation to pay any such fees or expenses (including, without
limitation, out-of-pocket expenses), and the duties of the Custodian hereunder
shall be independent of the Obligors' performance of their obligations to the
Custodian in respect of such fees and expenses.
SECTION 9. Termination of Agreement. This Agreement shall become
effective on and as of the date hereof and shall terminate upon the earlier of
(i) the Custodian's receipt of written Notice of Termination signed by the
Person or all of the Persons to whom the Custodian has issued Trust Receipts and
on whose behalf the Custodian is acting as agent, bailee and custodian or (ii)
the removal of all Mortgage Files from the possession of the Custodian pursuant
to the instructions of the Person or Persons entitled to request such removal
pursuant to this Agreement. The Custodian shall be entitled to rely, and shall
be protected in relying, on any such Notice of Termination delivered to it by
such Person or Persons. Upon such termination the Custodian shall deliver all
Mortgage Files then subject to this Agreement to the Person indicated in such
Notice of Termination or if no such Person is indicated, then to the Person or
Persons to whom the Custodian has issued Trust Receipts and for whom the
Custodian is acting on such date and the Custodian shall endorse the Notes
without recourse, representation and warranties and execute mortgage assignments
pursuant to any instruction by the Person on whose behalf the Custodian is
acting as agent and bailee pursuant to this Agreement.
SECTION 10. Resignation and Removal of Custodian.
(a) Resignation. The Custodian shall have the right, with or without
cause, to resign as the Custodian under this Agreement upon 90 days' prior
written notice to the Obligors, Buyer and, to the extent of its interest, any
Third Person. Following any such resignation, the Custodian shall continue to
act as the "Custodian" under this Agreement until it delivers the Mortgage Files
to a duly appointed successor Custodian as provided in (c) below, if any, or to
any designee specified by Buyer.
(b) Removal. Buyer may remove and discharge the Custodian from the
performance of its duties under this Agreement, by providing five (5) days'
written notice to the
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Custodian, signed by Buyer with a copy to the Obligors. Following any such
removal, the Custodian shall continue to act as the "Custodian" under this
Agreement until it delivers the Mortgage Files to a duly appointed successor
Custodian as provided in (c) below, if any, or to any designee specified by
Buyer.
(c) Appointment of Successor Custodian; Transfer of HELs. Upon
resignation or removal of the Custodian, Buyer shall have 60 days in which to
appoint and designate a successor to take possession of the Mortgage Files or
select one or more designees to take possession thereof. Upon receipt of written
direction regarding the foregoing from Buyer, the Custodian shall deliver all
Mortgage Files to the person so designated within 10 days following delivery to
the Custodian of such written notice. If a successor Custodian is appointed, the
Custodian shall deliver the Mortgage Files in accordance with the written
instructions of Buyer setting forth the name and address of the successor
Custodian. If Buyer fails to designate a successor Custodian or specify one or
more designees within such 60- day period, then the Custodian shall deliver
possession and custody to Buyer of the Mortgage Files at the address specified
in the Custodian's records. The Custodian shall, as part of the transfer of the
Mortgage Files, deliver the Mortgage Assignment for each HEL in recordable form
and shall endorse the Note without recourse, representation and warranties in
accordance with Buyer's instructions. Any successor Custodian hereunder shall be
a financial institution whose deposits are insured by FDIC, have a net worth of
not less than $10,000,000 and shall have secure vault storage facilities located
in the State of New York or such other State as Buyer and the Obligors may
agree, in which the Mortgage Files are to be retained.
SECTION 11. Limitation on Obligations of the Custodian. The Custodian
shall have no duties or obligations other than those specifically set forth
herein, and no further duties or obligations shall arise by implication or
otherwise. The Custodian agrees to use its best judgment and good faith in the
performance of such obligations and duties and shall incur no liability to the
Obligors for its acts or omissions hereunder, except as may result from its
negligence or willful misconduct. The Custodian shall also be entitled to rely
(and shall be protected in relying) upon written advice of its legal counsel and
to rely upon any written notice, document, correspondence, request or directive
received by it from Buyer, any Third Person (if applicable), or an Obligor, as
the case may be, that the Custodian believes to be genuine and to have been
signed or presented by the proper and duly authorized officer or representative
thereof, and shall not be obligated to inquire as to the authority or power of
any
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Person so executing or presenting such documents or as to the truthfulness of
any statements set forth therein. No provision of this Agreement shall require
the Custodian to expend or risk its own funds or otherwise incur financial
liability in the performance of its duties hereunder if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity is not
reasonably assured to it. The Obligors agree, jointly and severally, to
indemnify, defend and hold the Custodian harmless from and against any claim,
legal action, liability or loss that is initiated against or incurred by the
Custodian, including court costs and reasonable attorney's fees and
disbursements, and all of the Custodian's other cost, damage or expense incurred
in connection with the Custodian's performance of its duties under this
Agreement, but excluding any such claim, legal action, liability, loss, cost,
damage or expense caused by Custodian's negligence or willful misconduct.
Notwithstanding any of the foregoing provisions, however, the Custodian shall be
liable, without any right of indemnification by the Obligors, for all actual
damages resulting from the Custodian's loss or destruction of any document
included in any Mortgage File.
The Custodian shall at its own expense maintain at all times during the
existence of this Agreement and keep in full force and effect (a) fidelity
insurance, (b) theft and loss of documents insurance, (c) forgery insurance, and
(d) errors and omissions insurance. All such insurance shall be in amounts, with
standard coverage and subject to deductibles, as are customary for insurance
typically maintained by banks which act as the Custodian in similar
transactions. The Custodian shall, upon written request, provide to an Obligor,
or to any other Person as an Obligor shall direct, a certificate signed by an
authorized officer of the Custodian certifying that the foregoing insurance
policies are in full force and effect. The Custodian shall use its best efforts
to ensure that such insurance shall not terminate prior to receipt by Buyer by
registered mail of 30 days' prior written notice thereof.
SECTION 12. Notices. Any notice, demand or consent required or permitted
by this Agreement shall be in writing and shall be effective and deemed
delivered only when received by the party to which it is sent. Any such notice,
demand or consent shall be delivered in person or transmitted by a recognized
private courier service or deposited with the United States Postal Service,
certified mail, postage prepaid, return receipt requested, addressed as follows,
unless such address is changed by written notice hereunder:
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If to IMCLP:
Industry Mortgage Company, L.P.
3450 Bushwood Park Drive
Tampa Bay, Florida 33618
Attn: George Freeman
Telephone: (813) 932-2211
Telecopy: (813) 931-4840
If to IMCA:
IMC Corporation of America
3450 Bushwood Park Drive
Tampa Bay, Florida 33618
Attn: George Freeman
Telephone: (813) 932-2211
Telecopy: (813) 931-4840
If to Buyer:
Bear Stearns Home Equity Trust 1996-1
c/o Bear Stearns Mortgage Capital Corporation
245 Park Avenue
New York, New York 10167
Attn: John Garzone
Telephone: (212) 272-3853
Telecopy: (212) 272-7803
If to the Custodian:
Bank of Boston
100 Federal Street
Mail Location: 01-1B-06
Boston, Massachusetts 02110
Attn: Robert M. Pervoir
SECTION 13. Joint and Several Liability of Obligors. The Obligors agree
to be jointly and severally liable for the obligations of either Obligor
hereunder and all representations, warranties, covenants and agreements made by
or on behalf of either or both Obligors in this Agreement or in any exhibit
hereto or any document, instrument or certificate delivered pursuant hereto
shall be deemed to have been made by each Obligor, jointly and severally. The
joint and several obligation of each Obligor hereunder is absolute,
unconditional, irrevocable, present and continuing and, with respect to any
payment to be made pursuant hereto, is a guaranty of payment (and not of
collectability) and is in no way conditional or contingent upon the continued
existence of the other Obligor and is not and will not be subject to any
setoffs. Any notice or other communication provided to one Obligor pursuant
hereto shall be deemed to have been given to both Obligors and failure to be
sent any
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notice or communication contemplated hereby shall not relieve an Obligor from
its joint and several liability for the obligations of the other Obligor
hereunder.
SECTION 14. No Assignment or Delegation by the Custodian. The Custodian
shall not assign, transfer, pledge or grant a security interest in any of its
rights, benefits or privileges hereunder nor delegate or appoint any other
person to perform or carry out any of its duties, responsibilities or
obligations under this Agreement; any act or instrument purporting to effect any
such assignment, transfer, pledge, grant, delegation or appointment shall be
void.
SECTION 15. Controlling Law. This Agreement and all questions relating
to validity, interpretation, performance and enforcement shall be governed by
and construed, interpreted and enforced in accordance with the laws of the State
of New York, without regard to any New York or other conflict-of-law provisions.
SECTION 16. Agreement for the Exclusive Benefit of Parties. This
Agreement is for the exclusive benefit of the parties hereto, and their
respective successors and permitted assigns, and shall not be deemed to create
or confer any legal or equitable right, remedy or claim upon any other person
whatsoever except a Third Person to the extent rights are explicitly conferred
on any one or more Third Persons pursuant to this Agreement.
SECTION 17. Entire Agreement. This Agreement contains the entire
agreement among the parties hereto with respect to the subject matter hereof,
and supersedes all prior and contemporaneous agreements, understandings,
inducements and conditions, express or implied, oral or written, of any nature
whatsoever with respect to the subject matter hereof, including any prior
custody agreements. The express terms hereof control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms hereof.
This Agreement may not be modified or amended other than by an agreement in
writing signed by every party affected thereby.
SECTION 18. Exhibits. All Exhibits referred to herein or attached hereto
are hereby incorporated by reference into, and made a part of, this Agreement.
SECTION 19. Indulgences, Not Waivers. Neither the failure nor any delay
on the part of a party hereto to exercise any right, remedy, power or privilege
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same
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or of any other right, remedy, power or privilege, nor shall any waiver of any
right, remedy, power or privilege with respect to any occurrence be construed as
a waiver of such right, remedy, power or privilege with respect to any other
occurrence. No waiver shall be effective unless it is in writing and is signed
by the parties asserted to have granted such waiver.
SECTION 20. Titles Not to Affect Interpretation. The titles of sections
and subsections contained in this Agreement are for convenience only, and they
neither form a part of this Agreement nor are they to be used in the
construction or interpretation hereof.
SECTION 21. Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other provision or provisions may be invalid or unenforceable in whole or in
part.
SECTION 22. Representations and Warranties of the Custodian. The
Custodian represents, warrants to, and covenants with Buyer that on the date
hereof, and on the date of the issuance of any Trust Receipt by the Custodian:
(1) The Custodian is (i) a national banking association duly
organized, validly existing and in good standing under the laws of the
United States of America and (ii) duly qualified and in good standing
and in possession of all requisite authority, power, licenses, permits
and franchises in order to execute, deliver and comply with its
obligations under the terms of this Agreement;
(2) The execution, delivery and performance of this Agreement
have been duly authorized by all necessary corporate action and the
execution and delivery of this Agreement by the Custodian in the manner
contemplated herein and the performance of and compliance with the terms
hereof by it will not (i) violate, contravene or create a default under
any applicable laws, licenses or permits to the best of its knowledge,
or (ii) violate, contravene or create a default under any charter
document or bylaw of the Custodian or to the best of the Custodian's
knowledge any contract, agreement, or instrument to which the Custodian
or by which any of its property may be bound and will not result in the
creation of any lien, security interest or other charge or encumbrance
upon or with respect to any of its property;
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(3) The execution and delivery of this Agreement by the Custodian
and the performance of and compliance with its obligations and covenants
hereunder do not require the consent or approval of any governmental
authority or, if such consent or approval is required, it has been
obtained;
(4) This Agreement, and the original Trust Receipt issued
hereunder, when executed and delivered by the Custodian will constitute
valid, legal and binding obligations of the Custodian, enforceable
against the Custodian in accordance with their respective terms, except
as the enforcement thereof may be limited by applicable debtor relief
laws and that certain equitable remedies may not be available regardless
of whether enforcement is sought in equity or at law;
(5) Custodian does not believe, nor does it have any reason or
cause to believe, that it cannot perform each and every covenant
contained in this Agreement;
(6) To Custodian's knowledge after due inquiry, there is no
litigation pending or threatened which, if determined adversely to
Custodian, would adversely affect the execution, delivery or
enforceability of this Agreement, or any of the duties or obligations of
Custodian thereunder, or which would have a material adverse effect on
the financial condition of Custodian;
(7) Upon written request of a Buyer or any Third Person, and
assurance reasonably satisfactory to Custodian that its costs of doing
so will be timely reimbursed and that Custodian will receive reasonable
compensation (in addition to the compensation provided for elsewhere in
this Agreement) for doing so, Custodian shall take such steps as may be
reasonably requested by Buyer or any Third Person (consistent with
Custodian's undertakings hereunder) to protect or maintain any interest
in any real property securing the HEL owned by such owner and any
insurance applicable thereto.
SECTION 23. Limited Role of Trustee; Successor Trustee.
(a) The execution and delivery of this Agreement by the undersigned
Trustee is solely and strictly in its capacity as Trustee under that certain
Trust Agreement dated as of March 29, 1996 (the "Trust Agreement") by and
between State Street Bank and Trust Company of California, N.A., as
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Trustee (the "Trustee") and Bear Stearns Mortgage Capital Corporation, as
Depositor (the "Depositor"), and not individually, and has been undertaken at
the direction of the Depositor. It is hereby expressly acknowledged that any
obligations, liabilities, covenants, duties, representations and warranties
hereunder are those of the Buyer only and not of the Trustee. There shall be no
individual or corporate liability against or on the part of the Trustee (or any
of its officers, directors or employees) under this Agreement, and there shall
be no recourse against the Trustee in its individual or corporate capacity (or
any of its directors, officers or employees), or against any of its properties
or assets, for recovery of or as a result of any claim, debt, liability or
obligation (whether of payment or performance) of or against the Buyer under or
pursuant to this Agreement (whether arising out of or relating to any covenant,
agreement, representation or warranty, or otherwise). Recourse against the Buyer
for any claims, liabilities, debts or obligations under this Agreement is
limited to the assets and properties of the trust established by the Trust
Agreement.
(b) It is hereby acknowledged that the rights and remedies of the Buyer
under or pursuant to this Agreement shall automatically be transferred to and
vest in any successor trustee under the Trust Agreement, in the event of the
resignation or removal of the Trustee as trustee thereunder.
SECTION 24. Counterparts. For the purpose of facilitating the execution
of this Agreement as herein provided and for other purposes, this Agreement may
be executed simultaneously in any number of counterparts, each of which
counterpart shall be deemed to be an original, and such counterparts shall
constitute and be one and the same instrument.
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IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the date set forth above.
INDUSTRY MORTGAGE COMPANY, L.P.
By: Industry Mortgage Corporation,
its general partner
By:
Name:
Title:
IMC CORPORATION OF AMERICA
By:
Name:
Title:
BANK OF BOSTON, as Custodian
By:
Name:
Title:
BEAR STEARNS HOME EQUITY TRUST 1996-1
By: State Street Bank and Trust
Company of California, N.A., as
Trustee
By:
Name:
Title:
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EXHIBIT A
LETTER OF TRANSMITTAL
To: Bank of Boston From: [OBLIGOR]
16120 U.S. Highway 19, North [ADDRESS]
Suite 212
Clearwater, Florida 34624
Loan Number: Mortgaged Property:
Pursuant to the Custody Agreement dated as of March 29, 1996 (the
"Custody Agreement") among Bank of Boston (the "Custodian"), Industry Mortgage
Company, L.P. ("IMCLP"), IMC Corporation of America ("IMCA"; IMCLP and IMCA are
each referred to as an "Obligor" and collectively as the "Obligors"), and Bear
Stearns Home Equity Trust 1996-1, the Obligor hereby delivers to you (i) the
documents described below in connection with the HELs referred to above and (ii)
an updated Loan Schedule identifying each HEL in your custody (including the HEL
referred to above).
We understand that the following is a checklist that lists the materials
for transmittal in brief fashion; it is not intended to describe fully all the
required characteristics of each item. We further understand that each item sent
to the Custodian must comply with the applicable requirements of the Custody
Agreement, and that all required documents must be delivered together before the
Custodian will accept the HEL.
Section 2
<TABLE>
<S> <C> <C>
(1) ( ) Letter of Transmittal (original and one copy)
(2) ( ) Original Note (endorsed in blank), including all intervening endorsements
( ) Power of Attorney (if applicable)
(3) ( ) Original of any loan agreement and guarantee executed in connection with
the Notes, if applicable
(4) ( ) Mortgage
( ) original, or
( ) Conformed Copy, together with the appropriate certificate
(5) ( ) Assignment of Mortgage in blank
( ) original, or
( ) Conformed Copy, together with the appropriate certificate
(6) ( ) Intervening Mortgage Assignment, if any
( ) original, or
( ) Conformed Copy, together with the appropriate certificate
(7) ( ) originals of all assumption, modification, consolidation or extension
agreements
(8) ( ) Lender's Title Insurance Policy
( ) original, or
( ) Written commitment issued by the title insurance company, together
with the
appropriate certificate, or
( ) Preliminary Title Report
(9) ( ) other.
</TABLE>
A-1
<PAGE>
<PAGE>
Submitted
By:
Date:
Telephone Number:
The Custodian acknowledges receipt of the documents referred to and agrees to
hold and retain possession thereof pursuant to the terms of the Custody
Agreement.
BANK OF BOSTON, as Custodian
By:
Name:
Title:
A-2
<PAGE>
<PAGE>
EXHIBIT B
NOTICE TO THE CUSTODIAN
TO: Bank of Boston, as Custodian
FROM: Bear Stearns Home Equity Trust 1996-1
DATE:
Pursuant to the Custody Agreement dated as of March 29, 1996, among
Industry Mortgage Company, L.P., IMC Corporation of America, Bear Stearns Home
Equity Trust 1996-1 and Bank of Boston, as Custodian ("Custody Agreement"), the
undersigned hereby notifies you that it has transferred its interest in the
Mortgage Files with respect to the HELs identified in the mortgage loan schedule
attached hereto (the "Notice Loan Schedule") to [TRANSFEREE NAME AND ADDRESS].
Included with this notice is the original Trust Receipt for amendment of
the Loan Schedule attached thereto. Capitalized terms used herein without
definition are as defined in the Custody Agreement.
BEAR STEARNS HOME EQUITY TRUST 1996-1
By: State Street Bank and Trust Company
of California, N.A., as Trustee
By:
Name:
Title:
cc: [OBLIGOR]
B-1
<PAGE>
<PAGE>
EXHIBIT C
TRUST RECEIPT
[Date]
Bear Stearns Home Equity Trust 1996-1
Re: Custody Agreement dated as of March 29, 1996,
among Industry Mortgage Company, L.P., IMC
Corporation of America, Bear Stearns Home Equity
Trust 1996-1 and Bank of Boston, as Custodian
Gentlemen:
In accordance with the provisions of Paragraph 3 of the above-referenced
Custody Agreement (the "Custody Agreement"), the undersigned, as Custodian,
hereby certifies that as to each HEL described in the Loan Schedule, a copy of
which is attached hereto, it has reviewed the Mortgage File and has determined
that, except as set forth on the Exception Report attached hereto, (i) all
documents required to be delivered to it pursuant to the Custody Agreement are
in its possession, (ii) such documents have been reviewed by it and appear
regular on their face and relate to such HEL, and (iii) based on its examination
of the foregoing documents, such documents on their face satisfy the
requirements set forth in Sections 3(a)(1) through 3(a)(7) of the Custody
Agreement.
The Custodian hereby confirms that it is holding each such Mortgage File
as agent and bailee of and custodian for and for the exclusive use and benefit
of Bear Stearns Home Equity Trust 1996-1 ("BS Trust") or its transferee pursuant
to the terms of the Custody Agreement.
This Trust Receipt is not a negotiable instrument. BS Trust may,
however, transfer this receipt by endorsement to one other party. The party that
takes this receipt from BS Trust or its affiliate by special endorsement may
only transfer this receipt by a second endorsement in BS Trust's or its
affiliate's favor.
The Custodian will accept and act on instructions with respect to the
HELs only upon surrender of this receipt at its Corporate Trust Office, 100
Federal Street, Mail Location: 01-1B- 06, Boston, Massachusetts 02110,
Attention: Robert M. Pervoir. If the receipt has been endorsed and is held by a
Person other than BS Trust or one of its affiliates, we will accept and act on
instructions from the endorsee only if the attached Notice of Default
Certificate is executed and delivered to us stating that an Event of Default has
occurred under a repurchase agreement relating to this Trust Receipt between BS
Trust and the endorsee.
C-1
<PAGE>
<PAGE>
All initially capitalized terms used herein shall have the meanings
ascribed to them in the above-referenced Custody Agreement.
BANK OF BOSTON,
as Custodian
By:
Name:
Title:
C-2
<PAGE>
<PAGE>
EXHIBIT D
NOTICE OF TERMINATION
[date]
TO: Bank of Boston, as Custodian
FROM: Bear Stearns Home Equity Trust 1996-1
DATE:
You are hereby notified that the Custody Agreement, dated as of March
29, 1996, among Industry Mortgage Company, L.P., IMC Corporation of America,
Bear Stearns Home Equity Trust 1996-1 and Bank of Boston, as Custodian, is
terminated pursuant to Section 9 of such Agreement and you are instructed to
deliver all property in your possession with respect to such Agreement to [the
undersigned Person or Persons as their interests in the HELs appear on your
records].
BEAR STEARNS HOME EQUITY TRUST 1996-1
By: State Street Bank and Trust Company
of California, N.A.,
as Trustee
By:
Name:
Title:
[ ]
By:
Name:
Title:
cc: [OBLIGOR]
D-1
<PAGE>
<PAGE>
EXHIBIT E
NOTICE OF DEFAULT CERTIFICATE
, 199_
Bank of Boston,
as Custodian
100 Federal Street
Mail Location: 01-1B-06
Boston, Massachusetts 02110
Gentlemen:
As the transferee of a Trust Receipt for certain HELs, which Trust
Receipt is attached hereto, we hereby notify you that an event of default has
occurred under our agreement with __________________________ and we are entitled
to receive the HELs subject to the aforementioned Trust Receipt.
[ ]
By:
Name:
Title:
Notice Received by
Custodian on [Date]:
By:
Title:
Date:
E-1
<PAGE>
<PAGE>
EXHIBIT F
Bank of Boston,
as Custodian
100 Federal Street
Mail Location: 01-1B-06
Boston, Massachusetts 02110
Re: Custody Agreement dated as of March 29, 1996,
among Industry Mortgage Company, L.P., IMC
of America, Bear Stearns Home Equity Trust
1996-1 and Bank of Boston, as Custodian
Gentlemen:
On [date] you issued a trust receipt in the name of __________________
evidencing entitlement to the HELs described on Schedule A hereto and held by
you as Custodian. You issued that receipt pursuant to our agreement with
Industry Mortgage Company, L.P. and IMC Corporation of America, dated as of
March 29, 1996. The trust receipt has been [lost, destroyed, etc.]. Every effort
was made to recover the receipt; those efforts were unsuccessful. It is,
therefore, now unavailable for surrender to you.
At the time of its [loss, destruction, etc.], the receipt was held by us
under [the terms of original issue, special endorsement]. Since its [issuance,
endorsement] to us, we have not sold, assigned, transferred, pledged or
otherwise granted an interest in the trust receipt that has not been released
prior to the date hereof. Accordingly, this letter authorizes you to act on our
instructions regarding such HELs without surrender of the receipt to you.
We hereby agree to indemnify and hold you harmless against any loss,
liability or expense that you may incur as a result of acting on our
instructions regarding such HELs without our surrender of the receipt to you,
excluding, however, any such loss, liability or expense caused by your
negligence or willful misconduct.
If the trust receipt is ever recovered by us, we will immediately notify
you, cancel the receipt and surrender the receipt to you.
BEAR STEARNS HOME EQUITY TRUST 1996-1
By: State Street Bank and Trust Company of
California, N.A.,
as Trustee
By:
Name:
Title:
F-1
<PAGE>
<PAGE>
EXHIBIT G
Bank of Boston,
as Custodian
100 Federal Street
Mail Location: 01-1B-06
Boston, Massachusetts 02110
Re: Custody Agreement dated as of March _, 1996,
among Industry Mortgage Company, L.P., IMC
of America, Bear Stearns Home Equity Trust
1996-1 and Bank of Boston, as Custodian
Gentlemen:
On [date] you issued a trust receipt in the name of Bear Stearns Home
Equity Trust 1996-1 ("BS Trust") evidencing entitlement to the HELs described on
Schedule _ hereto and held by you in the name of ____________________, as
Custodian. You issued that receipt pursuant to our agreement with Industry
Mortgage Company, L.P. and IMC Corporation of America, dated as of March __,
1996. The trust receipt has been [lost, destroyed, etc.]. Every effort was made
to recover the receipt; those efforts were unsuccessful. It is, therefore, now
unavailable for surrender to you.
At the time of its [loss, destruction, etc.], the receipt was held by
[name of transferee] under a special endorsement by us. We have attached to this
letter a special endorsement, from [name of transferee] conveying to us its
interest in the trust receipt and authorizing us to issue instructions regarding
the HELs subject thereto without surrender of the receipt. [name of transferee]
has represented to us that it has not sold, assigned, transferred, pledged or
otherwise granted an interest in the trust receipt to any party other than BS
Trust. Accordingly, this letter authorizes you to act on our instructions
regarding such HELs without surrender of the receipt to you.
We hereby agree to indemnify and hold you harmless against any loss,
liability or expense that you may incur as a result of acting on our
instructions regarding such HELs without our surrender of the receipt to you,
excluding, however, any such loss, liability or expense caused by your
negligence or willful misconduct.
If the trust receipt is ever recovered by us, we will immediately notify
you, cancel the receipt and surrender the receipt to you.
BEAR STEARNS HOME EQUITY TRUST 1996-1
By: State Street Bank and Trust Company
of California, N.A.,
as Trustee
By:
Name:
Title:
G-1
<PAGE>
<PAGE>
EXHIBIT H
REQUEST FOR RELEASE OF DOCUMENTS
To: Bank of Boston,
as Custodian
100 Federal Street
Mail Location: 01-1B-06
Boston, Massachusetts 02110
Re: Custody Agreement dated as of March 29, 1996,
among Industry Mortgage Company, L.P., IMC
of America, Bear Stearns Home Equity Trust
1996-1 and Bank of Boston, as Custodian
In connection with the administration of HELs held by you as Custodian
for Buyer and Third Persons from time to time pursuant to the above-referenced
Custodial Agreement, we hereby request the release, and acknowledge receipt, of
the [specify documents] for the HELs described below, for the reason indicated.
Mortgagor's Name Address and Zip Code:
HEL Number:
Reason for Requesting Documents (check one):
<TABLE>
<S> <C>
____ 1. HEL paid in full. (The Custodian shall delete the HEL from the
applicable Loan Schedule and send the amended Loan Schedule to
Buyer and any related Third Person.)
____ 2. Repurchase of HEL pursuant to the Repurchase Agreement. (The
Custodian shall delete the HEL from the applicable Loan Schedule
and send the amended Loan Schedule to Buyer and any related Third
Person.)
____ 3. Delivery of substituted HEL. (The Custodian is hereby
authorized to delete the HEL from the applicable Loan Schedule
attached hereto and send the amended Loan Schedule to Buyer and
any related Third Person.)
____ 4. HEL liquidated by _________________. (The Custodian is hereby
authorized to delete the HEL from the applicable Loan Schedule
attached hereto and send the amended Loan Schedule to Buyer and
any related Third Person.)
____ 5. HEL in foreclosure or otherwise released for
servicing.
</TABLE>
If box 1, 2, 3 or 4 above is checked, and if all or part of the Mortgage
Files were previously released to the Obligor, please release to such Obligor
its previous request and receipt on file with you, as well as any additional
documents in your possession relating to the specified HEL.
H-1
<PAGE>
<PAGE>
If box 5 above is checked, upon the return of all of the above documents
to you as the Custodian, please acknowledge your receipt by signing in the space
indicated below, and returning this form.
The Obligor understands and agrees that all documents delivered to the
Obligor or its subservicer pursuant to this request for release (other than with
respect to Items 1-4) shall be returned to the Custodian no later than
twenty-one (21) days from the date hereof. Capitalized terms used and not
otherwise defined herein shall have the meanings set forth in the Custody
Agreement.
[OBLIGOR]
By:
Name:
Title:
Date:
Acknowledged and Agreed:
BEAR STEARNS HOME EQUITY TRUST
1996-1
By: State Street Bank and Trust
Company of California, N.A.,
as Trustee
(Required if documentation relating to more than three (3) Mortgage Files are
outstanding or the release of a Note or Mortgage Assignment is requested.)
By:
Name:
Title:
Date:
H-2
<PAGE>
<PAGE>
CUSTODIAL AGREEMENT
THIS CUSTODIAL AGREEMENT (the "Agreement") is made and entered into as of
the 1st day of March 1996, by and among THE FIRST NATIONAL BANK OF BOSTON, a
national banking association (the "Custodian"), INDUSTRY MORTGAGE COMPANY, L.P.,
a Delaware limited partnership ("Industry"), and IMC CORPORATION OF AMERICA, a
Delaware corporation ("IMC" and, collectively with Industry, the "Borrowers"),
and RESIDENTIAL FUNDING CORPORATION, a Delaware corporation ("Lender").
A. The Borrowers and the Lender are entering into a Warehousing Credit and
Security Agreement of even date herewith, as the same may hereafter be amended
from time to time (the "Credit Agreement"), under which advances made by the
Lender to the Borrowers ("Advances") will be secured by specifically pledged
mortgage loans.
B. The Lender and the Borrowers desire to deposit with the Custodian from
time to time promissory notes evidencing such specifically pledged mortgage
loans ("Pledged Notes") and other documentation related to such specifically
pledged mortgage loans, as specified in this Agreement or otherwise from time to
time by the Lender (the "Collateral Documents"), to be held by the Custodian
acting as agent and bailee of the Lender.
C. Custodian is willing to act in such capacity under the terms and
conditions set forth herein.
NOW THEREFORE, in consideration of the premises and the mutual agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Definitions. Terms capitalized and used herein shall have the
meanings given them elsewhere herein or, if not defined elsewhere herein, shall
have the following meanings:
"Advance" shall mean a loan made by the Lender to either Borrower under
the Credit Agreement.
"Approved Subwarehousing Agreement" means a loan and security agreement
acceptable to Lender between either of the Borrowers and a Subwarehousing
Borrower acceptable to the Lender, pursuant to which such Borrower makes
loans to such Subwarehousing Borrower against the pledge to such Borrower of
Mortgage Loans to secure such loans. The Lender shall from time to time
provide the Custodian with a list of Approved Subwarehousing Agreements
and Subwarehousing Borrowers, and the Custodian may conclusively rely on
that list.
-1-
<PAGE>
<PAGE>
"Business Day" means any day excluding Saturday or Sunday and excluding
any day on which national banking associations are closed for business.
"Company Securities" means securities (other than Mortgage-backed
Securities) issued by Industry, a subsidiary of Industry other than IMC, or
a trust created by Industry or a subsidiary of Industry other than IMC,
that are backed by Mortgage Loans.
"FHLMC" means the Federal Home Loan Mortgage Corporation and any
successor thereto.
"FNMA" means the Federal National Mortgage Association and any successor
thereto.
"GNMA" means the Government National Mortgage Association and any
successor thereto.
"Investor" means FNMA, FHLMC or a financially responsible private
institution which is deemed acceptable by the Lender from time to time in
its sole discretion.
"Mortgage" means a mortgage or deed of trust on improved real property.
"Mortgage-backed Securities" means GNMA, FNMA or FHLMC securities that
are backed by Mortgage Loans.
"Mortgage Loan" means any loan evidenced by a Mortgage Note and secured
by a Mortgage.
"Mortgage Note" means a promissory note secured by a Mortgage.
"Pledged Mortgage" shall mean Mortgage Loans (other than Subwarehousing
Mortgage Loans), including all Mortgage Notes and Mortgages evidencing such
Mortgage Loans, which from time to time are delivered or caused to be
delivered to the Custodian or in respect of which an Advance has been made
by the Lender, including without limitation all Mortgage Loans in respect of
which Wet Settlement Advances have been made by the Lender
"Pledged Subwarehousing Mortgage" shall mean a Mortgage Loan in respect
of which an Advance has been made by the Lender, of which the Borrowers
otherwise pledge to the Lender hereunder, all Subwarehousing Notes
evidencing the same, all of the Borrowers' right, title and interest in and
to all Approved Subwarehousing Agreements and other agreements, documents
and instruments governing, evidencing, securing or otherwise relating to
the same, and all of the Borrowers'
-2-
<PAGE>
<PAGE>
right, title and interest in and to all Subwarehousing Mortgage Loans
securing such Subwarehousing Loans, including all Mortgage Notes and
Mortgages evidencing or securing such Subwarehousing Mortgage Loans.
"Release Amount" shall mean in connection with any Pledged Mortgage or
Pledged Subwarehousing Mortgage shall be (i) prior to the occurrence of an
Event of Default under the Credit Agreement, the principal amount of the
Advances made against such Pledged Mortgage or the Subwarehousing Loan
secured by such Pledged Subwarehousing Mortgage, and (ii) from and after
the occurrence and during the continuance of an Event of Default, the
amount paid to the Lender in a commercially reasonable disposition of
a Pledged Mortgage or the amount of the Subwarehousing Loan secured by a
Pledged Subwarehousing Mortgage.
"Subwarehousing Borrower" means the Person to which the Borrowers make
Subwarehousing Loans pursuant to any Approved Subwarehousing Agreement.
"Subwarehousing Loan" means a loan made by either Borrower to any
Subwarehousing Borrower pursuant to any Approved Subwarehousing Agreement,
provided that (i) such loan is secured by a Subwarehousing Mortgage Loan
with respect to which the Collateral Documents have been delivered to the
Custodian, and (ii) such loan is evidenced by a Subwarehousing Note that has
been delivered to the Lender.
"Subwarehousing Mortgage Loan" means a Mortgage Loan pledged by a
Subwarehousing Borrower to either Borrower pursuant to an Approved
Subwarehousing Agreement.
"Subwarehousing Note" means a promissory note executed and delivered by
a Subwarehousing Borrower to either Borrower to evidence Subwarehousing
Loans made by such Borrower pursuant to an Approved Subwarehousing
Agreement.
"Wet Settlement Advance" means an Advance in respect of the closing or
settlement of a Mortgage Loan, based upon delivery to the Lender of a Bailee
Pledge Agreement, pending subsequent delivery of the Collateral Documents as
provided in this Agreement.
SECTION 2. Delivery of Documents to Custodian. Under the terms of the
Credit Agreement, the Borrowers are required to deliver the Pledged Note and the
Collateral Documents related to each Pledged Mortgage and Pledged Subwarehousing
Mortgage to the Lender, either after the making of a Wet Settlement Advance
against such Pledged Mortgage or as a condition precedent to the Lender making
any other Advance against such Pledged Mortgage or the Subwarehousing Loan
secured by such Pledged Subwarehousing
-3-
<PAGE>
<PAGE>
Mortgage. In accordance with the terms of this Agreement, the Custodian agrees
to accept delivery of the Pledged Notes and the Collateral Documents as the
agent and bailee for the Lender.
SECTION 3. Procedure for Recuestinq Advances. Notwithstanding anything to
the contrary contained in the Credit Agreement, on the date the Borrowers wish
the Lender to make an Advance under the Credit Agreement, the Borrowers shall:
(a) Not later than 10:30 a.m. (Eastern time) on the date an Advance is
requested, deliver to the Lender the following:
(1) an original Request for Advance in the form of Exhibit C-SF or
Exhibit C-SUBW attached to the Credit Agreement (which may be
electronically transmitted);
(2) in the case of a request for a Wet Settlement Advance, an executed
Bailee Pledge Agreement in the form of Exhibit M attached to the
Credit Agreement;
(3) in the case of a request for a Wet Settlement Advance, a copy of
the settlement or funding check, payable to the closing agent, used to
fund the related Pledged Mortgage.
(b) In the case of an Advance other than a Wet Settlement Advance, not
later than 9:00 a.m. (Eastern time) on the date an Advance is requested,
deliver to the Custodian the following:
(1) an original signed Mortgage Note evidencing the related Pledged
Mortgage, and one copy thereof;
(2) a copy of the Mortgage securing the related Pledged Mortgage,
certified as true by the closing agent;
(3) an executed assignment of the Mortgage to the Lender in rGcordable
form;
(4) copies of all interim assignments of the Mortgage, certified as
true by the closing agent;
(5) completed Company Worksheet Concerning Applicability of Section 32
of Regulation Z (12 CFR Section 226.32) and, if Section 32 applies,
copies of he disclosure and other related documentation delivered to
the mortgagor, evidencing compliance with Section 32.
Not later than 10:30 a.m. (Eastern time) on the date any Advance(s) other than
Wet Settlement Advances are requested, the Custodian shall notify the Lender of
the Pledged Mortgages and Pledged Subwarehousing Mortgages with respect to which
the required
-4-
<PAGE>
<PAGE>
documents have been received, in a form designated by the Lender. In the case of
a Wet Settlement Advance, the Borrowers shall deliver to the Custodian the
documents required under clause (b) within five Business Days after the date on
which the related Advance is made.
Not later than 12:00 noon (Eastern time) on any date on which Advances are
made, the Lender will deliver to the Custodian a report identifying the Mortgage
Loans against which Advances were made that day, in the form of Exhibit A hereto
(the "Loans Warehoused Report").
SECTION 4. Duties of Custodian.
(a) Collateral Review and Daily Reporting. Upon receipt of the Pledged
Note and the Collateral Documents for any Pledged Mortgage, as described in
Section 3(b) above, the Custodian will examine the Pledged Note and
Collateral Documents in accordance with the Document Review Requirements
prescribed by the Lender. A copy of the Document Review Requirements as
currently in effect are attached hereto as Exhibit B. The Lender reserves
the right, upon five (5) Business Days' prior written notice to the
Custodian, to modify the Document Review Requirements to conform to current
legal requirements or Lender practices (provided, however, that
modifications to conform to current Lender practices do not materially
increase the review responsibilities of the Custodian unless such Lender
practices conform to industry practices). If any Pledged Mortgages are
being pledged to the Lender in connection with (i) a bulk purchase of
Mortgage Loans by the Borrower or (ii) the release of a Lien on such
Mortgage Loans by another lender to the Borrowers, the Custodian shall
provide to the Lender a copy of the documentation confirming such purchase
and/or release no later than 10:30 a.m. (Eastern time) on the date of the
requested Advances against such Pledged Mortgages. After the Custodian
completes its examination of the Pledged Notes and the Collateral
Documents, the Custodian shall deliver to the Lender, with a copy to the
Borrowers, no later than 4:00 p.m. (Eastern time) on each Business Day, a
daily collateral status report in the form of Exhibit C hereto, certifying
that such Collateral complies with the Document Review Requirements or, if
it fails to so comply, accompanied by a written statement of the manner in
which the Pledged Note and the Collateral Documents fail to satisfy the
Document Review Requirements. If, subsequent to the delivery of a daily
collateral status report with respect to a Pledged Mortgage, the Custodian
discovers any defect with respect to a Pledged Note or any Collateral
Document, the Custodian shall give written specification of such defect to
the Lender and the Borrowers. Delivery of the daily collateral status
report shall be made
-5-
<PAGE>
<PAGE>
by telecopy (with a hard copy being mailed the same day) to the Lender
and the Borrowers.
(b) Possession of Pledged Notes. Following the Custodian's receipt of a
Pledged Note and the related Collateral Documents, the Custodian shall
retain possession and custody thereof in trust for the benefit of the
Lender and as the agent and bailee of the Lender for purpose of perfecting
the Lender's security interest therein under applicable law. The Pledged
Notes shall be retained by the Custodian and shall, subject to the
provisions of Section 5 hereof, be segregated from any property held by the
Custodian for the Borrowers or any other Person. The Custodian shall also
make appropriate notations in the Custodian's books and records reflecting
that each Pledged Note has been pledged to the Lender and that the Lender
has acquired and holds a security interest therein. The Custodian shall
have secure vault storage facilities in which the Pledged Notes and the
Collateral Documents shall be retained. Notwithstanding any other provision
of this Agreement, the Custodian shall not at any time exercise or seek to
enforce any claim, right or remedy, including any statutory or common law
rights of set-off, that the Custodian might otherwise have against all or
any part of the Pledged Notes and the Collateral Documents or the proceeds
thereof.
(c) Weekly Reports. The Custodian shall deliver to the Lender, on the
first Business Day of each week, as of the opening of business on such day,
a weekly collateral status report in the form of Exhibit D hereto,
confirming the Advances outstanding, and Pledged Notes and Collateral
Documents received, and setting forth (1) Mortgage Loans with respect to
which the Mortgage Note and Collateral Documents have not been delivered
within five Business Days after the making of a Wet Settlement Advance, (2)
Mortgage Loans shipped to an Investor or pool custodian for purchase and
not purchased within thirty (30) days after shipment, if any, (3) Mortgage
Loans shipped to the Borrowers for correction pursuant to a Trust Receipt
and not returned within ten Business Days, (4) Mortgage Loans against which
an Advance has been outstanding for more than the maximum period permitted
under the Credit Agreement, and (5) the amount of Advances outstanding
under each sublimit set forth in the Credit Agreement. Delivery of the
foregoing shall be made by hand or by telecopy (with a hard copy being
mailed the same day).
(d) Other Information. The Custodian shall, promptly upon receipt, send
to the Lender by facsimile copies of all notices given to the Custodian of
a security interest in or other encumbrance in any of the Collateral
Documents.
-6-
<PAGE>
<PAGE>
SECTION 5. Release of Pledged Notes by the Custodian.
(a) To the Lender. Subject to the provisions of this subparagraph, the
Custodian is hereby authorized and directed, at any time and from time to
time, to deliver to the Lender or to its designee all or any of the Pledged
Notes and the Collateral Documents, upon receipt by the Custodian of a
written request of the Lender (with a copy to the Borrowers). Within one
(1) Business Day following the Custodian's receipt of the Lender's written
request, the Custodian shall send the applicable Pledged Notes and
Collateral Documents to the Lender or its designee. All Pledged Notes and
Collateral Documents to be delivered by the Custodian to the Lender or its
designee shall be delivered in person, by reputable overnight courier, by
registered mail or by other means agreed upon between the Lender and the
Custodian.
(b) To the Borrowers. From time to time, unless and until the Lender has
notified the Custodian that an Event of Default has occurred and is
continuing, upon the Custodian's receipt from the Borrowers of the
Borrowers' Shipping Request in the form of Exhibit E hereto ("Shipping
Request"), the Custodian is hereby authorized to deliver the Pledged Notes
to the Borrowers against a Trust Receipt (Borrowers) in the form of Exhibit
F hereto; provided, that the aggregate principal balance of all Pledged
Mortgages with respect to which the Mortgage Note or any Collateral
Document is at any time in the Borrowers' possession pursuant to a Trust
Receipt shall not exceed $5,000,000. Trust Receipts shall be prepared by
the Custodian.
(c) To Pool Custodian. From time to time, unless and until the Lender
has notified the Custodian that an Event of Default has occurred and is
continuing, upon the receipt from the Borrowers of the Borrowers' Shipping
Request, the Custodian is hereby authorized to transfer the Pledged Notes
and Collateral Documents to itself, in its capacity as custodian for the
purpose of holding a pool of Pledged Mortgages that will secure or
otherwise support a Mortgage-backed Security or a Company Security (in
such capacity, Custodian is hereinafter referred to as "Pool Custodian").
Upon any such transfer, the Lender will continue to have a security
interest in the Pledged Notes and Collateral Documents so transferred. The
Pool Custodian shall hold the Pledged Notes and Collateral Documents in
trust for the Lender, and subject to the Lender's direction and control.
The Pool Custodian shall immediately upon the Lender's request deliver the
Pledged Notes and the Collateral Documents to the Lender. The Borrowers
shall, not less than ten days prior to the date of issuance of any
Mortgage-backed Securities or Company Securities, notify the Custodian of
the underwriter(s) or placement agent(s) for such securities. The Custodian
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shall notify the underwriter(s) or placement agent(s) for any such
Mortgage-backed Securities or Company Securities of the Lender's security
interest in the Pledged Mortgages. The Borrowers shall provide for the
payment of the Release Amount for each Pledged Mortgage directly to the
Lender as provided in the Credit Agreement. No Mortgage-backed Security or
Company Security secured or otherwise supported by Pledged Mortgages may be
issued unless the Pool Custodian confirms, either from the Lender or by
direct access to the Lender's account information, that the Lender has
received the Release Amount with respect to all such Pledged Mortgages.
(d) To Investors. From time to time, unless and until the Lender has
notified the Custodian that an Event of Default has occurred and is
continuing, upon the receipt from the Borrowers of the Borrowers' Shipping
Request, the Custodian is hereby authorized to deliver the Pledged Notes
and Collateral Documents to investors against a Bailee Letter in the form
of Exhibit G hereto. Bailee Letters shall be prepared by the Custodian.
(e) Against Payment. From time to time, unless and until the Lender has
notified the Custodian that an Event of Default has occurred and is
continuing, upon the receipt from the Borrowers of the Borrowers' Shipping
Request, the Custodian is hereby authorized to transfer the Pledged Note
and Collateral Documents evidencing and securing any Pledged Mortgage to
the Borrowers, to itself, as custodian for another Person, or to any other
Person, against payment of the Release Amount with respect to such Pledged
Mortgage to the Lender.
(f) Loans Paid Report. The Custodian shall, by 1:00 p.m. (Eastern time)
on each Business Day, provide the Lender with a Loans Paid Report, in form
and substance satisfactory to Lender, identifying the Pledged Mortgages and
Pledged Subwarehousing Mortgages with respect to which the proceeds have
been received by the Lender. The Custodian shall have access to information
concerning deposits into the Cash Collateral Account for purposes of
enabling the Custodian to identify the Pledged Mortgages and Pledged
Subwarehousing Mortgages with respect to which payments have been received.
(g) Power of Attorney. The Custodian shall have the authority to execute
endorsements of Pledged Notes, assignments of the related Mortgages and
other Collateral Documents on behalf of the Borrower to implement the terms
of this Agreement pursuant to a limited power of attorney in the form of
Exhibit H hereto.
SECTION 6. Custodian's Fees. The Borrowers will pay the fees of the
Custodian accrued under this Agreement, pursuant to a separate arrangement,
between them. The Lender shall have no
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liability or obligation to pay any such fees, and the duties of the Custodian
hereunder shall be independent of the Borrowers' performance of its obligations
to the Custodian in respect of such fees.
SECTION 7. Termination of Agreement. This Agreement shall become effective
on and as of the date hereof and shall terminate upon the Custodian's receipt of
written notice of termination signed by the Lender and delivery of all Pledged
Notes and Collateral Documents then held by the Custodian to the Lender or, if
authorized in writing by the Lender, to the Borrowers. Notwithstanding
termination, the Lender's security interest in the Pledged Notes and Collateral
Documents and the proceeds shall continue in effect until all advances under the
Credit Agreement and all other obligations of the Borrowers to the Lender have
been paid and satisfied in full.
SECTION 8. Resignation of Custodian.
(a) Resignation. The custodian shall have the right, with or without
cause, to resign as "Custodian" under this Agreement upon sixty (60) days'
prior written notice to the Lender and the Borrowers. The Custodian shall
continue to act as "Custodian" under this Agreement until it delivers the
Pledged Notes and Collateral Documents to a duly appointed successor
Custodian or the Lender as provided in (b) below.
(b) Appointment of Successor Custodian: Transfer of Mortgage Loans. Upon
resignation of the Custodian, the Borrowers and the Lender shall have sixty
(60) days in which to appoint and designate a successor, and the Custodian
shall deliver all Pledged Notes and Collateral Documents to the Person so
designated within thirty (30) days following delivery to the Custodian of
written notice from the Lender setting forth the name and address of the
successor custodian. If the Lender fails to designate a successor Custodian
within such 60-day period, then the Custodian shall deliver possession and
custody of the Pledged Notes and Collateral Documents to the Lender at the
address provided in Section 10 below or as otherwise directed by the
Lender.
SECTION 9. Obligations of Custodian. The Custodian agrees to act as a
fiduciary of the Lender in the performance of any obligations and duties
required under this Agreement. The Custodian shall be entitled to rely upon the
advice of its legal counsel from time to time and shall not be liable for any
action or inaction by it in good faith and in reliance upon such advice. The
Custodian shall also be entitled to rely upon any notice, document,
correspondence, request or directive received by it from any other party to this
Agreement that the Custodian believes in good faith to be genuine and to have
been signed or presented by the proper duly authorized officer or representative
thereof. The Borrowers
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agree to indemnify, defend and hold the Custodian harmless from and against any
claim, legal action, liability or loss that is initiated against or incurred by
the Custodian, including court costs and reasonable attorney's fees and
disbursements, in connection with the Custodian's performance of its duties
under this Agreement, except as may involve bad faith or negligence on the part
of the Custodian. The Custodian shall at its own expense maintain at all times
during the existence of this Agreement and keep in full force and effect (a)
fidelity insurance, (b) theft and loss of documents insurance, and (c) forgery
insurance. All subject insurance shall be in amounts, with standard coverage and
subject to deductibles, as are customary for insurance typically maintained by
banks which act as custodians in similar transactions and are satisfactory to
the Lender.
SECTION 10. Notices. Any notice, demand or consent shall be conclusively
deemed to have been properly given or made when duly delivered, in person, by
telecopy or by overnight courier, or if mailed on the third Business Day after
being deposited in the mails. Any such notice, demand or consent shall be
delivered in person, by telecopy or transmitted by a recognized private courier
service or deposited with the United States Postal Service, certified mail,
postage prepaid, return receipt requested, addressed as follows, unless such
address is changed by written notice hereunder:
If to the Borrowers: Industry Mortgage Company, L.P.
IMC Corporation of America
3450 Buschwood Park Drive
Suite 250
Tampa, Florida 33618
Attention: George Freeman, CFO
Telecopier No.: ___________________________________
If to the Lender: Residential Funding Corporation
4800 Montgomery Avenue, Suite 300
Bethesda, MD 20814
Attention: Patty Erfan, Director
Telecopier No.: (301) 215-6330 or
(301) 215-6333
If to the Custodian: The First National Bank of Boston
Trust Department
___________________________________________________
Boston, MA 35283-0180
Attention: ________________________________________
Telecopier No.: ___________________________________
SECTION 11. No Assignment or Delegation by Custodian. The Custodian shall
not assign, transfer, pledge or grant a security interest in any of its rights,
benefits or privileges hereunder nor delegate or appoint any other Person to
perform or carry out any of
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its duties, responsibilities or obligations under this Agreement; any act or
instrument purporting to effect any such assignment, transfer, pledge, grant
delegation or appointment shall be void.
SECTION 12. Right of Inspection. Upon reasonable prior and written notice
to the Custodian, the Lender or any duly authorized representative of the Lender
may at any time, during normal business hours, inspect and examine the Pledged
Notes and Collateral Documents in the possession and custody of the Custodian at
such place or places where such Pledged Notes and Collateral Documents are
deposited.
SECTION 13. Controlling Law. This Agreement and all questions relating to
validity, interpretation, performance and enforcement, shall be governed by and
construed, interpreted and enforced in accordance with the laws of the State of
Minnesota.
SECTION 14. Consent to Jurisdiction. The Borrowers and the Custodian each
hereby agrees that any action or proceeding under this Agreement or any document
delivered pursuant hereto may be commenced against it in any court of competent
jurisdiction within the State of Minnesota, by service of process upon it, by
first class registered or certified mail, return receipt requested, addressed to
it at its address last known to the Lender. The Borrowers and the Custodian each
agrees that any such suit, action or proceeding arising out of or relating to
this Agreement or any other such document may be instituted in the Hennepin
County, State District Court or in the United States District Court for the
District of Minnesota at the option of the Lender; and each hereby waives any
objection to the jurisdiction or venue of any such court with respect to, or the
convenience of any court as a forum for, any such suit, action or proceeding.
Nothing herein shall affect the right of the Lender to accomplish service of
process in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against the Borrowers or the Custodian in any other
jurisdiction or court.
SECTION 15. WAIVER OF JURY TRIAL. THE BORROWERS, THE CUSTODIAN AND THE
LENDER EACH HEREBY (a) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY
ISSUE TRIABLE OF RIGHT BY A JURY, AND (b) WAIVES ANY RIGHT TO TRIAL BY JURY
FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS
WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY,
BY THE BORROWERS, THE CUSTODIAN AND THE LENDER, AND THIS WAIVER IS INTENDED TO
ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT OF A
JURY TRIAL WOULD OTHERWISE ACCRUE. THE LENDER, THE BORROWERS AND THE CUSTODIAN
ARE EACH HEREBY AUTHORIZED AND REQUESTED TO SUBMIT THIS AGREEMENT TO ANY COURT
HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES HERETO, SO AS TO
SERVE AS CONCLUSIVE EVIDENCE OF THE FOREGOING WAIVER OF THE RIGHT TO JURY TRIAL.
FURTHER, THE BORROWERS, THE CUSTODIAN AND THE
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LENDER EACH HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF THE OTHER PARTY,
INCLUDING THE OTHER PARTY'S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO
ANY OF ITS REPRESENTATIVES OR AGENTS THAT THE OTHER PARTY WILL NOT SEEK TO
ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.
SECTION 16. Agreement for the Exclusive Benefit of Parties. This Agreement
is for the exclusive benefit of the parties hereto, and their respective
successors and permitted assigns, and shall not be deemed to create or confer
any legal or equitable right, remedy or claim upon any other Person whatsoever.
SECTION 17. Entire Agreement. This Agreement contains the entire agreement
among the parties hereto with respect to the subject matter hereof, and
supersedes all prior and contemporaneous agreements, understandings, inducements
and conditions, express or implied, oral or written, of any nature whatsoever
with respect to the subject matter hereof, including any prior custody
agreements. The express terms hereof control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms hereof.
This Agreement may not be modified or amended other than by an agreement in
writing executed by the parties hereto.
SECTION 18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute but one and the same instrument.
SECTION 19. Exhibits. All Exhibits referred to herein or attached hereto
are hereby incorporated by reference into, and made a part of, this Agreement.
SECTION 20. Indulgences, Not Waivers. Neither the failure nor any delay on
the part of a party hereto to exercise any right, remedy, power or privilege
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy, power or privilege,
nor shall any waiver of any right, remedy, power or privilege with respect to
any occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence. No waiver shall be effective
unless it is in writing and is signed by the parties asserted to have granted
such waiver.
SECTION 21. Titles Not to Affect Interpretation. The titles of sections and
subsections contained in this Agreement are for convenience only, and they
neither form a part of this Agreement nor are they to be used in the
construction or interpretation hereof.
SECTION 22. Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no
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provision shall be affected or rendered invalid or unenforceable by virtue of
the fact that for any reason any other provision or provisions may be valid or
unenforceable in whole or in part.
IN WITNESS WHEREOF, the parties have entered into this Custody Agreement as
of the date first set forth above.
INDUSTRY MORTGAGE COMPANY, L.P,
a Delaware limited partnership
By: INDUSTRY MORTGAGE CORPORATION,
a Delaware corporation
By: ____________________________________
Its: ____________________________________
Its: General Partner
IMC CORPORATION OF AMERICA,
a Delaware corporation
By: __________________________________________
Its: _________________________________________
THE FIRST NATIONAL BANK OF BOSTON,
a national banking association
By: __________________________________________
Its: _________________________________________
RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation
By: __________________________________________
Its: _________________________________________
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EXHIBIT A
FORM OF LOANS WAREHOUSED REPORT
RESIDENTIAL FUNDING CORPORATION
LOANS WAREHOUSED______/________/_________
RUN: ______, _____, 199_, _____ _M
INDUSTRY MORTGAGE
LOAN LOAN NOTE UNPAID PRIN. ADVANCED WAREHOUSE PREMIUM MORTGAGOR NO.
TYPE RATE BALANCE AMOUNT AMOUNT AMOUNT
A QUALITY
LOANS - 00001
Allocation Total: # of Loans: _____
B QUALITY
LOANS - 00002
Allocation Total: # of Loans: _____
C QUALITY
LOANS - 00003
Allocation Total: # of Loans: _____
D QUALITY
LOANS - 00004
Allocation Total: # of Loans: _____
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EXHIBIT B
DOCUMENTATION REVIEW REQUIREMENTS
Mortgage Note
- The Note MUST be endorsed in Blank by an authorized representative
of the Borrowers. Authorized representatives are enumerated on the
most recent available Corporation Resolution(s) and Certificate(s)
of Incumbency. Note: Confirm per the Corporate Resolution(s) that
the individual is specifically approved to execute note endorsements
on behalf of the mortgage company.
A sample endorsement in Blank follows:
Pay to the order of ____________________________________________________.
By: [Industry Mortgage Company, L.P.] [IMC Corporation of
America]
Signature of Authorized Representative of [Industry]
(Title)
- The Note MUST contain the ORIGINAL SIGNATURES of all the
borrower(s)/mortgagor(s). Any changes to the face or body of the
Note, i.e., white outs or cross overs, MUST be initialed by the
borrower(s)/mortgagor(s).
- Confirm that, if referenced on the Note, all original riders or
attachments to the Note are attached.
- Confirm that the loan type matches that noted in the Loans
Warehoused Report.
- Review the endorsements, if the loan was not originated directly by
the Borrowers, to ensure that there is an endorsement from each
previous owner. Verify that the note has been endorsed specifically
to the Borrowers by the previous owner.
- Verify that the customer included a copy of the Note with the
original Note.
Deed of Trust or Mortgage
- Verify that the Mortgage date is the same as the Note date.
- Confirm that the Mortgage contains the borrower/mortgagor name(s) in
the typed portion of the document and that all of the borrower(s)
have executed it. The name(s) should be the same as those on the
Note.
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- Verify that the copy has been certified by the closing agent or the
Borrowers as a "certified true copy."
- Confirm that the legal description section is complete or that, if
this section of the document indicates that the legal description is
attached, that it is attached thereto and is appropriately labelled.
Interim Assignment(s) of Mortgage
- Verify that there is a recorded or certified true copy of an
assignment for every endorsement on the Note and that the mortgagor
name(s) and Mortgage date match those on the Note and Mortgage.
- Confirm that each assignment contains the legal description for the
property or book and page number evidencing the recordation of the
corresponding Mortgage. If the legal description section of the
document indicates that the legal description is attached, ensure
that it is attached thereto and that it is correct and appropriately
labelled.
- Verify that each assignment is executed by the assignor(s).
Original Recordable Assignment of Mortgage in Blank
- Confirm that the mortgagor name(s) and Assignment date exactly match
those on the Note and Mortgage.
- Verify that the assignment grants a beneficial interest to the
assignee and that the assignee has been completed in blank. The
assignment must indicate that the customer's rights, title and
interest in the mortgage loan are assigned to the assignee.
- Confirm that the document contains the legal description or property
or completed Book and Page number or Document Number evidencing the
recordation of the Mortgage. If the legal description section of the
document indicates that the legal description is attached, ensure
that it is attached thereto and that it is correct and appropriately
labelled.
- Verify that the assignment is executed by an authorized
representative, as per the most recent Corporate Resolution(s) and
Certificate(s) of Incumbency, of the mortgage company. Note: Confirm
per the Corporate Resolution(s) that the individual is specifically
approved to execute assignments on behalf of the mortgage company.
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EXHIBIT D
FORM OF WEEKLY COLLATERAL STATUS REPORT
Residential Funding Corporation
4800 Montgomery Avenue, Suite 300
Bethesda, MD 20814
In accordance with the provisions of the Custodial Agreement dated as of
February , 1996 (the "Custodial Agreement") among the undersigned (the
"Custodian"), Industry Mortgage Company, L.P. ("Industry") and IMC Corporation
of America ("IMC" and, collectively with Industry, the "Borrowers") and you
(the "Lender"), the Custodian hereby certifies as follows:
Attached hereto are schedules of (i) all Mortgage Loans pledged or to be
pledged to the Lender with respect to which the Pledged Note and other
Collateral Documents were received by the Custodian on or before ________, 19_,
and with respect to which the Lender's security interest has not been released
as provided in the Custodial Agreement, (ii) the amount of Advances outstanding
under each sublimit set forth in the Credit Agreement, (iii) all Mortgage Loans
with respect to which the Mortgage Note and Collateral Documents have not been
delivered within five Business Days after the making of a Wet Settlement
Advance, (iv) Mortgage Loans shipped to an Investor or pool custodian for
purchase and not purchased within thirty (30) days after shipment, if any, (v)
all Mortgage Loans shipped to the Borrowers for correction pursuant to a Trust
Receipt and not returned within ten Business Days and (vi) Mortgage Loans with
respect to which an Advance has been outstanding for more than the maximum
period permitted under the Credit Agreement.
The undersigned hereby acknowledges that it is holding the Pledged Notes
and Collateral Documents in trust, for the benefit of the Lender, and agrees
that it will comply in all respects with the requirements of the Custodial
Agreement.
Dated: __________________ THE FIRST NATIONAL BANK OF BOSTON,
a national banking association
By: ________________________________
Its: _______________________________
cc: Industry
IMC
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EXHIBIT E
SHIPPING REQUEST
To: The First National Bank of Boston Date: ______________________
The undersigned hereby requests The First National Bank of Boston, as agent and
bailee for Residential Funding Corporation, to ship the Pledged Notes and
related Collateral Documents listed on the schedule attached hereto for the
purpose noted:
[ ] For correction or completion (Trust Receipt (Borrowers)).
Ship to: Industry Mortgage Company, L.P.
IMC Corporation of America
3450 Buschwood Park Drive, Suite 250
Tampa, Florida 33618
Attention: George Freeman, CFO
Ship by: ______________________________________________________
[ ] For processing in connection with an issuance of securities
(Pool Custodian).
Ship to: The First National Bank of Boston
Trust Department
_________________________________
Boston, MA ______________________
Attention: ______________________
Ship by: ______________________________________________________
[ ] For sale to Investor (Bailee letter).
Ship to: ______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
Ship by: ______________________________________________________
If applicable, the Pledged Notes should be endorsed without recourse as
indicated below:
______________________________________________________
______________________________________________________
The Pledged Notes should be shipped by: [ ] H.and delivery
[ ] Federal Express
[ ] Other ____________________________
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The Pledged Notes and Collateral Documents are subject to a security interest
in favor of Residential Funding Corporation.
Sincerely,
INDUSTRY MORTGAGE COMPANY, L.P.,
a Delaware limited partnership
By: INDUSTRY MORTGAGE CORPORATION,
a Delaware corporation
By: _________________________________________
Its: _________________________________________
Its: General Partner
IMC CORPORATION OF AMERICA,
a Delaware corporation
By: __________________________________________
Its: _________________________________________
cc: Residential Funding Corporation
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EXHIBIT F
TRUST RECEIPT
(BORROWERS)
Industry Mortgage Company, L.P. Date: ________________________
IMC Corporation of America Air Bill: ____________________
3450 Buschwood Park Drive Re: __________________________
Suite 250
Tampa, Florida 33618
Attention: George Freeman, CFO
Enclosed with this Trust Receipt are the Collateral Documents listed on
Schedule 1 attached hereto to be held by you as pledgee.
Residential Funding Corporation ("RFC") has and will continue to have a
security interest under the Uniform Commercial Code of the State of Minnesota in
the Collateral Documents pursuant to that certain Warehousing Credit and
Security Agreement (the "Agreement") between RFC and you, and that the
Collateral Documents have been delivered to you by THE FIRST NATIONAL BANK OF
BOSTON, RFC's agent and bailee (the "Custodian"), solely for correction or
completion.
You agree to hold the Collateral Documents, in trust, for RFC and subject
to RFC's direction and control. You shall immediately return the Collateral
Documents, or the proceeds thereof, if received by you, on RFC's demand, or if
no demand has been made by RFC, in any event within ten (10) Business Days after
the date of receipt by you of the Collateral Documents.
No deviation in performance of the terms of any previous Trust Receipt will
alter any of your duties or responsibilities as set forth in this Trust Receipt.
If any action is taken by RFC to recover the Collateral Documents or the
proceeds thereof, the prevailing party shall be entitled to recover all
attorney's fees, expenses and costs from the nonprevailing party as a result of
such action.
By accepting the Collateral Documents for correction or completion, you are
bound by the terms of this Trust Receipt, and have acknowledged receipt of the
Collateral Documents, whether or not you sign or return this Trust Receipt to
RFC. We ask that you promptly date, sign and return a copy of this Trust Receipt
to the Custodian at the following address:
THE FIRST NATIONAL BANK OF BOSTON
_________________________________
_________________________________
_________________________________
Attention: ______________________
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All capitalized terms used herein, which have not been defined herein,
shall have the meanings given them in the Agreement.
THE FIRST NATIONAL BANK OF BOSTON, RECEIPT ACKNOWLEDGED:
as Agent and Bailee for INDUSTRY MORTGAGE COMPANY, L.P.
Residential Funding Corporation a Delaware limited partnership
By: _________________________ By: INDUSTRY MORTGAGE CORPORATION,
a Delaware corporation
Its: ________________________
By: _______________________________
Its: ______________________________
Its: General Partner
IMC CORPORATION OF AMERICA,
a Delaware corporation
By: ___________________________________
Its: __________________________________
Date: _________________________________
Enclosures
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EXHIBIT G
BAILEE LETTER
(Investor) Date:
- --------------------------------------- ----------------------
(Address) Air Bill:
- --------------------------------------- -----------------
(City, State. Zip) Seller:
- --------------------------------------- --------------------
Attention:
----------------------------
Enclosed with this Bailee Letter are __________ original promissory notes
evidencing the mortgage loans described on the attached schedule, along with
other related documents (hereinafter collectively referred to as the "Pledged
Mortgages"), for your inspection prior to purchase from the above-referenced
Seller. A security interest in the Pledged Mortgages and proceeds thereof has
been granted to RESIDENTIAL FUNDING CORPORATION ("RFC"), in accordance with
Seller's Warehousing Credit and Security Agreement with RFC.
Pledged Mortgages now or hereafter delivered to you are to be held by you
as a bailee and agent for the benefit of RFC, subject to only RFC's direction
and control until released as provided herein. Immediately upon purchase by you,
the purchase proceeds ("Purchase Proceeds") of the Pledged Mortgages must be
wire transferred in immediately available funds to:
______________________________ Account No.____________________
______________________________ Attn: _________________________
ABA No._______________________ Re: ___________________________
RFC has no obligation to release its security interest in the Pledged Mortgages
unless RFC receives the Purchase Proceeds for the Pledged Mortgages in an amount
not less than $_______. RFC acknowledges that the Purchase Proceeds for the
Pledged Mortgages may be less than the advanced amount set forth on the attached
schedule. RFC will only release its security interest in the Pledged Mortgages
if the Purchase Proceeds are not reduced by adjustments or offsets unrelated to
the Pledged Mortgages. Subject to the foregoing, upon RFC's receipt of the
Purchase Proceeds, RFC's security interest in the Pledged Mortgages shall
terminate without further action.
Pledged Mortgages which are not accepted for purchase must be returned
immediately to the Custodian, at ______________, __________________________,
____________________, to the attention of _______________, _________________, or
in any event, within thirty (30) days after the date of this letter. RFC
reserves the right at any time, prior to receipt of the Purchase Proceeds, to
demand the delivery of the Pledged Mortgages.
You are not to honor any communications from Seller relating to any Pledged
Mortgages without the written consent of RFC, or
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until RFC has received Purchase Proceeds. You are not to deliver any Pledged
Mortgages to any person or entity other than the Custodian or RFC without the
written consent of RFC. In no event shall the Pledged Mortgages enclosed herein
be returned to Seller.
No deviation in performance of the terms of any previous Bailee Letter will
alter any of your duties or responsibilities as set forth in this Bailee Letter.
By accepting the Pledged Mortgages for inspection, you are bound by the
terms of this Bailee Letter, and the notices stated herein, whether or not you
sign or return this Bailee Letter to the Custodian. We ask that you promptly
date, sign and return a copy of this Bailee Letter to the Custodian at
______________________, ______________________________,
________________________________________________
Attention: __________________________________, ______________________.
THE FIRST NATIONAL BANK OF BOSTON,
as Agent and Bailee for RECEIVED AND ACKNOWLEDGED:
Residential Funding Corporation Investor: ____________________
By: _______________________________ By: ________________________________
Its: ______________________________ Its: _______________________________
Date: ______________________________
Enclosures
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EXHIBIT H
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PREMISES:
That, INDUSTRY MORTGAGE COMPANY, L.P., a Delaware limited partnership
("Industry"), and IMC CORPORATION OF AMERICA, a Delaware corporation ("IMC" and,
collectively with Industry, the "Borrowers"), having their office located at
3450 Buschwood Park Drive, Suite 250, in the City of Tampa, State of Florida,
does by these presents make, constitute and appoint THE FIRST NATIONAL BANK OF
BOSTON, a national banking association, its true and lawful Attorney-in-Fact,
with full power and authority to sign, execute, acknowledge, deliver, file for
record, and record any instrument on its behalf and to perform such other act or
acts as may be customarily and reasonably necessary and appropriate to
effectuate the following enumerated transactions in respect of any promissory
note (the "Mortgage Note") payable to the order of or endorsed in the name of
the Borrowers and evidencing a mortgage loan, the origination or purchase of
which has been financed under that certain Warehousing Credit and Security
Agreement dated as of March 1, 1996, by and between Residential Funding
Corporation and the Borrowers, as the same may be amended or supplemented (the
"Credit Agreement").
This appointment shall apply to the following enumerated transactions only:
(a) The endorsement in blank or in the name of Residential Funding
Corporation or any purchase thereof of any Mortgage Note evidencing
a mortgage loan financed under the Credit Agreement.
The undersigned gives said Attorney-in-Fact full power and authority to
execute such instruments and to do and perform all and every act and thing
necessary and proper to carry into effect the power or powers granted by or
under this Limited Power of Attorney as fully as the undersigned might or could
do, and hereby does ratify and confirm to all that said Attorney-in-Fact shall
lawfully do or cause to be done by authority hereof.
Third parties without actual notice may rely upon the exercise of the power
granted under this Limited Power of Attorney; and may be satisfied that this
Limited Power of Attorney shall continue in full force and effect and has not
been revoked unless an instrument of revocation has been made in writing by the
undersigned.
-1-
<PAGE>
<PAGE>
This instrument is to be construed and interpreted as a Limited Power of
Attorney. The enumeration of specific items, rights, acts or powers herein is
not intended to, nor does it give rise to, and it is not to be construed as a
General Power of Attorney.
The rights, power and authority of the Attorney-in-Fact shall commence and
be in full force and effect as of the date of execution hereof, and such rights,
powers and authority shall remain in full force and effect thereafter until the
earlier of the payment in full of all obligations of the Borrowers under the
Credit Agreement or revocation by the undersigned of this Limited Power of
Attorney by giving written notice to the Attorney-in-Fact. No revocation by the
Borrowers of the power granted under this Limited Power of Attorney shall affect
the ability of The First National Bank of Boston to exercise the power granted
hereunder with respect to any Mortgage Note evidencing a mortgage loan financed
under the Credit Agreement prior to receipt of written notice of the revocation
in the manner prescribed in the Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
INDUSTRY MORTGAGE COMPANY, L.P,
a Delaware limited partnership
By: INDUSTRY MORTGAGE CORPORATION,
a Delaware corporation
By: ____________________________________
Its: ___________________________________
Its: General Partner
IMC CORPORATION OF AMERICA,
a Delaware corporation
By: __________________________________________
Its: _________________________________________
-2-
<PAGE>
<PAGE>
STATE OF _______________)
) ss
COUNTY OF _____________)
On ____________________, 1996, before me, a Notary Public, personally
appeared ________________________ the ______________ of INDUSTRY MORTGAGE
CORPORATION, a Delaware corporation, which is the General Partner of INDUSTRY
MORTGAGE COMPANY, L.P., a Delaware limited partnership, personally known to me
(or proved to me on the basis of satisfactory evidence) to be the person whose
name is subscribed to the within instrument and acknowledged to me that he/she
executed the same in his/her authorized capacity, and that by his/her signature
on the instrument the person, or the entities upon behalf of which the person
acted, executed the instrument.
WITNESS my hand and official seal.
______________________________________
Notary Public
(SEAL) My Commission Expires: ________________
STATE OF _______________)
) ss
COUNTY OF _____________)
On ____________________, 1996, before me, a Notary Public, personally
appeared ________________________, the ______________ of IMC CORPORATION OF
AMERICA, a Delaware corporation, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person whose name is subscribed to the
within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by his/her signature on the instrument the
person, or the entities upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
______________________________________
Notary Public
(SEAL) My Commission Expires: ________________
-3-
<PAGE>
<PAGE>
- Confirm that the assignment is in recordable form with appropriate
corporate seal (if required) and notarized.
-3-
<PAGE>
<PAGE>
EXHIBIT C
FORM OF DAILY COLLATERAL STATUS REPORT
Residential Funding Corporation
4800 Montgomery Avenue, Suite 300
Bethesda, MD 20814
In accordance with the provisions of the Custodial Agreement dated as of
February ___, 1996 (the "Custodial Agreement") among the undersigned (the
"Custodian"), Industry Mortgage Company, L. P. ("Industry") and IMC Corporation
of America ("IMC" and, collectively with Industry, the "Borrowers") and you
(the "Lender"), the Custodian hereby certifies as follows:
Attached hereto is a schedule of (a) all Pledged Mortgages and Pledged
Subwarehousing Mortgages listed on the Loans Warehoused Report received by the
Custodian today, (b) all Pledged Mortgages and Pledged Subwarehousing Mortgages
with respect to which the Lender has received the Release Amount today, and (c)
all Pledged Mortgages against which Wet Settlement Advances were outstanding
prior to today and with respect to which the Custodian received the Collateral
Documents today.
With respect to each Mortgage Loan (i) with respect to which an Advance,
other than a Wet Settlement Advance, was made today, or (ii) with respect to
which Wet Settlement Advances were outstanding prior to today and with respect
to which the Custodian received the Collateral Documents today, except to the
extent described in a written statement attached hereto,
(1) The Custodian is in possession of, or has shipped in
accordance with the Custodial Agreement, the original executed
Mortgage Notes listed on the schedule attached hereto, one copy of
each such Mortgage Note and the related Collateral Documents;
(2) The obligor, principal amount, interest rate, note date,
note date and loan type for each Mortgage Note referred to in a
Loans Warehoused Report previously received by the Custodian
coincide with those stated in such Loans Warehoused Report;
(3) Each Mortgage Note bears the original signature(s) of the
mortgagor(s), any changes in the Mortgage Note have been initialed
by the mortgagor(s), all riders and attachments to each Mortgage
Note are included, each Mortgage Note has been endorsed to
the order of the Borrowers or a Subwarehousing Borrower, as
applicable, by the named payee and all interim assignees, if
required, and has been endorsed in blank without recourse by the
Borrowers or a Subwarehousing Borrower, as applicable;
(4) The Custodian is in possession of, or has shipped in
accordance with the Custodial Agreement, copies, certified as
-1-
<PAGE>
<PAGE>
true by the closing agent(s), of the related Mortgages and
intervening assignments of such Mortgages corresponding to the
endorsements on the related Mortgage Note and executed by the
mortgagee or prior assignee, evidencing a complete chain of title
from the named mortgagee thereon to the Borrowers or a
Subwarehousing Borrower, as applicable;
(5) The date on each Mortgage is the same as the date on the
related Mortgage Note.
(6) The legal description on each Mortgage is complete or a
legal description is attached, and each assignment of Mortgage
contains the same legal description as or appropriate recording
information for of the original Mortgage.
(7) The Custodian is in possession of, or has shipped in
accordance with the Custodial Agreement, an original assignment of
each Mortgage in recordable form for such Mortgage, and the
mortgagor name(s) and the mortgage date on each such assignment
exactly match those on the related Mortgage Note and the Mortgage;
(8) The Custodian has not received notice of another Person's
security interest in any Pledged Mortgage;
(9) The documents referred to in (1) through (7) above have
not been mutilated, damaged, torn or otherwise physically altered;
and
(10) The Company Worksheet and related documents delivered to
the Custodian with respect to each Mortgage Loan indicates either
that such Mortgage Loan is not subject to Section 32 of Regulation
Z (12 CFR Section 226.32) or, if such Mortgage Loan is subject to
Section 32, that all required disclosure and other documentation
has been delivered to the mortgagor.
The undersigned hereby acknowledges that it is holding such Pledged Notes
and Collateral Documents in trust, for the benefit of the Lender, and agrees
that it will comply in all respects with the requirements of the Custodial
Agreement.
Dated: _______________________
THE FIRST NATIONAL BANK OF BOSTON,
a national banking association
By: __________________________________________
Its: _________________________________________
CC: Industry
IMC
-2-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Custody Agreement as
of the date first set forth above.
INDUSTRY MORTGAGE COMPANY, L.P.,
a Delaware limited partnership
By: INDUSTRY MORTGAGE CORPORATION,
a Delaware corporation
By:
------------------------------------
Its: CHIEF OPERATING OFFICER
----------------------------------
Its: General Partner
IMC CORPORATION OF AMERICA,
a Pennsylvania corporation
By:
---------------------------------------
Its: CHIEF OPERATING OFFICER
---------------------------------------
THE FIRST NATIONAL BANK OF BOSTON,
a national banking association
By:
__________________________________________
Its: _________________________________________
RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation
By: DONNA A. WEST
------------------------------------------
Its: DIRECTOR
-----------------------------------------
-13-
<PAGE>
<PAGE>
EXHIBIT 11.1 COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
December 31, March 31, March 31,
------------------------------------------------- ---------------- ------------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Primary
Weighted averaged number of
shares outstanding 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000
Additional shares deemed
outstanding: Cheap stock (1) 1,935,752 1,935,752 1,935,752 1,935,752 1,935,752
---------- ---------- ---------- ---------- ----------
Primary weighted average
number of common share and
common share equivalents 7,935,752 7,935,752 7,935,752 7,935,752 7,935,752
========== ========== ========== ========== ==========
Pro forma net income (loss) $(215,971) $1,855,631 $4,032,007 $ 689,541 $1,625,474
========== ========== ========== ========== ==========
Primary earnings per share of
common shares and common
share equivalents $(0.03) $0.23 $0.51 $0.09 $0.20
======= ===== ===== ===== =====
Fully Diluted: Weighted
average number of shares
outstanding 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000
Additional shares deemed
outstanding:
cheap stock (1) 1,935,752 1,935,752 1,935,752 1,935,752 1,935,752
convertible debt -- -- -- -- 107,527
convertible preferred stock -- -- -- -- 261,499
---------- ---------- ---------- ---------- ----------
Fully diluted weighted
average number of common
shares and common share
equivalent outstanding 7,935,752 7,935,752 7,935,752 7,935,752 8,304,778
========= ========= ========= ========= ==========
Pro forma net income $215,971 $1,855,631 $4,032,007 $689,541 $1,625,474
Add back of interest expense
attributable to convertible
debentures and accrued
preferred dividends -- -- -- -- 41,682
--------- ---------- ---------- -------- ----------
Pro forma net income attributable
to common shares $(215,971) $1,855,631 $4,032,007 $689,541 $1,667,156
========== ========== ========== ======== ==========
Fully diluted earnings per
share of common shares and
common share equivalents $(0.03) $0.23 $0.51 $0.09 $0.20
======= ===== ===== ===== =====
</TABLE>
- ----------
(1) Pursuant to SAB Topic 4D, incremental shares of stock, contingent shares
and options issued within one year of the Company's Initial Public
Offering at prices less than the initial public offering price of $18
per share have been computed using the treasury stock method and have
been assumed outstanding for all periods presented.
<PAGE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
IMC MORTGAGE COMPANY
We consent to the inclusion in this Registration Statement on Form S-1 of
our report dated May 21, 1996 on our audits of the consolidated financial
statements of IMC Mortgage Company and Subsidiaries. We also consent to the
reference to our firm under the caption 'Experts.'
COOPERS & LYBRAND L.L.P.
Jacksonville, Florida
May 31, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996
<CASH> 5,133,718 7,566,695
<SECURITIES> 0 0
<RECEIVABLES> 1,179,907 3,002,890
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 908,095 1,194,824
<DEPRECIATION> 228,145 280,099
<TOTAL-ASSETS> 354,551,434 525,200,197
<CURRENT-LIABILITIES> 0 0
<BONDS> 11,120,642 23,679,279
<COMMON> 60,000 60,000
0 2,006,000
0 0
<OTHER-SE> 5,548,844 12,062,435
<TOTAL-LIABILITY-AND-EQUITY> 354,551,434 525,200,197
<SALES> 0 0
<TOTAL-REVENUES> 19,672,813 11,456,549
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 6,006,919 3,375,244
<INCOME-PRETAX> 6,554,007 2,651,474
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 6,554,007 2,651,474
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 6,554,007 2,651,474
<EPS-PRIMARY> .51 .20
<EPS-DILUTED> .51 .20
<PAGE>
