<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 24, 1996
REGISTRATION NO. 333-3954
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 4
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>
FLORIDA 6162 59-3350574
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
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)
</TABLE>
------------------------
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: [ ]
------------------------
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
-------------------------------- --------------------------
<S> <C> <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>
SUBJECT TO COMPLETION, DATED JUNE 24, 1996
PROSPECTUS
3,100,000 SHARES
IMC MORTGAGE COMPANY
COMMON STOCK
[LOGO]
------------------------------
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 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 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 total 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 , 1996 at the
offices of Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New York 10167.
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.
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 MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. 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 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% 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
which, prior to the completion of the Public Offering, will be converted into a
warrant 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, this securitization was structured so
that ContiFinancial received, in exchange for cash, 25% of the residual
interests of such 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 interest-only and residual certificates, dependence on
securitizations, dependence on credit enhancement, limited operating history,
recent formation 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 warrant (the 'Conti Warrant')
to be issued to ContiFinancial upon the conversion 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>
MARCH 31, 1996
DECEMBER 31, -------------------------------
---------------------------------------------- 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
Interest-only and residual
certificates.......................... 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
</TABLE>
<TABLE>
<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% 2.31%
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 0.09 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 interest-only and residual certificates received by ContiFinancial
in connection with IMC's agreement with ContiFinancial. See
'Business -- Loans -- Loan Sales -- 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 interest-only and residual certificates with estimated values of
$3.0 million, $25.1 million and $9.5 million in exchange for $2.1 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 public 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 interest-only and residual certificate sharing
arrangements with ContiFinancial
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and its 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 I/O and residual
certificate 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 INTEREST-ONLY AND RESIDUAL CERTIFICATES
At March 31, 1996, the Company's balance sheet reflected investment in 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 I/O and residual certificates 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. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Certain Accounting Considerations -- Interest-only and Residual
Certificates.'
Higher than anticipated rates of loan prepayments or losses would require
the Company to write down the value of the I/O and residual certificates,
adversely impacting earnings. Similarly, if delinquencies or liquidations were
to be greater than were initially assumed, the I/O and residual certificates
could be impaired, 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 I/O and residual classes of certificates. 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 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 I/O and residual certificates, the Company will recognize a loss in
such assets. See ' -- Valuation and Potential Impairment of Interest-only and
Residual Certificates.'
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 Articles 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 assumed
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, key employees 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 85.0% of the outstanding
shares of Common Stock (56.9% following the completion of the Public Offering
assuming no exercise of the Underwriters' over-allotment option). Also, the
Management Partners and Mr. Nicholas will beneficially own an aggregate of 20.6%
of the outstanding shares of Common Stock (14.2% 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.'
15
<PAGE>
<PAGE>
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 (together, the 'Joint Venture Partners') are IMC, Foxgard
Limited ('Foxgard') and Financial Security Assurance Inc. ('FSA'). 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 $73.1 million as of June 20,
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.
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, 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, to be paid over two
years based on formulae keyed to 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 8.0% 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 SECURITIZATIONS
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
16
<PAGE>
<PAGE>
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.
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 the Conti Option to purchase limited partnership interests in the
Partnership in exchange for 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.
17
<PAGE>
<PAGE>
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 a
public 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 interest 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.
18
<PAGE>
<PAGE>
DILUTION
The following 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>
<CAPTION>
<S> <C> <C>
Assumed 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% $0.94
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.
19
<PAGE>
<PAGE>
CAPITALIZATION
The following 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 public 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; 20,060 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 11,065,092 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>
20
<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 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
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
Interest-only and residual
certificates........................... 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(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>
21
<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% 2.31%
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 0.09 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 I/O and residual certificates received by ContiFinancial in
connection with IMC's agreement with ContiFinancial. See
'Business -- Loans -- Loan Sales -- 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)
22
<PAGE>
<PAGE>
(footnotes continued from previous page)
(2) In 1994 and 1995 and the three months ended March 31, 1996, ContiFinancial
received I/O and residual certificates with estimated values of $3.0
million, $25.1 million and $9.5 million in exchange for $2.1 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 public 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.
23
<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
Interest-only and Residual Certificates
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. 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.
Mortgage Servicing Rights
On May 12, 1995, the Financial Accounting Standards Board released SFAS
122 -- Accounting for Mortgage Servicing Rights, an amendment to SFAS 65.
Effective January 1, 1996, the Company adopted SFAS 122. Because SFAS 122
prohibits retroactive application, the historical accounting results for the
periods ended December 31, 1993, 1994, and 1995 have not been restated and,
accordingly, the accounting results for the three months ended March 31, 1996
are not directly comparable to any previous period.
SFAS 122 requires that a mortgage banking entity recognize as a separate
asset the rights to service mortgage loans for others. Mortgage banking entities
that acquire or originate loans and subsequently sell or securitize those loans
and retain the mortgage servicing rights are required to allocate the total cost
of the loans to the mortgage servicing rights and the mortgage loans. The
Company is also required to assess capitalized mortgage servicing rights for
impairment based upon the fair value of those rights. The impact of the adoption
of SFAS 122 on the Company's Statement of Operations for the three months ended
March 31, 1996 resulted in additional income of approximately $1.4 million,
reported as gain on sale of loans and an additional pro forma provision for
income tax expense of approximately $0.5 million. The continuing effects of SFAS
122 on the Company's financial position and results of operations will depend on
several factors, including, among other things, the amount of acquired or
originated loans subsequently sold or securitized, the type, term and credit
quality of loans, and estimates of future prepayments rates.
24
<PAGE>
<PAGE>
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 I/O and
residual classes of certificates, 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, ContiFinancial received I/O and residual certificates 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 I/O and residual certificates, 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. 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 I/O and residual
certificates received by 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 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 I/O and residual classes of certificates 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 depending 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.
25
<PAGE>
<PAGE>
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 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.
26
<PAGE>
<PAGE>
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
such certificates, 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
Standards 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 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 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.
27
<PAGE>
<PAGE>
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 I/O and
residual certificates, 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.
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-
28
<PAGE>
<PAGE>
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:
<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
such certificates, 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
29
<PAGE>
<PAGE>
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 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.
30
<PAGE>
<PAGE>
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 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>
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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:
<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
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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.
I/O and residual certificates at March 31, 1996 were $22.9 million,
representing an increase of $8.8 million or 62.8% over I/O and residual
certificates 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 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.
I/O and residual certificates at December 31, 1995 were $14.1 million,
representing an increase of $10.7 million or 313.5% over I/O and residual
certificates 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.
33
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<PAGE>
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
$0.8 million, respectively, related to I/O and residual certificates. 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 I/O and residual certificates. 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 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 I/O and residual classes of certificates which were secured by such I/O
and residual certificates.
On January 12, 1996, Lakeview, an affiliate of one of the Industry
Partners, extended the $7.0 million Lakeview Facility to the Company. Such
credit facility, 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 I/O and residual certificates.
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
34
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<PAGE>
next 12 months. 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 I/O and residual certificates. 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 I/O and residual certificates.
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.
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. 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
12 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 12 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.
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<PAGE>
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 I/O
and residual classes of certificates 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 I/O and
residual certificates 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, ContiFinancial has received certain I/O and residual
certificates in exchange for cash to provide a source of cash flow to fund the
Company's growing securitization program and other liquidity needs. Although the
Company intends to lessen its reliance on the disposition of I/O and residual
certificates to third parties to meet its cash flow needs, no assurance can be
given that such transactions will not be necessary in the future.
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 I/O and residual certificates) 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 through a
public offering of securities in the aggregate amount of $200.0 million. The
securities sold in the securitization were rated AAA/Aaa and had a weighted
average pass-through rate of 7.0% for the fixed-rate tranches plus an adjustable
rate tranche initially set at 7.3%. 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 such 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.
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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.
37
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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, the securitizations were structured so that
ContiFinancial received, in exchange for cash, a portion of the residual
interests 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 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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<PAGE>
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 and FSA. 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 $73.1 million as of June 20, 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 loans funded, IMC typically packages the loans in a portfolio
and sells the portfolio, either through a
40
<PAGE>
<PAGE>
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 nine 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
$14.3 million, or 48.3% of total purchases and originations, for the period
ended December 31, 1993, $116.0 million, or 41.0% 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.
41
<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......................... 64 56 57 62 64
Combined weighted average
loan-to-value ratio(2)....... 70.1% 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.
42
<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(1)............ 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
$14.3 million or 48.3% of total purchases and originations for the period ended
December 31, 1993, $116.0 million or 41.0% 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
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<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, payment of
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 eight 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.
44
<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, if any, will be made at the end of 1996
and 1997 and, if the Convertible Preferred Stock has been converted into Common
Stock, will 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
45
<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.
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<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 credit problems
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.
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<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 YEAR ENDED DECEMBER 31,
(AUGUST 12, 1993) ---------------------------------------- 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
greater 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 I/O and residual certificate
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.
49
<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 98.9% 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 loan 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.
50
<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% 1.00% 1.73%
60-89 days.................................... 0.15 0.59 0.32 0.32
90+ days...................................... 0.00 0.30 0.00 0.26
---- ---- ---- ----
Total delinquency........................ 0.87% 3.43% 1.32% 2.31%
---- ---- ---- ----
---- ---- ---- ----
Default percentages(2):
Foreclosure................................... 0.00% 0.75% 0.12% 0.92%
Bankruptcy.................................... 0.12 0.25 0.00 0.30
Real estate owned............................. 0.00 0.16 0.00 0.18
---- ---- ---- ----
Total default............................ 0.12% 1.16% 0.12% 1.40%
---- ---- ---- ----
---- ---- ---- ----
</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.
51
<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% 0.09% 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 nine 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
52
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<PAGE>
and marketing resources than IMC. In addition, many financial service
organizations have formed 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.
53
<PAGE>
<PAGE>
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 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.
54
<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 Compensation and
Executive Committees
George Freeman............................ 59 Chief Financial Officer
Timothy W. Griffin........................ 40 Vice President
Susan W. McCarthy......................... 39 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.
55
<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 nine 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.
56
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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 -- Provisions of Articles of
Incorporation and Bylaws.' 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.
57
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<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.
58
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<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
59
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<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: the Company Incentive
Plan (the 'Incentive Plan') and the Directors' Stock Option Plan (the
'Directors' Plan'). In connection with the Reorganization Plan, all options
granted under the Partnership Option Plan will be assumed by the Company
pursuant to the Incentive Plan and 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.
60
<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
61
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<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.
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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 17.70% 1,350,000 12.60%
277 Park Avenue
New York, New York 10172
Branchview, Inc. .................................... 825,045 13.16 825,045 8.81
989 McBride Avenue
West Patterson, New Jersey 07424
JRJ Associates Inc. ................................. 573,414 9.15 573,414 6.12
20 Waterview Blvd.
Parsippany, New Jersey 07054
Cityscape Corp. ..................................... 545,455 8.70 545,455 5.82
565 Taxter Road
Elmsford, New York 10523-2300
Mortgage America .................................... 567,822 9.06 567,822 6.06
305 5th Street, Suite 200
Bay City, Michigan 48708
Investors Mortgage, a Washington LP(2) .............. 494,988 7.89 494,988 5.28
10220 N.E. Points Drive, Suite 200
Kirkland, Washington 98033
American Industrial Loan Association ................ 601,373 9.59 601,373 6.42
3420 Holland Road, Suite 107
Virginia Beach, Virginia 23452
The Money Store ..................................... 384,563 6.13 384,563 4.10
3301 C Street, Suite 100M
Sacramento, California 95816
George Nicholas(3) .................................. 715,173 11.11 715,173 7.50
3450 Buschwood Park Drive
Tampa, Florida 33618
Thomas G. Middleton(4) .............................. 188,209 2.96 188,209 1.99
3450 Buschwood Park Drive
Tampa, Florida 33618
Karen S. Bausman(5) ................................. 13,759 0.22 13,759 0.15
3450 Buschwood Park Drive
Tampa, Florida 33618
Susan W. McCarthy(6) ................................ 104,733 1.66 104,733 1.12
3450 Buschwood Park Drive
Tampa, Florida 33618
Timothy W. Griffin(6) ............................... 32,962 0.52 32,962 0.35
3450 Buschwood Park Drive
Tampa, Florida 33618
David McDonald(7) ................................... 263,550 4.12 263,550 2.86
3450 Buschwood Park Drive
Tampa, Florida 33618
Joseph P. Goryeb(8)(12) ............................. 577,293 9.20 577,293 6.16
Waterview Corporate Centre
20 Waterview Boulevard
Parsippany, New Jersey 07054-1267
</TABLE>
(table continued on next page)
63
<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 0.06% 3,880 0.04%
3420 Holland Road
Virginia Beach, Virginia 23452
Mitchell W. Legler(8)(9) ............................ 22,487 0.36 22,487 0.24
Independent Drive, Suite 3104
Jacksonville, Florida 32202
All directors and executive officers as a group (13
persons)(10)....................................... 1,949,804 29.39 1,949,804 20.03
</TABLE>
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(1) Includes 1,350,000 shares of Common Stock issuable upon the exercise of the
immediately exercisable Conti 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 245,455 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. Also includes
18,095 shares of Common Stock issuable to Mr. McDonald upon conversion of
the Convertible Preferred Stock.
(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 601,373 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 601,373 shares of Common Stock owned
by American Industrial Loan Association.
(12) Includes 517,414 shares of Common Stock owned by JRJ Associates, Inc. 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 $5.1 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 28, 1996 and executed
by each LP, the Partnership and the Company prior to the filing of the
Registration Statement of which this Prospectus is a part, each of the LPs
irrevocably committed 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
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underwriting of securitizations and whole loan acquisitions or dispositions of
the Company mortgage 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 I/O and residual classes of certificates 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% of the fair market value of the Company in the event
ContiFinancial elects to terminate the 1995 Agreement to 25% of the fair market
value of the Company in the event 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 (after 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 I/O and residual certificate 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 (valued at $3.0 million)
in the Company's 1994-1 securitization in exchange for $2.1 million, 50% of the
residual interests (valued at $4.2 million) in the Company's 1995-1
securitization in exchange for $3.3 million, 100% of the residual interests
(valued at $12.4 million) in the Company's 1995-2 securitization in exchange for
$10.0 million, 55% of the residual interests (valued at $8.5 million) in the
Company's 1995-3 securitization in exchange for $5.1 million, 50% of the
residual interests (valued at $9.5 million) in the Company's 1996-1
securitization 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 the 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 Equitystars Warehouse. 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). The
shares of Common Stock issuable upon the conversion of the Convertible Preferred
Stock will be subject to certain incidental registration rights for public
offerings of the Common Stock subsequent to the completion of the Public
Offering.
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.
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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 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
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therefore concluded that the value of the Conti VSA (the put for 15% of the
Company's value) was approximately $5.9 million.
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 in
accordance with 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'). Immediately prior to
the completion of the Public Offering, there will be issued and outstanding
6,269,833 shares of Common Stock held of record by 25 stockholders and an escrow
agent. Immediately prior to the completion of the Public Offering, 5,331,820
shares of Common Stock will be held by the Industry Partners, 290,822 shares
will be held by the Management Partners and 545,453 shares will be held by Mr.
Nicholas, 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 ($2,006,000) by 93% of 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 cancelled. 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.
71
<PAGE>
<PAGE>
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 payable 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
72
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<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.
73
<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 (assuming the exercise of all vested options
and the Conti Warrant) 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 (assuming the exercise of all vested options
and the Conti Warrant) 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
(93,698 shares immediately after the Public Offering excluding any exercise of
options or 1.35 million shares pursuant to the Conti Warrant), 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
74
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<PAGE>
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 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., currently provides the Company with a $200.0 million warehouse borrowing
facility which extends through March, 1997. Bear Stearns Home Equity Trust
1996-1 has informed the Company that, subject to the completion of appropriate
documentation, it has approved an increase to $300.0 million in the warehouse
borrowing facility. 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
75
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<PAGE>
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.
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
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<PAGE>
<PAGE>
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
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.
77
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[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<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.
/s/ COOPERS & LYBRAND L.L.P.
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
Interest-only and residual certificates.......................... 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 THREE MONTHS ENDED
THROUGH DECEMBER 31, DECEMBER 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 interest-only and residual
certificates......................... 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 $14,314,000, $115,976,000, $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 (consisting
solely of normal recurring 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.
INTEREST-ONLY AND RESIDUAL CERTIFICATES
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 interest-only and residual securities.
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 with the provisions of SFAS
115, the Company classifies interest-only and residual certificates as
F-9
<PAGE>
<PAGE>
IMC MORTGAGE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
'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 interest-only and residual certificates is recorded
as earned, which is the recognition of the increased time value of such
discounted interest 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 interest-only and residual
certificates 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 ENDED THREE MONTHS 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 ENDED THREE MONTHS 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, interest-only and
residual certificates 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
interest-only and residual certificates 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 ---------------------------
AT MARCH 31, 1996 1994 1995 MARCH 31, 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 interest-only and residual
certificates. 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 interest-only and residual
certificates. 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 interest-only and
residual certificates which was collateralized by those interest-only and
residual certificates.
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,
--------------------
1994 1995 MARCH 31, 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 $783,367,000 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.
Interest-only and Residual Certificates: The fair value was determined
by discounting the estimated cash flow over the life of the certificate
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 interest-only and residual certificates. 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 'Partnership Option 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 Partnership Option 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
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<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.................................. 16
The Company.................................... 17
The Reorganization Plan........................ 17
Use of Proceeds................................ 18
Dilution....................................... 19
Dividend Policy................................ 19
Capitalization................................. 20
Selected Consolidated Financial Data........... 21
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 24
Business....................................... 38
Management..................................... 55
Principal Stockholders......................... 63
Certain Relationships and Related
Transactions................................. 65
Certain Accounting Considerations Relating to
the Conti VSA................................ 69
Description of Capital Stock................... 71
Shares Eligible For Future Sale................ 74
Underwriting................................... 75
Legal Matters.................................. 76
Experts........................................ 76
Additional Information......................... 76
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................................................................ 35,000
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............................................................................. 96,869
----------
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 Company presently maintains
policies of directors' and officers' liability insurance in the amount of $2.0
million.
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.
Pursuant to the Pre-IPO Agreement, dated as of March 30, 1996, prior to the
effectiveness of the Registration Statement, the Company issued 6,150,000 shares
of Common Stock (including 150,000 shares issued in exchange for limited
partnership interests acquired upon exercise by Branchview, Inc. of a portion of
the Conti Option acquired in a transaction to which the Company was not a party)
to the Industry Partners, the Management Partners and Mr. George Nicholas in
exchange for their interests in the Partnership. The issuance of the Common
Stock was exempt from registration under the Securities Act by virtue of Section
4(2) thereof.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<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 -- Articles 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.'ch'
4.2 -- Indenture Agreement between the Partnership and Rotch Property Group Limited.'ch'
4.3 -- Substitution Agreement between the Partnership and ContiTrade Services Corporation.'ch'
4.4 -- Incentive Plan of the the Company and related assumption agreements.'ch'
4.5 -- Outside Directors' Option Plan of the the Company and related assumption agreements.'ch'
4.6 -- Form of Common Stock Warrant issued to ContiTrade Services Corporation.
5.1 -- Opinion of Dewey Ballantine.'ch'
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.'ch'
10.5 -- Share Subscription and Shareholders' Agreement between the Partnership and Foxgard Limited, Financial
Security Assurance Holdings, Inc. and Preferred Mortgages Limited.'ch'
</TABLE>
II-2
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
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.'ch'
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.
10.18 -- Master Repurchase Agreement between the Partnership and Nomura Securities International, Inc.'ch'
10.19 -- Global Master Repurchase Agreement between the Partnership and Nomura Grand Cayman, Ltd.
10.20 -- Custodial Agreement among the Partnership, The First National Bank of Boston and Nomura Asset Capital
Corporation.'ch'
10.21 -- Loan and Security Agreement between the Partnership and First National Bank of Boston and amendments
thereto.
10.22 -- Interim Loan and Security Agreement between the Partnership and National Westminster Bank PLC, New York
Branch.
10.23 -- Custodial Agreement among the Partnership, National Westminster Bank PLC and First National Bank of
Boston.'ch'
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.
10.27 -- Custody Agreement among the Partnership, IMC Corporation of America, Bear Stearns Home Equity Trust 1996-1
and Bank of Boston.'ch'
10.28 -- Warehousing Credit and Security Agreement among 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.'ch'
10.30 -- Loan and Security Agreement between the Partnership and American Industrial Loan Association, Approved
Residential Mortgage, Inc. and Armada Residential Mortgage, LLC.'ch'
10.31 -- Loan and Security Agreement between the Partnership and Mortgage Central Corp.'ch'
10.32 -- Custodial Agreement among the Partnership, Mortgage Central Corp. and the First National Bank of
Boston.'ch'
10.33 -- Custodial Agreement among the Partnership, American Industrial Loan Association, Approved Residential
Mortgage, Inc., Armada Residential Mortgage, LLC and the First National Bank of Boston.'ch'
11.1 -- Statement re computation of earnings per share (See Note 1 to the Consolidated Financial Statements).'ch'
16.1 -- Letter dated April, 1996 from Deloitte & Touche, LLP to the Registrant.'ch'
21.1 -- Subsidiaries of the Registrant.'ch'
</TABLE>
II-3
<PAGE>
<PAGE>
<TABLE>
<S> <C>
23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2 -- Consent of Dewey Ballantine (contained in Exhibit 5.1).'ch'
24.1 -- Power of Attorney (included on page II-4).'ch'
27.1 -- Financial Data Schedule'ch'
99.1 -- Third Amended and Restated Agreement of Limited Partnership.'ch'
</TABLE>
- ------------
* To be filed by amendment.
`D' Confidential treatment requested.
'ch' Previously filed.
(b) Financial Statement Schedules
None
II-4
<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-5
<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 24, 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
--------- ----- ----
<S> <C> <C>
* Chairman of the Board, Chief June 24, 1996
......................................... Executive Officer and Assistant
(GEORGE NICHOLAS) Secretary (Principal Executive Officer)
* Director June 24, 1996
.........................................
(JOSEPH P. GORYEB)
* Director June 24, 1996
.........................................
(ALLEN D. WYKLE)
* Director June 24, 1996
.........................................
(MITCHELL W. LEGLER)
/S/ THOMAS G. MIDDLETON President, Chief Operating Officer, June 24, 1996
......................................... Assistant Secretary and Director
(THOMAS G. MIDDLETON)
* Chief Financial Officer (Principal June 24, 1996
......................................... Accounting Officer and Principal
(GEORGE FREEMAN) Financial Officer
*By: /S/ THOMAS G. MIDDLETON
.........................................
(THOMAS G. MIDDLETON
AS ATTORNEY-IN-FACT)
</TABLE>
II-6
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
LOCATION OF EXHIBIT
EXHIBIT IN SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT NUMBERING SYSTEM
- ------- ----------------------- -------------------
<S> <C> <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 -- Articles 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'ch'........................................
4.2 -- Indenture Agreement between the Partnership and Rotch Property Group Limited'ch'....
4.3 -- Substitution Agreement between the Partnership and ContiTrade Services
Corporation'ch'....................................................................
4.4 -- Incentive Plan of the the Company and related assumption agreements'ch'............
4.5 -- Outside Directors' Option Plan of the the Company and related assumption
agreements'ch'.....................................................................
4.6 -- Form of Common Stock Warrant issued to ContiTrade Services Corporation.............
5.1 -- Opinion of Dewey Ballantine'ch'....................................................
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.'ch'........
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'ch'......................................................
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..
10.18 -- Master Repurchase Agreement between the Partnership and Nomura Securities
International, Inc. 'ch'............................................................
10.19 -- Global Master Repurchase Agreement between the Partnership and Nomura Grand Cayman,
Ltd.................................................................................
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C>
10.20 -- Custodial Agreement among the Partnership, The First National Bank of Boston and
Nomura Asset Capital Corporation'ch'................................................
10.21 -- Loan and Security Agreement between the Partnership and First National Bank of
Boston and amendments thereto.......................................................
10.22 -- Interim Loan and Security Agreement between the Partnership and National Westminster
Bank PLC, New York Branch...........................................................
10.23 -- Custodial Agreement among the Partnership, National Westminster Bank PLC and First
National Bank of Boston'ch'.........................................................
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..............................................................................
10.27 -- Custody Agreement among the Partnership, IMC Corporation of America, Bear Stearns
Home Equity Trust 1996-1 and Bank of Boston'ch'.....................................
10.28 -- Warehousing Credit and Security Agreement among 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'ch'......................
10.30 -- Loan and Security Agreement between the Partnership and American Industrial Loan
Association, Approved Residential Mortgage, Inc. and Armada Residential Mortgage,
LLC'ch'.............................................................................
10.31 -- Loan and Security Agreement between the Partnership and Mortgage Central
Corp. 'ch'..........................................................................
10.32 -- Custodial Agreement among the Partnership, Mortgage Central Corp. and the First
National Bank of Boston'ch'.........................................................
10.33 -- Custodial Agreement among the Partnership, American Industrial Loan Association,
Approved Residential Mortgage, Inc., Armada Residential Mortgage, LLC and the First
National Bank of Boston'ch'.........................................................
11.1 -- Statement re computation of earnings per share (See Note 1 to the Consolidated
Financial Statements)'ch'...........................................................
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)'ch'..........................
24.1 -- Power of Attorney (included on page II-4)'ch'.......................................
27.1 -- Financial Data Schedule'ch'.........................................................
99.1 -- Third Amended and Restated Agreement of Limited Partnership'ch'.....................
</TABLE>
- ------------
* To be filed by amendment.
`D' Confidential treatment requested.
'ch' Previously filed.
STATEMENT OF DIFFERENCES
------------------------
The British pound sign shall be expressed as 'L'
The dagger symbol shall be expressed as `D'
The checkmark symbol shall be expressed as `ch'
<PAGE>
<PAGE>
3,100,000 Shares of Common Stock
IMC MORTGAGE COMPANY
UNDERWRITING AGREEMENT
June __, 1996
BEAR, STEARNS & CO. INC.
OPPENHEIMER & CO., INC.
as Representatives of the
several Underwriters named
in Schedule I attached hereto
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Dear Sirs:
IMC Mortgage Company, a corporation organized and existing
under the laws of the State of Florida (the "Company"), proposes to issue and
sell, subject to the terms and conditions stated herein, to the several
underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
3,100,000 shares (the "Firm Shares") of common stock, par value $0.01 per share
of the Company (the "Common Stock"). In addition, for the sole purpose of
covering over-allotments in connection with the sale of the Firm Shares, the
Company proposes to issue and sell, at the option of the Underwriters, up to an
additional 465,000 shares (the "Additional Shares") of Common Stock. The Firm
Shares and any Additional Shares purchased by the Underwriters are referred to
herein as the "Shares." The Shares are more fully described in the Registration
Statement referred to below.
1. Representations and Warranties of the Company and the
Partnership. Each of the Company and Industry Mortgage Company, L.P. (the
"Partnership"), jointly and severally, represents and warrants to, and agrees
with, the Underwriters that:
<PAGE>
<PAGE>
(a) The Company has filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and amendments
thereto, on Form S-1 (No. 333-3954), for the registration of the Shares under
the Securities Act of 1933, as amended (the "Act"). Such registration statement,
including the prospectus, financial statements and schedules, exhibits and all
other documents filed as a part thereof, as amended at the time of effectiveness
of the registration statement, including any information deemed to be a part
thereof as of the time of effectiveness pursuant to paragraph (b) of Rule 430A
of the Rules and Regulations of the Commission under the Act (the
"Regulations"), is herein called the "Registration Statement" and the
prospectus, in the form first filed with the Commission pursuant to Rule 424(b)
of the Regulations or filed as part of the Registration Statement at the time of
effectiveness if no Rule 424(b) filing is required, is herein called the
"Prospectus." The term "preliminary prospectus" as used herein means a
preliminary prospectus as described in Rule 430 of the Regulations.
(b) At the time of the effectiveness of the
Registration Statement or the effectiveness of any post-effective amendment to
the Registration Statement, when the Prospectus is first filed with the
Commission pursuant to Rule 424(b) of the Regulations, when any supplement to or
amendment of the Prospectus is filed with the Commission and at the Closing Date
and the Additional Closing Date, if any, (as hereinafter respectively defined),
the Registration Statement and the Prospectus and any amendments thereof and
supplements thereto complied or will comply in all material respects with the
applicable provisions of the Act and the Regulations and do not or will not
contain an untrue statement of a material fact and do not or will not omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein (i) in the case of the Registration Statement, not
misleading and (ii) in the case of the Prospectus, in light of the circumstances
under which they were made, not misleading. When any related preliminary
prospectus was first filed with the Commission (whether filed as part of the
registration statement for the registration of the Shares or any amendment
thereto or pursuant to Rule 424(a) of the Regulations) and when any amendment
thereof or supplement thereto was first filed with the Commission, such
preliminary prospectus and any amendments thereof and supplements thereto
complied in all material respects with the applicable provisions of the Act and
the Regulations and did not contain an untrue statement of a material fact and
did not omit to state any 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. No representation or warranty is made
in this subsection (b), however, with respect to any information contained in or
omitted from the Registration Statement or the Prospectus or any related
preliminary prospectus or any amendment thereof or supplement thereto in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of any Underwriter through you as herein stated
expressly for use in connection with the preparation thereof.
(c) Coopers & Lybrand L.L.P., who have certified the
financial statements included in the Registration Statement, are independent
public accountants as required by the Act and the Regulations.
2
<PAGE>
<PAGE>
(d) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, except as
set forth in the Registration Statement and the Prospectus, there has been no
material adverse change in the business, prospects, properties, operations,
financial condition or results of operations of the Company, its subsidiaries
and the Partnership taken as a whole, whether or not arising from transactions
in the ordinary course of business, and since the date of the latest balance
sheet presented in the Registration Statement and the Prospectus, neither the
Company, any of its subsidiaries nor the Partnership has incurred or undertaken
any liabilities or obligations, direct or contingent, which are material to the
Company, its subsidiaries and the Partnership taken as a whole, except for
liabilities or obligations which are reflected in the Registration Statement and
the Prospectus.
(e) This Agreement and the transactions contemplated
herein have been duly and validly authorized by the Company and the Partnership
and this Agreement has been duly and validly executed and delivered by the
Company and the Partnership.
(f) The execution, delivery, and performance of this
Agreement and the consummation of the transactions contemplated hereby do not
and will not (i) conflict with or result in a breach of any of the terms and
provisions of, or constitute a default (or an event which with notice or lapse
of time, or both, would constitute a default) under, or result in the creation
or imposition of any lien, charge or encumbrance upon any property or assets of
the Company, any of its subsidiaries or the Partnership pursuant to, any
agreement, instrument, franchise, license or permit to which the Company, any of
its subsidiaries or the Partnership is a party or by which any of such entities
or their respective properties or assets may be bound or (ii) violate or
conflict with any provision of the certificate of organization or by-laws of the
Company, any of its subsidiaries or the Partnership or any judgment, decree,
order, statute, rule or regulation of any court or any public, governmental or
regulatory agency or body having jurisdiction over any of such entities or any
of their respective properties or assets. No consent, approval, authorization,
order, registration, filing, qualification, license or permit of or with any
court or any public, governmental or regulatory agency or body having
jurisdiction over any of such entities or any of their respective properties or
assets is required for the execution, delivery and performance of this Agreement
or the consummation of the transactions contemplated hereby, including the
issuance, sale and delivery of the Shares to be issued, sold and delivered by
the Company hereunder, except the registration under the Act of the Shares and
such consents, approvals, authorizations, orders, registrations, filings,
qualifications, licenses and permits as may be required under state securities
or Blue Sky laws in connection with the purchase and distribution of the Shares
by the Underwriters.
(g) All of the outstanding shares of capital stock
of the Company are duly and validly authorized and issued, fully paid and
non-assessable and were not issued and are not now in violation of or subject to
any preemptive rights created by the Partnership or the Company or by any
statute, law, rule or regulation. None of the outstanding shares of capital
stock of the Company, nor any securities convertible into shares of such capital
stock
3
<PAGE>
<PAGE>
or exchangeable therefor, were issued in violation of the provisions of Section
5 of the Act. The Shares, when issued, delivered and sold in accordance with
this Agreement, will be duly and validly issued and outstanding, fully paid and
non-assessable, and will not have been issued in violation of or be subject to
any preemptive rights. The Company had, at March 31, 1996, an authorized and
outstanding capitalization as set forth in the Registration Statement and the
Prospectus. The Common Stock, the Firm Shares and the Additional Shares conform
to the descriptions thereof contained in the Registration Statement and the
Prospectus.
(h) Each of the Company and its subsidiaries has
been duly organized and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation. The Partnership has been
duly organized and is validly existing as a limited partnership in good standing
under the laws of the State of Delaware. Each of the Company, its subsidiaries
and the Partnership is duly qualified and in good standing as a foreign
corporation or limited partnership, as the case may be, in each jurisdiction in
which the character or location of its properties (owned, leased or licensed) or
the nature or conduct of its business makes such qualification necessary, except
for those failures to be so qualified or in good standing which will not in the
aggregate have a material adverse effect on the Company, its subsidiaries and
the Partnership taken as a whole. Each of the Company, its subsidiaries and the
Partnership has all requisite power and authority, and all necessary material
consents, approvals, authorizations, orders, registrations, qualifications,
licenses and permits of and from all public, regulatory or governmental agencies
and bodies, to own, lease and operate its properties and conduct its business as
now being conducted and as described in the Registration Statement and the
Prospectus, and no such consent, approval, authorization, order, registration,
qualification, license or permit contains a materially burdensome restriction
not adequately disclosed in the Registration Statement and the Prospectus. All
of the issued and outstanding capital stock of each corporate subsidiary of the
Company has been duly and validly issued and is fully paid and non-assessable
and was not issued in violation of pre-emptive rights created by the Partnership
or the Company or by any statute, law, rule or regulation and, at the time of
the effectiveness of the Registration Statement, will be owned directly or
indirectly by the Company, free and clear of any lien, encumbrance, claim,
security interest, restriction on transfer (other than those contained in the
Partnership Agreement, as amended), shareholders' agreement, voting trust or
other defect of title whatsoever. All of the outstanding limited and general
partnership interests in the Partnership have been duly and validly issued and
were not issued in violation of pre-emptive rights and, at the time of the
effectiveness of the Registration Statement, will be owned directly or
indirectly by the Company, free and clear of any lien, encumbrance, claim,
security interest, restriction on transfer (other than those contained in the
Partnership Agreement, as amended), voting trust or other defect of title
whatsoever.
(i) Except as described in the Prospectus, there is
no litigation or governmental proceeding to which the Company, any of its
subsidiaries or the Partnership is a party or to which any property of the
Company, any of its subsidiaries or the Partnership is subject or which is
pending or, to the knowledge of the Company, contemplated against the Company,
any of its subsidiaries or the Partnership which might result in any material
adverse
4
<PAGE>
<PAGE>
change in the business, prospects, properties, operations, financial condition
or results of operations of the Company, its subsidiaries and the Partnership
taken as a whole or which is required to be disclosed in the Registration
Statement and the Prospectus.
(j) The Company has not taken and will not take,
directly or indirectly, any action designed to cause or result in, or which
constitutes or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of Common Stock to
facilitate the sale or resale of the Shares.
(k) The financial statements, including the notes
thereto, and supporting schedules included in the Registration Statement and the
Prospectus present fairly the financial position of the Company as of the dates
indicated and the results of its operations for the periods specified; except as
otherwise stated in the Registration Statement, said financial statements have
been prepared in conformity with generally accepted accounting principles
applied on a consistent basis; and the supporting schedules included in the
Registration Statement present fairly the information required to be stated
therein.
(l) Except as described in the Prospectus, no holder
of securities of the Company has any rights to the registration of securities of
the Company because of the filing of the Registration Statement or otherwise in
connection with the sale of the Shares contemplated hereby.
(m) The Company is not, and upon consummation of the
transactions contemplated hereby will not be, subject to registration as an
"investment company" under the Investment Company Act of 1940.
(n) The exchange of the limited and general
partnership interests of the Partnership for shares of Common Stock of the
Company (the "Exchange") qualifies as a tax-free exchange under Section 351 of
the Internal Revenue Code of 1986, as amended (the "Code") and is not subject to
the provisions of Section 5 of the Act or Subpart 229.900 of Title 17 of the
Code of Federal Regulations. The consummation of the Exchange and the
transactions contemplated thereby do not and will not (i) conflict with or
result in a breach of any of the terms and provisions of, or constitute a
default (or an event which with notice or lapse of time, or both, would
constitute a default) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company, any of
its subsidiaries or the Partnership pursuant to, any agreement, instrument,
franchise, license or permit to which the Company, any of its subsidiaries or
the Partnership is a party or by which any of such entities or their respective
properties or assets may be bound or (ii) violate or conflict with any provision
of the certificate of organization or by-laws of the Company, any of its
subsidiaries or the Partnership or any judgment, decree, order, statute, rule or
regulation of any court or any public, governmental or regulatory agency or body
having jurisdiction over any of such entities or any of their respective
properties or assets. No consent, approval, authorization, order, registration,
filing, qualification, license or permit of or with any court or any public,
governmental or regulatory agency or body having jurisdiction over any of such
entities or any of their respective properties or assets is required
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for the consummation of the Exchange and the transactions contemplated thereby,
including the issuance and delivery of shares of Common Stock to be issued and
delivered by the Company thereunder, except those consents, approvals,
authorizations, orders, registrations, filings, qualifications, licenses or
permits that have been obtained and made.
2. Purchase, Sale and Delivery of the Shares.
(a) On the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to sell to the Underwriters and
the Underwriters, severally and not jointly, agree to purchase from the Company,
at a purchase price per share of $_______, the number of Firm Shares which bears
the same proportion to the number of Firm Shares to be sold by the Company, as
the number of Firm Shares set forth opposite the respective names of the
Underwriters in Schedule I hereto bears to the total number of Firm Shares to be
sold by the Company plus any additional number of Shares which such Underwriter
may become obligated to purchase pursuant to the provisions of Section 9 hereof.
(b) Payment of the purchase price for, and delivery
of certificates for, the Shares shall be made at the office of Dewey Ballantine,
1301 Avenue of the Americas, New York, New York 10019, or at such other place as
shall be agreed upon by you and the Company, at 10:00 A.M. on the third business
day (unless postponed in accordance with the provisions of Section 11 hereof)
following the date of the effectiveness of the Registration Statement (or, if
the Company has elected to rely upon Rule 430A of the Regulations, the third
business day after the determination of the initial public offering price of the
Shares), or such other time not later than ten business days after such date as
shall be agreed upon by you and the Company (such time and date of payment and
delivery being herein called the "Closing Date"). Payment shall be made to the
Company by certified or official bank check or checks drawn in New York Clearing
House funds or similar next day funds payable to the order of the Company,
against delivery to you for the respective accounts of the Underwriters of
certificates for the Shares to be purchased by them. Certificates for the Firm
Shares shall be registered in such name or names and in such authorized
denominations as you may request in writing at least two full business days
prior to the Closing Date. The Company will permit you to examine and package
such certificates for delivery at least one full business day prior to the
Closing Date.
(c) In addition, the Company hereby grants to the
Underwriters the option to purchase up to 465,000 Additional Shares at the same
purchase price per share to be paid by the Underwriters to the Company for the
Firm Shares as set forth in this Section 2, for the sole purpose of covering
over-allotments in the sale of Firm Shares by the Underwriters. This option may
be exercised at any time, in whole or in part, on or before the thirtieth day
following the date of the Prospectus, by written notice by you to the Company.
Such notice shall set forth the aggregate number of Additional Shares as to
which the option is being exercised and the date and time, as reasonably
determined by you, when the Additional Shares are to be delivered (such date and
time being herein sometimes referred to as the "Additional Closing Date");
provided, however, that the Additional Closing Date shall
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not be earlier than the Closing Date or earlier than the third full business day
after the date on which the option shall have been exercised nor later than the
eighth full business day after the date on which the option shall have been
exercised (unless such time and date are postponed in accordance with the
provisions of Section 9 hereof). Certificates for the Additional Shares shall be
registered in such name or names and in such authorized denominations as you may
request in writing at least two full business days prior to the Additional
Closing Date. The Company will permit you to examine and package such
certificates for delivery at least one business day prior to the Additional
Closing Date.
The number of Additional Shares to be sold to each Underwriter
shall be the number which bears the same ratio to the aggregate number of
Additional Shares being purchased as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto (or such number
increased as set forth in Section 9 hereof) bears to 3,100,000, subject,
however, to such adjustments to eliminate any fractional shares as you in your
sole discretion shall make.
Payment for the Additional Shares shall be made by certified
or official bank check or checks, in New York Clearing House or similar next day
funds, payable to the order of the Company, at the offices of Dewey Ballantine,
1301 Avenue of the Americas, New York, New York 10019, or such other location as
may be mutually acceptable, upon delivery of the certificates for the Additional
Shares to you for the respective accounts of the Underwriters.
3. Offering. Upon your authorization of the release of the
Firm Shares, the Underwriters propose to offer the Shares for sale to the public
upon the terms set forth in the Prospectus.
4. Covenants of the Company and the Partnership. The Company
and the Partnership, jointly and severally, covenant and agree with the
Underwriters that:
(a) If the Registration Statement has not yet been
declared effective, the Company and the Partnership will use their best efforts
to cause the Registration Statement and any amendments thereto to become
effective as promptly as possible, and if Rule 430A is used or the filing of the
Prospectus is otherwise required under Rule 424(b), the Company will file the
Prospectus (properly completed if Rule 430A has been used) pursuant to Rule
424(b) within the prescribed time period and will provide evidence satisfactory
to you of such timely filing.
The Company will notify you immediately (and, if
requested by you will confirm such notice in writing) (i) when the Registration
Statement and any amendments thereto become effective, (ii) of any request by
the Commission for any amendment of or supplement to the Registration Statement
or the Prospectus or for any additional information, (iii) of the mailing or the
delivery to the Commission for filing of any amendment of or supplement to the
Registration Statement or the Prospectus, (iv) of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration Statement or
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any post-effective amendment thereto or of the initiation, or the threatening,
of any proceedings therefor, (v) of the receipt of any comments from the
Commission and (vi) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for that
purpose. If the Commission shall propose or enter a stop order at any time, the
Company will make every reasonable effort to prevent the issuance of any such
stop order and, if issued, to obtain the lifting of such order as soon as
possible. The Company will not file any amendment to the Registration Statement
or any amendment of or supplement to the Prospectus (including the prospectus
required to be filed pursuant to Rule 424(b)) that differs from the prospectus
on file at the time of the effectiveness of the Registration Statement before or
after the effective date of the Registration Statement to which you shall
reasonably object in writing after being timely furnished in advance a copy
thereof.
(b) If at any time when a prospectus relating to the
Shares is required to be delivered under the Act any event shall have occurred
as a result of which the Prospectus as then amended or supplemented includes an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or if it shall
be necessary at any time to amend or supplement the Prospectus or Registration
Statement to comply with the Act or the Regulations, the Company will notify you
promptly and prepare and file with the Commission an appropriate amendment or
supplement (in form and substance reasonably satisfactory to you) which will
correct such statement or omission and will use its best efforts to have any
amendment to the Registration Statement declared effective as soon as possible.
(c) The Company will promptly deliver to you three
signed copies of the Registration Statement, including exhibits and all
amendments thereto, and the Company will promptly deliver to each of the
Underwriters such number of copies of any preliminary prospectus, the
Prospectus, the Registration Statement, and all amendments of and supplements to
such documents, if any, as you may reasonably request.
(d) The Company will endeavor in good faith, in
cooperation with you, at or prior to the time of effectiveness of the
Registration Statement, to qualify the Shares for offering and sale under the
securities laws relating to the offering or sale of the Shares of such
jurisdictions as you may designate and to maintain such qualification in effect
for so long as required for the distribution thereof; except that in no event
shall the Company be obligated in connection therewith to qualify as a foreign
corporation or to execute a general consent to service of process.
(e) The Company will make generally available
(within the meaning of Section 11(a) of the Act) to its security holders and to
you as soon as practicable, but not later than 90 days after the end of its
fiscal quarter in which the first anniversary date of the effective date of the
Registration Statement occurs, an earning statement (in form complying with the
provisions of Rule 158 of the Regulations) covering a period of at least twelve
consecutive months beginning after the effective date of the Registration
Statement.
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(f) During the period of 180 days from the Closing
Date, the Company will not, without your prior written consent, issue, sell,
offer or agree to sell, grant any option for the sale of, or otherwise dispose
of, directly or indirectly, any Common Stock (or any securities convertible
into, exercisable for or exchangeable for Common Stock), and the Company will
obtain the undertaking of each of its officers and directors and such of its
shareholders as have been heretofore designated by you and listed on Schedule II
hereto not to engage in any of the aforementioned transactions on their own
behalf (subject to certain exceptions), other than the Company's sale of Shares
hereunder and the Company's issuance of Common Stock upon the exercise of
presently outstanding stock options.
(g) During a period of three years from the
effective date of the Registration Statement, the Company will furnish to you
copies of (i) all reports to its shareholders; and (ii) all reports, financial
statements and proxy or information statements filed by the Company with the
Commission or any national securities exchange.
(h) The Company will apply the proceeds from the
sale of the Shares as set forth under "Use of Proceeds" in the Prospectus.
(i) The Company will use its best efforts to cause
the Shares to be listed for inclusion in The Nasdaq National Market.
(j) The Company will file with the Commission, or
retain in its files, such reports on Form SR as may be required pursuant to Rule
463 of the Regulations.
5. Payment of Expenses. Whether or not the transactions
contemplated in this Agreement are consummated or this Agreement is terminated,
the Company and the Partnership, jointly and severally, hereby agree to pay all
costs and expenses incident to the performance of the obligations of the Company
hereunder, including those in connection with (i) preparing, printing,
duplicating, filing and distributing the Registration Statement, as originally
filed and all amendments thereof (including all exhibits thereto), any
preliminary prospectus, the Prospectus and any amendments or supplements thereto
(including, without limitation, fees and expenses of the Company's accountants
and counsel), the underwriting documents (including this Agreement and the
Agreement Among Underwriters) and all other documents related to the public
offering of the Shares (including those supplied to the Underwriters in
quantities as hereinabove stated), (ii) the issuance, transfer and delivery of
the Shares to the Underwriters, including any transfer or other taxes payable
thereon, (iii) the qualification of the Shares under state or foreign securities
or Blue Sky laws, including the costs of printing and mailing a preliminary and
final Blue Sky Survey and the fees of counsel for the Underwriters and such
counsel's disbursements in relation thereto, (iv) the quotation of the Shares on
The Nasdaq National Market, (v) filing fees of the Commission and the National
Association of Securities Dealers, Inc., (vi) the cost of printing certificates
representing the Shares and (vii) the cost and charges of any transfer agent or
registrar.
6. Conditions of the Underwriters' Obligations. The
obligations of the Underwriters to purchase and pay for the Firm Shares and the
Additional Shares, as provided
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herein, shall be subject to the accuracy of the representations and warranties
of the Company and the Partnership herein contained, as of the date hereof and
as of the Closing Date (for purposes of this Section 6, "Closing Date" shall
refer to the Closing Date for the Firm Shares and any Additional Closing Date,
if different, for the Additional Shares), to the absence from any certificates,
opinions, written statements or letters furnished to you or to Gibson, Dunn &
Crutcher LLP ("Underwriters' Counsel") pursuant to this Section 6 of any
material misstatement or omission, to the performance in all material respects
by the Company and the Partnership of its or their obligations hereunder, and to
the following additional conditions:
(a) The Registration Statement shall have become
effective not later than 9:30 A.M., New York time, on the business day
immediately following the date of this Agreement or at such later time and date
as shall have been consented to in writing by you; if the Company shall have
elected to rely upon Rule 430A of the Regulations, the Prospectus shall have
been filed with the Commission in a timely fashion in accordance with Section
5(a) hereof; and, at or prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement or any post-effective amendment
thereof shall have been issued and no proceedings therefor shall have been
initiated or threatened by the Commission.
(b) At the Closing Date you shall have received the
opinion of Dewey Ballantine, counsel for the Company, dated the Closing Date
addressed to the Underwriters and in form and substance reasonably satisfactory
to Underwriters' Counsel, to the effect that:
(i) The Company has been duly organized and
is validly existing as a corporation in good standing under the laws
of the State of Florida. The Partnership has been duly organized and
is validly existing as a limited partnership in good standing under
the laws of the State of Delaware.
(ii) The Shares to be delivered on the
Closing Date have been duly and validly authorized and, when delivered
by the Company in accordance with this Agreement, will be duly and
validly issued, fully paid and non-assessable and will not have been
issued in violation of or subject to any preemptive rights. The Common
Stock, the Firm Shares and the Additional Shares conform to the
descriptions thereof contained in the Registration Statement and the
Prospectus.
(iii) The Shares to be sold under this
Agreement to the Underwriters are duly authorized for quotation on The
Nasdaq National Market.
(iv) This Agreement has been duly and
validly authorized, executed and delivered by the Company and the
Partnership.
(v) To the best of such counsel's knowledge,
there is no litigation or governmental or other action, suit,
proceeding or investigation before any court or before or by any
public, regulatory or governmental agency or body pending
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or, threatened against, or involving the properties or business of,
the Company, any of its subsidiaries or the Partnership, which is of a
character required to be disclosed in the Registration Statement and
the Prospectus which has not been properly disclosed therein.
(vi) The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated hereby by the Company and the Partnership do not and will
not (A) conflict with or result in a breach of any of the terms and
provisions of, or constitute a default (or an event which with notice
or lapse of time, or both, would constitute a default) under, or
result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company, any of its
subsidiaries or the Partnership pursuant to, any agreement,
instrument, franchise, license or permit referred to in or filed as an
exhibit to the Registration Statement or (B) to the best knowledge of
such counsel, violate or conflict with any judgment, decree, order,
statute, rule or regulation of any court or any public, governmental
or regulatory agency or body having jurisdiction over the Company,
any of its subsidiaries or the Partnership or any of their respective
properties or assets. No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with
any court or any public, governmental, or regulatory agency or
body having jurisdiction over the Company, any of its subsidiaries or
the Partnership or any of their respective properties or assets is
required for the execution, delivery and performance of this Agreement
or the sale of the Shares to the Underwriters, except for (1) such
as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by
the Underwriters or pursuant to the Corporate Financing Rule of the
National Association of Securities Dealers, Inc. (as to which such
counsel need express no opinion) and (2) such as have been made or
obtained under the Act.
(vii) The Registration Statement and the
Prospectus and any amendments thereof or supplements thereto (other
than the financial statements and schedules and other financial data
included or incorporated by reference therein, as to which no opinion
need be rendered) comply as to form in all material respects with the
requirements of the Act and the Regulations.
(viii) The Registration Statement is
effective under the Act, and, to the best knowledge of such counsel,
no stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereof has been issued and,
to the best knowledge of such counsel, no proceedings therefor have
been initiated or threatened by the Commission and all filings
required by Rule 424(b) of the Regulations have been made.
(ix) In addition, such opinion shall also
contain a statement that such counsel has participated in conferences
with officers and representatives of
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the Company, representatives of the independent public accountants for
the Company and the Underwriters at which the contents and the
Prospectus and related matters were discussed, and no facts have come
to the attention of such counsel which would lead such counsel to
believe that either the Registration Statement at the time it became
effective (including the information deemed to be part of the
Registration Statement at the time of effectiveness pursuant to Rule
430A(b), if applicable), or any amendment thereof made prior to the
Closing Date as of the date of such amendment contained an untrue
statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus as of its date (or any
amendment thereof or supplement thereto made prior to the Closing Date
as of the date of such amendment or supplement) and as of the Closing
Date contained or contains an untrue statement of a material fact or
omitted or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (it being
understood that such counsel need express no belief or opinion with
respect to the financial statements and schedules and other financial
data included or incorporated by reference therein).
In rendering such opinion, such counsel may rely: (A) as to
matters involving the application of laws other than the laws of the United
States and jurisdictions in which they are admitted, to the extent such counsel
deems proper and to the extent specified in such opinion, if at all, upon an
opinion or opinions (in form and substance reasonably satisfactory to
Underwriters' Counsel) of other counsel reasonably acceptable to Underwriters'
Counsel, familiar with the applicable laws; and (B) as to matters of fact, to
the extent they deem proper, on certificates of responsible officers of the
Company and certificates or other written statements of officers of departments
of various jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company and its subsidiaries, provided that
copies of any such statements or certificates shall be delivered to
Underwriters' Counsel. The opinion of such counsel for the Company shall state
that the opinion of any such other counsel is in form satisfactory to such
counsel and, in their opinion, you and they are justified in relying thereon.
(c) At the Closing Date you shall have received the
opinion of Mitchell W. Legler, counsel for the Company, dated the Closing Date
addressed to the Underwriters and in form and substance reasonably satisfactory
to Underwriters' Counsel, to the effect that:
(i) Each of the Company and its subsidiaries
has been duly organized and is validly existing as a corporation in
good standing under the laws of its jurisdiction of incorporation. The
Partnership has been duly organized and is validly existing as a
limited partnership in good standing under the laws of the State of
Delaware. Each of the Company, its subsidiaries and the Partnership is
duly qualified and in good standing as a foreign corporation or
limited partnership, as the case may be, in each jurisdiction in which
the character or location of its properties (owned,
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leased or licensed) or the nature or conduct of its business makes
such qualification necessary, except for those failures to be so
qualified or in good standing which will not in the aggregate have a
material adverse effect on the Company, its subsidiaries and the
Partnership taken as a whole. Each of the Company, its subsidiaries
and the Partnership has all requisite corporate or partnership
authority, as the case may be, to own, lease and license its
respective properties and conduct its business as now being conducted
and as described in the Registration Statement and the Prospectus. All
of the issued and outstanding capital stock of each corporate
subsidiary of the Company has been duly and validly issued and is
fully paid and non-assessable and was not issued in violation of
pre-emptive rights and is owned directly or indirectly by the Company,
free and clear of any lien, encumbrance, claim, security interest,
restriction on transfer, shareholders' agreement, voting trust or
other defect of title whatsoever. All of the outstanding limited and
general partnership interests in the Partnership have been duly and
validly issued and were not issued in violation of pre-emptive rights
created by the Partnership, the Company or any applicable statute,
law, rule or regulation and are owned directly or indirectly by the
Company, free and clear of any lien, encumbrance, claim, security
interest, restriction on transfer (other than those contained in the
Partnership Agreement, as amended), voting trust or other defect of
title whatsoever.
(ii) The Company has an authorized capital
stock as set forth in the Registration Statement and the Prospectus.
All of the outstanding shares of capital stock of the Company are duly
and validly authorized and issued, fully paid and non-assessable and
were not issued and are not now in violation of or subject to any
preemptive rights. The Shares to be delivered on the Closing Date have
been duly and validly authorized and, when delivered by the Company in
accordance with this Agreement, will be duly and validly issued, fully
paid and non-assessable and will not have been issued in violation of
or subject to any preemptive rights. The Common Stock, the Firm Shares
and the Additional Shares conform to the descriptions thereof
contained in the Registration Statement and the Prospectus.
(iii) This Agreement has been duly and
validly authorized, executed and delivered by the Company and the
Partnership.
(iv) To the best of such counsel's
knowledge, there is no litigation or governmental or other action,
suit, proceeding or investigation before any court or before or by any
public, regulatory or governmental agency or body pending or,
threatened against, or involving the properties or business of, the
Company, any of its subsidiaries or the Partnership, which is of a
character required to be disclosed in the Registration Statement and
the Prospectus which has not been properly disclosed therein.
(v) The execution, delivery, and performance
of this Agreement and the consummation of the transactions
contemplated hereby by the Company and the Partnership do not and will
not (A) conflict with or result in a
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breach of any of the terms and provisions of, or constitute a default
(or an event which with notice or lapse of time, or both, would
constitute a default) under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the
Company, any of its subsidiaries or the Partnership pursuant to, any
agreement, instrument, franchise, license or permit referred to in or
filed as an exhibit to the Registration Statement or otherwise known
to such counsel to which the Company, any of its subsidiaries or the
Partnership is a party or by which any of such entities or their
respective properties or assets may be bound or (B) violate or
conflict with any provision of the certificate of organization or
by-laws of the Company, any of its subsidiaries or the Partnership,
or, to the best knowledge of such counsel, any judgment, decree,
order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body having jurisdiction over the
Company, any of its subsidiaries or the Partnership or any of their
respective properties or assets. No consent, approval, authorization,
order, registration, filing, qualification, license or permit of or
with any court or any public, governmental, or regulatory agency or
body having jurisdiction over the Company, any of its subsidiaries or
the Partnership or any of their respective properties or assets is
required for the execution, delivery and performance of this Agreement
or the consummation of the transactions contemplated hereby, except
for (1) such as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the Shares by
the Underwriters or pursuant to the Corporate Financing Rule of the
National Association of Securities Dealers, Inc. (as to which such
counsel need express no opinion) and (2) such as have been made or
obtained under the Act.
(vi) In addition, such opinion shall also
contain a statement that such counsel has participated in conferences
with officers and representatives of the Company, representatives of
the independent public accountants for the Company and the
Underwriters at which the contents and the Prospectus and related
matters were discussed, and no facts have come to the attention of
such counsel which would lead such counsel to believe that either the
Registration Statement at the time it became effective (including the
information deemed to be part of the Registration Statement at the
time of effectiveness pursuant to Rule 430A(b), if applicable), or any
amendment thereof made prior to the Closing Date as of the date of
such amendment contained an untrue statement of a material fact or
omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus as of its date (or any amendment thereof or supplement
thereto made prior to the Closing Date as of the date of such
amendment or supplement) and as of the Closing Date contained or
contains an untrue statement of a material fact or omitted or omits to
state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading (it being understood that such counsel
need express no belief or opinion with respect to the financial
statements and schedules and other financial data included or
incorporated by reference therein).
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In rendering such opinion, such counsel may rely:
(A) as to matters involving the application of laws other than the laws of the
United States and the State of Florida, to the extent such counsel deems proper
and to the extent specified in such opinion, if at all, upon an opinion or
opinions (in form and substance reasonably satisfactory to Underwriters'
Counsel) of other counsel reasonably acceptable to Underwriters' Counsel,
familiar with the applicable laws; and (B) as to matters of fact, to the extent
such counsel deems proper, on certificates of responsible officers of the
Company and certificates or other written statements of officers of departments
of various jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company and its subsidiaries, provided that
copies of any such statements or certificates shall be delivered to
Underwriters' Counsel. The opinion of such counsel for the Company shall state
that the opinion of any such other counsel is in form satisfactory to such
counsel and, in such counsel's opinion, you and such counsel are justified in
relying thereon.
(d) At the Closing Date you shall have received the
opinion of Foley & Lardner, special counsel for the Company, dated the Closing
Date addressed to the Underwriters and in form and substance reasonably
satisfactory to Underwriters' Counsel, to the effect that:
(I) The Exchange qualifies as a tax-free
exchange under Section 351 of the Code and is not subject to the
provisions of Section 5 of the Act or Subpart 229.900 of Title 17 of
the Code of Federal Regulations. The consummation of the Exchange and
the transactions contemplated thereby do not and will not: (i)
conflict with or result in a breach of any of the terms and provisions
of, or constitute a default (or an event which with notice or lapse of
time, or both, would constitute a default) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company, any of its subsidiaries or the
Partnership pursuant to, any agreement, instrument, franchise, license
or permit to which the Company, any of its subsidiaries or the
Partnership is a party or by which any of such entities or their
respective properties or assets may be bound; or (ii) violate or
conflict with any provision of the certificate of organization or
by-laws of the Company, any of its subsidiaries or the Partnership or
any judgment, decree, order, statute, rule or regulation of any court
or any public, governmental or regulatory agency or body having
jurisdiction over any of such entities or any of their respective
properties or assets. No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any
court or any public, governmental or regulatory agency or body having
jurisdiction over any of such entities or any of their respective
properties or assets was required for the consummation of the Exchange
and the transactions contemplated thereby, including the issuance and
delivery of shares of Common Stock issued and delivered by the Company
thereunder, except those consents, approvals, authorizations, orders,
registrations, filings, qualifications, licenses or permits that have
been obtained and made.
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(ii) None of the outstanding shares of
capital stock of the Company, nor any securities convertible into
shares of such capital stock or exchangeable therefor, were issued in
violation of the provisions of Section 5 of the Act.
In rendering such opinion, such counsel may rely:
(A) as to matters involving the application of laws other than the laws of the
United States and jurisdictions in which they are admitted, to the extent such
counsel deems proper and to the extent specified in such opinion, if at all,
upon an opinion or opinions (in form and substance reasonably satisfactory to
Underwriters' Counsel) of other counsel reasonably acceptable to Underwriters'
Counsel, familiar with the applicable laws; and (B) as to matters of fact, to
the extent they deem proper, on certificates of responsible officers of the
Company and certificates or other written statements of officers of departments
of various jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company and its subsidiaries, provided that
copies of any such statements or certificates shall be delivered to
Underwriters' Counsel. The opinion of such counsel for the Company shall state
that the opinion of any such other counsel is in form satisfactory to such
counsel and, in their opinion, you and they are justified in relying thereon.
(e) All proceedings taken in connection with the
sale of the Firm Shares and the Additional Shares as herein contemplated shall
be reasonably satisfactory in form and substance to you and to Underwriters'
Counsel, and the Underwriters shall have received from said Underwriters'
Counsel a favorable opinion, dated as of the Closing Date with respect to the
issuance and sale of the Shares, the Registration Statement and the Prospectus
and such other related matters as you may reasonably require, and the Company
shall have furnished to Underwriters' Counsel such documents as they request for
the purpose of enabling them to pass upon such matters.
(f) At the Closing Date you shall have received a
certificate of the Chief Executive Officer and Chief Financial Officer of the
Company, dated the Closing Date, to the effect that (i) the condition set forth
in subsection (a) of this Section 6 has been satisfied, (ii) as of the date
hereof and as of the Closing Date the representations and warranties of the
Company set forth in Section l hereof are accurate, (iii) as of the Closing Date
the obligations of the Company to be performed hereunder on or prior thereto
have been duly performed and (iv) subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, the
Company, its subsidiaries and the Partnership have not sustained any material
loss or interference with their respective businesses or properties from fire,
flood, hurricane, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or any legal or governmental proceeding,
and there has not been any material adverse change in the business prospects,
properties, operations, financial condition or results of operations of the
Company and its subsidiaries taken as a whole, except in each case as described
in or contemplated by the Prospectus.
(g) At the time this Agreement is executed and at
the Closing Date, you shall have received a letter from Coopers & Lybrand
L.L.P., independent public
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<PAGE>
accountants for the Company, dated, respectively, as of the date of this
Agreement and as of the Closing Date, addressed to the Underwriters and in form
and substance reasonably satisfactory to you: (i) to the effect that they are
independent certified public accountants with respect to the Company within the
meaning of the Act and the Regulations and stating that the answer to Item 10 of
the Registration Statement is correct insofar as it relates to them; (ii)
stating that, in their opinion, the financial statements and schedules of the
Company included in the Registration Statement and the Prospectus and covered
by their opinion therein comply as to form in all material respects with the
applicable accounting requirements of the Act and the applicable published rules
and regulations of the Commission thereunder; (iii) stating that, on the basis
of procedures consisting of a reading of the latest available unaudited interim
consolidated financial statements of the Company, and its subsidiaries, a
reading of the minutes of meetings and consents of the shareholders and boards
of directors of the Company and its subsidiaries and the committees of such
boards subsequent to March 31, 1996, inquiries of officers and other employees
of the Company and its subsidiaries who have responsibility for financial and
accounting matters of the Company and its subsidiaries with respect to
transactions and events subsequent to March 31, 1996 and other specified
procedures and inquiries to a date not more than five days prior to the date of
such letter, nothing has come to their attention that would cause them to
believe that: (A) the unaudited consolidated financial statements and schedules
of the Company presented in the Registration Statement and the Prospectus do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and, if applicable, the Exchange Act and the applicable
published rules and regulations of the Commission thereunder or that such
unaudited consolidated financial statements are not fairly presented in
conformity with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited consolidated financial
statements included in the Registration Statement and the Prospectus; (B) with
respect to the period subsequent to March 31, 1996, there were, as of the date
of the most recent available monthly consolidated financial statements of the
Company and its subsidiaries, if any, and as of a specified date not more than
five days prior to the date of such letter, any changes in the capital stock or
long-term indebtedness of the Company or any decrease in the net current assets
or stockholders' equity of the Company, in each case as compared with the
amounts shown in the most recent balance sheet presented in the Registration
Statement and the Prospectus, except for changes or decreases which the
Registration Statement and the Prospectus disclose have occurred or may occur or
which are set forth in such letter or (C) during the period from April 1, 1996
to the date of the most recent available monthly consolidated financial
statements of the Company and its subsidiaries, if any, and to a specified date
not more than five days prior to the date of such letter, there was any
decrease, as compared with the corresponding period in the prior fiscal year, in
total revenues, or total or per share net income, except for decreases which the
Registration Statement and the Prospectus disclose have occurred or may occur or
which are set forth in such letter; (iv) stating that they have compared such
dollar amounts, numbers of shares, percentages of revenues and earnings, and
other financial information pertaining to the Company and its subsidiaries set
forth in the Registration Statement and the Prospectus, which have been
specified by you prior to the date of this Agreement, to the extent that such
amounts, numbers, percentages, and information may be derived from the general
accounting
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and financial records of the Company and its subsidiaries or from schedules
furnished by the Company, and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the application
of specified readings, inquiries, and other appropriate procedures specified by
you set forth in such letter, and found them to be in agreement; and (v) stating
that they have read the unaudited pro forma consolidated financial statements,
inquired of officials of the Company who have responsibility for financial and
accounting matters about the basis for their determination of the pro forma
adjustments and compliance with Regulation S-X, and proved the arithmetic
accuracy of the application of the pro forma adjustments to the historical
amounts, and that nothing came to their attention that caused them to believe
that the unaudited pro forma condensed financial statements included in the
Registration Statement do not comply as to form in all material respects with
the applicable accounting requirements of Regulation S-X and that the pro forma
adjustments have not been properly applied to the historical amounts in the
compilation of those statements.
(h) Prior to the Closing Date, the Company shall
have furnished to you such other information, certificates and documents as you
may reasonably request.
(i) You shall have received from such officers,
directors and shareholders as have been heretofore designated by you and listed
on Schedule II hereto an agreement to the effect that such person will not,
directly or indirectly, without your prior written consent, offer, sell, offer
or agree to sell, grant any option to purchase or otherwise dispose (or announce
any offer, sale, grant of an option to purchase, or other disposition) of any
shares of Common Stock (in the case of certain shareholders, only with respect
to shares purchased by them in this offering) for a period of 180 days after the
Closing Date, subject to certain exceptions.
(j) At the Closing Date, the Shares shall have been
approved for quotation on The Nasdaq National Market.
If any of the conditions specified in this Section 6 shall not
have been fulfilled when and as required by this Agreement, or if any of the
certificates, opinions, written statements or letters furnished to you or to
Underwriters' Counsel pursuant to this Section 6 shall not be in all material
respects reasonably satisfactory in form and substance to you and to
Underwriters' Counsel, all obligations of the Underwriters hereunder may be
canceled by you at, or at any time prior to, the Closing Date and the
obligations of the Underwriters to purchase the Additional Shares may be
canceled by you at, or at any time prior to, the Additional Closing Date. Notice
of such cancellation shall be given to the Company in writing, or by telephone,
telex or telegraph, confirmed in writing.
7. Indemnification.
(a) Each of the Company and the Partnership jointly
and severally, agrees to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the Act or Section 20(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), against all
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losses, liabilities, claims, damages and expenses as incurred (including but
not limited to reasonable attorneys' fees and expenses incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation), joint or several, to which they or any of them may
become subject under the Act, the Exchange Act or otherwise, insofar as such
losses, liabilities, claims, damages or expenses (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the registration statement for the registration
of the Shares, as originally filed or any amendment thereto, or any related
preliminary prospectus or the Prospectus, or in any supplement thereto or
amendment thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however,
that the Company and the Partnership will not be liable in any such case to the
extent but only to the extent that any such loss, liability, claim, damage or
expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of any Underwriter through you expressly for use therein. This indemnity
agreement will be in addition to any liability which the Company or the
Partnership may otherwise have, including under this Agreement.
(b) Each Underwriter severally, and not jointly,
agrees to indemnify and hold harmless the Company, the Partnership, each of the
directors of the Company, each of the officers of the Company who shall have
signed the Registration Statement, and each other person, if any, who controls
the Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act against any losses, liabilities, claims, damages and expenses
whatsoever as incurred (including but not limited to attorneys' fees and any and
all expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever, and
any and all amounts paid in settlement of any claim or litigation), jointly or
severally, to which they or any of them may become subject under the Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
registration statement for the registration of the Shares, as originally filed
or any amendment thereof, or any related preliminary prospectus or the
Prospectus, or in any amendment thereof or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that any
such loss, liability, claim, damage or expense arises out of or is based upon
any such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter through
you expressly for use therein; provided, however, that in no case shall any
Underwriter be liable or responsible for any amount in excess of the
underwriting discount (as shown on the cover page of the Prospectus) applicable
to the Shares purchased by such Underwriter hereunder. This indemnity will be in
addition to any liability which any
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Underwriter may otherwise have, including under this Agreement. Each of the
Company and the Partnership acknowledges that the statements set forth in the
second and third paragraphs and last sentence of each of the fourth, fifth and
seventh paragraphs under the caption "Underwriting" in the Prospectus, the last
paragraph on the front cover page of the Prospectus and the final paragraph on
the inside front cover page of the Prospectus constitute the only information
furnished in writing by or on behalf of any Underwriter expressly for use in the
registration statement relating to the Shares as originally filed or in any
amendment thereof, any related preliminary prospectus or the Prospectus or in
any amendment thereof or supplement thereto, as the case may be.
(c) Promptly after receipt by an indemnified party
under subsection (a) or (b) above of notice of the commencement of any action or
written notice of any threat thereof, such indemnified party shall, if a claim
in respect thereof is to be made against the indemnifying party under such
subsection, notify each party against whom indemnification is to be sought in
writing of the commencement thereof (but the failure so to notify an
indemnifying party shall not relieve it from any liability which it may have
under this Section 7). In case any such action is brought against any
indemnified party, and it notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall have the
right to employ its or their own counsel in any such case, but the reasonable
fees and expenses of such counsel shall be at the expense of such indemnified
party or parties unless (i) the employment of such counsel shall have been
authorized in writing by one of the indemnifying parties in connection with the
defense of such action, (ii) the indemnifying parties shall not have employed
counsel to have charge of the defense of such action within a reasonable time
after notice of commencement of the action or (iii) such indemnified party or
parties shall have been advised by counsel that there may be defenses available
to it or them which are different from or additional to those available to one
or all of the indemnifying parties (in which case the indemnifying parties shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such reasonable fees and
expenses shall be borne by the indemnifying parties (it being understood,
however, that the indemnifying party or parties shall not be liable for the fees
and expenses of more than one separate local counsel in any one action or series
of related actions in the same jurisdiction representing the indemnified party
or parties in such action). Anything in this Section 7 to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its written consent; provided, however,
that such consent shall not be unreasonably withheld.
8. Contribution. In order to provide for contribution in
circumstances in which the indemnification provided for in Section 7 hereof is
for any reason held to be unavailable from any indemnifying party or is
insufficient to hold harmless a party indemnified thereunder, the Company and
the Partnership, taken together, and the Underwriters shall contribute to the
aggregate losses, claims, damages, liabilities and expenses of the nature
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contemplated by such indemnification provision (including any investigation,
legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but after
deducting, in the case of losses, claims, damages, liabilities and expenses
suffered by the Company or the Partnership, any contribution received by the
Company or the Partnership from persons, other than the Underwriters, who may
also be liable for contribution, including persons who control the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, officers of the Company who signed the Registration Statement and directors
of the Company) as incurred to which the Company and the Partnership and one or
more of the Underwriters may be subject, in such proportions as is appropriate
to reflect the relative benefits received by the Company and the Partnership,
taken together, and the Underwriters from the offering of the Shares or, if such
allocation is not permitted by applicable law or indemnification is not
available as a result of the indemnifying party not having received notice as
provided in Section 7 hereof, in such proportion as is appropriate to reflect
not only the relative benefits referred to above but also the relative fault of
the Company and the Partnership, taken together, and the Underwriters in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Partnership, taken together, and the Underwriters shall be deemed to be in the
same proportion as (x) the total proceeds from the offering (net of underwriting
discount but before deducting expenses) received by the Company and (y) the
underwriting discount received by the Underwriters, respectively, in each case
as set forth in the table on the cover page of the Prospectus. The relative
fault of the Company and the Partnership, taken together, and of the
Underwriters shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company, the Partnership or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company, the Partnership and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this Section
8 were determined by pro rata allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this Section 8, (i) in no case shall any
Underwriter be liable or responsible for any amount in excess of the
underwriting discount (as set forth on the cover page of the Prospectus)
applicable to the Shares purchased by such Underwriter hereunder, and (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Notwithstanding the provisions of
this Section 8, no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages that such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. For purposes of this Section 8, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act shall have the same rights to contribution as such Underwriter, and
each person, if any, who controls the
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Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, each officer of the Company who shall have signed the Registration
Statement and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to clauses (i) and (ii) of
this Section 8. Any party entitled to contribution will, promptly after receipt
of notice of commencement of any action, suit or proceeding against such party
in respect of which a claim for contribution may be made against another party
or parties, notify each party or parties from whom contribution may be sought,
but the omission to so notify such party or parties shall not relieve the party
or parties from whom contribution may be sought from any obligation it or they
may have under this Section 8 or otherwise. No party shall be liable for
contribution with respect to any action or claim settled without its consent;
provided, however, that such consent shall not be unreasonably withheld.
9. Default by an Underwriter.
(a) If any Underwriter or Underwriters shall default
in its or their obligation to purchase Firm Shares or Additional Shares
hereunder, and if the Firm Shares or Additional Shares with respect to which
such default relates do not (after giving effect to arrangements, if any, made
by you pursuant to subsection (b) below) exceed in the aggregate 10% of the
number of Firm Shares or Additional Shares, to which the default relates shall
be purchased by the non-defaulting Underwriters in proportion to the respective
proportions which the numbers of Firm Shares set forth opposite their respective
names in Schedule I hereto bear to the aggregate number of Firm Shares set forth
opposite the names of the non-defaulting Underwriters.
(b) In the event that such default relates to more
than 10% of the Firm Shares or Additional Shares, as the case may be, you may in
your discretion arrange for yourself or for another party or parties (including
any non-defaulting Underwriter or Underwriters who so agree) to purchase such
Firm Shares or Additional Shares, as the case may be to which such default
relates on the terms contained herein. In the event that within 5 calendar days
after such a default you do not arrange for the purchase of the Firm Shares or
Additional Shares, as the case may be, to which such default relates as provided
in this Section 9, this Agreement or, in the case of a default with respect to
the Additional Shares, the obligations of the Underwriters to purchase and of
the Company to sell the Additional Shares shall thereupon terminate, without
liability on the part of the Company with respect thereto (except in each case
as provided in Sections 5, 7(a) and 8 hereof) or the Underwriters but nothing in
this Agreement shall relieve a defaulting Underwriter or Underwriters of its or
their liability, if any, to the other Underwriters and the Company for damages
occasioned by its or their default hereunder.
(c) In the event that the Firm Shares or Additional
Shares to which the default relates are to be purchased by the non-defaulting
Underwriters, or are to be purchased by another party or parties as aforesaid,
you or the Company shall have the right to postpone the Closing Date or
Additional Closing Date, as the case may be for a period, not exceeding five
business days, in order to effect whatever changes may thereby be made necessary
in the Registration Statement or the Prospectus or in any other documents and
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arrangements, and the Company agrees to file promptly any amendment or
supplement to the Registration Statement or the Prospectus which may thereby be
made necessary or advisable. The term "Underwriter" as used in this Agreement
shall include any party substituted under this Section 9 with like effect as if
it had originally been a party to this Agreement with respect to such Firm
Shares and Additional Shares.
10. Survival of Representations and Agreements. All
representations and warranties, covenants and agreements of the Underwriters,
the Company and the Partnership contained in this Agreement, including the
agreements contained in Section 5, the indemnity agreements contained in Section
7 and the contribution agreements contained in Section 8, shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of any Underwriter or any controlling person thereof or by or on behalf
of the Company, any of its officers and directors or any controlling person
thereof, and shall survive delivery of and payment for the Shares to and by the
Underwriters. The representations contained in Section l and the agreements
contained in Sections 5, 7, 8 and 11(d) hereof shall survive the termination of
this Agreement, including termination pursuant to Section 9 or 11 hereof. All
such representations and warranties, notwithstanding the provisions of this
Section 10, shall continue to be made as of the date of this Agreement or such
other specific date as shall be referenced in any such representation or
warranty.
11. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective upon the
execution and delivery of this Agreement by the Company, the Partnership and
you. If the Registration Statement shall not have been declared effective by the
Commission on or prior to 9:30 A.M. on the business day immediately following
the date hereof, this Agreement shall thereupon terminate without liability to
the Company, the Partnership or the Underwriters except as herein expressly
provided. Until this Agreement becomes effective as aforesaid, it may be
terminated by the Company by notifying you or by you notifying the Company.
Notwithstanding the foregoing, the provisions of this Section 11 and of Sections
1, 5, 7 and 8 hereof shall at all times be in full force and effect.
(b) You shall have the right to terminate this
Agreement at any time prior to the Closing Date or the obligations of the
Underwriters to purchase the Additional Shares at any time prior to the
Additional Closing Date, as the case may be, (A) if any domestic or
international event or act or occurrence has materially disrupted, or in your
opinion will in the immediate future materially disrupt, the market for the
Company's securities or securities in general; or (B) if trading on the New York
or American Stock Exchanges shall have been suspended, or minimum or maximum
prices for trading shall have been fixed, or maximum ranges for prices for
securities shall have been required, on the New York or American Stock Exchanges
by the New York or American Stock Exchanges or by order of the Commission or any
other governmental authority having jurisdiction; or (C) if a banking moratorium
has been declared by a New York, Florida or federal authority or if any new
restriction materially adversely affecting the distribution of the Firm Shares
or the Additional Shares, as the case may be, shall have become effective; or
(D) (i) if the United
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States becomes engaged in hostilities or there is an escalation of hostilities
involving the United States or there is a declaration of a national emergency or
war by the United States or (ii) if there shall have been such a material
adverse change in political, financial or economic conditions, if the effect of
any such event in (i) or (ii) as in your judgment makes it impracticable or
inadvisable to proceed with the offering, sale and delivery of the Firm Shares
or the Additional Shares, as the case may be, on the terms contemplated by the
Prospectus.
(c) Any notice of termination pursuant to this
Section 11 shall be by telephone, telex, or telegraph, confirmed in writing by
letter.
(d) If this Agreement shall be terminated pursuant
to any of the provisions hereof (otherwise than pursuant to (i) notification by
you as provided in Section 11(a) hereof or (ii) Section 9(b) or 11(b) hereof),
or if the sale of the Shares provided for herein is not consummated because any
condition to the obligations of the Underwriters set forth herein is not
satisfied or because of any refusal, inability or failure on the part of the
Company or the Partnership to perform any agreement herein or comply with any
provision hereof, the Company and the Partnership will, subject to demand by
you, reimburse the Underwriters for all out-of-pocket expenses (including the
fees and expenses of their counsel), incurred by the Underwriters in connection
herewith.
12. Notice. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing and, if sent to any
Underwriter, shall be mailed, delivered, or telexed or telegraphed and confirmed
in writing, to such Underwriter c/o Bear, Stearns & Co. Inc., 245 Park Avenue,
New York, New York 10167, Attention: Steven Begleiter; if sent to the Company,
shall be mailed, delivered, or telegraphed and confirmed in writing to the
Company, 3450 Buschwood Park Drive, Tampa, Florida 33618, Attention: Thomas
Middleton.
13. Parties. This Agreement shall inure solely to the benefit
of, and shall be binding upon, the Underwriters, the Company and the Partnership
and the controlling persons, directors, officers, employees and agents referred
to in Sections 7 and 8, and their respective successors and assigns, and no
other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provision herein contained. The term "successors and assigns" shall not include
a purchaser, in its capacity as such, of Shares from any of the Underwriters.
14. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, but without
regard to principles of conflict of laws.
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If the foregoing correctly sets forth the understanding among
you, the Company and the Partnership, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement among us.
Very truly yours,
IMC MORTGAGE COMPANY
By
-------------------------------
INDUSTRY MORTGAGE COMPANY, L.P.
By
-------------------------------
Accepted as of the date first above written
BEAR, STEARNS & CO. INC.
OPPENHEIMER & CO., INC.
By: Bear, Stearns & Co. Inc.
By
-----------------------
On behalf of themselves and the other
Underwriters named in Schedule I hereto.
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SCHEDULE I
Number of Firm
Name of Underwriter Shares to Be Purchased
- ------------------- ----------------------
Bear, Stearns & Co. Inc.
Oppenheimer & Co., Inc.
Total................
---------------------------
<PAGE>
<PAGE>
SCHEDULE II
George Nicholas
Thomas G. Middleton
George Freeman
Timothy W. Griffin
Susan W. McCarthy
Karen S. Bausman
Laurie S. Wockenfuss
David B. MacDonald
Dennis J. Pitocco
Jean S. Schwindt
Joseph P. Goryeb
Mitchell W. Legler
Allen D. Wyckle
[Any Industry Partners who purchase in the Directed Share Program]
<PAGE>
<PAGE>
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). NEITHER THIS WARRANT NOR SUCH SECURITIES MAY 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.
RESTATED WARRANT AGREEMENT
FOR COMMON STOCK OF
IMC MORTGAGE COMPANY
WARRANT NO. __
THIS CERTIFIES that, for value received, CONTITRADE SERVICES
CORPORATION, or its permitted assigns registered on the books of the Company
(collectively, the "Holder"), is entitled to purchase from IMC MORTGAGE COMPANY,
a Florida corporation (the "Company"), at any time, and from time to time, on or
after the date hereof and until 5 p.m. New York City time on March 31, 2011,
___________________________________________ shares (the "Shares") of fully paid
and non-assessable shares of common stock of the Company (the "Common Stock").
The purchase price for each Share (the "Share Price") is ________ Dollars
($_____) divided by the total number of shares of Common Stock subject to this
Warrant so that a total of $_____ will be paid if this Warrant is exercised in
full, upon the terms and subject to the conditions set forth herein. Securities
issuable upon exercise of this Warrant and the price payable therefor are
subject to adjustment from time to time as hereinafter set forth. As used
herein, the term "Warrant" shall include the warrant originally issued by the
Company of which this warrant is part and any warrant or warrants hereafter
issued in consequence of the exercise of this Warrant in part or transfer of
this Warrant in whole or in part.
1. Exercise; Payment for Ownership Interest. Upon the terms and subject to the
conditions set forth herein, this Warrant may be exercised in whole or in part
by the Holder hereof at any time, or from time to time, on or after the date
hereof by presentation and surrender of this Warrant to the principal offices of
the Company, together with the Purchase Form annexed hereto, duly executed, and
accompanied by payment to the Company of an amount equal to the Share Price
multiplied by the number of Shares as to which this Warrant is then being
exercised. Moreover, any transfer of Shares obtained by Holder in exercise of
this Warrant is subject to the requirement that such securities are registered
under the Securities Act of 1933 and applicable state securities laws or are
exempt from registration under such laws. The Holder
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of this Warrant shall be deemed to be a shareholder of the Shares as to which
this Warrant is exercised in accordance herewith effective immediately after the
close of business on the date on which the Holder shall have delivered to the
Company this Warrant in proper form for exercise and payment by certified or
official bank check or wire transfer of the cash purchase price for the number
of Shares as to which the exercise is being made, or by delivery to the Company
of securities of the Company having a value equal to the cash purchase price for
such number of Shares. If this Warrant shall be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the Shares purchasable hereunder as to which the Warrant has not
been exercised. If this Warrant is exercised in part, such exercise shall be for
a whole number of Shares. Upon any exercise and surrender of this Warrant, the
Company (a) will issue and deliver to the Holder a certificate or certificates
in the name of the Holder for the number of Shares to which the Holder shall be
entitled, and (b) will deliver to the Holder such other securities, properties
and cash which the Holder may be entitled to receive upon such exercise, or the
proportionate part thereof if this Warrant is exercised in part, pursuant to the
provisions of this Warrant.
2. Agreement of Holder. The Holder acknowledges that this Warrant is
unregistered and accordingly that it will not be transferred or sold except
pursuant to an effective registration statement under the Securities Act of
1933, as amended, or an exemption therefrom and in compliance with all state
securities laws.
3. Adjustments. Securities issuable upon exercise of this Warrant and the Share
Price shall be subject to adjustment from time to time as follows:
3.1 Exercise of Employee Options under Option Plan. In December 1995,
the Company's predecessor adopted an option plan (as it may be amended from time
to time, the "Plan") for key employees of the Company and certain other persons.
No adjustment in the number of Shares shall be made in respect of options and/or
shares of Common Stock granted under the Plan unless the number of options
and/or shares of Common Stock so granted exceeds the maximum number of shares of
Common Stock issuable under the Plan on the date the Plan was first adopted by
the Company's predecessor. If the Company shall issue options for shares of
Common Stock under the Plan in excess of the shares of Common Stock issuable
under the Plan at the time the Plan was first adopted by the Company's
predecessor, then the Shares issuable under this Warrant shall be adjusted so
that, if this Warrant were exercised immediately after all such shares of Common
Stock issuable under the Plan were issued, the Holder will be entitled to
receive that number of shares of Common Stock as will represent the percentage
of outstanding shares of Common Stock subsequent to such occurrence (including
the shares issuable under the Warrant) equal to the percentage of the
outstanding shares of Common Stock that the Holder would have been entitled to
possess if this Warrant was exercised in full prior to such excess shares being
issued. The Company shall not grant options or issue shares of Common Stock
under the Plan and all other plans or other arrangements with employees of the
Company in excess of twelve percent (12%) of the aggregate number of shares of
Common Stock outstanding on the date hereof (assuming this Warrant is exercised
in full), provided
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however that this provision shall not prevent the Company from selling
securities to its employees at the fair market value of such securities.
3.2 Reorganization, Reclassification, Consolidation, Merger or Sale;
Distributions.
(a) If any capital reorganization or reclassification of the
Company, or any consolidation or merger of the Company with another person, or
the sale, transfer or lease of all or substantially all of its assets to another
person shall be effected in such a way that holders of shares of Common Stock
shall be entitled to receive stock, securities or assets with respect to or in
exchange for their shares, then provision shall be made, in accordance with this
Section 3.2, whereby the Holder hereof shall thereafter have the right to
purchase and receive, upon the basis and upon the terms and conditions specified
in this Warrant Agreement and in addition to or in lieu of, as applicable, the
Shares subject to this Warrant immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby, such securities
or assets as would have been issued or payable with respect to or in exchange
for the aggregate Shares immediately theretofore purchasable and receivable upon
the exercise of the rights represented hereby if exercise of the Warrant had
occurred immediately prior to such reorganization, reclassification,
consolidation, merger or sale. The Company will not effect any such
consolidation, merger, sale, transfer or lease unless prior to the consummation
thereof the successor entity (if other than the Company) resulting from such
consolidation or merger or the entity purchasing or leasing such assets shall
assume by written instrument (i) the obligation to deliver to such Holder such
securities or assets as, in accordance with the foregoing provisions, such
Holder may be entitled to purchase, and (ii) all other obligations of the
Company under this Warrant. The Company shall not sell or lease any securities
or assets of the Company to any holder of securities of the Company for a
consideration of less than that believed by the Company, in good faith, to be
the fair market value of such securities or assets, or purchase or lease any
securities or assets from any holder of securities of the Company for a
consideration of more than that believed by the Company, in good faith, to be
the fair market value of such securities or assets, provided, however, that this
restriction shall not apply to ordinary course purchases and sales of mortgage
loans, provided further that this proviso shall not be used as a device to avoid
the purpose of this Section.
(b) If, at any time or from time to time after the date of this
Warrant, the Company shall distribute to the holders of shares of Common Stock
(i) securities, (ii) property, other than cash, or (iii) cash, without fair
payment therefor, then, and in each such case, the Holder, upon the exercise of
this Warrant, shall be entitled to receive such securities, property and cash
which the Holder would hold on the date of such exercise if, on the date of this
Warrant, the Holder had been the holder of record of the shares of Common Stock
subscribed for upon such exercise and, during the period from the date of this
Warrant to and including the date of such exercise, had retained such shares of
Common Stock and the securities, property and cash receivable by the Holder
during such period, subject, however, to the Holder agreeing to any conditions
to such distribution as were required of all other Holders of shares of Common
Stock in connection with such distribution. If the securities to be distributed
by the Company involve rights, warrants, options or any other form of
convertible securities and the right to exercise or convert such securities
would expire in accordance with its terms prior to the
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exercise of this Warrant, then the terms of such securities shall provide that
such exercise or convertibility right shall remain in effect until thirty (30)
days after the date the Holder of this Warrant receives such securities pursuant
to the exercise hereof. The provisions of this Section 3.2(b) shall not apply to
the issuance by the Company (a) under the Pre-IPO Agreement dated as of March
30, 1996 by and among Industry Mortgage Company, L.P. (the "Partnership") and
each of the Partnership's limited partners who are signatories thereto (the
"Pre-IPO Agreement") of Incentive Options under the Incentive Option Pool as in
effect on the date hereof (and the shares of Common Stock issuable thereunder)
or (b) of shares of Common Stock upon the conversion of (x) up to 2006 shares of
Series A Redeemable Preferred Stock issued in respect of the acquisition by the
Company of the assets and business of Mortgage Central Corporation (as such
Series A Redeemable Preferred Stock is in effect on the date hereof) and (y) the
$1.8 million Convertible Secured Debenture due September 18, 1996 held by Rotch
Property Group Limited (as in effect on the date hereof), but once such
securities are issued shall apply to any further issuance or distributions with
respect to such securities. The terms "Incentive Options" and "Incentive Option
Pool" shall have the meanings attributable thereto in the Pre-IPO Agreement.
(c) In addition to those adjustments set forth in Sections 3.2(a)
and (b), but without duplication of the adjustments to be made under such
Sections, if the Company:
(i) pays a dividend or makes a distribution on its Common Stock
in shares of its Common Stock;
(ii) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(iii) combines its outstanding shares of Common Stock into
a smaller number of shares;
(iv) makes a distribution on of its Common Stock in shares of
its capital stock other than Common Stock; and/or
(v) issues, by reclassification of its Common Stock, any shares
of its capital stock;
then the number and kind of Shares purchasable upon exercise of this Warrant
shall be adjusted so that the Holder upon exercise hereof shall be entitled to
receive the kind and number of Shares or other securities of the Company (such
other securities thereafter enjoying the rights of Shares under this Warrant)
that the Holder would have owned or have been entitled to receive after the
happening of any of the events described above had this Warrant been exercised
immediately prior to the happening of such event or any record date with respect
thereto. An adjustment made pursuant to this Section 3.2(c) shall become
effective on the date of the dividend payment, subdivision, combination or
issuance retroactive to the record date with respect thereto, if any, for such
event.
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The adjustment to the number of Shares purchasable upon the
exercise of this Warrant described in this Section 3.2(c) shall be made each
time any event listed in paragraphs (i) through (v) of this Section 3.2(c)
occurs.
(d) Simultaneously with all adjustments to the number and/or kind
of securities, property and cash to be issued in connection with the exercise of
this Warrant, the Share Price will also be appropriately adjusted so that at all
times the Holder and all subsequent holders of this Warrant (whether in whole or
in part) would not pay more than twenty dollars ($20.00) to exercise this
Warrant in full.
3.3 Other Action Affecting Shares. If the Company takes any action
affecting its shares of Common Stock after the date hereof, other than an action
described in any of Sections 3.1 and 3.2, which would in any way diminish the
value of this Warrant hereunder, then this Warrant shall be adjusted as to the
Shares purchasable hereunder in such manner as the Board of Directors of the
Company shall in good faith determine to be equitable under the circumstances.
3.4 Notice of Adjustments. Upon each adjustment or readjustment of the
Share Price or in the nature of the securities or other property receivable upon
the exercise of this Warrant, the Company at its expense will promptly compute
such adjustment or readjustment in accordance with the terms of this Warrant and
prepare a certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based. The
Company will forthwith mail, by first class mail, postage prepaid, a copy of
each such certificate addressed to the Holder of this Warrant at the address of
such Holder as shown on the books of the Company.
3.5 Other Notices. If at any time:
(a) the Company shall (i) offer for subscription pro rata to the
holders of shares of the Common Stock any additional equity in the Company or
other rights; (ii) pay a dividend in additional shares of the Common Stock or
distribute securities or other property to the holders of shares of the Common
Stock (including, without limitation, evidences of indebtedness and equity and
debt securities); or (iii) issue securities convertible into, or rights or
Warrants to purchase, securities of the Company;
(b) there shall be any capital reorganization or reclassification
or consolidation or merger of the Company with, or sale, transfer or lease of
all or substantially all of its assets to, another entity; or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, addressed to the Holder of this Warrant at the address of
such Holder as shown on the books of the Company, (a) at least 15 days prior
written notice of the date on which the books
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of the Company shall close or a record shall be taken for such subscription
rights, dividend, distribution or issuance, and (b) in the case of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, at least 15 days prior written notice of the date
when the same shall take place if no stockholder vote is required and at least
15 days prior written notice of the record date for stockholders entitled to
vote upon such matter if a stockholder vote is required. Such notice in
accordance with the foregoing clause (a) shall also specify, in the case of any
such subscription rights, the date on which the holders of shares of Common
Stock shall be entitled to exercise their rights with respect thereto, and such
notice in accordance with the foregoing clause (b) shall also specify the date
on which the holders of shares of Common Stock shall be entitled to exchange
their shares of Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be.
4. No Voting Rights. Except as otherwise provided herein, this Warrant shall not
be deemed to confer upon the Holder any right to vote or to consent to or
receive notice as a stockholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a stockholder, prior
to the exercise hereof.
5. Warrants Transferable.
(a) Subject to the provisions of Section 2, this Warrant and all
rights hereunder are transferable, in whole or in part, at the principal offices
of the Company by the Holder hereof, upon surrender of this Warrant properly
endorsed; provided, however, that without the prior written consent of the
Company, this Warrant and all rights hereunder may be transferred only (i) to an
Affiliate of the initial Holder hereof or successor in interest to any such
person; or (ii) pursuant to the registration of this Warrant or the Shares under
the Securities Act of 1933 or subsequent to three years from the date hereof an
exemption under Rule 144 or other exemption from such registration.
(b) Prior to the time the Company has a class of equity
securities registered under Section 12 of the Securities Exchange Act of 1934,
as amended, if the Holder receives a bona fide offer from a proposed purchaser
of the Warrant or any Shares obtained in exercise of this Warrant ("Proposed
Purchaser") in connection with the proposed sale of the Warrant or any Shares in
a private placement, then Holder will give the Company written notice (the
"First Refusal Notice") of the identity of the Proposed Purchaser and the terms
of the proposed purchase providing a copy of the offer if in writing. The
Company shall have ten (10) business days from receipt of the First Refusal
Notice (the "Response Period") to advise the Holder if the Company (or its
designee) wishes to acquire the Warrant or such shares on the same terms as are
set forth in the First Refusal Notice. If the Company (or its designee) elects
to acquire the Warrant, or any Shares obtained in exercise of this Warrant, then
the Holder shall sell to the Company (or its designee), and the Company (or its
designee) shall purchase from the Holder, within thirty (30) days of responding
to the Holder the Warrant or such Shares on such terms. If the Company (or its
designee) does not elect to purchase the Warrant or such Shares as described
above, then the Holder may sell the Warrant or such Shares to the person and on
the terms provided in the First Refusal Notice at any time for one hundred
twenty (120) days after
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the expiration of the Response Period. If the transaction does not occur within
such one hundred twenty-day period, then any sale thereafter shall again by
subject to the right of first refusal provided herein.
(c) Subsequent to the time the Company has a class of equity
securities registered under Section 12 of the Securities Exchange Act of 1934,
as amended, if Holder determines that Holder wishes to dispose in a private
placement of the Warrant or any Shares obtained in the exercise of this Warrant
then before contacting a third party to sell the Warrant or such shares and
before accepting an offer from a third party to purchase the Warrant or such
shares, Holder will give the Company written notice (the "First Offer Notice")
advising the Company of Holder's wish to dispose of the Warrant or such shares
and indicating, in good faith, the price Holder will accept for the Warrant or
such shares. The Company shall have thirty (30) days after its receipt of the
First Offer Notice (the "Opportunity Period") to reach an agreement with Holder,
or to arrange an agreement between a third party and Holder, for a price and
terms acceptable to Holder. Holder agrees not to reach an agreement to sell the
Warrant or such shares with any third party (other than one acceptable to the
Company) during the Opportunity Period. If no agreement is reached between
Holder and Company or a third party acceptable to the Company during the
Opportunity Period, Holder may, for a period of one hundred twenty (120) days
following the end of the Opportunity Period, sell the Warrant or such shares for
any price and on any terms acceptable to Holder. If no such sale occurs within
that one hundred twenty (120) day period, the Warrant and such shares shall
again become subject to the Company's first offer opportunity rights described
above.
(d) Sections 5(b) and (c) shall not apply to any sale or proposed
sale of the Warrant or any Shares pursuant to a registration statement that has
become effective under the Securities Act of 1933, as amended, or any other sale
occurring on a securities exchange or through the Nasdaq Stock Market (including
but not limited to Rule 144 under the Securities Act of 1933, as amended) or any
sale, transfer or conveyance to an Affiliate of the Holder.
(e) Any proposed transfer in violation of this provision will be
void.
6. Warrants Exchangeable; Loss, Theft, Destruction, Etc.. This Warrant is
exchangeable, upon surrender hereof by the Holder hereof at the principal
offices of the Company, for new Warrants of like tenor representing in the
aggregate the right to subscribe for and purchase the Shares which may be
subscribed for and purchased hereunder, each such new Warrant to represent the
right to subscribe for and purchase such Shares (not to exceed the maximum
aggregate Shares which may be purchased hereunder) as shall be designated by
such Holder hereof at the time of such surrender. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction, upon
delivery of a bond or indemnity satisfactory to the Company, or, in the case of
any such mutilation, upon surrender or cancellation of this Warrant, the Company
will issue to the Holder hereof a new Warrant of like tenor, in lieu of this
Warrant, representing the right to subscribe for and purchase the Shares which
may be subscribed for and purchased hereunder.
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7. Legends; Investment Representations. Any certificate evidencing the
securities issued upon exercise of this Warrant shall bear a legend in
substantially the following form:
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.
8. Registration.
8.1 Definitions. The following additional definitions shall apply for
purposes of this Section 8:
(a) 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.
(b) The term "Act" means the Securities Act of 1933, as amended,
or any successor legislation thereto.
(c) 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.
(d) The term "Registrable Securities" means (1) the Shares
issuable or issued upon exercise of this Warrant, and (2) any securities of the
Company issued as (or issuable upon the conversion or exercise of any Warrant,
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 8 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.
8.2 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
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time promptly give written notice to the Holder. Upon the written request of the
Holder made within 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 such securities, 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 all shares of Common Stock owned by persons other
than the Company then being registered in accordance with Section 8.4; provided,
however, that the provisions of this Section 8.2 will not be deemed to limit or
otherwise restrict the rights of Holder under Section 8.3 hereof.
8.3 Demand Registration. At any time commencing after the later to occur
of (i) the time there has been a closing of an initial public offering of
securities of the Company under the Securities Act of 1933, or (ii) December 31,
1998, the Holder shall have the right on two occasions to demand on each such
occasion the registration of up to 50% of all Registrable Securities then held
by the Holder, provided that if at the time of such request the aggregate value
of all Registrable Securities held by the Holder (based on the low end of the
expected range of the offering price of such securities) is equal to or less
than $10,000,000, the Holder may demand the registration of all of the
Registrable Securities then held by the Holder. If the Holder makes such
request, the Company shall, in accordance with Section 8.5, 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). Notwithstanding the limitations on
the Holder's right to demand registration pursuant to this Section 8.3, if the
registration statement that is required to be filed hereunder is withdrawn for
any reason (which shall not in any way diminish the obligations of the Company
under Section 8.5) before, at or after effectiveness, if the Company shall fail
to keep such registration statement current as required by Section 8.5 or if the
Company shall fail to register all Registrable Securities requested to be
registered, then in addition to any remaining demand registration right held by
the Holder under this Section 8.3, the Holder shall have one additional demand
registration right so long as the conditions herein above set forth are
satisfied.
8.4 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
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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 aggregate number of all securities requested
to be registered by all holders of the Company's securities (other than
securities being registered by the Company itself). By way of example, if the
Holder requests registration of 500 shares and only one other holder of shares
of Common Stock requests registration and seeks to register 1000 shares and the
Company seeks to register 3000 shares and the Sale Number is 4200, then the
Holder will be entitled to register 400 shares of Common Stock. The restrictions
set forth in this Section 8.4 will no longer be applicable to the extent that
the Company grants registration rights to any other holder (other than Rotch
Property Group Limited pursuant to that $1.8 million Convertible Secured
Debenture dated March 18, 1996 as such registration rights exist on the date
hereof) that are more favorable to such holder than the registration rights
granted hereunder and in such event the Holder shall automatically receive
rights no less favorable than those granted to such other holder.
8.5 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:
(a) 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.
(b) 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.
(c) 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.
(d) 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
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qualify to do business, subject itself to taxation or to file a general consent
to service of process in any such states or jurisdictions.
(e) 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.
(f) 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.
(g) 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 8.5(g), to such underwriters, and make such other accommodations as are
reasonably necessary for the Holder and the Holder's underwriters, 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 except as contemplated herein and except as required by law
or court order. 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.
(h) Provide such opinions, certifications, indemnifications, and
take such other actions, including, without limitation, entering into such
agreements (including underwriting agreements), as are reasonably required and
appropriate, to permit the Holder to make a public offering of the Registrable
Securities requested to be registered.
8.6 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.
8.7 Indemnification. In the event of any registration under this
Agreement:
(a) 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,
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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,
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.
(b) 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 (b), 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 8.7(b) 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 (b) 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.
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(c) Promptly after receipt by an indemnified party under this
Section 8.7 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 8.7, 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
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 8.7, 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 8.7. 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.
(d) If the indemnification provided for in this Section 8.7 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 or in addition to, as appropriate, 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 8.7(d) 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 8.7(b).
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(e) 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.
8.8 Expenses of Registration. All expenses incurred in connection with
any registration, qualification or compliance pursuant to Section 8 of this
Agreement, 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, other than as set forth in
this Section 8.
8.9 Amendments. Any term of this Section 8 may be amended only with the
written consent of the Company and the holders of a majority of the Registrable
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.
9. Miscellaneous. The Company shall pay all expenses and other charges payable
in connection with the preparation, issuance and delivery of this Warrant and
all substitute Warrants other than as set forth in this Section 9. The Holder
shall pay all taxes (other than any issuance taxes, including, without
limitation, documentary stamp taxes, transfer taxes and other governmental
charges, which shall be paid by the Company) in connection with such issuance
and delivery of the Warrants and the Shares.
The Company shall maintain, at the office or agency of the
Company maintained by the Company, books for the registration and transfer of
the Warrant.
10. Reservation of Shares. The Company will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued Common Stock or its authorized and issued Common Stock held in its
treasury, solely for the purpose of enabling it to satisfy any obligation to
issue Shares upon exercise of this Warrant, the maximum number of shares of
Common Stock which may then be deliverable upon the exercise of this Warrant.
The Company or, if appointed, the transfer agent for the Common
Stock (the "Transfer Agent") and every subsequent transfer agent for any shares
of the Company's capital stock issuable upon the exercise of any of the rights
of purchase aforesaid will be irrevocably authorized and directed at all times
to reserve such number of authorized shares as shall be required for such
purpose. The Company will keep a copy of this Warrant on file with the Transfer
Agent and with every subsequent transfer agent for any shares of the Company's
capital stock issuable upon the exercise of the rights of purchase represented
by this Warrant. The Company will furnish such Transfer Agent a copy of all
notices of adjustments and certificates related thereto transmitted to the
Holder pursuant to Section 3.5 hereof.
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The Company covenants that all Shares which may be issued upon
exercise of this Warrant will, upon issue, be fully paid, nonassessable, free of
preemptive rights and free from all taxes, liens, charges and security interests
with respect to the issue thereof.
11. Obtaining Stock Exchange Listings. The Company will, from time to time, take
all actions which may be necessary so that the Shares, immediately upon their
issuance upon the exercise of this Warrant, will be listed on the principal
securities exchanges and markets within the United States of America, if any, on
which other shares of Common Stock are then listed; provided, however, that this
provision will not be construed to require registration of such Shares except as
otherwise provided in this Agreement and no listing will be required to the
extent such listing would violate applicable laws, regulations and exchange
regulations.
12. Adjustment of Number of Shares Issuable and Exercise Price. The number of
Shares issuable upon the exercise of this Warrant and the Share Price are
subject to adjustment from time to time upon the occurrence of the events
enumerated in Section 3. For purposes of this Warrant, "Common Stock" means
shares now or hereafter authorized of any class of common stock of the Company
and any other stock of the Company, however designated, that has the right
(subject to any prior rights of any class or series of preferred stock) to
participate in any distribution of the assets or earnings of the Company without
limit as to per share amount.
13. Descriptive Headings and Governing Law. The descriptive headings of the
several paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. This Warrant shall be construed and enforced
in accordance with the laws of the State of Delaware, and the rights of the
parties shall be governed by, the law of such State.
IN WITNESS WHEREOF, this Warrant Agreement has been executed as
of the _____ day of _______________, 1996.
IMC MORTGAGE COMPANY
By:___________________________________________________
Its:_______________________________________________
CONTITRADE SERVICES CORPORATION
By:___________________________________________________
Its:_______________________________________________
By:___________________________________________________
Its:_______________________________________________
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PURCHASE FORM
Dated:__________________, 19__
The undersigned hereby irrevocably elects to exercise the within Warrant
to the extent of purchasing ________ Shares and hereby makes payment of
$_______________ in payment of the exercise price thereof.
__________________________________________
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MASTER REPURCHASE AGREEMENT GOVERNING
PURCHASE AND SALES OF MORTGAGE LOANS
Dated as of December 8, 1995
Between:
NOMURA ASSET CAPITAL CORPORATION, AS BUYER
AND
INDUSTRY MORTGAGE COMPANY, L.P., AS SELLER
1. APPLICABILITY. From time to time the parties hereto may enter into
transactions in which Industry Mortgage Company, L.P. ("Seller"), agrees to
transfer to Nomura Asset Capital Corporation ("Buyer") Mortgage Loans against
the transfer of funds by Buyer, with a simultaneous agreement by Buyer to
transfer to Seller such Mortgage Loans at a date certain not later than thirty
days after the date of transfer or on demand, as specified in the Confirmation,
against the transfer of funds by Seller. Each such transaction shall be referred
to herein as a "Transaction" and shall be governed by this Agreement and the
related Confirmation, unless otherwise agreed in writing.
2. DEFINITIONS.
"Act of Insolvency" means, with respect to any party, and its
Affiliates, (i) the filing of a petition, commencing, or authorizing the
commencement of any case or proceeding under any bankruptcy, insolvency,
reorganization, liquidation, dissolution or similar law relating to the
protection of creditors, or suffering any such petition or proceeding to be
commenced by another and in the case of any such filing which is made without
such party's application, approval or consent, the same shall remain undismissed
or unstayed and in effect for the Reasonable Correction Period; (ii) seeking the
appointment of a receiver, trustee, custodian or similar official for such party
or an Affiliate or any substantial part of the property of either, (iii) the
appointment of a receiver, conservator, or manager for such party or an
Affiliate by any governmental agency or authority having the jurisdiction to do
so; (iv) the making or offering by such party or an Affiliate of a composition
with its creditors or a general assignment for the benefit of creditors, (v) the
admission by such party or an Affiliate of such party's or such Affiliate's
inability to pay its debts or discharge its obligations as they become due or
mature; or (vi) any governmental authority or agency or any person, agency or
entity acting or purporting to act under governmental authority shall have taken
any action to condemn, seize or appropriate, or to assume custody or control of,
all or any substantial part of the property of such party or of any of its
Affiliates, or shall have taken any action to displace the management of such
party or of any of its Affiliates or to curtail its authority in the conduct of
the business of such party or of any of its Affiliates.
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"Additional Loans" means Mortgage Loans or cash provided by
Seller to Buyer or its designee pursuant to Section 4.(a).
"Adjusted Purchase Price" shall mean, with respect to each
Purchased Mortgage Loan, an amount (determined on a daily basis) equal to the
Purchase Price less any Income or Periodic Payments actually remitted to or
received by Buyer.
"Affiliate" means an affiliate of a party as such term is defined
in the United States Bankruptcy Code in effect from time to time as to Seller
but excluding any limited partner of Seller and person who or which would be an
Affiliate only as a result of a relationship with any such limited partner.
"Agency" means FNMA, FHLMC or GNMA.
"Agency Program" means the mortgage backed securities program(s)
identified in the Confirmation to which the Conforming Mortgage Loans (on an
individual and pooled basis) conform.
"Agreement" means this Master Repurchase Agreement
Governing Purchase and Sales of Mortgage Loans, as amended from
time to time.
"Business Day" means a day other than (i) a Saturday or Sunday,
or (ii) a day in which the New York Stock Exchange or Federal Reserve is
authorized or obligated by law or executive order to be closed.
"Buyer" has the meaning specified in Section 1.
"Collateral" has the meaning specified in Section 6.
"Collateral Amount" means, with respect to any Transaction, the
amount obtained by application of the Collateral Amount Percentage to the Market
Value of the Purchased Mortgage Loans for such Transaction.
"Collateral Amount Percentage" means 100% (unless the Purchased
Mortgage Loans are trading in the secondary market for a price less than 103, in
which case the Collateral Amount Percentage shall by 97%).
"Collateral Deficit" has the meaning specified in Section 4.(a).
"Confirmation" has the meaning specified in Section 3.(a).
"Conforming Mortgage Loan" means a Mortgage Loan which meets the
requirements of the applicable Agency Program and otherwise conforms with the
representations and warranties set forth in EXHIBIT V.
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"Custodial Agreement" means that custodial agreement, dated as of
the date hereof by and among Buyer, Seller and Custodian.
"Custodial Delivery" means the form executed by the Seller in
order to deliver the Mortgage File to Buyer or its designee (including the
Custodian) pursuant to Section 7.(c), a form of which is attached hereto as
EXHIBIT II.
"Custodian" means The First National Bank of Boston as
custodian under the Custodial Agreement.
"Escrow Letter" means the escrow letter substantially
in the form of EXHIBIT VII.
"Event of Default" has the meaning specified in
Section 13.
"FHA" means the Federal Housing Administration, an
agency within HUD.
"FHLMC" means the Federal Home Loan Mortgage
Corporation.
"FHLMC Guide" means the FHLMC Sellers/Servicers Guide, as amended
from time to time.
"FNMA" means the Federal National Mortgage Association.
"FNMA Guide" means the FNMA Selling, Servicing and MBS Guides, as
amended from time to time.
"GNMA" means the Government National Mortgage
Association.
"GNMA Guide" means the GNMA Mortgage-Backed Securities Guide, as
amended from time to time.
"HUD" means the United States Department of Housing
and Urban Development.
"Income" means, with respect to any Mortgage Loan at any time,
any principal thereof then payable and all interest or other distributions
payable thereon less any related servicing fee(s) charged by the Servicer.
"Market Value" means as of any date with respect to any Mortgage
Loans, the price at which such Mortgage Loans could readily be sold as
reasonably determined in good faith by Nomura; provided, however, that in making
such determination, Nomura shall not take into account (i) any Mortgage Loan
that has been delinquent for at least ninety (90) days or (ii) any Mortgage Loan
with respect to which there is a breach of a representation, warranty or
covenant made by Seller in this Agreement or the Custodial Agreement that
materially adversely affects Buyer's interest in such Mortgage Loan and which
breach has not been cured.
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"Maximum Facility Amount" shall mean One Hundred Million dollars
($100,000,000) or such other amount as Buyer may consent to in writing from time
to time.
"Mortgage" means 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" means the documents specified as the "Mortgage
File" in Section 7.(c), together with any additional documents and information
required to be delivered to Buyer or its designee (including the Custodian)
pursuant to this Agreement.
"Mortgage Loan" means non-securitized whole loans, namely: (i)
Conforming Mortgage Loans, (ii) Non-Conforming Residential Mortgage Loans; (iii)
Warehouse Mortgage Loans; and (iv) such other types of non-securitized whole
loans as may be agreed upon by the parties hereto from time to time.
"Mortgage Loan Schedule" means a schedule of Mortgage Loans
attached to each Trust Receipt, Confirmation and Custodial Delivery which
includes the information set forth in Exhibit II.
"Mortgage Note" means a note or other evidence of indebtedness of
a Mortgagor secured by a Mortgage.
"Mortgaged Property" means the real property securing repayment
of the debt evidenced by a Mortgage Note.
"Mortgagee" means the record holder of a Mortgage Note
secured by a Mortgage.
"Mortgagor" means the obligor on a Mortgage Note and
the grantor of the related Mortgage.
"Nomura" means Nomura Asset Capital Corporation, a corporation
organized under the laws of the State of Delaware.
"Non-Conforming Residential Mortgage Loan" means a residential
Mortgage Loan other than a Conforming Mortgage Loan and Non-Performing Mortgage
Loan and otherwise conforms to the representations and warranties set forth in
Exhibit V.
"Non-Performing Mortgage Loan" means a Mortgage Loan that has
been delinquent for at least ninety (90) days.
"Obligor" means the owner of a Warehouse Mortgage Loan who
pledged or sold such Warehouse Mortgage Loan to Seller pursuant to a warehouse,
credit or repurchase agreement.
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"Periodic Payment" has the meaning specified in
Section 5.(b).
"Price Differential" means, with respect to any Transaction
hereunder as of any date, the aggregate amount obtained by daily application of
the Pricing Rate for such Transaction to the Adjusted Purchase Price for such
Transaction on a 360 day per year basis for the actual number of days during the
period commencing on (and including) the Purchase Date for such Transaction and
ending on (but excluding) the Repurchase Date (reduced by any amount of such
Price Differential previously paid by Seller to Buyer with respect to such
Transaction).
"Pricing Rate" means 30 day LIBOR plus 85 basis points. 30
day LIBOR shall be the rate set forth as such on page 12 of telerate at
10:00 a.m. (New York time) two Business Days prior to each Purchase Date.
"Prime Rate" means the rate of interest published by The Wall
Street Journal, northeast edition, as the "prime rate".
"Purchase Date" means the date on which Purchased Mortgage Loans
are transferred by Seller to the Buyer or its designee (including the Custodian)
as specified in the Confirmation.
"Purchase Price" means on each Purchase Date, the price at which
Purchased Mortgage Loans are transferred by Seller to Buyer or its designee
(including the Custodian).
"Purchased Mortgage Loans" means the Mortgage Loans sold by
Seller to Buyer in a Transaction, any Additional Loans and any Substituted
Mortgage Loans.
"Reasonable Correction Period" means that number of Business Days
as is determined by Buyer, in good faith and acting reasonably, as the time
period a situation may remain uncorrected or unknown.
"Release of Instructions" means that release by Buyer of
instructions to a Servicer to deliver income to Buyer, which is signed by Buyer
on termination of a Transaction as provided in Section 3(d).
"Replacement Assets" has the meaning specified in Section 14.(b).
"Repurchase Date" means the date on which Seller is to repurchase
the Purchased Mortgage Loans from Buyer, including any date determined by
application of the provisions of Sections 3 or 14, as specified in the
Confirmation.
"Repurchase Price" means the price at which Purchased Mortgage
Loans are to be transferred from Buyer or its designee (including the Custodian)
to Seller upon termination of a Transaction, which will be determined in each
case (including Transactions terminable upon demand) as the sum of the Purchase
Price and the Price Differential as of the date of such
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determination decreased by all cash, Income and Periodic Payments actually
received by Buyer pursuant to Sections 4.(a), 5.(a) and 5.(b), respectively.
"Seller" has the meaning specified in Section 1.
"Servicer" has the meaning specified in Section 25.
"Seller Release" means, if there is no Warehouse Lender with
respect to a Mortgage Loan, a letter from the Seller to Buyer, substantially in
the form of an exhibit to the Custodial Agreement, confirming such fact and
releasing any and all right, title and interest of the Seller in such Mortgage
Loan.
"Servicing Agreement" has the meaning specified in
Section 25.
"Servicing Records" has the meaning specified in
Section 25.
"Substituted Mortgage Loans" means any Mortgage Loans
substituted for Purchased Mortgage Loans in accordance with
Section 9 hereof.
"Takeout Commitment" means an agreement by an investor or
financial institution to purchase Mortgage Loans on a forward delivery basis.
"Takeout Investor" means the investor of financial institution
which agrees to purchase Mortgage Loans pursuant to a Takeout Commitment.
"Transaction" has the meaning specified in Section 1.
"Trust Receipt" means a trust receipt issued by Custodian to
Buyer confirming the Custodian's possession of certain mortgage loan files which
are the property of and held by Custodian for the benefit of the Buyer or the
registered holder thereof.
"Warehouse Lender" means 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" means 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 an exhibit to the Custodial Agreement, addressed to
Buyer, releasing any and all right, title and interest of the Warehouse Lender
in such Mortgage Loan.
"Warehouse Mortgage Loan" means a mortgage loan or a security
interest in a mortgage loan that was originated by someone other than the Seller
but is subject to a first priority perfected security interest of the Seller and
otherwise complies with the representations and warranties for such mortgage
loans as set forth in Exhibit V hereof.
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"Wet Funding Notice" means a request by the Seller to Buyer to
purchase Wet Ink Mortgage Loans, in the form substantially as set forth in the
Custodial Agreement.
"Wet Ink Mortgage Loans" means Mortgage Loans
purchased by Buyer subject to a Wet Funding Notice and not in
the possession of the Custodian.
3. INITIATION; COMMITMENT FEE; CONFIRMATION; TERMINATION.
(a) On the terms and subject to the conditions set forth herein
(including without limitation the absence of any event of default hereunder),
Buyer agrees from time to time, at such times as Seller shall request, to
purchase Mortgage Loans from the Seller on or before one year from the date
hereof; provided, however, that the aggregate Purchase Price of the Purchased
Mortgage Loans at any one time transferred to Buyer and not repurchased by
Seller shall not exceed the Maximum Facility Amount. An agreement to enter into
a Transaction may be entered into orally or in writing at the initiation of
either Buyer or Seller. In any event, Buyer shall confirm the terms of each
Transaction by issuing a written confirmation to the Seller promptly after the
parties enter into such Transaction containing the terms set forth on EXHIBIT I
attached hereto (a "Confirmation"). Such Confirmation shall describe the
Purchased Mortgage Loans, identify Buyer and Seller and set forth (i) the
Purchase Date, (ii) the Purchase Price, (iii) the Repurchase Date, (iv) the
Pricing Rate applicable to the Transaction, and (v) may contain additional terms
or conditions not inconsistent with this Agreement. After receipt of the
Confirmation, the Seller shall, subject to the provisions of subsection (c)
below, sign the Confirmation and promptly return it to Buyer.
(b) Any Confirmation by Buyer shall be deemed to have been
received by Seller on the date actually received by Seller.
(c) Each Confirmation, together with this Agreement, shall be
conclusive evidence of the terms of the Transaction(s) covered thereby unless
objected to in writing by the Seller no more than one (1) Business Day after the
date the Confirmation was received by the Seller or unless a corrected
Confirmation is sent by Buyer. An objection sent by the Seller must state
specifically that the writing is an objection, must specify the provision(s)
being objected to by the Seller, must set forth such provision(s) in the manner
that the Seller believes they should be stated, and must be received by Buyer no
more than one (1) Business Day after the Confirmation was received by the
Seller.
(d) On the Repurchase Date, termination of the Transaction will
be effected by transfer to Seller or its designee of the Purchased Mortgage
Loans (and any Income in respect thereof received by Buyer not previously
credited or transferred to, or applied to the obligations of Seller pursuant to
Section 5) and the simultaneous delivery by Buyer to the Servicer of a Release
of Instructions in the form of EXHIBIT VI hereto, against the simultaneous
transfer of the Repurchase Price to an account of Buyer; provided, however, that
the Seller's obligation to repurchase any Purchased Mortgage Loan shall be
subject to the continued accuracy of the representations and warranties of the
Buyer set forth in Section 10 hereof with respect to such
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Purchased Mortgage Loan. Seller is obligated to obtain the Mortgage Files from
Buyer or its designee (including the Custodian) at Seller's expense on the
Repurchase Date.
4. COLLATERAL AMOUNT MAINTENANCE.
(a) If at any time the Repurchase Price of Purchased Mortgage
Loans subject to a Transaction is greater than the Collateral Amount for such
Transaction (a "Collateral Deficit"), then Buyer may by notice to Seller require
Seller, to transfer to Buyer or its designee (including the Custodian) (at the
Buyer's option) Mortgage Loans or cash ("Additional Loans"), so that the
Repurchase Price shall be no greater than the Collateral Amount, and thereafter
such Additional Loans shall be included in the Purchased Mortgage Loans for
purposes of determining Seller's Collateral Amount maintenance obligations.
(b) Notice required pursuant to subsection (a) above may be given
by any means of telecopier or telegraphic transmission. A notice for the payment
or delivery in respect of a Collateral Deficit must be met not later than 10:00
a.m. (New York time) on the next Business Day following the date on which the
notice was given. Any notice given on a Business Day after 10:00 a.m. (New York
time) shall be met not later than 4:00 p.m. (New York time) on the next Business
Day following the date the notice was given. The failure of Buyer, on any one or
more occasions, to exercise its rights under subsection (a) of this Section
shall not change or alter the terms and conditions to which this Agreement is
subject or limit the right of the Buyer to do so at a later date. Buyer agrees
that a failure or delay to exercise its rights under subsection (a) of this
Section shall not limit its rights under this Agreement or otherwise existing by
law or in any way create additional rights for the Seller.
5. INCOME PAYMENTS.
(a) Where a particular Transaction's term extends over an Income
payment date on the Purchased Mortgage Loans subject to that Transaction such
Income shall be the property of Buyer. Notwithstanding the foregoing, Buyer
agrees that (i) if a Servicer is in place for the Purchased Mortgage Loans,
Servicer shall continue to remit Income to Seller, or (ii) if Seller is the
servicer of the Purchased Mortgage Loans, Seller is permitted to retain the
Income, until and unless Buyer directs Servicer or Seller, as the case may be,
to hold such Income in a segregated account for and on behalf of Buyer and/or to
remit such Income directly to Buyer.
(b) Notwithstanding that Buyer and Seller intend that the
Transactions hereunder be sales to Buyer of the Purchased Mortgage Loans, Seller
shall pay to Buyer the accredited value of the Price Differential (less any
amount of such Price Differential previously paid by Seller to Buyer) (each such
payment, a "Periodic Payment") on the first Business Day of each month.
(c) Buyer shall offset against the Repurchase Price of each such
Transaction all Income and Periodic Payments actually received by Buyer pursuant
to Sections 5.(a) and 5.(b), respectively.
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6. SECURITY INTEREST. The Buyer and the Seller intend that the
Transactions hereunder be sales to the Buyer of the Purchased Mortgage Loans and
not loans from the Buyer to the Seller secured by the Purchased Mortgage Loans.
However, in order to preserve the Buyer's rights under this Agreement in the
event that a court or other forum recharacterizes the Transactions hereunder as
loans and as security for the performance by Seller of all of Seller's
obligations to Buyer under this Agreement and the Transactions entered into
pursuant to this Agreement, Seller grants Buyer a first priority security
interest in the Purchased Mortgage Loans, Servicing Agreements, Servicing
Records, insurance relating to the Mortgage Loans and Income accounts relating
to the Mortgage Loans and any other contract rights (including the right to
receive principal and interest payments with respect to the Mortgage Loans and
the right to enforce such payments and including any rights Seller may have
against an Obligor and in any Warehouse Mortgage Loans), general intangibles and
other assets relating to the Mortgage Loans or any interest in the Mortgage
Loans, the servicing of the Mortgage Loans (including and the right to contract
for servicing), securities backed by or representing an interest in such
Mortgage Loans, Takeout Commitments and any other property of Seller held from
time to time by Buyer or its Affiliates (collectively, the "Collateral").
7. PAYMENT, TRANSFER AND CUSTODY.
(a) Unless otherwise mutually agreed in writing, all transfers of
funds hereunder shall be in immediately available funds.
(b) On the Purchase Date for each Transaction, ownership of the
Purchased Mortgage Loans shall be transferred to the Buyer or its designee
(including the Custodian) against the simultaneous transfer of the Purchase
Price to an account of Seller specified in the Confirmation. In the case of
Purchased Mortgage Loans other than Wet Ink Mortgage Loans, Seller,
simultaneously with the delivery to the Buyer or its designee (including the
Custodian) of the Purchased Mortgage Loans relating to each Transaction hereby
sells, transfers, conveys and assigns to Buyer or its designee (including the
Custodian) without recourse, but subject to the terms of this Agreement, all the
right, title and interest of Seller in and to the Purchased Mortgage Loans
together with all right, title and interest in and to the proceeds of any
related insurance policies. In the case of Purchased Mortgage Loans which are
Wet Ink Mortgage Loans, Seller, simultaneously with the purchase by the Buyer of
the Wet Ink Mortgage Loans relating to each Transaction hereby sells, transfers,
conveys and assigns to Buyer or its designee (including the Custodian) without
recourse, but subject to the terms of this Agreement, all the right, title and
interest of Seller in and to such Purchased Mortgage Loans together with all
right, title and interest in and to the proceeds of any related insurance
policies. Upon transfer of the Mortgage Loans to Buyer as set forth in Paragraph
3(a) of this Agreement (or in the case of Purchased Mortgage Loans which are Wet
Ink Mortgage Loans, upon the purchase thereof by Buyer) and until termination of
any Transactions as set forth in this Agreement, record title in the name of
Seller to each Mortgage Loan shall be retained by Seller in trust, for the
benefit of Buyer, for the sole purpose of facilitating the servicing and the
supervision of the servicing of the Mortgage Loans by Seller in accordance with
Section 25 hereof.
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(c) In connection with such sale, transfer, conveyance and
assignment, on or prior to each Purchase Date, the Seller shall deliver or cause
to be delivered and released to Buyer or its designee (including the Custodian),
prior to Buyer's purchase thereof, the following original documents (the
"Mortgage File"), pertaining to each of the Purchased Mortgage Loans identified
in the Custodial Delivery delivered therewith:
(i) the original Mortgage Note bearing all ntervening
endorsements, endorsed on the instrument or by allonge, "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]";
(ii) the original of any guarantee executed in
connection with the Mortgage Note (if any);
(iii) the original Mortgage with evidence of recording
thereon or copies certified by Seller to have been sent for
recording;
(iv) the originals of all assumption, modification,
consolidation or extension agreements, with evidence of recording
thereon or copies certified by Seller to have been sent for
recording;
(v) 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]";
(vi) 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;
(vii) evidence of the existence of a fire and casualty
insurance policy (either in the form of the original policy, an
original binder or original certificate of insurance) covering
the mortgaged property which is an amount at least equal to the
full insurable value, or the outstanding principal balance of the
Mortgage Loan, whichever is less, 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;
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(viii) the original PMI Policy or certificate,
if any;
(ix) 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,
the preliminary title report, binder or commitment to insure;
(x) the original of any security agreement, chattel
mortgage or equivalent document executed in connection with the
Mortgage;
(xi) 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;
(xii) 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;
(xiii) with respect to VA guaranteed Mortgage Loans,
the original VA Loan Guaranty Certificate;
(xiv) either a Seller Release or a Warehouse Lender
Release from any Warehouse Lender having a security interest in a
Mortgage Loan, as appropriate; and
(xv) any other item which may constitute part of the
Mortgage File.
(d) Notwithstanding any provision in this Section 7(c) to the
contrary, in connection with such sale, transfer, conveyance and assignment of a
Wet Ink Mortgage Loan:
(i) at least two Business Days prior to the Purchase
Date, the Seller shall deliver to Buyer and Custodian a Wet
Funding Notice;
(ii) on or prior to the Purchase Date, Seller shall
either (A) cause the original Mortgage Note endorsed in blank to
be delivered to Buyer or the Custodian or (B) execute and send by
fax to Buyer an executed copy of an Escrow Letter attached hereto
as Exhibit VII;
(iii) no later than three Business Days following the
Purchaser Date Seller shall deliver or cause to be delivered all
the documents set forth in Section 7.(c) above to the Custodian.
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(e) Prior to the first Transaction, Seller shall deliver to Buyer
the following which shall be held in escrow by the Buyer until the termination
of this Agreement or the occurrence of an Event of Default:
(i) a fully executed power of attorney substantially
in the form of EXHIBIT III attached hereto irrevocably appointing
Buyer its attorney-in-fact with full power, upon Seller's failure
or refusal, to complete and record the assignment of Mortgage,
complete the endorsement of the Mortgage Note and take such other
steps as may be necessary or desirable to enforce Buyer's rights
against such Mortgage Loans, the related Mortgage Files and the
Servicing Records; and
(ii) a fully executed irrevocable letter of
instructions to Servicers or master servicers, substantially in
the form of EXHIBIT IV attached hereto, directing such Servicers
or Master Servicer to make all payments of Income directly to
Buyer.
(f) Buyer may deposit the Mortgage Files representing the
Purchased Mortgage Loans, or direct that the Mortgage Files be deposited
directly, with a designee acting in the capacity of bailee for the Buyer. If the
Mortgage Files are delivered to Buyer or its designee, Buyer or its designee
shall during the term of this Agreement exercise reasonable and prudent care in
the maintenance thereof. If the Mortgage Loan Documents are delivered to
Custodian, the Mortgage Files shall be maintained in accordance with the
Custodial Agreement. The Seller understands and agrees that the Custodian shall
have no responsibility to the Seller, including, without limitation, any
responsibility to keep the Seller informed of any changes in the status of such
Mortgage Files or in the Buyer's instructions with respect thereto, except as
explicitly set forth in the Custodial Agreement.
(g) Any Mortgage Files not delivered to Buyer or its designee
(including the Custodian) are and shall be held in trust by the Seller or its
designee for the benefit of the Buyer as the owner thereof. The Seller or its
designee shall maintain a copy of the Mortgage File and the originals of the
Mortgage File not delivered to Buyer or its designee (including the Custodian).
The possession of the Mortgage File by the Seller or its designee is at the will
of the Buyer for the sole purpose of servicing the related Purchased Mortgage
Loan, and such retention and possession by the Seller or its designee is in a
custodial capacity only. Each Mortgage File retained or held by the Seller or
its designee shall be identified on the Seller's books and records from the
other assets of the Seller or its designee and the books and records of the
Seller or its designee shall be marked appropriately to reflect clearly the sale
of the related Purchased Mortgage Loan to the Buyer. The Seller or its designee
shall release its custody of the Mortgage File only in accordance with written
instructions from the Buyer, unless such release is required as incidental to
the servicing of the Purchased Mortgage Loans or is in connection with a
repurchase of any Purchased Mortgage Loan by Seller.
8. HYPOTHECATION OR PLEDGE OF PURCHASED MORTGAGE LOANS. Title to all
Purchased Mortgage Loans shall pass to Buyer and Buyer shall have free and
unrestricted use of all Purchased Mortgage Loans. Nothing in this Agreement
shall preclude Buyer from engaging in
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repurchase transactions with the Purchased Mortgage Loans or otherwise pledging,
repledging, hypothecating, or rehypothecating the Purchased Mortgage Loans,
subject to the terms and conditions set forth in this Agreement, but no such
transaction shall relieve Buyer of its obligations to transfer Purchased
Mortgage Loans to Seller pursuant to Section 3. Nothing contained in this
Agreement shall obligate Buyer to segregate any Purchased Mortgage Loans
delivered to Buyer by Seller.
9. SUBSTITUTION.
(a) Subject to Section 9.(b), Seller may, upon one (1) Business
Days written notice to Buyer, with a copy to Custodian, substitute other
Mortgage Loans for any Purchased Mortgage Loans. Such substitution shall be made
by transfer to Buyer or its designee (including the Custodian) of the Mortgage
File of such other Mortgage Loans together with a Custodial Delivery and
transfer to Seller or its designee of the Purchased Mortgage Loans requested for
release. After substitution, the substituted Mortgage Loans, shall be deemed to
be Purchased Mortgage Loans.
(b) Notwithstanding anything to the contrary in this Agreement,
Seller may not substitute other Mortgage Loans for any Purchased Mortgage Loans
if (i) after taking into account such substitution, a Collateral Deficit were to
occur, or (ii) Buyer does not consent to such substitution which consent shall
not be unreasonably withheld.
10. REPRESENTATIONS.
(a) As of each Purchase Date, each of Buyer and Seller represents
and warrants to the other that (i) it is duly authorized to execute and deliver
this Agreement, to enter into the Transactions contemplated hereunder and to
perform its obligations hereunder and has taken all necessary action to
authorize such execution, delivery and performance; (ii) it will engage in such
Transactions as principal (or, if agreed in writing in advance of any
Transaction by the other party hereto, as agent for a disclosed principal);
(iii) the person signing this Agreement on its behalf is duly authorized to do
so on its behalf (or on behalf of any such disclosed principal); (iv) no
approval, consent or authorization of the Transactions contemplated by this
Agreement from any federal, state, or local regulatory authority having
jurisdiction over it is required or, if required, such approval, consent or
authorization has been or will, prior to the Purchase Date, be obtained; (v) the
execution, delivery, and performance of this Agreement and the Transactions
hereunder will not violate any law, regulation, order, judgment, decree,
ordinance, charter, by-law, or rule applicable to it or its property or
constitute a default (or an event which, with notice or lapse of time, or both
would constitute a default) under or result in a breach of any agreement or
other instrument by which it is bound or by which any of its assets are
affected; (vi) it has received approval and authorization to enter into this
Agreement and each and every Transaction actually entered into hereunder
pursuant to its internal policies and procedures; and (vii) neither this
Agreement nor any Transaction pursuant hereto are entered into in contemplation
of insolvency or with intent to hinder, delay or defraud any creditor.
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(b) The Seller represents and warrants to the Buyer that as of
the Purchase Date for the purchase of any Purchased Mortgage Loans by the Buyer
from the Seller and as of the date of this Agreement and any Transaction
hereunder and at all times while this Agreement and any Transaction thereunder
is in full force and effect:
(i) Organization. The Seller is duly organized,
validly existing and in good standing under the laws and
regulations of the state of Seller's organization and is duly
licensed, qualified, and in good standing in every state where
Seller transacts business and in any state where any Mortgaged
Property is located if the laws of such state require licensing
or qualification in order to conduct business of the type
conducted by the Seller.
(ii) No Litigation. There is no action, suit,
proceeding, investigation, or arbitration pending or threatened
against the Seller which may result in any material adverse
change in the business, operations, financial condition,
properties, or assets of the Seller, or which may have an adverse
effect on the validity of this Agreement or the Purchased
Mortgage Loans Assets or any action taken or to be taken in
connection with the obligations of the Seller contemplated
herein.
(iii) No Broker. The Seller has not dealt with any
broker, investment banker, agent, or other person, except for the
Buyer, who may be entitled to any commission or compensation in
connection with the sale of Purchased Mortgage Loans pursuant to
this Agreement; provided, that if Seller has dealt with any
broker, investment banker, agent, or other person, except for the
Buyer, who may be entitled to any commission or compensation in
connection with the sale of Purchased Mortgage Loans pursuant to
this Agreement, such commission or compensation shall have been
paid in full by Seller.
(iv) Good Title to Collateral. Purchased Mortgage
Loans shall be free and clear of any lien, encumbrance or
impediment to transfer, and the Seller represents and warrants
the foregoing to the Buyer and represents and warrants that it
has good, valid and marketable title or right to sell and
transfer such Purchased Mortgage Loans to the Buyer; provided,
however, that the existence of repurchase rights in favor of
third parties to repurchase Purchased Mortgage Loans from Seller
pursuant to repurchase agreements between Seller as buyer and
such third parties as seller will not violate Seller's warranties
and representations.
(v) Delivery of Mortgage File. The Mortgage Note, the
Mortgage, the Assignment of Mortgage and any other documents
required to be delivered under this Agreement or the Custodial
Agreement for the Mortgage Loans have been delivered to the
Custodian. The Seller or its designee is in possession of a
complete, true and accurate Mortgage File, except for such
documents the originals of which have been delivered to the
Custodian.
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(vi) Selection Process. The Purchased Mortgage Loans
were selected from among the outstanding mortgage loans in the
Seller's portfolio as to which the representations and warranties
set forth in this Agreement could be made and such selection was
not made in a manner so as to affect adversely the interests of
the Buyer.
(vii) Additional Representations and Warranties By
Insured Depository Institutions. If Seller is an "insured
depository institution" as that term is defined in Section
1813(a) of Title 12 of the United States Code, as amended, Seller
makes the following additional representations and warranties:
(A) This Agreement between Buyer and Seller
conforms to all applicable statutory requirements. This
Agreement is (1) executed contemporaneously with the
agreement reached by Buyer and Seller, (2) approved by a
specific corporate or banking association resolution by
the Seller's board of directors, which approval shall be
reflected in the minutes of said board, and (3)
continuously, from the time of its execution, an official
record of the Seller. A copy of such resolution, certified
by a vice president or higher officer of Seller has been
provided to Buyer.
(B) Seller will maintain a copy of this Agreement
and each Confirmation in its official books and records
and shall make same available for Buyer's inspection and
copying on one Business Day's notice.
(C) The aggregate amount of the Transactions
outstanding as of any date between Buyer and Seller shall
not exceed any restrictions or limitations imposed by the
board of directors of Seller.
(c) The Buyer represents and warrants to the Seller that as of
the Repurchase Date for the repurchase of any Purchased Mortgage Loans by the
Seller from the Buyer and as of the date of this Agreement and any Transaction
hereunder and at all times while this Agreement and any Transaction thereunder
is in full force and effect:
(i) Organization. The Buyer is duly organized,
validly existing and in good standing under the laws and
regulations of the state of Buyer's organization;
(ii) No Broker. The Buyer has not dealt with any
broker, investment banker, agent, or other person who, as a
result of Buyer's actions, is entitled to receive from Seller any
commission or compensation in connection with the sale of
Purchased Mortgage Loans pursuant to this Agreement; and
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(iii) No Impairment. Buyer shall not, without Seller's
prior consent, take, or cause to occur, any action which has any
material and adverse impact on the value of any Purchased
Mortgage Loan to Seller, including, without limitation, acts such
as altering, waiving or releasing any obligations of any party
obligated on any Purchase Mortgage Loan, and the placing of any
lien upon, or transferring in interest to any third person in,
any of the Purchased Mortgage Loans which lien or interest will
remain in effect on the Repurchase Date.
(d) The Seller represents and warrants to the Buyer that each
Mortgage Loan sold hereunder and each pool of Mortgage Loans sold in a
Transaction hereunder, as of the related Purchase Date conform to the
representations and warranties set forth in Exhibit V attached hereto and such
additional representations and warranties provided in the Confirmation, if any,
and that each Mortgage Loan delivered hereunder as Additional Loans or
Substituted Mortgage Loans, as of the date of such delivery, conforms to the
representations and warranties set forth in Exhibit V hereto and the
Confirmation, if any; provided, however, that any breach of the representations
and warranties set forth in Exhibit V shall not constitute an Event of Default
if Seller (i) substitutes another mortgage loan pursuant to Section 9(a) above
for any Purchased Mortgage Loan as to which the representations and warranties
of Exhibit V were breached, or (ii) repurchases such Mortgage Loan. Buyer may in
its sole discretion waive any of the representations and warranties set forth in
Exhibit V attached hereto; provided, that such waiver must be set forth in the
related Confirmation. It is understood and agreed that the representations and
warranties set forth in Exhibit V hereto and the Confirmation, if any, shall
survive delivery of the respective Mortgage File to Buyer or its designee
(including the Custodian). With respect to representation and warranty (o) in
Exhibit V, the percentage of Mortgage Loans with LTVs in excess of 85% without a
PMI policy shall be determined by Buyer on the last Business Day of each
calendar month. In the event a breach of such representation and warranty is
determined to exist, Buyer shall give notice thereof to Seller and Seller shall
have fifteen (15) days from the date of such notice to cure such breach.
(e) On the Purchase Date for any Transaction, Buyer and Seller
shall each be deemed to have made all the foregoing representations with respect
to itself as of such Purchase Date.
11. NEGATIVE COVENANTS. (a) On and as of the date of this
Agreement and each Purchase Date and until this Agreement is no
longer in force with respect to any Transaction, the Seller
covenants that it will not:
(i) take any action which would directly or
indirectly impair or adversely affect the Buyer's title to or the
value of the Purchased Mortgage Loans;
(ii) pledge, assign, convey, grant, bargain, sell,
set over, deliver or otherwise transfer any interest in the
Purchased Mortgage Loans to any person not a party to this
Agreement nor will the Seller create, incur or permit to exist
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any lien, encumbrance or security interest in or on the
Purchased Mortgage Loans except as described in Section 6 of
this Agreement;
(iii) without Buyer's prior consent, Seller and those
acting on behalf of Seller shall not, except in the ordinary
course of servicing, amend or modify, or waive any term or
condition of, or settle or compromise any claim in respect of,
any item of the Purchased Mortgage Loans or any related rights.
(b) On and as of the date of this Agreement and each Purchase
Date and until this Agreement is no longer in force with respect to any
Transaction, the Buyer covenants that it will not take any action which would
directly or indirectly violate its representations and warranties set forth in
Section 10(c) above.
12. AFFIRMATIVE COVENANTS.
(a) Affirmative covenants of the Seller:
(i) Seller covenants that it will promptly notify
Buyer of any material adverse change in its business operations
and/or financial condition, provided, however, that nothing in
this Section 12 shall relieve Seller of its obligations pursuant
to Section 10.(b)(iv) or pursuant to any other Section of this
Agreement.
(ii) Seller shall provide Buyer with copies of such
documentation as Buyer may reasonably request evidencing the
truthfulness of the representations of Seller set forth in
Section 10.
(iii) Seller shall, at Buyer's request, take all action
necessary to ensure that Buyer will have a first priority
security interest in the Purchased Mortgage Loans, including,
among other things, using its best efforts to obtain the
Servicer's signature (if the Servicer's signature is necessary)
and file such UCC financing statements as Buyer may reasonably
request.
(iv) Seller covenants that it will not create, incur
or permit to exist any lien, encumbrance or security interest in
or on any of the Collateral without the prior express written
consent of Buyer.
(v) Seller shall notify Buyer immediately after
obtaining actual knowledge thereof, if any event has occurred
that constitutes an Event of Default with respect to Seller or
any event that with the giving of notice or lapse of time, or
both, would become an Event of Default with respect to Seller.
(vi) Seller warrants and will defend the right, title
and interest of Buyer in and to all Collateral against all
adverse claims and demands.
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(vii) Seller shall immediately notify Buyer of any
litigation or proceeding commenced against it which may, if
adversely determined, have a material adverse affect on the
business of the Seller.
(viii) Seller shall repurchase or cause the repurchase
of any Mortgage Loan within 180 days of the initial Purchase Date
of such Mortgage Loan; provided, however, that the Seller's
obligation to repurchase any Purchased Mortgage Loan shall be
subject to the continued accuracy of the representations and
warranties of the Buyer set forth in Section 10 hereof with
respect to such Purchased Mortgage Loan and the satisfaction of
all other conditions precedent set forth in this Agreement.
(b) Affirmative covenants of the Buyer: Buyer will take such
actions as are reasonably required to assure that its representations and
warranties in this Agreement remain true and correct during the term of this
Agreement.
13. EVENTS OF DEFAULT.
(a) If any of the following events (each an "Event of Default")
occur, the Seller and Buyer shall have the rights set forth in Section 14, as
applicable:
(i) Seller fails to pay the Repurchase Price in full
when due or Buyer fails to deliver the Mortgage Loans against
full payment therefor or breaches its obligations set forth in
Section 4);
(ii) Seller or Buyer fails to satisfy or perform any
material obligation or covenant under this Agreement which has
not been cured within 10 days after written notice;
(iii) an Act of Insolvency occurs with respect
to Seller or Buyer;
(iv) any representation made by Seller or Buyer shall
have been incorrect or untrue in any material respect when made
or repeated or deemed to have been made or repeated (including
any breach of the representation set forth in 10.(b)(iv);
(v) Seller or Buyer shall admit its inability
to, or its intention not to, perform any of its
obligations hereunder;
(vi) any governmental, regulatory, or self-regulatory
authority takes any action to remove, limit, restrict, suspend or
terminate the rights, privileges, or operations of the Seller or
any of its Affiliates, including suspension as an issuer, lender
or seller/servicer of mortgage loans, which suspension has a
material adverse effect on the ordinary business operations of
Seller or Seller's Affiliate, and which continues for more than
24 hours;
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(vii) there exists a change in the chief executive
officer of the Seller or Seller dissolves, merges or consolidates
with another entity unless it is the surviving party, or sells,
transfers, or otherwise disposes of a material portion of its
business or assets (other than sales of mortgage loans in the
ordinary course of Seller's business), unless such change in
management or merger is approved by Buyer; provided, however,
that a breach of this clause (vii) may, at Buyer's sole
discretion, result in a termination of Buyer's commitment under
Section 3(c) hereof, and provided, further, that such breach
shall not constitute an Event of Default unless it remains
uncured, in the sole judgment of Buyer, for a period of 60 days;
(viii) Buyer, in its respective good faith judgment, has
reasonable cause to believe that there has been a material
adverse change in the business, operations, organizational
structure or financial condition of the Seller or that the Seller
will not meet any of its obligations under any Transaction
pursuant to this Agreement or any other agreement between the
parties, and the Seller fails to provide the Buyer with adequate
assurances (including without limitation performance guarantees),
within 24 hours of a request therefor, of its ability to perform
its obligations;
(ix) Seller shall fail to pay any of its indebtedness
for borrowed money of at least $250,000 or pay interest or
premium thereon when due (whether by scheduled maturity, required
payment, acceleration, demand or otherwise), or shall fail to
perform any of its obligations with respect to repurchase
transactions of at least $250,000 and either of such failures
remains in effect beyond the Reasonable Correction Period;
(x) a judgment by any competent court in the United
States of America for the payment of money in an amount of at
least $100,000 is rendered against the Seller, and the same
remains undischarged or unpaid for a period of sixty (60) days
during which execution of such judgment is not effectively
stayed;
(xi) a court or other forum recharacterizes the
Transactions hereunder as loans and as security for the
performance by Seller of all of Seller's obligations to Buyer
under this Agreement, and this Agreement shall for any reason
cease to create a valid, first priority security interest in any
of the Purchased Mortgage Loans purported to be covered hereby;
or
(xii) Seller fails to provide quarterly unaudited and
annual audited financial statements within 60 and 120 days,
respectively, after the date on which such period ends, or falls
to deliver in a timely manner such financial or other information
as Buyer may from time to time reasonably request.
(b) In making a determination as to whether an Event of Default
has occurred, the Buyer shall be entitled to rely on reports published or
broadcast by media sources believed
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by the Buyer to be generally reliable and on information provided to it by any
other sources believed by it to be generally reliable, provided that the Buyer
reasonably and in good faith believes such information to be accurate and has
taken such steps as may be reasonable in the circumstances to attempt to verify
such information; provided, however, that Buyer shall have used its best effects
to obtain correct information from Seller and Buyer shall have been unable to do
so within the Reasonable Correction Period.
14. REMEDIES.
(a) If an Event of Default occurs with respect to the Seller, the
following rights and remedies are available to the Buyer:
(i) At the option of the Buyer, exercised by written
notice to the Seller (which option shall be deemed to have been
exercised, even if no notice is given, immediately upon the
occurrence of an Act of Insolvency), the Repurchase Date for each
Transaction hereunder shall be deemed immediately to occur.
Notwithstanding that the Repurchase Date shall be deemed
immediately to have occurred upon the exercise or deemed exercise
of such option by the Buyer, for purposes of determining the
Repurchase Price, the Repurchase Date shall be the date specified
in the Confirmation for such Transaction.
(ii) If the Buyer exercises or is deemed to have exercised
the option referred to in subsection (a)(i) of this Section,
(A) the Seller's obligations hereunder to
repurchase all Purchased Mortgage Loans in such
Transactions shall thereupon become immediately due and
payable,
(B) to the extent permitted by applicable law, the
Pricing Rate shall be the Prime Rate plus 2.50%, and
(C) all Income actually received by the Buyer
pursuant to Section 5 shall be applied to the aggregate
unpaid Repurchase Price owed by the Seller.
(iii) After one Business Day's notice to the Seller
(which notice may be given concurrently with any notice to Seller
of Buyer's declaration of an Event of Default, and which notice
may be the notice given under subsection (a)(i) of this Section),
the Buyer may (A) immediately sell, without notice or demand of
any kind, at a public or private sale and at such price or prices
as the Buyer may reasonably deem satisfactory any or all
Purchased Mortgage Loans subject to a Transaction hereunder or
(B) in its sole discretion elect, in lieu of selling all or a
portion of such Purchased Mortgage Loans, to give the Seller
credit for such Purchased Mortgage Loans in an amount equal to
the Market Value of the Purchased Mortgage Loans against the
aggregate unpaid Repurchase Price and
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any other amounts owing by the Seller hereunder. The
proceeds of any disposition of Purchased Mortgage Loans shall be
applied first to the costs and expenses incurred by the Buyer in
connection with the Seller's default; second to actual damages,
including but not limited to costs of cover and/or related
hedging transactions; third to the Repurchase Price; and fourth
to any other outstanding obligation of the Seller to the Buyer
or its Affiliates.
(iv) Buyer or an Affiliate may deliver the Purchased
Mortgage Loans which are subject to a purchase commitment by FNMA
or another purchaser to FNMA or such purchaser in exchange for
securities or cash, which securities or cash shall then be
treated as Purchased Mortgage Loans, and the Seller hereby
irrevocably appoints the Buyer to act as its attorney-in-fact and
agent to take such action upon the occurrence of an Event of
Default as may be necessary to obtain such securities or cash.
(v) The parties recognize that it may not be possible
to purchase or sell all of the Purchased Mortgage Loans on a
particular Business Day, or in a transaction with the same
purchaser, or in the same manner because the market for such
Purchased Mortgage Loans may not be liquid. In view of the nature
of the Purchased Mortgage Loans, the parties agree that
liquidation of a Transaction or the underlying Purchased Mortgage
Loans does not require a public purchase or sale and that a good
faith private purchase or sale shall be deemed to have been made
in a commercially reasonable manner; provided, however, that the
Buyer shall give the Seller at least one (1) day prior written
notice of any public or private sale, which notice may be given
concurrently with any notice to Seller of Buyer's declaration of
an Event of Default. Accordingly, Buyer may elect, in its sole
discretion, the time and manner of liquidating any Purchased
Mortgage Loan and nothing contained herein shall (A) obligate
Buyer to liquidate any Purchased Mortgage Loan on the occurrence
of an Event of Default or to liquidate all Purchased Mortgage
Loans in the same manner or on the same Business Day or (B)
constitute a waiver of any right or remedy of Buyer. However, in
recognition of the parties' agreement that the Transactions
hereunder have been entered into in consideration of and in
reliance upon the fact that all Transactions hereunder constitute
a single business and contractual relationship and that each
Transaction has been entered into in consideration of the other
Transactions, the parties further agree that Buyer shall use its
best efforts to liquidate all Transactions hereunder upon the
occurrence of an Event of Default as quickly as is prudently
possible in the reasonable judgment of Buyer.
(vi) Buyer shall, without regard to the adequacy of
the security for the Seller's obligations under this Agreement,
be entitled to the appointment of a receiver by any court having
jurisdiction, without notice, to take possession of and protect,
collect, manage, liquidate, and sell the Collateral or any
portion thereof, and collect the payments due with respect to the
Collateral or any portion
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thereof. Seller shall pay all costs and expenses incurred by
Buyer in connection with the appointment and activities of such
receiver.
(vii) Seller agrees that Buyer may obtain an injunction
or an order of specific performance to compel Seller to fulfill
its obligations as set forth in Section 25, if Seller fails or
refuses to perform its obligations as set forth therein.
(viii) Seller shall be liable to Buyer for (A) the
amount of all expenses, including reasonable legal or other
expenses incurred by Buyer in connection with or as a consequence
of an Event of Default, and (B) actual damages, including,
without limitation, all reasonable costs incurred in connection
with hedging or covering transactions.
(ix) Buyer shall have all the rights and remedies
provided herein, provided by applicable federal, state, foreign,
and local laws (including, without limitation, the rights and
remedies of a secured party under the Uniform Commercial Code of
the State of New York, to the extent that the Uniform Commercial
Code is applicable, and the right to offset any mutual debt and
claim), in equity, and under any other agreement between Buyer
and Seller.
(x) Buyer may exercise one or more of the remedies
available to Buyer immediately upon the occurrence of an Event of
Default and, except to the extent provided in subsections (a)(i),
(iii) or (v) of this Section, at any time thereafter without
notice to Seller. All rights and remedies arising under this
Agreement as amended from time-to-time hereunder are cumulative
and not exclusive of any other rights or remedies which Buyer may
have.
(xi) In addition to its rights hereunder, Buyer shall
have the right to proceed against any assets of Seller which may
be in the possession of Buyer, its Affiliates or their designee
(including the Custodian), including the right to liquidate such
assets and to set off the proceeds against monies owed by Seller
to Buyer pursuant to this Agreement. Buyer may set off cash, the
proceeds of the liquidation of the Purchased Mortgage Loans, any
Collateral or its proceeds, and all sums or obligations owed by
Buyer or its Affiliates to Seller against all of Seller's
obligations to Buyer, whether under this Agreement, under a
Transaction, or under any other agreement between the parties, or
otherwise, whether or not such obligations are then due, without
prejudice to Buyer's right to recover any deficiency. Any cash,
proceeds, or property in excess of any amounts due, or which
Buyer reasonably believes may become due, to it from Seller shall
be returned to Seller after satisfaction of all obligations of
Seller to Buyer.
(xii) Buyer may enforce its rights and remedies
hereunder without prior judicial process or hearing, and Seller
hereby expressly waives any defenses Seller might otherwise have
to require Buyer to enforce its rights by judicial process.
Seller also waives any defense Seller might otherwise have
arising from
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the use of nonjudicial process, enforcement and sale of all or
any portion of the Collateral, or from any other election of
remedies. Seller recognizes that nonjudicial remedies are
consistent with the usages of the trade, are responsive to
commercial necessity and are the result of a bargain at arm's
length.
(b) If an Event of Default occurs with respect to Buyer, the
following rights and remedies are available to the Seller:
(i) Upon tender by the Seller of payment of the
aggregate Repurchase Price for all such Transactions, the Buyer's
right, title and interest in all Purchased Mortgage Loans subject
to such Transactions shall be deemed transferred to the Seller,
and the Buyer shall deliver or cause to be transferred all such
Purchased Mortgage Loans to the Seller or its designee at Buyer's
expense.
(ii) If the Seller exercises the option referred to in
subsection (b)(i) of this Section and the Buyer fails to deliver
or cause to be delivered the Purchased Mortgage Loans to the
Seller or its designee, after one Business Day's notice to the
Buyer, the Seller may (A) purchase Mortgage Loans or securities
("Replacement Assets") that are as similar as is reasonably
practicable in characteristics, outstanding principal amounts (as
a pool) and interest rate to any Purchased Mortgage Loans that
are not delivered by the Buyer to the Seller or its designee as
required hereunder or (B) in its sole discretion elect, in lieu
of purchasing Replacement Assets, to be deemed to have purchased
Replacement Assets at a price therefor on such date, equal to the
Market Value of the Purchased Mortgage Loans.
(iii) The Buyer shall be liable to the Seller (A) with
respect to Purchased Mortgage Loans (other than Additional
Loans), for any excess of the price paid (or deemed paid) by the
Seller for Replacement Assets therefor over the Repurchase Price
for such Purchased Mortgage Loans, (B) with respect to Additional
Loans, for the price paid (or deemed paid) by the Seller for the
Replacement Assets therefor, and (C) for actual damages,
including, without limitation, all costs incurred in connection
with hedging or covering transactions. In addition, the Buyer
shall be liable to the Seller for interest on such remaining
liability with respect to each such purchase (or deemed purchase)
of Replacement Assets from the date of such purchase (or deemed
purchase) until paid in full by Buyer. Such interest shall be at
the greater of the Pricing Rate or the Prime Rate.
15. RECORDING OF COMMUNICATIONS. Buyer has represented to Seller
that Buyer is required by applicable law or regulations to from time to time
make or cause to be made tape recordings of communications between its employees
and those of the other party with respect to Transactions. Accordingly, Buyer
and Seller shall have the right (but not the obligation) from time to time to
make or cause to be made tape recordings of communications between its employees
and those of the other party with respect to Transactions. Buyer and
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Seller consent to the admissibility of such tape recordings in any court,
arbitration, or other proceedings. The parties agree that a duly authenticated
transcript of such a tape recording shall be deemed to be a writing conclusively
evidencing the parties' agreement.
16. SINGLE AGREEMENT. Buyer and Seller acknowledge that, and have
entered hereunto and will enter into each Transaction hereunder in consideration
of and in reliance upon the fact that, all Transactions hereunder constitute a
single business and contractual relationship and that each has been entered into
in consideration of the other Transactions. Accordingly, each of Buyer and
Seller agrees (i) to perform all of its obligations in respect of each
Transaction hereunder, and that a default in the performance of any such
obligations shall constitute a default by it in respect of all Transactions
hereunder, (ii) that each of them shall be entitled to set off claims and apply
property held by them in respect of any Transaction against obligations owing to
them in respect of any other Transactions hereunder and (iii) that payments,
deliveries, and other transfers made by either of them in respect of any
Transaction shall be deemed to have been made in consideration of payments,
deliveries, and other transfers in respect of any other Transactions hereunder,
and the obligations to make any such payments, deliveries, and other transfers
may be applied against each other and netted.
17. NOTICES AND OTHER COMMUNICATIONS. Unless another address is
specified in writing by the respective party to whom any written notice or other
communication is to be given hereunder, all such notices or communications shall
be in writing or confirmed in writing and delivered at the respective addresses
set forth in the Confirmation. Any notices or other communications permitted or
required hereunder shall be in writing and shall be deemed conclusively to have
been given if (a) personally delivered, (b) mailed by registered or certified
mail, postage prepaid, and return receipt requested, (c) sent by express courier
delivery service and received by the party to whom it is sent or (d) transmitted
by telex or facsimile transmission (or any other type of electronic transmission
agreed upon by the parties) and confirmed by a writing given by means of (a),
(b) or (c) but, if transmitted by facsimile, shall be deemed received on the
date of the confirmation of the receipt by the receiving party's facsimile
machine.
18. ENTIRE AGREEMENT; SEVERABILITY. This Agreement together with the
applicable Confirmation and the Custodial Agreement constitutes the entire
understanding between Buyer and Seller with respect to the subject matter it
covers and shall supersede any existing agreements between the parties
containing general terms and conditions for repurchase transactions involving
Purchased Mortgage Loans. By acceptance of this Agreement, Buyer and Seller
acknowledge that they have not made, and are not relying upon, any statements,
representations, promises or undertakings not contained in this Agreement. Each
provision and agreement herein shall be treated as separate and independent from
any other provision or agreement herein and shall be enforceable notwithstanding
the unenforceability of any such other provision or agreement.
19. NON-ASSIGNABILITY. The rights and obligations of the parties under
this Agreement and under any Transaction shall not be assigned by either party
without the prior written consent of the other party; provided, however, that
Nomura may assign its rights and obligations under
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this Agreement and/or under any Transaction to an Affiliate without the prior
written consent of the other party. Subject to the foregoing, this Agreement and
any Transactions shall be binding upon and shall inure to the benefit of the
parties and their respective successors and assigns. Nothing in this Agreement
express or implied, shall give to any person, other than the parties to this
Agreement and their successors hereunder, any benefit or any legal or equitable
right, power, remedy or claim under this Agreement.
20. TERMINABILITY. This Agreement shall be terminated three hundred and
sixty four (364) days following the date hereof, and any outstanding
Transactions shall become due on such date. Notwithstanding any such termination
or the occurrence of an Event of Default, all of the representations, warranties
and covenants hereunder shall continue and survive.
21. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW
PRINCIPLES THEREOF.
22. CONSENT TO JURISDICTION AND ARBITRATION. The parties irrevocably
agree to submit to the personal jurisdiction of the United States District Court
for the Southern District of New York, the parties irrevocably waiving any
objection thereto and waive all rights to a trial by jury. If, for any reason,
federal jurisdiction is not available, and only if federal jurisdiction is not
available, the parties irrevocably agree to submit to the personal jurisdiction
of the Supreme Court of the State of New York, the parties irrevocably waiving
any objection thereto and waive all rights to a trial by jury. Notwithstanding
the foregoing two sentences, at either party's sole option exercisable at any
time not later than thirty (30) days after an action or proceeding has been
commenced, the parties agree that the matter may be submitted to binding
arbitration in accordance with the commercial rules of the American Arbitration
Association then in effect in the State of New York and judgment upon any award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof within the City, County and State of New York; provided, however, that
the arbitrator shall not amend, supplement, or reform in any regard this
Agreement or the terms of any Confirmation, the rights or obligations of any
party hereunder or thereunder, or the enforceability of any of the terms hereof
or thereof. Any arbitration shall be conducted before a single arbitrator who
shall be reasonably familiar with repurchase transactions and the secondary
mortgage market in the City, County, and State of New York.
23. NO WAIVERS, ETC. No express or implied waiver of any Event of
Default by either party shall constitute a waiver of any other Event of Default
and no exercise of any remedy hereunder by any party shall constitute a waiver
of its right to exercise any other remedy hereunder. No modification or waiver
of any provision of this Agreement and no consent by any party to a departure
herefrom shall be effective unless and until such shall be in writing and duly
executed by both of the parties hereto. Any such waiver or modification shall be
effective only in the specific instance and for the specific purpose for which
it was given.
24. INTENT. The parties understand and intend that this Agreement and
each Transaction hereunder constitute a "securities contract" as that term is
defined in Section 741
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of Title 11 of the United States Code, as amended; provided, however, that if
the Seller is an "insured depository institution" as that term is defined in
Section 1813(a) of Title 12 of the United States Code, as amended, the parties
understand and intend that this Agreement and each Transaction hereunder
constitute a "qualified financial contract" as that term is defined in Section
1821 of Title 12 of the United States Code, as amended.
25. SERVICING.
(a) Seller covenants to maintain or cause the servicing of the
Mortgage Loans to be maintained in conformity with accepted servicing practices
in the industry and in a manner at least equal in quality to the servicing
Seller provides to mortgage loans which it owns. The Servicer (or Seller if
acting as Servicer) may retain record title of the Purchased Mortgage Loans
solely for the purpose of servicing or supervising the servicing of such
Purchased Mortgage Loans. All beneficial ownership in the Purchased Mortgage
Loans shall remain in the Buyer while any such Purchased Mortgage Loan has not
been repurchased hereunder. All servicing fees and compensation with respect to
the servicing of the Mortgage Loans shall be customary, reasonable and
consistent with industry practice.
(b) If the Mortgage Loans are serviced by the Seller, (i) Seller
agrees that, while any such Purchased Mortgage Loan has not been repurchased
hereunder, Buyer is the owner of all servicing records, including but not
limited to any and all servicing agreements, files, documents, records, data
bases, computer tapes, copies of computer tapes, proof of insurance coverage,
insurance policies, appraisals, other closing documentation, payment history
records, and any other records relating to or evidencing the servicing of
Purchased Mortgage Loans (the "Servicing Records"), and (ii) Seller grants the
Buyer a security interest in all servicing fees and rights relating to the
Mortgage Loans and all Servicing Records to secure the obligation of the Seller
or its designee to service in conformity with this Section and any other
obligation of Seller to Buyer. Seller covenants to safeguard such Servicing
Records and to deliver them promptly to Buyer or its designee (including the
Custodian) at Buyer's request.
(c) If the Mortgage Loans are serviced by a third party servicer
(such third party servicer, the "Servicer"), the Seller (i) shall provide a copy
of the servicing agreement to Buyer (the "Servicing Agreement"); and (ii) hereby
irrevocably assigns to the Buyer and Buyer's successors and assigns all right,
title, interest and the benefits of the Servicing Agreements with respect to the
Mortgage Loans.
(d) The Servicer (or Seller if acting as Servicer) shall use of
one or more of the following types of accounts, in each case maintained at an
institution that is independent of and unaffiliated with Seller, into which all
sums collected in respect of Mortgage Loans shall be deposited and maintained:
(i) a trust account or accounts maintained for the benefit of Buyer with the
trust department of a federally chartered depository institution or trust
company acting in its fiduciary capacity or (ii) a trust account or accounts
maintained for the benefit of Buyer with the trust department of a state
chartered depository institution or trust company acting in its fiduciary
capacity and subject to regulations regarding fiduciary funds on deposit therein
substantially similar to 12 CFR ss. 9.10(b), or (iii) an account or accounts (a)
maintained with a
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depository institution the debt obligations of which are rated by Standard &
Poor's Ratings Group in one of its two highest rating categories at the time of
any deposit therein or (b) the deposits of which are insured by the FDIC, to the
limits established by the FDIC, and the uninsured deposits in which are
otherwise secured such that, as evidenced by an opinion of counsel, Buyer has a
claim with respect to the funds in such account or a perfected first security
interest against any collateral securing such funds that is superior to claims
of any other depositor or creditors of the depository institution with which
such account is maintained.
(e) Seller shall provide to Buyer a letter from the Servicer to
the effect that upon the occurrence of an Event of Default, Buyer may terminate
the Servicing Agreement and transfer such servicing to its designee, at no cost
or expense to Buyer, it being agreed that Seller will pay any and all fees
required to terminate the Servicing Agreement and to effectuate the transfer of
Servicing to Buyer.
26. DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS. The parties
acknowledge that they have been advised that in the case of Transactions in
which one of the parties is an "insured depository institution" as that term is
defined in Section 1831(a) of Title 12 of the United States Code, as amended,
funds held by the financial institution pursuant to a Transaction hereunder are
not a deposit and therefore are not insured by the Federal Deposit Insurance
Corporation, the Savings Association Insurance Fund or the Bank Insurance Fund,
as applicable.
27. NETTING. If Buyer and Seller are "financial institutions" as now or
hereinafter defined in Section 4402 of Title 12 of the United States Code
("Section 4402") and any rules or regulations promulgated thereunder:
(a) All amounts to be paid or advanced by one party to or on
behalf of the other under this Agreement or any Transaction hereunder shall be
deemed to be "payment obligations" and all amounts to be received by or on
behalf of one party from the other under this Agreement or any Transaction
hereunder shall be deemed to be "payment entitlements" within the meaning of
Section 4402, and this Agreement shall be deemed to be a "netting contract" as
defined in Section 4402.
(b) The payment obligations and the payment entitlements of the
parties hereto pursuant to this Agreement and any Transaction hereunder shall be
netted as follows. In the event that either party (the "Defaulting Party") shall
fail to honor any payment obligation under this Agreement or any Transaction
hereunder, the other party (the "Nondefaulting Party") shall be entitled to
reduce the amount of any payment to be made by the Nondefaulting Party to the
Defaulting Party by the amount of the payment obligation that the Defaulting
Party failed to honor.
28. CONDITIONS PRECEDENT TO INITIAL TRANSACTION. As conditions precedent
to the initial Transaction hereunder, Buyer shall have received on or before the
day of such Transaction the following, in form and substance satisfactory to the
Buyer and duly executed by Seller:
(a) This Agreement and the Custodial Agreement.
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(b) Evidence that all other actions necessary or, in the sole
discretion of Buyer exercised reasonably, desirable to perfect and protect the
security interests and liens created by Section 6 hereof have been taken,
including without limitation duly executed Uniform Commercial Code financing
statements on Form UCC-1 with respect to the Collateral.
(c) A certified copy of the Seller's corporate resolutions
approving this Agreement and the Custodial Agreement and transactions
contemplated thereunder, and all documents evidencing other necessary corporate
action or governmental approvals as may be required in connection with this
Agreement and the Custodial Agreement.
(d) A certificate of the Seller's Corporate Secretary or
Assistant Secretary certifying the names, true signatures and titles of the
Seller's officers duly authorized to initiate Transactions and to sign this
Agreement and the Custodial Agreement and the other documents to be delivered
thereunder.
(e) A favorable opinion of the Seller's outside counsel as to
such matters as the Buyer may reasonably request.
(f) The documents set forth in Exhibit III and
Exhibit IV hereto.
29. CONFIDENTIALITY. This Agreement and its terms and contents are
proprietary to Buyer and shall be held by Seller in strict confidence and shall
not be disclosed to any third party without the consent of Buyer except for (i)
disclosure to your attorneys or accountants, provided that such attorneys and
accountants likewise agree to be bound by this covenant of confidentiality or
(ii) disclosure required by law, rule, regulation or order of a court or other
regulatory body.
30. MISCELLANEOUS.
(a) Time is of the essence under this agreement and all
Transactions and all references to a time shall mean New York time in effect on
the date of the action unless otherwise expressly stated in this Agreement.
(b) Buyer shall be authorized to accept orders and take any other
action affecting any accounts of the Seller in response to instructions given in
writing or orally by telephone or otherwise by any person with apparent
authority to act on behalf of the Seller, and the Seller shall indemnify Buyer,
defend, and hold Buyer harmless from and against any and all liabilities,
losses, damages, costs, and expenses of any nature arising out of or in
connection with any action taken by Buyer in response to such instructions
received or reasonably believed to have been received from the Seller.
(c) If there is any conflict between the terms of this Agreement
or any Transaction entered into hereunder and the Custodial Agreement, this
Agreement shall prevail.
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(d) If there is any conflict between the terms of a Confirmation
or a corrected Confirmation issued by the Buyer and this Agreement, the
Confirmation shall prevail.
(e) This Agreement may be executed in counterparts, each of which
so executed shall be deemed to be an original, but all of such counterparts
shall together constitute but one and the same instrument.
(f) The headings in this Agreement are for convenience of
reference only and shall not affect the interpretation or construction of this
Agreement.
IN WITNESS WHEREOF, the parties have entered into this Agreement
as of the date set forth above.
BUYER
NOMURA ASSET CAPITAL CORPORATION
By:
_____________________________________
Title:
_____________________________________
Date:
_____________________________________
SELLER
INDUSTRY MORTGAGE COMPANY, L.P.
BY: INDUSTRY MORTGAGE CORPORATION
ITS: GENERAL PARTNER
By: /s/ GEORGE NICHOLAS
_____________________________________
By: GEORGE NICHOLAS
Title: CHIEF EXECUTIVE OFFICER
Date: DECEMBER 20, 1995
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EXHIBIT I
FORM OF CONFIRMATION
<PAGE>
<PAGE>
EXHIBIT II
FORM OF CUSTODIAL DELIVERY
<PAGE>
<PAGE>
EXHIBIT III
POWER OF ATTORNEY
THE UNDERSIGNED, INDUSTRY MORTGAGE COMPANY, L.P., a Delaware limited
partnership ("Principal") does hereby appoint NOMURA ASSET CAPITAL CORPORATION
as the undersigned's attorney in fact ("Attorney") with full power and authority
to undertake the following acts in the name and in the stead of Principal to the
same extent as though such acts were taken directly by Principal:
(i) To complete, as necessary, and record, an
assignment of mortgage evidencing the transfer of
the mortgagee's interest in a mortgage loan to
the Attorney;
(ii) To complete, as necessary, the endorsement of a promissory
note evidencing the indebtedness secured by a mortgage
loan to effect a transfer of title to such note to the
Attorney; and
(iii) To take such other steps as may be necessary or desirable
to enforce the Attorney's rights against the mortgage
loan, the related mortgage file and servicing records,
all in accordance with the terms of a Master Repurchase Agreement Governing
Purchase and Sales of Mortgage Loans between the Attorney as buyer and the
Principal as seller dated as of December 8, 1995 (the "Master Agreement"). The
power of attorney granted herein is coupled with an interest and is
irrevocable.
TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, SELLER HEREBY AGREES THAT
ANY THIRD PARTY RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT
MAY ACT HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE
INEFFECTIVE AS TO SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE
OF SUCH REVOCATION OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY,
AND SELLER ON ITS OWN BEHALF AND ON BEHALF OF SELLER'S LEGAL REPRESENTATIVES AND
ASSIGNS, HEREBY AGREES TO INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM
AND AGAINST ANY AND ALL CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON
OF SUCH THIRD PARTY HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, this instrument has been executed as of this _____
day of December, 1995.
INDUSTRY MORTGAGE COMPANY, L.P.
Witnesses:
By:
__________________________________ _____________________________________
Its
__________________________________ _____________________________________
STATE OF FLORIDA
COUNTY OF _______________
The foregoing instrument was acknowledged before me this _____ day of
December, 1995, by __________________________________, the
_____________________________ of INDUSTRY MORTGAGE COMPANY, L.P., a Delaware
corporation, on behalf of the corporation. Such person did not take an oath and:
(notary must check applicable box)
[ ] is/are personally known to me.
[ ] produced a current Florida driver's license as
identification.
[ ] produced __________________________________ as
identification.
{Notary Seal must be affixed}
Signature of Notary
_____________________________________
_____________________________________
Name of Notary (Typed, Printed or Stamped)
Commission Number (if not legible on seal): ________
My Commission Expires (if not legible on seal): ____
2
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EXHIBIT IV
IRREVOCABLE LETTER OF INSTRUCTIONS
[Letterhead of Industry Mortgage Company]
December , 1995
The First National Bank of Boston
100 Federal Street
Boston, MA 02110
ATTN: Mr. David Hall
Re: Irrevocable Letter of Instructions to Master Servicer and Servicers
Ladies and Gentlemen:
We refer to a Master Repurchase Agreement governing purchases and sales
of mortgage loans dated as of ___________________ (the "Agreement") between
NOMURA ASSET CAPITAL CORPORATION as buyer ("Buyer") and the undersigned,
INDUSTRY MORTGAGE COMPANY, L.P. as seller (referred to as the pronoun "we" or
"us" or as the defined term "Seller"). Pursuant to the Agreement, we have sold
to Buyer those mortgage loans identified on the schedule attached hereto
("Relevant Mortgage Loans") which you are servicing for us pursuant to our
existing service agreement.
We hereby advise you that effective immediately, the Relevant Mortgage
Loans should be held by you on behalf of Buyer and all payments received by you
at any time hereafter of any principal, interest or other distributions payable
with respect to the Relevant Mortgage Loans (less any related servicing fees)
should be paid by you to the order of Buyer, in the manner and on the date such
monies would have been payable to Seller, as follows:
Mellon Bank, Pittsburgh
ABA #043000261 for the account of Nomura Asset Capital Corporation
Acct. #1092525
Attn: Murray Pozmanter/re: Industry Mortgage Company
<PAGE>
<PAGE>
The First National Bank of Boston
December , 1995
Page 2
These instructions are irrevocable by us and shall remain in effect
until you receive written instructions from Buyer to the contrary.
INDUSTRY MORTGAGE COMPANY, L.P.,
Seller
By: _____________________________________
Name
___________________________
Title
___________________________
Date
____________________________
Acknowledged:
FIRST NATIONAL BANK OF BOSTON
By: ________________________________
Name
_________________________
Title
_________________________
Date
_________________________
<PAGE>
<PAGE>
EXHIBIT V
REPRESENTATIONS AND WARRANTIES
REGARDING NON-CONFORMING RESIDENTIAL MORTGAGE LOANS
Seller represents and warrants to the Buyer that, with respect to each
Non-Conforming Residential Mortgage Loan sold hereunder and with respect to each
pool of Non-Conforming Residential Mortgage Loans sold in a Transaction
hereunder, as of the related Purchase Date:
(a) Mortgage Loans as Described. The information set forth in the
Mortgage Loan Schedule is complete, true and correct;
(b) Payments Current. All payments required to be made under the terms
of the mortgage note have been made and credited or are not more than one
payment past due;
(c) No Outstanding Charges. There are no defaults in complying with the
terms of the mortgage, and all taxes, governmental assessments, insurance
premiums, water, sewer and municipal charges, leasehold payments or ground rents
which previously became due and owing have been paid, or an escrow of funds has
been established in an amount sufficient to pay for every such item which
remains unpaid and which has been assessed but is not yet due and payable.
Seller has not advanced funds, or induced, solicited or knowingly received any
advance of funds by a party other than the mortgagor, directly or indirectly,
for the payment of any amount required under the Mortgage Loan, except for
interest accruing from the date of the mortgage note or date of disbursement of
the Mortgage Loan proceeds, whichever is greater, to the day which precedes by
one month the due date of the first installment of principal and interest;
(d) Original Terms Unmodified. Except in the ordinary course of
servicing, the terms of the mortgage note and mortgage have not been impaired,
waived, altered or modified in any respect, except by a written instrument which
has been recorded, if necessary to protect the interests of Buyer and which has
been delivered to Buyer or its designee (including the Custodian). The substance
of any such waiver, alteration or modification has been approved by the issuer
of any related PMI Policy (as defined below) and the title insurer, to the
extent required by the policy, and its terms are reflected on the Mortgage Loan
Schedule. No mortgagor has been released, in whole or in part, except in
connection with an assumption agreement approved by the issuer of any related
PMI Policy (as defined below) and the title insurer, to the extent required by
the policy, and which assumption agreement is included in the Mortgage File
delivered to Buyer or its designee (including the Custodian) and the terms of
which are reflected in the Mortgage Loan Schedule;
(e) No Defenses. The Mortgage Loan is not subject to any right of
rescission, set-off counterclaim or defense, including without limitation the
defense of usury, nor will the operation of any of the terms of the mortgage
note or the mortgage, or the exercise of any right thereunder, render either the
mortgage note or the mortgage unenforceable, in whole or in part in any material
respect, or subject to any right of rescission, set-off counterclaim or defense,
<PAGE>
<PAGE>
including without limitation the defense of usury, and no such right of
rescission, set-off counterclaim or defense has been asserted with respect
thereto;
(f) Insurance Policies in Effect. The fire and casualty insurance policy
(either in the form of the original policy, an original binder or original
certificate of insurance) covering the mortgaged property (1) affords (and will
afford) sufficient insurance against fire and such other risks as are usually
insured against in the broad form of extended coverage insurance from time to
time available, as well as insurance against flood hazards if the mortgaged
property is an area identified by the Federal Emergency Management Agency as
having special flood hazards; (2) is a standard policy of insurance for the
locale where the mortgaged property is located, is in full force and effect, and
the amount of the insurance is in the amount of the full insurable value of the
mortgaged property on a replacement cost basis, where applicable, or the unpaid
balance of the Mortgage Loans, whichever is less; (3) names (and will name) the
present owner of the mortgaged property as the insured; and (4) contains a
standard mortgagee loss payable clause in favor of Seller;
(g) Compliance with Applicable Laws. Any and all requirements of any
federal, state or local law including, without limitation, usury,
truth-in-lending, real estate settlement procedures, consumer credit protection,
equal credit opportunity or disclosure laws applicable to the Mortgage Loan have
been complied with, and Seller shall maintain in its possession, available for
Buyer's inspection, and shall deliver to Buyer upon demand, evidence of
compliance with all such requirements;
(h) No Satisfaction of Mortgage. The mortgage has not been satisfied,
canceled, subordinated or rescinded, in whole or in part, and the mortgaged
property has not been released from the lien of the mortgage, in whole or in
part, nor has any instrument been executed that would effect any such release,
cancellation, subordination or rescission;
(i) Location and Type of Mortgaged Property. The mortgaged property is
located in the state identified in the Mortgage Loan Schedule and consists of a
parcel of real property with a detached single family residence erected thereon,
or a two- to four-family dwelling, or an individual condominium unit in a
low-rise condominium project, or an individual unit in a planned unit
development and no residence or dwelling is a mobile home or a manufactured
dwelling. No portion of the mortgaged property is used for commercial purposes
other than as to mixed-use properties which include one to four dwellings;
(j) Valid First Lien. The mortgage is a valid, subsisting and
enforceable first or second lien on the mortgaged property, including all
buildings on the mortgaged property and all installations and mechanical,
electrical, plumbing, heating and air conditioning systems located in or annexed
to such buildings, and all additions, alterations and replacements made at any
time with respect to the foregoing. The lien of the mortgage is subject only to:
(1) the lien of current real property taxes and assessments
not yet due and payable;
2
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(2) covenants, conditions and restrictions, rights of way,
easements and other matters of the public record as of the
date of recording acceptable to mortgage lending
institutions generally and specifically referred to in the
lender's title insurance policy delivered to the
originator of the Mortgage Loan and (i) referred to or to
otherwise considered in the appraisal made for the
originator of the Mortgage Loan or (ii) which do not
adversely affect the appraised value of the mortgaged
property set forth in such appraisal; and
(3) other matters to which like properties are commonly
subject which do not materially interfere with the
benefits of the security intended to be provided by the
mortgage or the use, enjoyment, value or marketability of
the related mortgaged property.
Any security agreement, chattel mortgage or equivalent document related to and
delivered in connection with the Mortgage Loan establishes and creates a valid,
subsisting and enforceable first or second lien and first or second priority
security interest on the property described therein and Seller has full right to
pledge and assign the same to Buyer or its designee (including the Custodian).
The mortgaged property was not, as of the date of origination of the Mortgage
Loan, subject to a mortgage, deed of trust, deed to secured debt or other
security instrument creating a lien subordinate to the lien of the mortgage;
(k) Validity of Mortgage Documents. The mortgage note and the mortgage
are genuine, and each is the legal, valid and binding obligation of the maker
thereof enforceable, in accordance with its terms. All parties to the mortgage
note and the mortgage had legal capacity to enter into the Mortgage Loan and to
execute and deliver the mortgage note and the mortgage, and the mortgage note
and the mortgage have been duly and properly executed by such parties;
(l) Full Disbursement of Proceeds. The proceeds of the Mortgage Loan
have been fully disbursed and there is no requirement for future advances
thereunder, and any and all requirements as to completion of any on-site or
off-site improvement and as to disbursements of any escrow funds therefor have
been complied with. All costs, fees and expenses incurred in making or closing
the Mortgage Loan and the recording of the mortgage were paid, and the mortgagor
is not entitled to any refund of any amounts paid or due under the mortgage note
or mortgage;
(m) Ownership. Seller is the sole owner of record and holder of the
Mortgage Loan. The Mortgage Loan is not assigned or pledged except as provided
in this Agreement, and Seller has good and marketable title thereto, and has
full right to pledge and assign the Mortgage Loan to Buyer or its designee
(including the Custodian) free and clear of any encumbrance, equity,
participation interest, lien, pledge, charge, claim or security interest, and
has full right and authority subject to no interest or participation of, or
agreement with, any other party, to sell and assign each Mortgage Loan pursuant
to this Agreement;
3
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<PAGE>
(n) Doing Business. Seller and any originator of a Purchased Mortgage
Loan is (or, during the period in which such party held and disposed of any
interest in the Mortgage Loan, was) (1) in compliance with any and all
applicable licensing requirements of the laws of the state wherein the mortgaged
property is located, and (2) organized under the laws of such state, or (3)
qualified to do business in such state to the extent the failure to qualify
could reasonably be expected to materially and adversely impact a Purchased
Mortgage Loan or its enforceability, or (4) federal savings and loan
associations or national banks having principal offices in such state, or (5)
not doing business in such state;
(o) LTV, PMI Policy. Unless otherwise agreed in writing by Buyer and
Seller, no Mortgage Loan has a LTV of more than 90%. The original LTV of the
Mortgage Loan either was not more than 80% or the excess over 75% is and will be
insured as to payment defaults by a policy with respect to each Mortgage Loan
having primary mortgage guaranty insurance issued by a generally accepted
insurance carrier (a "PMI Policy"), such PMI Policy insures the original LTV of
such Mortgage Loan over 75% as to payment defaults until the LTV thereof is
reduced to 75%. All provisions of such PMI Policy have been and are being
complied with, such policy is in full force and effect, and all premiums due
thereunder have been paid. Any Mortgage Loan subject to a PMI Policy obligates
the mortgagor thereunder to maintain the PMI Policy and to pay all premiums and
charges in connection therewith. No more than 5% of the Mortgage Loans, by
aggregate principal balance, have original LTVs of more than 85% and no PMI
Policy;
(p) Title Insurance. The Mortgage Loan is covered by either (i) an
attorney's opinion of title and abstract of title the form and substance of
which is acceptable to mortgage lending institutions making mortgage loans in
the area where the mortgaged property is located or (ii) an ALTA lender's title
insurance policy or other generally acceptable form of policy of insurance,
issued by a title insurer qualified to do business in the jurisdiction where the
mortgaged property is located, insuring Seller, its successors and assigns, as
to the first or second priority lien of the mortgage in the original principal
amount of the Mortgage Loan, subject only to the exceptions contained in clauses
(1), (2) and (3) of paragraph (j) above. Seller is the sole insured of such
lender's title insurance policy, and such lender's title insurance policy is in
full force and effect and will be in force and effect upon the consummation of
the transactions contemplated by this Agreement. No claims have been made under
such lender's title insurance policy, and no prior holder of the mortgage,
including Seller, has done, by act or omission, anything which would impair the
coverage of such lender's title insurance policy;
(q) No Defaults. There are no defaults, breaches, violations or events
of acceleration, except payments not more than one payment past due, existing
under the mortgage or the mortgage note and neither Obligor nor its respective
predecessors have waived any default, breach, violation or event of
acceleration;
(r) No Mechanics' Liens. There are no mechanics' or similar liens or
claims which have been filed for work, labor or material (and no rights are
outstanding that under the law could give rise to such liens) affecting the
mortgage d property which are or may be liens prior to, or equal or coordinate
with, the lien of the Mortgage;
4
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<PAGE>
(s) Location of Improvements; No Encroachments. All improvements which
were considered in determining the appraised value of the mortgaged property lay
wholly within the boundaries and building restriction lines of the mortgaged
property and no improvements on adjoining properties encroach upon the mortgaged
property. No improvement located on or being part of the mortgaged property is
in violation of any applicable zoning law or regulation;
(t) Origination; Payment Terms. The principal balance at the time of
purchase by Buyer was no more than $500,000. The documents, instruments and
agreements submitted for loan underwriting were not falsified and contain no
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary to make the information and statements therein
not misleading. With respect to adjustable rate Mortgage Loans, the mortgage
interest rate is adjusted periodically on each interest rate adjustment date to
equal the index plus the gross margin, rounded up or down to the nearest 1/8%,
subject to the mortgage interest rate cap. With respect to fixed rate Mortgage
Loans, the mortgage note is payable each month in equal monthly installments of
principal and interest. With respect to adjustable rate Mortgage Loans,
installments of interest are subject to change due to the adjustments to the
mortgage interest rate on each interest rate adjustment date, with interest
calculated and payable in arrears, sufficient to amortize the Mortgage Loan
fully by the stated maturity date, over an original term of not more than thirty
years from commencement of amortization.
(u) Customary Provisions. The mortgage contains customary and
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the mortgaged property of the
benefits of the security provided thereby, including, (i) in the case of a
mortgage designated as a deed of trust, by trustee's sale, and (ii) otherwise by
judicial foreclosure. There is no homestead or other exemption available to a
mortgagor which would interfere with the right to sell the mortgaged property at
a trustee's sale or the right to foreclose the mortgage;
(v) Occupancy of the Mortgaged Property. As of the related Purchase Date
the mortgaged property is lawfully occupied under applicable law. All
inspections, licenses and certificates required to be made or issued with
respect to all occupied portions of the mortgaged property and, with respect to
the use and occupancy of the same, including but not limited to certificates of
occupancy and fire underwriting certificates, have been made or obtained from
the appropriate authorities;
(w) No Additional Collateral. The mortgage note is not and has not been
secured by any collateral except the lien of the corresponding mortgage and the
security interest of any applicable security agreement or chattel mortgage
referred to in (j) above;
(x) Deeds of Trust. In the event the mortgage constitutes a deed of
trust, a trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in the mortgage, and no
fees or expenses are or will become payable by Buyer to the trustee under the
deed of trust, except in connection with a trustee's sale after default by the
mortgagor;
5
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(y) Acceptable Investment. Seller has no knowledge of any circumstances
or conditions with respect to the mortgage, the mortgaged property, the
mortgagor or the mortgagor's credit standing that can reasonably be expected to
cause private institutional investors to regard the Mortgage Loan as an
unacceptable investment, cause the Mortgage Loan to become delinquent, or
adversely affect the value or marketability of the Mortgage Loan;
(z) Purchase of Mortgage Documents. The Mortgage File and any other
documents required by Buyer to be delivered for the Mortgage Loan by Seller
under this Agreement have been delivered to the Custodian. Seller is in
possession of a complete, true and accurate mortgage file except for such
documents the originals of which have been delivered to the Buyer or its
designee (including the Custodian);
(aa) Transfer of Mortgage Loans. The assignment of mortgage is in
recordable form and is acceptable for recording under the laws of the
jurisdiction in which the mortgaged property is located;
(ab) Due on Sale. The Mortgage contains an enforceable provision for the
acceleration of the payment of the unpaid principal balance of the Mortgage Loan
in the event that the mortgaged property is sold or transferred without the
prior written consent of the mortgagee thereunder;
(ac) No Buydown Provisions; No Graduated Payments or Contingent
Interests. The Mortgage Loan does not contain provisions pursuant to which
monthly payments are paid or partially paid with funds deposited in any separate
account established by Seller, the mortgagor or anyone on behalf of the
mortgagor, or paid by any source other than the mortgagor nor does it contain
any other similar provisions currently in effect which may constitute a
"buydown" provision. The Mortgage Loan is not a graduated payment mortgage loan
and the Mortgage Loan does not have a shared appreciation or other contingent
interest feature;
(ad) Consolidation of Future Advances. Any future advances made prior to
the Purchase Date have been consolidated with the outstanding principal amount
secured by the mortgage, and the secured principal amount, as consolidated,
bears a single interest rate and single repayment term. The lien of the mortgage
securing the consolidated principal amount is expressly insured as having first
and second lien priority by a title insurance policy or an endorsement to the
policy insuring the mortgagee's consolidated interest or by other title evidence
acceptable to FNMA or FHLMC. The consolidated principal amount floes not exceed
the original principal amount of the Mortgage Loan;
(ae) Mortgaged Property Undamaged. There is no proceeding pending or
threatened for the total or partial condemnation of the mortgaged property. The
mortgaged property is undamaged by waste, fire, earthquake or earth movement,
windstorm, flood, tornado or other casualty so as to affect adversely the value
of the mortgaged property as security for the Mortgage Loan or the use for which
the premises were intended;
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(af) Collection Practices; Escrow Deposits: Interest Rate Adjustments.
The origination and collection practices used with respect to the Mortgage Loan
have been in all respects in accordance with industry custom and practice, and
have been in all respects legal and proper. With respect to escrow deposits and
escrow payments, all such payments are in the possession of Seller and there
exist no deficiencies in connection therewith for which customary arrangements
for repayment thereof have not been made. All escrow payments have been
collected in full compliance with state and federal law. If an escrow of funds
has been established, it is not prohibited by applicable law and has been
established in an amount sufficient to pay for every item that remains unpaid
and has been assessed but is not yet due and payable. No escrow deposits or
escrow payments or other charges or payments due Seller have been capitalized
under the Mortgage or the mortgage note. All mortgage interest rate adjustments
have been made in strict compliance with state and federal law and the terms of
the related mortgage note. Any interest required to be paid pursuant to state
and local law has been properly paid and credited;
(ag) Appraisal. With respect to any Mortgage Loan that has been
outstanding for five (5) years or less, the mortgage file contains an appraisal
of the related mortgaged property signed prior to the approval of the Mortgage
Loan application by a qualified appraiser, duly appointed by the originator of
the Mortgage Loan, who had no interest, direct or indirect in the mortgaged
property or in any loan made on the security thereof, other than as an employee
of the lender, and whose compensation is not affected by the approval or
disapproval of the Mortgage Loan, and the appraisal and appraiser both satisfy
the requirements of Title XI of the Federal Institutions Reform, Recovery, and
Enforcement Act of 1989 and the regulations promulgated thereunder, all as in
effect on the date the Mortgage Loan was originated;
(ah) Soldiers' and Sailors' Relief Act. The mortgagor has not notified
Seller, and Seller has no knowledge of any relief requested or allowed to the
mortgagor under the Soldiers' and Sailors' Civil Relief Act of 1940; and
(ai) Environmental Matters. The mortgaged property is free from any and
all toxic or hazardous substances and there exists no violation of any local,
state or federal environmental law, rule or regulation.
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REPRESENTATIONS AND WARRANTIES FOR WAREHOUSE MORTGAGE LOANS
Seller represents and warrants to the Buyer that with respect to each
Warehouse Mortgage Loan sold in a Transaction hereunder, as of the Purchase
Date:
(a) The applicable warehouse, credit or repurchase agreement between
Seller and Obligor has been duly authorized, executed and delivered by both
Obligor and Seller, and the execution, delivery, and performance of such
agreement and the transactions thereunder will not violate any law, regulation,
order, judgment, decree, ordinance, charter, by-law, or rule applicable to it or
its property or constitute a default (or an event which, with notice or lapse of
time, or both would constitute a default) under or result in a breach of any
agreement or other instrument by which either the Obligor or Seller is bound or
by which any of their assets are affected;
(b) The applicable warehouse, credit or repurchase agreement between
Seller and Obligor is and will be valid and enforceable in accordance with their
terms, without defense, offset or right of rescission, and has not been and will
not be modified or amended nor any requirements thereof waived;
(c) No event of default has occurred and is continuing under any
applicable warehouse, credit or repurchase agreement between Seller and Obligor;
(d) Advances to an Obligor have not exceeded the amount permitted
pursuant to any applicable warehouse, credit or repurchase agreement between
Seller and Obligor;
(e) Each Warehouse Mortgage Loan which is a Non-Conforming Residential
Mortgage Loans complies with the representations and warranties set forth herein
for Non-Conforming Residential Mortgage Loans; and
(f) Each Warehouse Mortgage Loan which is a Conforming Residential
Mortgage Loans complies with the representations and warranties set forth herein
for Conforming Residential Mortgage Loans.
8
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REPRESENTATIONS AND WARRANTIES FOR CONFORMING MORTGAGE LOANS
Seller represents and warrants to the Buyer that with respect to each
Conforming Mortgage Loan sold hereunder and with respect to each pool of
Conforming Mortgage Loans sold in a Transaction hereunder, as of the Purchase
Date:
(a) Each Mortgage Loan is eligible, and in the form required for and
satisfies all of the requirements for inclusion in the Mortgage Backed
Securities Program of the Agency or Agencies indicated on the Confirmation and
the characteristics of each pool are such that the pool is eligible for
inclusion in such Mortgage Backed Securities Program. Each Mortgage Loan is a
bona fide Mortgage Loan of the type it purports to be, made to one or more
borrowers each having substantially the credit standing he or she is represented
to have.
(b) If the Confirmation indicates that the Mortgage Loan(s) are eligible
for inclusion in the Mortgage Backed Securities Program of GNMA, the Seller
represents and warrants that such Mortgage Loans satisfy the requirements and
representations and warranties required to be made by the Seller in the GNMA
Guide. If the Confirmation indicates that the Mortgage Loan(s) are eligible for
inclusion in the Mortgage Backed Securities Program of FNMA, the Seller
represents and warrants that such Mortgage Loans satisfy the requirements and
representations and warranties required to be made by the Seller in the FNMA
Guide. If the Confirmation indicates that the Mortgage Loan(s) are eligible for
inclusion in the Mortgage Backed Securities Program of FHLMC, the Seller
represents and warrants that such Mortgage Loans satisfy the requirements and
representations and warranties required to be made by the Seller in the FHLMC
Guide.
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EXHIBIT VI
RELEASE OF IRREVOCABLE LETTER OF INSTRUCTIONS
[Letterhead of Nomura Asset Capital Corporation]
_______________, 1996
The First National Bank of Boston
100 Federal Street
Boston, MA 02110
ATTN: Mr. David Hall
Re: Release of Irrevocable Letter of Instructions
Ladies and Gentlemen:
We refer to a Master Repurchase Agreement governing purchases and sales
of mortgage loans dated as of _____________ (the "Agreement") between NOMURA
ASSET CAPITAL CORPORATION as buyer (referred to herein as "we" or "us" or as the
definition "Buyer") and the undersigned, INDUSTRY MORTGAGE COMPANY, L.P. as
seller ("Seller"). You have previously received an irrevocable letter of
instructions executed by Seller relating to those mortgage loans listed on
Exhibit A hereto (the "Relevant Mortgage Loans") directing that those loans be
held for benefit of Buyer and that all payments received with respect to the
Relevant Mortgage Loans (less any related servicing fees) be paid to Buyer
instead of Seller, which letter of instructions was dated ____________ (the
"Prior Letter of Instructions").
You are hereby advised that the Prior Letter of Instructions is revoked
as to the Relevant Mortgage Loan and that those loans shall hereafter be held by
you on behalf of Seller and not Buyer and that all amounts received by you at
any time hereafter of any principal, interest or other distributions thereon
(less any related servicing fees) shall be paid by you not to Buyer but to
Seller or as Seller directs.
NOMURA ASSET CAPITAL CORPORATION,
Buyer
By: _____________________________________
Name
___________________________
Title
___________________________
Date
____________________________
<PAGE>
<PAGE>
EXHIBIT VII
FORM OF ESCROW LETTER
<PAGE>
<PAGE>
VERSION 1
GROSS PAYING SECURITIES
GLOBAL MASTER REPURCHASE AGREEMENT
This agreement is to be used for repos and reverse repos of securities
other than equities, U.S. Treasury Instruments and Net Paying Securities
Dated as of February 7, 1996
Between:
INDUSTRY MORTGAGE COMPANY, L.P. ("Party A") ("Seller")
and
NOMURA GRAND CAYMAN, Ltd. ("Party B") ("Buyer")
1. Applicability
From time to time the parties hereto may enter into
transactions in which one party ("Seller") agrees to sell to the other ("Buyer")
securities and financial instruments (other than equities, U.S. Treasury
instruments and Net Paying Securities) ("Securities") against the payment of the
purchase price in money by Buyer to Seller, with a simultaneous agreement by
Buyer to sell to Seller securities equivalent to such Securities at a date
certain or on demand against the payment of the purchase price in money by
Seller to Buyer. Each such transaction shall be referred to herein as a
"Transaction" and shall be governed by this Agreement, including any
supplemental terms and conditions contained in Annex I hereto, unless otherwise
agreed in writing.
2. Definitions
(a) "Act of Insolvency" shall occur with respect to any party
hereto upon (i) its making a general assignment for the benefit of, or entering
into a reorganization, arrangement, or composition with creditors, or (ii) its
admitting in writing its inability to pay its debts as they become due, or (iii)
its seeking, consenting to or acquiescing in the appointment of any trustee,
administrator, receiver or liquidator or analogous officer of it or any material
part of its property, or (iv) the presentation or filing of a petition in
respect of it (other than by the counterparty to this Agreement in respect of
any obligation under this Agreement) in any court or before any agency alleging
or for the bankruptcy, winding-up or other insolvency of such party (or any
analogous proceeding) or seeking any reorganization, arrangement, composition,
re-adjustment, administration, liquidation,
<PAGE>
<PAGE>
dissolution or similar relief under any present or future statute, law or
regulation, such petition (except in the case of a petition for winding-up or
any analogous proceeding) not having been stayed or dismissed within 30 days of
its filing, or (v) the appointment of a receiver, administrator, liquidator or
trustee or analogous officer of such party over all or any material part of such
party's property;
(b) "Additional Purchased Securities", Securities transferred
by Seller to Buyer pursuant to paragraph 4(a) hereof;
(c) "Base Currency", the currency indicated in Annex I hereto;
(d) "Business Day", (i) a day other than a Saturday or a
Sunday on which banks are open for business in London and in the principal
financial centre of the country of which the currency in which the Purchase
Price and the Repurchase Price are denominated is the official currency (or, in
the case of ECU, Brussels) and (ii) in the event that the Transaction is to be
settled through CEDEL or Euroclear on a payment against delivery basis, a day on
which CEDEL or, as the case may be, Euroclear is open to settle business in the
currency in which the Purchase Price and the Repurchase Price are denominated
and (iii) in the event that the Transaction is to be settled otherwise than
through CEDEL or Euroclear on a payment against delivery basis, a day on which
the settlement system through which the Transaction is to be settled is open to
settle such Transaction and (iv) where settlement is not being effected through
a specific settlement system, a day on which banks are open for business in the
place where delivery of the Securities the subject of such Transaction is to be
settled:
(e) "Buyer's Margin Amount", with respect to any Transaction
as of any date, the amount obtained by application of a percentage to the
Repurchase Price for such Transaction as of such date, such percentage (which
may be equal to the percentage that is agreed to for the purposes of Seller's
Margin Amount under sub-paragraph (aa) of this paragraph) being a percentage
agreed to by Buyer and Seller for this purpose in relation to that Transaction;
(f) "CEDEL", Cedel S.A.;
(g) "Confirmation", the meaning specified in paragraph
7(a) hereof;
(h) "Contractual Currency", the meaning specified in
paragraph 7(a) hereof;
(i) "Defaulting Party", the meaning specified in
paragraph 10 hereof;
(j) "Default Market Value", in relation to Securities on any
date: (where Seller is the Defaulting Party) the Market Value of such Securities
on such date; and (where Buyer is the Defaulting party) the amount it would cost
to buy such Securities at the best available offer price therefor (and where
different offer prices are available for
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different delivery dates, such offer price in respect of the earliest available
such delivery date) on the most appropriate market on such date together with
all broker's fees and commissions, transfer taxes and all other costs, fees and
expenses that would be incurred in connection therewith (calculated on the
assumption that the aggregate thereof is the least that could reasonably be
expected to be paid in order to carry out the Transaction), all as determined by
Seller; and for these purposes any sum in a currency other than the Contractual
Currency for the Transaction in question shall be converted into such
Contractual Currency at the Spot Rate;
(k) "Equivalent Securities", with respect to a Transaction,
securities of the same issuer, forming a part of the same issue and being of an
identical type, nominal value, description and (except where otherwise stated)
amount to the Purchased Securities under that Transaction. If and to the extent
that such Purchased Securities have been redeemed the expression shall mean a
sum of money equivalent to the proceeds of the redemption;
(l) "Euroclear", Morgan Guaranty Trust Company of New
York, Brussels Branch, as operator of the Euroclear System;
(m) "Event of Default", the meaning specified in
paragraph 10 hereof;
(n) "Income", with respect to any Security at any time,
all interest, dividends or other distributions thereon;
(o) "LIBOR", in relation to any sum in any currency, the
three-month London Inter Bank Offered Rate in respect of that currency as quoted
on Page 3750 on the Telerate Service (or such other page as may replace Page
3750 on that service or such other service as may be nominated for the time
being by the British Bankers' Association as the information vendor for the
purpose of displaying British Bankers' Association Interest Settlement Rates) as
of 11:00 a.m., London time, on the date on which it is to be determined;
(p) "Margin Default", the meaning specified in paragraph
4(a) hereof;
(q) "Margin Excess", the meaning specified in paragraph
4(b) hereof;
(r) "Market Value", with respect to any Securities as of any
time on any date, the price for such Securities at such time on such date
obtained from a generally recognized source agreed to by the parties (and where
different prices are obtained for different delivery dates, the price so
obtainable for the earliest available such delivery date) (provided that the
price of Securities that are suspended shall (for the purposes of paragraph 4
hereof) be nil unless the parties otherwise agree and (for all other purposes)
shall be the price of those Securities as of the close of business on the
Business Day last preceding the date of suspension) plus the aggregate amount of
Income which, as of such date, has accrued but not yet been paid in respect of
the Securities to the extent not
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included in such price as of such date, and for these purposes any sum in a
currency other than the Contractual Currency for the Transaction in question
shall be converted into such Contractual Currency at the Spot Rate;
(s) "Net Paying Securities", Securities in respect of which
any interest, dividend or other distribution payable by the issuer to either
Seller or Buyer is required by law to be paid subject to withholding or
deduction for or on account of taxes or duties of whatsoever nature imposed,
levied, collected, withheld or assessed by any authority having power to tax;
(t) "Price Differential", with respect to any Transaction as
of any date, the aggregate amount obtained by daily application of the Pricing
Rate for such Transaction to the Purchase Price for such Transaction (on a 306
day year basis, or 365 day year basis as agreed between the parties for the
Transaction) for the actual number of days during the period commencing on (and
including) the Purchase Date for such Transaction and ending on (but excluding)
the date of calculation;
(u) "Pricing Rate", with respect to any Transaction, the per
annum percentage rate for calculation of the Price Differential agreed to by
Buyer and Seller in relation to that Transaction;
(v) "Purchase Date", with respect to any Transaction, the
date on which Purchased Securities are to be sold by Seller to Buyer in relation
to that Transaction;
(w) "Purchase Price", (i) on the Purchase Date, the price at
which Purchased Securities are sold or are to be sold by Seller to Buyer, and
(ii) thereafter, such price increased by the amount of any money paid by Buyer
to Seller pursuant to paragraph 4(b) hereof and decreased by the amount of any
money paid by Seller to Buyer pursuant to paragraph 4(a) hereof (and for this
purpose any amount of money not denominated in the Contractual Currency shall
(subject to paragraph 7(a)) be converted into the Contractual Currency at the
Spot Rate);
(x) "Purchased Securities", with respect to any Transaction,
subject to paragraph 8 hereof, the Securities sold or to be sold by Seller to
Buyer under that Transaction. With respect to any Transaction the term
"Purchased Securities" shall include Additional Purchased Securities transferred
pursuant to paragraph 4(a) and attributed to that Transaction and shall exclude
Purchased Securities in respect of which Equivalent Securities have been
transferred pursuant to paragraph 4(b);
(y) "Repurchase Date", with respect to any Transaction,
the date on which Buyer is to sell Equivalent Securities to Seller in relation
to that Transaction;
(z) "Repurchase Price", with respect to any Transaction
and as of any date the sum of the Purchase Price and the Price Differential as
of such date (and for this
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purpose any amount of money not denominated in the Contractual Currency shall
(subject to paragraph 7(a)) be converted into the Contractual Currency at the
Spot Rate);
(aa) "Seller's Margin Amount", with respect to any Transaction
as of any date, the amount obtained by application of a percentage to the
Repurchase Price, such percentage (which may be equal to the percentage that is
agreed to for the purposes of Buyer's Margin Amount under sub-paragraph (e) of
this paragraph) being a percentage agreed to by Buyer and Seller for this
purpose in relation to that Transaction;
(bb) "Spot Rate", where an amount in one currency is to be
converted into a second currency on any date, unless the parties otherwise
agree, at the spot rate of exchange quoted by Barclays Bank PLC in the London
interbank market for the sale by it of such second currency against a purchase
by it of such first currency;
(cc) "Term", with respect to any Transaction, the interval
of time commencing with the Purchase Date and ending with the Repurchase Date;
and
(dd) "Termination", with respect to any Transaction, refers to
the requirement with respect to such Transaction for Buyer to sell Equivalent
Securities against payment by Seller of the Repurchase Price in accordance with
paragraph 3(d)(ii), and references to a Transaction having a "fixed term" or
being "terminable upon demand" shall be construed accordingly.
3. Imitation; Confirmation; Termination
(a) A Transaction may be entered into orally or in
writing at the initiation of either Buyer or Seller.
(b) Upon agreeing to enter into a Transaction hereunder, Buyer
or Seller (or both), as shall be agreed, shall promptly deliver to the other
party a written confirmation of such Transaction (a "Confirmation").
The Confirmation shall describe the Purchased Securities
(including CUSIP or CINS or other identifying number, if any), identify Buyer
and Seller and set forth (i) the Purchase Date, (ii) the Purchase Price, (iii)
the Repurchase Date, unless the Transaction is to be terminable on demand (in
which case the Confirmation will say that it is so terminable), (iv) the Pricing
Rate applicable to the Transaction, (v) in respect of each party the details of
the bank account(s) to which payments to be made hereunder are to be credited,
and (vi) any additional terms or conditions of the Transaction not inconsistent
with this Agreement and shall be substantially in the form of Annex II hereto or
such other form as the parties may agree.
The Confirmation relating to a Transaction shall, together
with this Agreement, constitute prima facie evidence of the terms agreed between
Buyer and Seller for that Transaction, unless specific objection is made with
respect to the Confirmation
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promptly after receipt thereof. In the event of any conflict between the terms
of such Confirmation and this Agreement, this Agreement shall prevail except in
the case of those provisions in relation to which the Agreement specifically
states that the parties may otherwise agree; and as to those provisions, the
Confirmation shall prevail;
(c)(i) In the case of on demand Transactions, demand for
Termination shall be made by Buyer or Seller, by telephone or otherwise, and
shall provide for Termination to occur after not less than the minimum period as
is customarily required for the settlement or delivery of money or Equivalent
Securities of the relevant kind.
(ii) Termination of a Transaction will be effected, in the
case of on demand Transactions, on the date specified for Termination in such
demand, and, in the case of fixed term Transactions on the date fixed for
Termination.
(d)(i) On the Purchase Date for a Transaction, the Purchased
Securities shall be transferred to Buyer or its agent against the payment of the
Purchase Price to Seller.
(ii) Termination of a Transaction will be effected on the
Repurchase Date by transfer to Seller or its agent of Equivalent Securities
against the payment by the Seller of the Repurchase Price (less any amount then
payable and unpaid by Buyer to Seller pursuant to paragraph 5 hereof).
4. Margin Maintenance
(a) If at any time the aggregate Market Value of all Purchased
Securities then subject to any Transaction in which a particular party hereto is
acting as Buyer is less than the aggregate of the Buyer's Margin Amounts for all
such Transactions (the difference between such amounts being a "Margin
Deficit"), then Buyer may by notice to Seller in such Transactions require
Seller to pay money or, at Seller's option, to transfer additional Securities
reasonably acceptable to Buyer ("Additional Purchased Securities"), so that the
aggregate Market Value of the Purchased Securities, including any such
Additional Purchased Securities, will thereupon equal or exceed an amount which
equals the aggregate of the Buyer's Margin Amounts for all such Transaction in
which such Buyer is acting as Seller. For the purposes of this calculation all
sums not denominated in the Base Currency shall be converted into the Base
Currency on the relevant date at the Spot Rate.
(b) If at any time the aggregate Market Value of all Purchased
Securities then subject to any Transaction in which a particular party hereto is
acting as Seller exceeds the aggregate of the Seller's Margin Amounts for all
such Transaction (the difference between such amounts being a "Margin Excess"),
then Seller may by notice to Buyer in such Transactions require Buyer to pay
money or, at Buyer's option, to transfer Equivalent Securities to Seller in an
amount such that the aggregate Market Value of all Purchased Securities will
thereupon not exceed an amount which equals the aggregate of
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the Seller's Margin Amounts for all such Transactions plus the amount of the
Margin Excess (if any) as of such date in respect of all the Transactions in
which such Seller is acting as Buyer. For the purposes of this calculation all
sums not denominated in the Base Currency shall be converted into the Base
Currency on the relevant date at the Spot Rate.
(c) Any money paid or Securities transferred pursuant to this
paragraph shall be attributed as between all the different Transactions then
outstanding as shall be agreed upon by Buyer and Seller and, failing such
agreement, as determined by the party receiving such money or Securities. Any
money paid shall be paid in the currency agreed therefor between Buyer and
Seller and failing such agreement in the Base Currency.
(d) The parties may agree, with respect to any or all
Transactions, that their respective rights under sub-paragraphs (a) and (b) of
this paragraph may be exercised only where a Margin Deficit or a Margin Excess
exceeds an agreed amount or an agreed percentage of the aggregate of the
Repurchase Prices of the relevant Transactions.
(e) The parties may agree that their respective rights under
sub-paragraphs (a) and (b) of this paragraph (to require the elimination of a
Margin Deficit or a Margin Excess, as the case may be) may be exercised in
respect of an individual Transaction whenever a Margin Deficit or Margin Excess
(calculated on the basis that that Transaction is the only Transaction then
outstanding) exists with respect to it.
(f) Where the Seller or Buyer becomes obliged under either of
sub- paragraph (a) or (b) of this paragraph to pay money or to transfer
Securities or Equivalent Securities, it shall pay or transfer the same within
the minimum period specified in Annex I or, if no period is there specified,
such minimum period as is customarily required for the settlement or delivery of
money, Securities or Equivalent Securities of the relevant kind.
5. Income Payments
Unless otherwise agreed, where a particular Transaction's Term
extends over an Income payment date in respect of any Securities subject to that
Transaction, Buyer shall on the date such Income is paid transfer to or credit
to the account of Seller an amount equal to (and in the same currency as) such
Income payment or payments.
6. Payment and Transfer
(a) Unless otherwise agreed, all money paid hereunder shall be
in immediately available, freely convertible funds of the relevant currency. All
Securities transferred hereunder (i) shall be in suitable form for transfer and
shall be accompanied by duly executed instruments of transfer or assignment in
blank (where required for transfer) and such other documentation as the
transferee party may reasonably request, or (ii) shall be transferred through
the book entry system of Euroclear or CEDEL, or (iii)
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shall be transferred through any other agreed securities clearance system; or
(iv) shall be transferred by any other method mutually acceptable to Seller and
Buyer.
(b) Unless otherwise agreed, all money payable by one party to
the other in respect of any Transaction shall be paid free and clear of, and
without withholding or deduction for, any taxes or duties of whatsoever nature
imposed, levied, collected, withheld or assessed by any authority having power
to tax, unless the withholding or deduction of such taxes or duties is required
by law. In that event, unless otherwise agreed, the paying party shall pay such
additional amounts as will result in the net amounts receivable by the other
party (after taking account of such withholding or deduction) being equal to
such amounts as would have been received by it had no such taxes or duties been
required to be withheld or deducted.
(c) Unless otherwise agreed in writing between the parties,
under each Transaction transfer of Purchased Securities by Seller and payment of
Purchase Price payable by Buyer against the transfer of such Purchased
Securities shall be made simultaneously and transfer of Equivalent Securities by
Buyer and payment of Repurchase Price payable by Seller against the transfer of
such Equivalent Securities shall be made simultaneously.
(d) In the case of any Transaction where, pursuant to the
provisions of this Agreement, a party performs an obligation to transfer
Securities or to pay money at a time when the other party, in accordance with
this Agreement, is required to perform an obligation to pay money or transfer
Securities simultaneously with the performance of the first party's obligation
but, nevertheless, the second party's obligation is not performed
simultaneously, the second party shall hold on trust for the first party any
assets (including money or Securities) that it receives from the first party
prior to the performance of its own obligations being completed provided always
that the second party shall be at liberty to dispose of any such assets to the
extent such disposal occurs in the ordinary course of its business and provided
further that any such trust shall terminate upon the completion of the
performance of the aforesaid obligations of the second party or disposal of such
assets whichever shall first occur.
(e) Subject to and without prejudice to the provisions of
sub-paragraph 6(c), either party may from time to time in accordance with market
practice and in recognition of the practical difficulties in arranging
simultaneous delivery of Securities and money waive in relation to any
Transaction its rights under this Agreement to receive simultaneous transfer
and/or payment provided that transfer and/or payment shall, notwithstanding such
waiver, be made on the same day and provided also that no such waiver in respect
of one Transaction shall affect, or bind it in respect of, any other
Transaction.
(f) The parties shall execute and deliver all necessary
documents and take all necessary steps to procure that all right, title and
interest in any Purchased Securities and any Equivalent Securities shall pass to
the party to which transfer is being
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made upon transfer of the same in accordance with this Agreement, free from all
liens, claims, charges and encumbrances.
(g) Notwithstanding the use of expressions such as "Repurchase
Date", "Repurchase Price", "Margin", "Margin Excess" and "Margin Deficit" which
are used to reflect terminology used in the market for transactions of the kind
provided for in this Agreement, all right, title and interest in and to
Securities and money transferred or paid under this Agreement shall pass to the
transferee upon transfer or payment (subject to the trust provided for in
paragraph 6(d) of this Agreement), the obligation of the party receiving
Purchased Securities being an obligation to transfer Equivalent Securities. For
the avoidance of doubt all right, title and interest in and to Securities and
money transferred or paid pursuant to paragraph 4(a) and 4(b) shall pass in like
manner.
(h) Time shall be of the essence in this Agreement.
(i) Subject to paragraph 10 hereof, all amounts in the same
currency payable by each party to the other under any Transaction or hereunder
on the same date shall be combined in a single calculation of a net amount
payable by one party to the other.
(j) Subject to paragraph 10 hereof, all Securities of the same
issue, denomination, currency and series, transferable by each party to the
other under any Transaction or hereunder on the same date shall be combined in a
single calculation of a net quantity of Securities transferable by one party to
the other.
7. Contractual Currency
(a) All the payments made in respect of the Purchase Price or
the Repurchase Price of any Transaction shall be made in the currency of the
Purchase Price (the "Contractual Currency") save as provided in paragraph
10(b)(ii). Notwithstanding the foregoing, the payee of any money may, at its
option, accept tender thereof in any other currency, provided, however, that, to
the extent permitted by applicable law, the obligation of the payer to pay such
money will be discharged only to the extent of the amount of original currency
that such payee may, consistent with normal banking procedures, purchase with
such other currency (after deduction of any premium and costs or exchange) for
delivery on the second Business Day following its receipt of such currency.
(b) If for any reason the amount in the original currency
received by a party, including amounts received after conversion of any recovery
under any judgment or order expressed in a currency other than the original
currency, falls short of the amount in the original currency due and payable,
the party required to make the payment will, as a separate and independent
obligation, to the extent permitted by applicable law, immediately transfer such
additional amount in the original currency as may be necessary to compensate for
the shortfall.
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(c) If for any reason the amount in the original currency
received by a party exceeds the amount of the original currency due and payable,
the party receiving the transfer will refund promptly the amount of such excess.
8. Substitution
In relation to any Transaction, at any time between the
Purchase Date and the Repurchase Date Seller may, subject to agreement with and
acceptance by Buyer, substitute other Securities for any Purchased Securities,
provided, however, that such substitute Securities shall have a Market Value at
least equal to the Market Value of the Purchased Securities for which they are
substituted as at the date of substitution. Such substitution shall be made by
transfer to Buyer of such other Securities and simultaneous transfer to Seller
of the relevant amount of Equivalent Securities in respect of the Purchased
Securities being substituted. Where either or both of such transfers is or are
settled on a payment against delivery basis the parties shall make such payments
as between each other as will ensure that the aggregate amount paid by each
party equals the aggregate amount received by its. After substitution, the
substituted Securities shall be deemed to be Purchased Securities and the
original Purchased Securities so substituted shall cease to be Purchased
Securities.
9. Representations
Each party represents and warrants to the other that (i) it is
duly authorized to execute and deliver this Agreement, to enter into the
Transactions contemplated hereunder and to perform its obligations hereunder and
thereunder and has taken all necessary action to those such execution, delivery
and performance, (ii) it will engage in this Agreement and the Transactions
contemplated hereunder as principal, (iii) the person signing this Agreement on
its behalf is, and any person representing it is entering into a Transaction
will have been, duly authorized to do so on its behalf, (iv) it has obtained all
authorizations of any governmental body required in connection with this
Agreement and the Transactions contemplated hereunder and such authorizations
are in full force and effect, (v) the execution, delivery and performance of
this Agreement and the Transactions contemplated hereunder will not violate any
law, ordinance, charter, by-law or rule applicable to it or any agreement by
which it is bound or by which any of its assets are affected, (vi) it has
satisfied itself and will continue to satisfy itself as to the tax implications,
if any, of the Transactions contemplated hereunder, (vii) when acting as Seller,
at the time of transfer to the Buyer of any Purchased Securities it will have
the full and unqualified right to make such transfer and that upon such transfer
of Purchased Securities the Buyer will receive the same free and clear of any
lien, claim, charge or encumbrance, (viii) when acting as Buyer, at the time of
transfer to the Seller of any Equivalent Securities it will have the full and
unqualified right to make such transfer and that upon such transfer of
Equivalent Securities the Seller will receive the same free and clear of any
lien, claim, charge or encumbrance and (ix) when acting as Seller, the paying
and collecting arrangements applied in relation to any Purchased Securities
prior to their transfer to the Buyer will not have resulted in the payment of
any Income to the Seller
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in respect of such Purchased Securities under deduction or withholding for or on
account of UK tax. On the date on which any Transaction is entered into pursuant
hereto, and on each day on which Securities or Equivalent Securities are to be
transferred under any Transaction, Buyer and Seller shall each be deemed to
repeat all the foregoing representations made by it. For the avoidance of doubt
and notwithstanding any arrangements which the Seller or the Buyer may have with
any third party, each party will be liable as a principal for its obligations
under this Agreement and each Transaction.
10. Events of Default
If any of the following events (each an "Event of Default")
occurs in relation to either party (the "Defaulting Party", the other party
being the "non-Defaulting Party") whether acting as Seller or Buyer: (i) Buyer
fails to pay the Repurchase Price or Seller fails to deliver Securities upon the
applicable Purchase Date or Seller fails to pay the Repurchase Price or Buyer
fails to deliver Equivalent Securities upon the applicable Repurchase Date, and
the non-Defaulting Party serves written notice on the Defaulting Party, or (ii)
Seller or Buyer fails, after one Business Day's written notice, to comply with
paragraph 4 hereof, and the non-Defaulting Party serves written notice on the
Defaulting Party, or (iii) Buyer fails to comply with paragraph 5 hereof, and
the non-Defaulting Party serves written notice on the Defaulting Party, or (iv)
an Act of Insolvency occurs with respect to Seller or Buyer and (except in the
case of an Act of Insolvency which is the presentation of a petition for
winding-up or any analogous proceeding or the appointment of a liquidator or
analogous officer of the Defaulting Party in which case no such notice shall be
required) the non-Defaulting Party serves notice on the Defaulting Party, or (v)
any representations made by Seller or Buyer shall have been incorrect or untrue
in any material respect when made or repeated or deemed to have been made or
repeated, and non-Defaulting Party serves written notice on the Defaulting
Party, or (vi) Seller or Buyer shall admit to the other its inability to, or its
intention not to, perform any of its obligations hereunder and/or in respect of
any Transaction and the non- Defaulting Party serves written notice on the
Defaulting Party, or (vii) Seller or Buyer shall be suspended or expelled from
membership of or participation in any securities exchange or association or
other self regulating organization, or suspended from dealing in securities by
any government agency or any of the assets of either of them or the assets of
investors held by them or to their order shall be transferred or ordered to be
transferred to a trustee by a regulatory authority pursuant to any securities
regulating legislation and the non-Defaulting Party serves notice on the
Defaulting Party, or (viii) Seller or Buyer shall fail to perform any other of
its obligations hereunder and shall not remedy such failure within 30 days after
the non-Defaulting Party serves written notice relating to such failure on it;
then:
(a) the Repurchase Date for each Transaction hereunder
shall be deemed immediately to occur;
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(b)(i) the Default Market Values of the Equivalent
Securities to be transferred and the Repurchase Prices to be paid by
each party shall be established by the non-Defaulting Party for all
Transactions as at the Repurchase Date; and
(ii) on the basis of the sums so established, an account
shall be taken (as at the Repurchase Date) of what is due from each
party to the other under this Agreement (on the basis that each party's
claim against the other in respect to transfer to it of Equivalent
Securities under this Agreement equals the Default Market Value
therefor) and the sums due from one party shall be set-off against the
sums due from the other and only the balance of the account shall be
payable (by the party having the claim valued at the lower amount
pursuant to the foregoing) and such balance shall be due and payable on
the Repurchase Date. For the purposes of this calculation, all sums not
denominated in the Base Currency shall be converted into the Base
Currency on the relevant date at the Spot Rate; and
(iii) interest shall accrue (as well after as before
judgment) on any sum payable by the Defaulting Party to the
non-Defaulting Party under this sub- paragraph 10(b) at LIBOR
on a day to day basis from the date on which sum becomes due and
payable to the date of payment;
(c) the Defaulting Party shall be liable to the non-Defaulting
Party for the amount of all reasonable legal and other expenses
incurred by the non- Defaulting Party in connection with or as a
consequence of an Event of Default, together with interest thereon at
LIBOR or (in the case of an expense attributable to a particular
Transaction, and if greater than LIBOR) the Pricing Rate for the
relevant Transaction; and
(d) the non-Defaulting Party shall have, in addition to its
rights hereunder, any rights otherwise available to it under any other
agreement or applicable law.
Each party shall immediately notify the other if an Event of Default occurs in
relation to it.
11. Withholding of Payment or Delivery
Without prejudice to the provisions of paragraph 10 hereof, in
the case of transfers to be made otherwise than on a payment against delivery
basis, neither party shall be obliged on any Repurchase Date to transfer
Equivalent Securities or to pay the Repurchase Price to the other in respect of
a particular Transaction unless it is satisfied that the other party will pay or
deliver to it on such date the Repurchase Price or, as the case may be, the
relevant Equivalent Securities. If it is not so satisfied it shall by not later
than the time, if any, specified in Annex I notify the other party and request
assurances of that other party's ability to make such delivery or payment to it,
as the case
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may be, and unless that other party gives such assurances which are reasonably
adequate to the notifying party, the notifying party shall (provided it is
itself in a position, and willing, to perform its own obligations) be entitled
to withhold delivery or payment to the other party (but where it exercises such
entitlement it shall immediately give notice thereof to the other party) and in
this event the procedures set out in paragraph 10(b) hereof shall have effect
and be applied (on the basis that such other party is the Defaulting Party) but
only in relation to the particular Transaction in question and for this purpose
the Contractual Currency of that Transaction shall be treated as the Base
Currency.
12. Interest
Without prejudice to the provisions of paragraph 10 hereof and
to the extent permitted by applicable law, if any sum of money payable hereunder
or under any Transaction is not paid when due, interest shall accrue on such
unpaid sum as a separate debt at the greater of the Pricing Rate for the
Transaction to which such sum relates (where such sum is referable to a
Transaction) and LIBOR on a 360 day year basis, or a 365 day year basis,
as shall have been agreed for this purpose, for the actual number of days
during the period from and including the date on which payment was due
to, but excluding, the date of payment.
13. Single Agreement
Buyer and Seller acknowledge that, and have entered into this
Agreement and will enter into each Transaction hereunder in consideration of and
in reliance upon the fact that, all Transactions hereunder constitute a single
business and contractual relationship and have been made in consideration of
each other. Accordingly, each of Buyer and Seller agrees (i) to perform all of
its obligations in respect of each Transaction hereunder, and that a default in
the performance of any such obligations shall constitute a default by it in
respect of all Transactions hereunder, and (ii) that payments, deliveries and
other transfers made by either of them in respect of any Transaction shall be
deemed to have been made in consideration of payments, deliveries and other
transfers in respect of any other Transactions hereunder.
14. Notices and Other Communications
Unless another address has been specified in writing by the
party to whom any notice or other communication is to be given hereunder, all
such notices or other communications shall be in writing in the English language
and shall be delivered personally or sent by mail (first class mail in the UK
and by air mail if overseas) or by telex or by telefax, and delivered at the
respective addresses set forth in Annex III hereto or to such other person,
address, telex number or telefax number as either party may specify by notice in
writing to the other.
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In the absence of evidence of earlier receipt, any notice or
other communications shall be deemed to have been duly given:
(a) if delivered personally, when left at the address
referred to above;
(b) if sent by mail other than air mail, two days after
posting it;
(c) if sent by air mail, six days after posting it;
(d) if sent by telex, when the proper answer-back is
received; and
(e) if sent by facsimile transmission, on the date that
transmission is received by a responsible employee of the recipient in
legible form, it being agreed that the burden of proving receipt will
be on the sender and will not be met by a transmission report generated
by the sender's facsimile machine.
15. Entire Agreement; Severability
This Agreement shall supersede any existing agreements between
the parties containing general terms and conditions for Transactions. Each
provision and agreement herein shall be treated as separate from any other
provision or agreement herein and shall be enforceable notwithstanding the
unenforceability of any such other provision or agreement.
16. Non-assignability; Termination of Agreement
The rights and obligations of the parties under this Agreement
and under any Transaction shall not be assigned, charged or otherwise dealt with
by either party without the prior written consent of the other party. Subject to
the foregoing, this Agreement and any Transactions shall be binding upon and
shall inure to the benefit of the parties and their respective successors and
assigns.
This Agreement may be terminated by either party upon giving
written notice to the other, except that this Agreement shall, notwithstanding
such notice, remain applicable to any Transactions then outstanding.
All remedies hereunder shall survive Termination in respect of
the relevant Transaction and termination of this Agreement.
17. Governing Law
This Agreement shall be governed by and construed in
accordance with the laws of England. Buyer and Seller hereby irrevocably submit
for all purposes of or in connection with this Agreement and each Transaction to
the jurisdiction of the Courts of England.
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Party A hereby appoints the person identified in Annex IV
hereto as its agent to receive on its behalf service of process in such courts.
Party A shall promptly appoint, and notify Party B of the identity of, a new
agent in England if such agent ceases to be its agent.
Party B hereby appoints the person identified in Annex V
hereto as its agent to receive on its behalf service of process in such courts.
Party B shall promptly appoint, and notify Party A of the identity of, a new
agent in England if such agent ceases to be its agent.
Nothing in this paragraph shall limit the right of any party
to take proceedings in the courts of any other country of competent
jurisdiction.
18. No Waivers, Etc.
No express or implied waiver of any Event of Default be either
party shall constitute a waiver of any other Event of Default and no exercise of
any remedy hereunder by any party shall constitute a waiver of its right to
exercise any other remedy hereunder. No modification or waiver of any provision
of this Agreement and no consent by any party to a departure herefrom shall be
effective unless and until such modification, waiver or consent shall be in
writing and duly executed by both of the parties hereto. Without limitation on
any of the foregoing, the failure to give a notice pursuant to sub-paragraphs
4(a) or 4(b) hereof will not constitute a waiver of any right to do so at a
later date.
19. Waiver of Immunity
Each party hereto hereby waives, to the fullest extent
permitted by applicable law, all immunity (whether on the basis of sovereignty
or otherwise) from jurisdiction, attachment (both before and after judgment) and
execution to which it might otherwise be entitled in any action or proceeding in
the Courts of England or of any other country or jurisdiction, relating in any
way to this Agreement or any Transaction, and agrees that it will not raise,
claim or cause to be pleaded any such immunity at or in respect of any such
action or proceeding.
NOMURA GRAND CAYMAN, Ltd. INDUSTRY MORTGAGE COMPANY, L.P.
By ____________________________________ By_____________________________
Title _________________________________ Title _________________________
Date __________________________________ Date __________________________
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MASTER COLLATERAL SECURITY AND NETTING AGREEMENT
MASTER COLLATERAL SECURITY AND NETTING AGREEMENT, dated as of February 7,
1996, between Nomura Securities International, Inc. ("NSI") and each of Nomura
Asset Capital Corporation, Nomura Capital Services, Inc. and Nomura Grand
Cayman, Ltd. (individually, an "NSI Company" and, collectively, the "NSI
Companies") on the one hand, and Industry Mortgage Company, L.P. (the
"Counterparty"), on the other hand. All of the NSI Companies together are also
referred to herein as the "NSI Group".
WHEREAS, in order to induce each NSI Company and Counterparty to enter
into future transactions and agreements and maintain existing transactions and
agreements with each other including, without limitation, extensions of credit,
purchases and sales of securities and whole loans, repurchases and reverse
repurchase transactions of securities and whole loans, securities loans and
borrows, dollar rolls, interest rate and currency exchange transactions
(including, but not limited to, swaps, caps and floors), futures and options on
futures transactions, secured loan transactions, certificates of deposit,
underwriting agreements and agreements for advisory services (collectively,
"Transactions"), Counterparty and each NSI Company desire to enter into this
Master Collateral Security and Netting Agreement.
NOW, THEREFORE, Counterparty and each NSI Company agree as follows:
1. Counterparty hereby grants to each member of the NSI Group a continuing
security interest in and first lien on all of its respective securities, notes,
mortgages instruments, financial assets, monies or other property and all
distributions thereon and proceeds thereof, whenever the same is held or carried
by or for such member by a member of the NSI Group or any of such member's
agents (collectively, the "Collateral") or pledged, lent or sold in a
Transaction by Counterparty to any member of the NSI Group. The Collateral
secures the payment and performance of any and all obligations and liabilities
of Counterparty to each member of the NSI Group now or hereafter existing
(including, without limitation, obligations and liabilities under Transactions)
whether matured, unmatured, liquidated, unliquidated, fixed or contingent
(together with interest at the rate provided under any agreement evidencing the
same (or if not so provided at a commercially reasonable rate) (collectively,
the "Secured Obligations").
2. In the event (each, an "Event of Default") that:
(i) Counterparty (or any receiver, trustee, conservator,
liquidator, legal custodian or similar official appointed for
such party or any of its property) commits an event of default
under, or disaffirms or repudiates, any agreement or any
Transaction with a member of the NSI Group;
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(ii) Counterparty becomes insolvent or a debtor under any
bankruptcy, reorganization or similar law or regulations; or
(iii) a receiver, trustee, conservator, liquidator, legal custodian
or similar official is appointed for Counterparty or any of
its property;
then each member of the NSI Group shall have, in addition to the rights and
remedies of a secured creditor under the New York Uniform Commercial Code then
in effect and such other rights and remedies as may be provided by law,
regulation or agreement (in all cases without notice to Counterparty), the right
to:
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IN WITNESS WHEREOF, the undersigned have executed this Master
Collateral Security and Netting Agreement as of the 7th day of February, 1996.
Agreed and Accepted:
NOMURA SECURITIES INTERNATIONAL, INC.
By: ________________________________________
Title: _____________________________________
NOMURA ASSET CAPITAL CORPORATION
By: ________________________________________
Title: _____________________________________
NOMURA CAPITAL SERVICES, INC.
By: ________________________________________
Title: _____________________________________
By: ________________________________________
Title: _____________________________________
NOMURA GRAND CAYMAN, LTD.
By: ________________________________________
Title: _____________________________________
INDUSTRY MORTGAGE COMPANY, L.P.
By: ________________________________________
Title: _____________________________________
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ANNEX I
Supplemental Terms and Conditions
This Annex I sets forth the following elections and supplemental terms
and conditions to that certain Global Master Repurchase Agreement, dated as of
February 7, 1996 (the "Agreement") by and between Nomura Grand Cayman, Ltd.
("Buyer") and Industry Mortgage Company, L.P. ("Seller"). In the event of any
conflict or inconsistency between the provisions of this Annex I and the
Agreement, the provisions of this Annex I shall prevail. Capitalized terms used
but not defined herein shall have the meanings ascribed to them in the
Agreement. Paragraph references are to paragraphs in the Agreement.
1. Elections. The following elections shall apply:
(a) Paragraph 2(c). The Base Currency shall, for all purposes, be
United States Dollars Currency.
(b) Paragraph 2(e). The percentage used to determine Buyer's
Margin Amount shall be 110.00%
(c) Paragraph 3(b). In all cases, Buyer shall promptly deliver to
Seller a Confirmation.
(d) Paragraph 4(b) shall be inapplicable.
(e) Paragraph 4(c). Attribution to Transactions of money or
Securities transferred under margin maintenance provisions
shall be to all outstanding transactions pro-rated to the
aggregate amount of the same.
(f) Paragraph 4(e). Margin Maintenance provisions shall apply on
a Transaction by Transaction basis.
(g) Paragraph 4(f). Margin Deficits shall be satisfied by 4:00
p.m. New York time on the Business Day after notice by Buyer.
(h) Paragraph 11. Latest time, if any, for issue of request for
assurance shall be 4:00 p.m. New York time.
(i) Paragraph 12. Interest shall be calculated on a 360 day a
year basis.
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2. Definitions. (a) The following terms shall, for purposes of the
Agreement and this Annex I, have the following meaning:
"Domicile Country" the country of incorporation of Buyer or Seller.
"Issuer Country" the country of issue of the Securities.
"LIBOR", one month London Inter-Bank Offered Rate determined two
Business Days prior to the date of determination.
(b) Paragraph 2(u) of the Agreement shall be deleted in its
entirety and replaced with the following:
"Pricing Rate" shall be 30 day LIBOR plus 125 bp. The
Pricing Rate shall be reset at the beginning of each
Transaction.
(c) Paragraph 2(x) of the Agreement shall be deleted in its
entirety and replaced with the following:
"Purchased Securities" shall mean: IMC Home Equity Loan Trust
1996-1, Home Equity Loan Pass-Through Certificates, Series
1996-1, Class S Certificate evidencing a 50% Percentage
Interest.
3. Default Market Value; Market Value.
(a) Paragraph 2(j). In all cases, "Default Market Value" shall be
determined in good faith by Buyer.
(b) Paragraph 2(r) is replaced in its entirety with the following:
"(r) "Market Value", with respect to any Securities as of any
time on any date, the bid price for such Securities on such
date as determined in good faith by Buyer, plus accrued Income
to the extent not included therein (other than any Income
credited or transferred to, or applied to the obligations of,
Seller pursuant to paragraph 5 hereof) as of such date (unless
contrary to market practice for such Securities). Absent
manifest error, Buyer's determination shall be controlling for
purposes of this Agreement."
4. Income Payments. The text of paragraph 5 is replaced in its entirety
with the following:
"From the Purchase Date to the Repurchase Date, all Income in
respect of any Purchased Securities shall be paid to and
retained by Buyer as Additional Purchased Securities. Buyer
shall pay to Seller the amount by
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which such Income paid to and retained by Buyer plus the
Market Value of Purchased Securities then being held by Buyer
in connection with the related Transaction exceeds an amount
equal to the Purchase Price plus unpaid Price Differential for
the relevant Transaction calculated through the date of
payment of such Income. Notwithstanding the foregoing, Buyer
shall not be obligated to take any action pursuant to this
paragraph 5 to the extent that such action would result in the
creation or increase of a Margin Deficit, unless prior thereto
or simultaneously therewith. Seller transfers to Buyer cash
sufficient to eliminate such Margin Deficit."
5. Events of Default.
(a) In addition to the Events of Default set forth in paragraph
10, each of the following events shall constitute an Event of
Default for all purposes of the Agreement:
(i) A judgment by a court of competent jurisdiction for the
payment of money in the amount of $1,000,000 or more is
rendered against Seller or any of its affiliates, and the same
remains undischarged or unpaid for a period of thirty (30)
days during which execution of such judgment is not
effectively stayed;
(ii) The Agreement shall for any reason not either (x) create, or
shall cease to create, a valid, perfected first priority
security interest in favor of Buyer in any of the Purchased
Securities or (y) the Agreement shall for any reason not
cause, or shall cease to cause, Buyer to be the owner free of
any adverse claim of any of the Purchased Securities;
(iii) Seller shall be in default under any note, indenture, loan
agreement, guaranty or any other contract to which it is a
party, which default (A) involves the failure to pay a matured
obligation of $1,000,000 or more, or (B) permits the
acceleration of the maturity of obligations of $1,000,000 or
more by any other party to or beneficiary of such note,
indenture, loan agreement, guaranty or other contract;
(iv) Seller shall merge or consolidate into any entity unless (A)
the surviving or resulting entity shall be a corporation or
partnership organized under the laws of the United States or
any state thereof, (B) such entity expressly assumes by
written agreement, in form and substance satisfactory to Buyer
in its sole discretion, the performance of all of Seller's
duties and obligations under the Agreement, and (C) such
entity is at least as creditworthy as Seller, as determined by
Buyer in its sole and absolute discretion; or
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(v) Seller shall fail to perform, admit its inability to perform
or state its intention not to perform its obligations under
any Transaction or in respect of any repurchase agreement,
reverse repurchase agreement, securities contract or
derivative transaction with any party.
(b) In making a determination as to whether an Event of Default
or an Event of Acceleration (as defined below) has occurred,
Buyer shall be entitled to rely on reports published or
broadcast by media sources believed by Buyer to be generally
reliable and on information provided to it by any other
sources believed by it to be generally reliable, provided that
Buyer reasonably and in good faith believes such information
to be accurate and has taken such steps as may be reasonable
in the circumstances to attempt to verify such information.
(c) In addition to the right under paragraph 10(a), upon an Event
of Default the non-Defaulting Party shall no longer be
obligated to enter into any additional Transactions pursuant
to any outstanding Confirmation.
6. Events of Acceleration. Upon the occurrence of the following events
(each, an "Event of Acceleration"), at Buyer's election, the Repurchase
Date for any Transaction shall occur immediately and Seller shall be
required to perform all of its obligations with respect to such
Transaction on such accelerated Repurchase Date as if it were the
originally stipulated Repurchase Date:
(i) Any act, event, or circumstances shall occur which, in the
reasonable judgment of Buyer, would have a material adverse
impact on (A) the creditworthiness of Seller, (B) the ability
of Seller to perform its obligations under the Agreement in
prompt and timely manner, (C) the characterization,
convertibility, marketability, liquidity or value of any
Purchased Securities, or (D) the economic, political or
financial stability of the United States, the Domicile Country
or the Issuing Country; or
(ii) Any change or development involving a prospective change in
taxation or other applicable law or regulation or
interpretation thereof in the United States, the Domicile
Country or the Issuing Country directly affecting the
Purchased Securities, the imposition of exchange controls by
the United States, the Domicile Country or the Issuing Country
that directly affects the Purchased Securities, or the
imposition of exchange controls by the United States, the
Domicile Country, or the Issuing Country, that directly
affects the financial markets of the United States, the
Domicile Country or the Issuing Country and makes it, in the
sole judgment of Buyer, inadvisable or impracticable to enter
into Transactions with the Securities.
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7. Additional Representations. In addition to the representations and
warranties set forth in paragraph 9, Seller additionally represents and
warrants to Buyer that:
(i) immediately prior to any transfer of Securities to Buyer,
Seller shall own such Securities free and clear of all
pledges, liens, security interests, encumbrances, charges and
other adverse claims and upon transfer of such Securities to
Buyer, Buyer shall (A) be the owner of such Securities free of
any adverse claim or (B) obtain a valid, perfected first
priority security interest in such Securities; and
(ii) as of the date Buyer receives financial statements from Seller
and as of the date that Buyer and Seller enter into a
Transaction, there has been no material adverse change in
Seller's financial condition, business or prospects not
disclosed to Buyer since the date of such financial statements
and such financial statements accurately represent the
financial condition of Seller as of the date and for the
periods covered thereby.
8. Additional Remedies. In addition to the rights set forth in paragraph
10, Buyer shall have the following additional rights if an Event of
Default occurs with respect to Seller when Seller acts as Seller:
(a) After one (1) Business Day's notice to Seller (which notice
need not be given if an Act of Insolvency shall have
occurred), Buyer may immediately sell any or all Purchased
Securities, in public or private sales as Buyer may deem
appropriate and at such price(s) as Buyer deems satisfactory,
and apply the proceeds thereof to the aggregate unpaid
Repurchase Price and any other amounts owing by Seller
hereunder. Buyer may elect, in lieu of so selling such
Purchased Securities, to give Seller a credit for such
Purchased Securities in the amount of the Default Market Value
as of the date of such election against the amounts owing by
it to Buyer.
(b) Buyer and Seller agree and acknowledge that the Purchased
Securities constitute collateral that may decline rapidly in
value and may have limited or no liquidity. Accordingly,
notwithstanding anything to the contrary in the Agreement or
this Annex I, Buyer shall not be required to give notice to
Seller prior to exercising any remedy in respect of an Event
of Default. If no prior notice is given, Buyer shall give
notice to Seller of the remedies effected by Buyer promptly
thereafter.
(c) Buyer shall have the right to proceed against any assets of
Seller which may be in the possession of Buyer, any affiliate
of Buyer or any of their designees, including the right to
liquidate such assets and to set off the proceeds against all
amounts owing by Seller to Buyer under the Agreement. In
addition, Buyer may setoff the proceeds from the liquidation
or credit of the Purchased Securities against any and all
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amounts or obligations owing by Seller to Buyer under the
Agreement, any Transaction and any other agreement between the
parties, whether or not such obligations are then due, without
prejudice to Buyer's right to recover any deficiency. Any
cash, proceeds or property in excess of any amounts due to
Buyer shall be returned to Seller after satisfaction of all
obligations of Seller to Buyer.
9. Covenants. Seller agrees it shall take such actions, at its own
expense, as may be necessary to cause Purchased Securities which are in
physical form to be re- registered in the name of Buyer on or within
five (5) days after the Purchase Date of a Transaction, but, in any
event, no later than the record date for the next payment due under
such securities. Seller agrees it shall, from time to time upon Buyer's
request, (i) deliver to Buyer its then most recent audited or interim
financial statements and (ii) take such action, at its own expense, as
Buyer may deem necessary or advisable to confirm, evidence, validate or
perfect Buyer's interest in or rights to the Purchased Securities.
10. Payment and Transfer. Paragraph 6(a) is amended by adding the
following at the end thereof:
"Notwithstanding the foregoing, all transfer of certificated securities
from Seller to Buyer shall be effected by physical delivery to Buyer or
its designee. When Seller acts as Seller in a Transaction, no Purchased
Securities, whether certificated or uncertificated, shall remain in the
possession of Seller or any of its agents or in any account in the name
of Seller or any of its agents (other than an account maintained for
Seller on the books of Buyer)."
11. Waiver.
(a) Buyer and Seller each hereby waiver, in respect of and for the
benefit of the other, all and any rights and defenses it may
have to any claim hereunder based on any immunity granted by
any law or treaty by reason of the party being an entity owned
or controlled by the government of another country or any
sovereign immunity whatsoever.
(b) Except as provided in Section 8(c) of this Annex I, Seller
hereby agrees that its obligation to pay any amounts owing
under the Agreement shall not be affected by or subject to any
defense, set-off recoupment, claim, counterclaim or any other
right or remedy that Seller may have against Buyer for any
reason whatsoever, including, without limitation, any right or
remedy arising from or based on any agreement pursuant to
which Seller sold, purchased, transferred, borrowed or
otherwise acquired the Securities.
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12. Jurisdiction; Miscellaneous.
(a) With respect to any claim arising out of the Agreement, each
party (i) irrevocably submits to the non-exclusive
jurisdiction of the courts of the State of New York and the
United States District Court located in the Borough of
Manhattan in New York City, New York, U.S.A., and (ii)
irrevocably waives (A) any objection which it may have at any
time to the laying of venue of any suit, action or proceeding
arising out of or relating hereto brought in any court, (B)
any claim that any such suit, action or proceeding brought in
any such court has been brought in any inconvenient forum and
(iii) the right to object, with respect to such claim, suit,
action or proceeding brought in any such court, that such
court does not have jurisdiction over such party. Buyer and
Seller each irrevocably agree to waive any rights it may have
to a jury trial in any action or proceeding against it arising
out of or relating in any manner to the Agreement.
Notwithstanding Section 17 of the Agreement, this Agreement
will be governed by the laws of the State of New York.
(b) References to time in the Agreement and this Annex I shall be
to New York City time.
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IN WITNESS WHEREOF, the parties hereto have executed this Annex I this
7th day of February, 1996.
NOMURA GRAND CAYMAN, LTD. INDUSTRY MORTGAGE COMPANY, L.P.
By: ________________________________ By: ___________________________
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ANNEX II
CONFIRMATION
TO: Industry Mortgage Company, L.P.
FROM: Nomura Grand Cayman, Ltd.
DATE: February 7, 1996
SUBJECT: Repurchase Transaction
Dear Sirs:
The purpose of this letter is to set forth the terms and conditions of the above
repurchase transaction entered into between us on the Contract Date referred to
below.
This confirmation supplements and forms part of and is subject to the Global
Master Repurchase Agreement as entered into between us as of February 7, 1996
(as the same may be amended from time to time the "Agreement"). All provisions
contained in the Agreement govern this confirmation except as expressly modified
below. Words and phrases defined in the Agreement and used in this confirmation
shall have the meaning herein as in the Agreement.
1. Contract Date: February 7, 1996
2. Purchased Securities: IMC Home Equity Loan Trust 1996-1, Home Equity
Loan Pass-Through Certificates Series 1996-1.
Class S Certificates evidencing a 50% Percentage
Interest.
3. CUSIP, CINS or other identifying number: 449670 AT 5
4. Buyer: Nomura Grand Cayman, Ltd.
5. Seller: Industry Mortgage Company, L.P.
6. Purchase Date: February 7, 1996
7. Purchase Price: $2,879,296.87
8. Contractual Currency: United States Dollars
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9. Repurchase Date: February 6, 1997, subject to extension, at Buyer's
sole discretion, every three (3) months commencing
May 7, 1996 for an additional three (3) months.
10. Pricing Rate: 30 day LIBOR plus 125 bp.
11. Price Differential: to be calculated on a 360 day year basis
12. Percentage for calculating Buyer's Margin Amount: 90.00%
13. Buyer's Bank Account Details: Bank of New York, ABA #021000018;
GLA/111569; UID: NIT; SUB A/C Nomura
Grand Cayman; A/C # 004274321.
14. Seller's Bank Account Details: SunBank of Tampa Bay, Tampa, Florida;
ABA # 063106569; for the
benefit of Industry
Mortgage Company, L.P., A/C
# 0032020295202.
Yours faithfully
NOMURA GRAND CAYMAN, LTD.,
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
Accepted And Agreed:
INDUSTRY MORTGAGE COMPANY, L.P.
By: _______________________________
Name: _____________________________
Title: ____________________________
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ANNEX III
NOMURA GRAND CAYMAN, LTD.
P.O. Box 30819-SMB, Caledonian House, Mary Street, George Town
Grand Cayman, Cayman Islands, British West Indies
Attention: Lawrence Della Ratta
Telephone: (809) 949-1351
Facsimile: (809) 949-1588
INDUSTRY MORTGAGE COMPANY, L.P.
3450 Buschwood Park Drive, Suite 250
Tampa, Florida 33618
Attention: George Nicolas
Telephone: (813) 932-2211 ext. 301
Facsimile: (813) 931-4840
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ANNEX IV
CT CORPORATION
1633 Broadway
New York, NY 10019
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ANNEX V
NOMURA SECURITIES INTERNATIONAL, INC.
Two World Financial Center, Building B
New York, New York 10281-1198
Attention: General Counsel's Office
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT made this 18th day of March, 1994 by and
between The First National Bank of Boston, a national banking association, with
its principal address at 100 Federal Street, Boston, Massachusetts ("Lender")
and Industry Mortgage Company, L.P. a Delaware limited partnership, with its
principal address at 3450 W. Busch Blvd., Suite 250, Tampa, Florida 33618
("Borrower").
RECITALS
WHEREAS, Lender wishes to lend, and Borrower wishes to borrow, subject to
certain terms and conditions, monies in connection with a warehouse facility
for certain Mortgage Loans owned by Borrower.
WHEREAS, Borrower expects to use this warehouse facility to fund the
acquisition or origination of Mortgage Loans and Lender expects to fund such
activities of Borrower through Advances of monies.
WHEREAS, Lender expects repayment of such Advances made under this
warehouse facility and Borrower expects the subsequent sale of certain Mortgage
Loans to permit such repayment of Advances.
PROVISIONS
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. DEFINITIONS.
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
Advance: An advance by Lender to Borrower pursuant to this
Agreement.
Agreement: This Loan and Security Agreement, including all
exhibits and schedules attached or delivered pursuant hereto, and
as the same may be amended and supplemented from time to time by
Lender with Borrower's consent.
Base Rate: The greater of (i) the interest rate announced
from time to time by Lender at its head office as its Base Rate
and (ii) the rate equal to the weighted average of the published
rates on overnight Federal Funds transactions with members of the
Federal Reserve System plus 1/2%.
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Borrower's Note: The promissory note of Borrower in the form
set forth in Exhibit A hereto.
Business Day: Any day that is not a Saturday, Sunday or other
day on which Lender's offices in the City of Boston are closed.
Closing Date: Any Business Day on which Lender makes Advances.
Collateral: The property securing Advances set forth in
Section 7.1 hereof.
Eligible Collateral: Mortgage Loans meeting all of the
following criteria:
(a) the Essential Mortgage File Documents have been
delivered to Lender or its designated custodian;
(b) each of the representations and warranties
contained in section 5.2 of this Agreement is true as to such
Mortgage Loan;
(c) the Mortgage Loan meets the Underwriting Guidelines
set forth in Exhibit D; and,
(d) a condition requiring repayment with respect to
such Mortgage Loan under Sections 6.1 or 6.5 has not yet
occurred.
Essential Mortgage File Documents: As to each Mortgage Loan,
the original of the Note, endorsed in blank, a true and certified
copy of Mortgage, an original executed assignment of Mortgage in
recordable form with the assignee's name blank, and a marked-up
title policy or a title insurance binder or title certificate which
is in full force and effect and meets the requirements of Section
5.2(i) hereto.
Event of Default: Any event of default set forth in Section
8.1 hereof.
Mortgage: The Note, bond, deed of trust, Mortgage, mortgage
warranty, extension agreement, assumption of indebtedness,
assignment and any other documents constituting the basic
instruments for real estate security on real property owned by the
Mortgagor in the state in which the Mortgaged Property is located.
Mortgage Loans: The Note, the related Mortgage and the Related
Assets which are collectively identified as the Mortgage Loans.
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Mortgage Note Rate: The interest rate applicable to a Mortgage
Loan.
Mortgaged Property or Subject Property: The residential real
property subject to the Mortgage which secured the Mortgage Loan.
Mortgagor: The obligor under a Mortgage Loan.
Note: The original Note or bond or other evidence of
indebtedness evidencing the indebtedness of the Mortgagor under the
Mortgage Loan.
Related Assets: Any and all documents, instruments, collateral
agreements and assignments and endorsements for all documents,
instruments and collateral agreements, referred to in the Notes
and/or Mortgages or related thereto, including, without limitation,
current insurance policies (private mortgage insurance, if
applicable; flood insurance, if applicable; hazard insurance; title
insurance and other applicable insurance policies) covering the
Subject Property or relating to the Notes and all files, books,
papers, ledger cards, reports and records including, without
limitation, loan applications, mortgagor financial statements,
separate assignment of rents, if any, credit reports and
appraisals, relating to the Loans. In all cases, the Related Assets
shall be the original documents.
Request for Borrowing: A written request substantially in the
form of Exhibit C hereto, executed by Borrower and delivered to
Lender in accordance with Section 4(a) hereto.
Request for Release: A written request substantially in the
form of Exhibit F hereto, executed by Borrower and delivered to
Lender in accordance with Section 6.1 hereto.
Settlement Date: Such date of repayment of an Advance to
Lender by Borrower pursuant to this Agreement.
Underwriting Guidelines: Exhibit D attached hereto and made a
part hereof as the same may from time to time be amended with the
consent of Lender.
2. ADVANCES.
2.1 Subject to the Borrower's reimbursement obligations set forth in
Section 6 hereof, Lender hereby agrees to make Advances from time to time to
Borrower, and Borrower hereby agrees to borrow Advances from Lender, in
accordance with the terms of the Borrower's Note and this Agreement; provided,
however, that: (i) the outstanding amount of Advances provided to Borrower
hereunder shall not exceed the lesser of $5,000,000 and ninety-seven percent
(97%) of the Eligible Collateral; (ii) Lender must
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pre-approve any investor to whom Borrower seeks to sell Mortgage Loans funded
under this Agreement; (iii) Lender may terminate its obligation to make Advances
under this agreement upon 60 days notice to Borrower; (iv) Lender shall not be
obligated to make any advance in an amount less than $250,000, and shall not be
obligated to make more than one advance per Business Day; and, (v) Lender shall
not be obligated to accept any repayment by Borrower of principal and interest
in an amount less than $250,000, except for Advances repaid in accordance with
section 6.5 hereof.
2.2 Lender shall make Advances to Borrower on each Closing Date upon
receipt from Borrower of a duly executed Request for Borrowing. All payments of
Advances shall be made by wire transfer in immediately available funds to the
Borrower.
3. PURCHASE OF MORTGAGE LOANS ADVANCED UNDER THE AGREEMENT.
It is the express intention of the parties that Borrower may resell any
Mortgage Loan for which Advances are made hereunder; provided that Borrower uses
such sale proceeds for the repayment of Advances received from Lender. Borrower
hereby covenants and agrees that each Mortgage Loan which is Eligible Collateral
pursuant to this Agreement shall be sold to an investor or withdrawn from
Eligible Collateral and repaid in accordance with Section 6.5 on or before the
sixtieth day after Lender or its designated custodian received the Essential
Mortgage File Documents.
4. CONDITIONS PRECEDENT TO ADVANCES.
The Lender's obligation to make Advances hereunder shall be subject to the
fulfillment of the following conditions precedent, all of which shall be
conditions precedent to the making of each Advance:
(a) Delivery of Borrower's Note and Request for Borrowing to Lender.
Borrower shall have delivered to Lender: (i) Borrower's Note on the date of
this Agreement; and (ii) a Request for Borrowing prior to each Closing
Date.
(b) Mortgage Files. On each Closing Date, the Borrower shall have
delivered to Lender the Essential Mortgage File Documents with respect to
each Mortgage Loan included in the Eligible Collateral.
(c) Partnership Proceedings. Borrower shall have furnished to Lender a
copy, certified by Borrower's general partner on the date of this
Agreement, of the partnership vote by all general and limited partners of
Borrower authorizing the execution and delivery of Borrower's Note to
Lender and borrowing of Advances as herein provided for and
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the execution, delivery and performance of this Agreement by Borrower.
(d) Representations, Warranties and Covenants. The representations,
warranties and covenants contained in Section 5 hereof shall be true and
correct and shall have been performed as of the date of this Agreement and
on each Closing Date, and no Event of Default shall have occurred and be
continuing.
(e) Financing Statements. Lender shall have filed with the appropriate
state and local governmental authorities Uniform Commercial Code financing
statements, including any continuation statements, as are necessary and
appropriate, setting forth the Collateral as security for Advances, in
order to create a first priority security interest in favor of Lender in
such Collateral.
(f) Designation of Authorized Officers. The Borrower shall have
delivered to Lender a partners' vote and resolution, attested to by the
general partner of the Borrower, stating the names and showing the
facsimile partners' or agents' signatures of the officers of Borrower
authorized to execute and deliver this Agreement, Borrower's Note and any
Request for Borrowing.
(g) Legal Matters. All other instruments and legal proceedings in
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to Lender and counsel to Lender and
Borrower, and Lender shall have received copies of all documents which it
may have reasonably requested in connection herewith.
(h) Opinion of Counsel. With respect to the first Advance only,
Borrower shall have delivered to Lender an opinion of its outside counsel
with respect to due authorization, execution, delivery and enforceability
of this Agreement and Borrower's Note.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS.
5.1 Representations, Warranties and Covenants of the Borrower - General. It
is understood and agreed by Borrower and Lender that as a material inducement to
Lender to enter into this Agreement and make Advances, Borrower hereby
represents, warrants and covenants to Lender as follows:
(a) The Borrower is an organization as set forth in the introductory
paragraph of this Agreement and is duly organized, validly existing and in
good standing under the laws of the state of its organization and
existence, and is duly qualified as a limited partnership in all
jurisdictions wherein the character of the property owned or leased or the
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nature of the business transacted by it makes qualification as a foreign
organization necessary.
(b) The execution and delivery of the Agreement by Borrower and the
performance by Borrower of the obligations to be performed by it hereunder
have been duly authorized by all necessary partnership or other similar
action. Prior to the first Settlement Date, the Borrower shall deliver to
the Lender certified copies of relevant partnership or similar resolutions
and a good standing certificate for the state of its organization and
existence and, as requested by Lender, for each state in which Borrower is
registered to do business. It is within Lender's discretion to periodically
request good standing certificates for all states in which Borrower is
registered to do business.
(c) The execution and delivery of this Agreement by Borrower and the
performance by Borrower of the obligations to be performed by it hereunder
do not, and will not, violate any provision of any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award presently
in effect having applicability to Borrower or to the partnership agreement
of the Borrower. All parties which have had any interest in the Mortgages,
whether as mortgagee, assignee (other than Lender or assignee of Lender) or
pledgee are (or during the period in which they held and disposed of such
interest, were) in compliance with all applicable licensing requirements of
the federal, state and local governments wherein the Subject Property is
located.
(d) The execution and delivery of this Agreement by Borrower and the
performance by Borrower of the obligations to be performed by it hereunder
do not and will not result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other agreement, lease or
instrument to which Borrower is a party or by which it or its properties
may be bound or affected.
(e) This Agreement constitutes, when duly executed and delivered by
Borrower, a legal, valid and binding obligation of Borrower,
enforceable against Borrower according to its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium or similar laws affecting creditors' rights in
general, including equitable remedies.
(f) There are no actions, suits or proceedings pending or, to the
knowledge of Borrower, threatened against or affecting Borrower or the
properties of Borrower before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
which, if determined adversely to Borrower, would have a material
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adverse effect on the financial condition, properties or operations of
Borrower. Any consent by Lender to make Advances for the origination of
Mortgage Loans pursuant to this Agreement shall automatically terminate if:
(i) a decree or order of a court or agency supervisory authority having
jurisdiction for the appointment of a conservator or receivers or
liquidator in any insolvency, readjustment of debt, marshalling of assets
and liabilities, bankruptcy proceeding or any similar proceedings, or for
the winding up or liquidation of its affairs, shall have been entered
against Borrower and such decree or order shall have remained in force
undischarged or unstated for a period of 60 days; or (ii) Borrower shall
consent to the appointment of a conservator or receiver or liquidator in
any insolvency, readjustment of debt, marshalling of assets and
liabilities, bankruptcy or similar proceedings relating to Borrower or
relating to all or substantially all of its property; or (iii) Borrower
shall admit in writing its inability to pay its debts as they become due,
file a petition to take advantage of any applicable insolvency,
reorganization or bankruptcy statute, make an assignment for the benefit of
its creditors, or voluntarily suspend payment of its obligations.
(g) Borrower shall assure that all capital contributions required to
be made by partners of Borrower under any partnership or capital
contribution agreements of Borrower shall be made in timely fashion and
that the aggregate of all capital contributions made by partners of
Borrower is at least $3,500,000 by August 31, 1994.
(h) Borrower shall not permit its operations in any month to result in
a net loss, as shown on the books of the Borrower or determined in
accordance with generally accepted accounting practices. However, if the
Borrower is pooling for securitization, Lender shall permit Borrower to
compute and report to Lender as part of results of operations the value of
hypothetical revenues from unrealized gains on mortgages held for future
securitization. Borrower shall inform Lender of its intent to accumulate
loans for securitization before it begins any pooling of loans. Thereafter
until receipt of securitization proceeds, Borrower shall monthly mark to
market all loans held for securitization and, solely for purposes of this
paragraph, recognize as the results of operation any change in the market
value of such loans since the end of the preceding month or, if a loan was
acquired within the preceding month, since the date of acquisition. The
market value shall be based on existing prices for sales to purchasers
having valid mortgage purchase agreements with Borrower.
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(i) Borrower shall assure that the total of all outstanding Advances
does not exceed the lesser of: (i) 97% of the face amount of all Eligible
Collateral then held by Lender, and (ii) 5,000,000.
5.2 Representations, Warranties and Covenants of the Borrower As to Each
Loan. It is understood and agreed by Borrower and Lender that as a material
inducement to Lender to enter into this Agreement and make Advances, the
Borrower hereby represents, warrants and covenants to the Lender as of each
Closing Date with respect to each Mortgage Loan delivered to Lender each of the
following:
(a) The Borrower is a holder-in-due-course of each Note within the
meaning of the Uniform Commercial Code and is the sole owner of the
Mortgage Loan and has the right to pledge, assign and transfer the Mortgage
Loan to the Lender. The Borrower has not sold, assigned or otherwise
transferred any right or interest in or to the Mortgage Loan and has not
pledged the Mortgage Loan as collateral for any Loan or obligation of
Borrower or other purpose, except pursuant to this Agreement. The pledge of
the Mortgage Loan by the Borrower to Lender validly pledges such Mortgage
Loan to Lender free and clear of any pledges, liens, claims, encumbrances,
Mortgages, charges, exceptions and/or security interests of any third
parties.
(b) Except as expressly disclosed to and agreed by the Lender in
writing, each Mortgage Loan conforms to: (i) the Underwriting Guidelines
set forth in Exhibit D attached hereto, as the same may be amended from
time to time; and (ii) the conditions of the written Approval Advice of
Lender which modifies or requires additional conditions (if applicable).
(c) All information provided by Borrower as part of submission of
Collateral to Lender is true and correct in all respects, and all other
information furnished to Lender by Borrower with respect to the Mortgage
Loan(s) is true and correct as of the Closing Date.
(d) Each Note and Mortgage and the Essential Mortgage File Documents
or Related Assets are in every respect genuine, are the valid instrument
they purport on their face to be, are the legal, valid, binding and
enforceable obligation of the Mortgagor thereunder and not subject to any
discount, allowance, set-off, counterclaim, presently pending bankruptcy or
other defense; none of the Notes, Mortgages or Essential Mortgage File
Documents or Related Assets are forged or have affixed thereto any
unauthorized signature or have been entered into by any persons without the
required legal capacity; and no foreclosure (including any non-judicial
foreclosure) or any other legal action has
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been brought by the Borrower, any previous holder of the Mortgage, or any
senior lienholder in connection therewith.
(e) No instruments other than those delivered herewith are required
under applicable law to evidence the indebtedness represented by the
Mortgage Loan(s) or to perfect the lien of the Mortgage(s).
(f) Except as has been disclosed to and agreed to by the Lender in
writing, there is no agreement with the Mortgagor regarding any variation
of the interest rate and schedules of payment (except as described in the
Note and Mortgage) or other terms and conditions of the Mortgage Loan, no
Mortgagor has been released from liability on the Note, and no property has
been released from the Mortgage. If the Mortgage Loan is a variable rate
loan, the Borrower represents and warrants as of each Closing Date that all
applicable notices required by law or regulation have been provided to the
Mortgagor and that the right to future changes in the interest rate and
payment schedules has not been waived by the Borrower or any previous
holder of the Mortgage Loan.
(g) The Mortgage Loan is secured by a valid Mortgage, of the
agreed-upon priority, on real property, and such Mortgage has been properly
received by the appropriate public recording official to be filed, recorded
or otherwise perfected in due course in accordance with applicable law in
the appropriate jurisdiction.
(h) There are no violations of any applicable federal or state law or
regulation, including, without limitation, Fair Credit Reporting Act and
Regulations, the Federal Truth-in-Lending Act and Regulation Z, the Federal
Equal Credit Opportunity Act and Regulation B, the Federal Real Estate
Settlement Procedures Act and Regulation X, the Federal Debt Collection
Practices Act and any federal or state usury laws and regulations. All
disclosures required by law, federal, state or local, were properly made by
the Borrower (or other originator of the Mortgage Loan) prior to the
closing of the Mortgage Loan.
(i) The Borrower holds a marked-up title policy or a title insurance
binder or title certificate which is in full force and effect; which has an
insurance limit at least as great as the outstanding principal balance of
the Mortgage Loan; which names the Borrower, its successors and assigns as
the insured party and which is issued by a title insurer that is qualified
to do business in the jurisdiction where the Subject Property is located.
Said policy shall:
(i) Insure the absence of any lien of taxes or other assessments
that are due and payable;
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(ii) Disclose whether all taxes and other assessments due as of
the date of the policy have been paid-in-full; and
(iii) Disclose all other matters to which like properties are
commonly subject.
(j) The Note and Mortgage contain customary, valid, legal and
enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for the realization against the Subject Property of
the benefits of the security created thereby.
(k) The proceeds of the Mortgage Loan have been fully disbursed and
any and all requirements as to completion of on-site and off-site
improvements and disbursement of any escrow funds therefore have been
complied with.
(l) There are no mechanic's lien or similar liens or claims which have
been filed for work, labor or material affecting the Subject Property which
are or may be liens prior to or equal with the lien of the Mortgage and
senior Mortgage(s).
(m) The Subject Property is free of material damage and waste and is
in average repair and there is no proceeding pending or threatened for the
total or partial condemnation of the Subject Property, and the Subject
Property is free and clear of all hazardous material to the best of
Borrower's knowledge.
(n) All matured obligations pursuant to the Note and Mortgage have
been paid or performed and the Borrower has not waived any default, breach,
violation or event of acceleration.
(o) The Borrower has no knowledge of any fact as to any Mortgage Loan
which it has failed to disclose which would materially and adversely affect
the value or marketability of such Mortgage Loans.
(p) The Borrower has no knowledge of any impediments to title that
adversely affect the value, enjoyment or marketability of the Subject
Property.
(q) Where required by state law, the Borrower or Borrower's
predecessor in ownership of the Mortgage Loan has filed for record a
request for notice of action by a senior lienholder under a senior lien,
and the Borrower has notified any superior lienholder in writing of the
existence of the Mortgage Loan and requested notification of any action to
be taken against the Mortgagor by the superior lienholder. The Borrower
shall, upon request of the Lender,
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cooperate in recording a new request for action in favor of the Lender and
in providing superior lienholder with written requests for notification to
the Lender of action against the Mortgagor.
(r) There is no default, breach, violation or event of acceleration
existing under any senior Mortgage which, with notice, and the expiration
of any grace or cure period, which constitute a default, breach, violation
or event of acceleration.
(s) Each Note and Mortgage contains a provision for the acceleration
of the payment of the unpaid principal balance of the Mortgage Loan in the
event the related Mortgaged Property is sold without the prior consent of
the mortgagee thereunder which are applicable by state statute.
(t) All real estate appraisals made in connection with each Mortgage
Loan have been performed in accordance with industry standards in the
appraising industry in the area where the appraised property is located.
(u) To the best of Borrower's knowledge, no hazardous or toxic
materials or wastes or products regulated by law or ordinance or asbestos
or asbestos products or materials or polychlorinated biphenyls or urea
formaldehyde insulation have ever been used or employed in the
construction, use or maintenance of the Subject Property or have ever been
stored, treated at or disposed of on the Subject Property. However, in the
event it has been determined that asbestos or asbestos products or asbestos
materials have been used or employed in construction, use, or maintenance
in Subject Property, a duly qualified appraiser or engineer must state that
the material is in good repair or has been removed.
(v) To the best of Borrower's knowledge, there has not occurred nor
has any person or entity alleged that there has occurred upon the Subject
Property any spillage, leakage, discharge or release into the air, soil or
groundwater of any hazardous materials or regulated wastes.
(w) All taxes, filing fees and similar fees assessed by any state or
local authority in connection with the execution, delivery or recording of
the Mortgage have been paid.
5.3 Survival. To induce Lender to provide Advances, Borrower makes the
representations and warranties set forth herein, each and all of which shall:
(i) survive the execution and delivery of this Agreement and the making of any
Advance by Lender; (ii) inure to the benefit of Lender; and (iii) be deemed to
have been relied upon in making Advances hereunder by Lender regardless in each
case of any investigation or review Lender may
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have or shall hereafter make. Borrower additionally represents and warrants that
no Mortgage Loan for which an Advance is made hereunder shall have been acquired
more than thirty (30) days prior to any Closing Date.
6. REPAYMENT OF ADVANCES.
6.1 Repayment. When Borrower sells a Mortgage Loan, Borrower shall repay to
Lender the amount necessary to assure that the total of all outstanding Advances
does not exceed 97% of the total face amount of all Eligible Collateral then
held by Lender less the face amount of any sold Mortgage Loan. Such repayment
shall be paid to Lender by wire transfer in immediately available funds on the
Settlement Date. In any such case, after such repayment, in the event that: (1)
Borrower has provided Lender or Lender's custodian with a Request for Release
applicable to the sold Mortgage Loan, and (2) Lender or Lender's custodian has
verified repayment in accordance with this Section, the Lender shall deliver to
Borrower the Essential Mortgage File Documents with respect to the sold Mortgage
Loan unless the Mortgage Loan was sold to Lender. Borrower shall not sell
Mortgage Loans, nor request Lender to release the same, in lots of less than
$250,000 aggregate face amount, except for Mortgage Loans for which Advances
have been repaid in accordance with section 6.5 hereof.
6.2 Interests on Advances. Subject to Section 6.3 hereof, Borrower shall
pay to Lender on the fifteenth Business Day of each month interest on all
Advances outstanding during the prior month computed at an annual rate equal to
Lender's Base Rate in effect on the first Business Day of the prior month plus
1.0% per annum.
6.3 Failure to Repay Advances. In the event Borrower fails to reimburse
Lender when required under this Agreement, such repayment is considered to be
delinquent and the interest payable to Lender on the amount of all such
delinquent reimbursements shall be calculated at an annual rate equal to
Lender's Base Rate in effect on the first business day of the prior month, plus
five (5%) percent per annum.
6.4 Computation of Interest. Interest on Advances shall be computed on the
basis of a 360-day year and the actual number of days elapsed in the period
during which it accrues. In computing the interest on any Advances, the date of
making the Advance shall be included and the date of repayment shall be
excluded; provided, that if an Advance is repaid on the same day on which it is
made, one day's interest shall be paid on that Advance.
6.5 Repayment of Unpurchased Mortgage Loans. In the event that Lender has
not received from Borrower a copy of a binding agreement to purchase a
particular Mortgage Loan within 30 days of Lender's receipt of the Essential
Mortgage File Documents for
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such Mortgage Loan, such Mortgage Loan shall no longer constitute Eligible
Collateral and Borrower shall repay Lender the amount of any Advance made with
respect to such Mortgage Loan in an amount equal to such Advance. Such repayment
shall be paid to Lender by wire transfer in immediately available funds on the
Settlement Date.
In addition, if any Mortgage Loan is not purchased within 60 days after
Lender received the Essential Mortgage File Documents with respect to such
Mortgage Loan, such Mortgage Loan shall no longer constitute Eligible Collateral
and Borrower shall repay Lender any Advance made with respect to the unpurchased
Mortgage Loan in an amount equal to such Advance. Such repayment shall be made
as specified in the preceding paragraph.
7. SECURITY.
7.1 Grant of Security Interest. To secure the payment of Advances and the
performance of Borrower's other obligations hereunder, Borrower pledges and
hypothecates to Lender, and grants a security interest in favor of Lender in,
all of Borrower's right, title and interest in and to the following (the
"Collateral"):
(a) All Mortgage Loans, Mortgages and Mortgage Notes and other documents
and property as shall be deposited with, and held by Lender or its designated
custodian pursuant to this Agreement, whether or not the same shall be
determined to be Eligible Collateral;
(b) All payments and prepayments of principal, interest, penalties and
other income due or to become due (other than amounts received by Borrower for
the purpose of payment of real property taxes, assessments and insurance
premiums pursuant to the terms of Mortgage Notes) on all Mortgages Loans,
Mortgage and Mortgage Notes referred to in Paragraph (a) above, and all proceeds
thereof, all the right, title and interest of every nature whatsoever of
Borrower in and to the same and all property used in connection therewith
(subject to Borrower's right under this Agreement to collect certain payments so
long as no Event of Default shall have occurred and be continuing) including,
without limitation, the following:
(i) All rights, liens and security interests existing with respect to,
or as security for, all such Mortgage Loans;
(ii) All hazard insurance policies, title insurance policies or
condemnation proceeds with respect to each such Mortgage Loan;
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(iii) All insurance and guaranties provided by the FHA or VA, as the
case may be, with respect to each such Mortgage Loan; and
(iv) All private mortgage insurance policies with respect to each such
Mortgage Loan.
(c) All files, surveys, certificates, correspondence, appraisals, computer
programs, tapes, discs, cards, accounting records and other records and data of
Borrower related to the Mortgage Loans referred to in Paragraph (a) above; and
(d) All products and proceeds of any of the property described in the
foregoing Paragraphs (a) and (c) and any other property or documents relating to
any of the foregoing that may, from time to time hereafter, be delivered by
Borrower to Lender under this Agreement.
7.2 Authority to Collect. So long as no Event of Default shall have
occurred and be continuing, Borrower shall have the right to collect for its own
account all payments (but not proceeds of sale of Mortgage Loans) of principal,
interest, penalties and other amounts due or to become due on Mortgage Loans and
pledged and hypothecated under this Agreement.
7.3 Lender Appointed Attorney-in-Fact. Upon the occurrence of an Event of
Default, Borrower appoints Lender as Borrower's attorney-in-fact, with full
power of substitution, for the purpose of taking such action and executing such
documents, in the name of Borrower or otherwise, as Lender may deem necessary or
advisable to accomplish the purposes of this Agreement, which appointment is
coupled with an interest and is irrevocable. Lender agrees promptly to notify
Borrower after any such action or execution of instruments, provided that the
failure to give such notice shall not affect the validity of such action or
execution of instruments.
7.4 Security for Obligations. This Agreement shall create a continuing
security interest in the Collateral and shall: (i) remain in full force and
effect until payment in full of Borrower's Note; (ii) be binding upon Borrower,
its successors and assigns; and (iii) inure to the benefit of Lender and its
successors, transferees and assigns.
8. EVENTS OF DEFAULT.
8.1 Event of Default. The occurrence of any of the following conditions or
events shall constitute an "Event of Default" hereunder:
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(a) Failure to Make Payments When Due.
(i) Failure to pay the principal of any Advance when due, whether
at maturity, by acceleration, by notice of prepayment or otherwise; or
(ii) Failure to pay any interest on Advances from the prior month
by the fifteenth Business Day of the current month;
(b) Default in Other Agreements. Failure of Borrower to pay or any
default in the payment of any principal of or interest on any other
indebtedness or in the payment of any contingent obligation beyond any
period of grace provided or breach or default with respect to any other
material term of any evidence of any other indebtedness or of any loan
agreement, mortgage, indenture or other agreement relating thereto, if the
effect of such failure, default or breach is to cause, or to permit the
holder or holders of that indebtedness (or a trustee on behalf of such
holder or holders) to cause, indebtedness of Borrower in the aggregate
amount of $10,000 or more to become or be declared due prior to its stated
maturity (upon the giving or receiving of notice, lapse of time, both, or
otherwise);
(c) Breach of Warranty. Any of Borrower's representations or
warranties made herein or in any statement or certificate at any time given
by Borrower in writing pursuant hereto or in connection herewith shall be
false in any material respect on the date as of which made;
(d) Other Defaults. Borrower shall default in the performance of or
compliance with any term contained in this Agreement, other than those
referred to in Paragraphs (a) or (c) above and such default shall not have
been remedied or waived within fifteen days after receipt by Borrower of
notice from Lender, which notice shall be sent to Borrower of such default;
(e) Involuntary Bankruptcy; Appointment of Receiver, etc. Either: (i)
a court having jurisdiction in the premises shall enter a decree or order
for relief with respect to Borrower in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, which decree or order is not stayed; or (ii) any other similar
relief shall be granted under any applicable federal or state law, or a
decree or order of a court having jurisdiction in the premises for the
appointment of a receiver, liquidator, trustee, custodian or other officer
having similar powers over Borrower or over all or a substantial part of
its property, shall have been entered, or the involuntary appointment of an
interim receiver, trustee or other custodian of Borrower for all or a
substantial part of its property, or the issuance of a warrant of
attachment, execution or similar process against any substantial part of
the property
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of Borrower, and the continuance of any such events in clause (ii) for 45
days unless dismissed, bonded or discharged;
(f) Voluntary Bankruptcy; Appointment of Receiver, etc. Borrower shall
have an order for relief entered with respect to it or commence a voluntary
case under any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, or shall consent to the entry of an order for
relief in an involuntary case, or to the conversion to an involuntary case,
under any such law, or shall consent to the appointment of or taking
possession by a receiver, trustee or other custodian for all or a
substantial part of its property; the making by Borrower of any assignment
for the benefit of creditors; or the inability to pay its debts as such
debts become due or a majority of the partners of Borrower adopts any
resolution or otherwise authorizes action to approve any of the foregoing;
(g) Judgments and Attachments. Any money judgment, writ or warrant of
attachment, or similar process involving in any case an amount in excess of
$10,000 shall be entered or filed against Borrower or its assets and shall
remain undischarged, unvacated, unbounded or unstayed for a period of 30
days or in any event later than five days prior to the date of any proposed
sale thereunder;
(h) Dissolution; Liquidation. Any order, judgment or decree shall be
entered against Borrower decreeing its dissolution or liquidation and such
order shall remain undischarged or unstayed for a period in excess of 20
days.
8.2 Remedies
(a) Upon the occurrence of any Event of Default, the unpaid principal
amount of and accrued interest on the note shall automatically become due
and payable, without presentment, demand or other requirements of any kind,
all of which are hereby expressly waived by Borrower, and the obligation of
Lender to make Advances shall thereupon terminate.
(b) Upon the occurrence of any Event of Default, Lender may do any of
the following:
(i) Foreclose upon or otherwise enforce its security interest and
lien on the Collateral to secure all payments and performance of
obligations owed by Borrower under Borrower's Note and this Agreement.
(ii) Notify all obligors of Collateral that the Collateral has
been assigned to Lender and that all payments thereon are to be made
directly to Lender or such other party as may be designated by Lender;
settle, compromise or release, in whole or in part, any amounts owing
on the Collateral, any portion of the
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Collateral, by any such obligor on terms acceptable to Lender; enforce
payment and prosecute any action or proceeding with respect to any and
all Collateral; and, where any such Collateral is in default,
foreclose on, and enforce security interests in, such Collateral by
any available judicial procedure or without judicial process and sell
property acquired as a result of any such foreclosure in a
commercially reasonable manner.
(iii) Cause any disposition of all or any portion of the
Collateral to be conducted immediately upon the occurrence of an Event
of Default (or immediately upon the expiration of any period of delay
or notice required by law) or Lender may delay any such sale or other
disposition for such period of time as Lender deems to be in its best
interest. Lender agrees to conduct any such sale or disposition in a
commercially reasonable manner. Should Lender decide to conduct more
than one such sale or disposition, Lender may at its option cause the
same to be conducted simultaneously or successively on the same day or
upon such different days or at such different times and in such order
as Lender may deem to be in its best interests. Borrower waives, to
the fullest extent permitted by law, any prejudice resulting to it
from any such decision.
(iv) Sell the Collateral in one or more lots, at one or more
times, at public or private sales, in an established market therefor
or otherwise, and with or without notice of any kind, as Lender may
elect, at such prices and on such terms, as to cash or credit, as
Lender may deem proper, and in the case of pledged Mortgages, with or
without servicing rights, provided that notwithstanding any provision
hereof, five Business Days' notice shall be given to Borrower of all
sales of all or any portion of the Collateral. Any sale may be made at
any place designated by Lender, and Lender shall have the right to
become the lender at any such sale which is open to the public. If
notice is given of the public sale of any of the Collateral, it is
agreed that notice shall be satisfactorily given for all purposes if
such notice is published at least once in a newspaper of general
circulation in the vicinity of Borrower and in the regional edition of
The Wall Street Journal, not less than five Business Days prior to
such sale and Lender mails, or causes to be mailed a copy of such
notice to Borrower on or prior to the first publishing date. The
foregoing notice provisions shall not preclude Lender's rights to
foreclose upon the collateral in any other manner permitted under the
Uniform Commercial Code; provided, however, a sale of the Collateral
in accordance with the above notice
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requirements shall be deemed a disposal of the Collateral in a
commercially reasonable manner. Lender shall have the right in
connection with the Collateral either to sell the same as above
provided, or to foreclose, sue upon, or otherwise seek to enforce the
same in its own name or in the name of Borrower as provided herein.
Subject to the foregoing provisions of this paragraph, after an Event
of Default shall occur and be continuing, Lender shall have the right
to renew, extend the time of payment of, or otherwise modify, amend,
supplement, settle or compromise, in any manner, any obligations for
the payment of money included in the Collateral, any security therefor
and any other agreements, instruments, claims or choses in action of
any kind, which may be included in the Collateral.
(v) Take possession of all or any portion of the Collateral that
is not already in its possession of Lender and Borrower agrees to
assemble and make available the Collateral to Lender at a convenient
location. Lender may manage and protect the Collateral, do any acts
which Lender deems proper to protect the Collateral as security
hereunder, and sue upon any contract or claim relating to the
Collateral and receive any payments due thereon or any damages
thereunder, and apply all sums received to the payment of the
indebtedness secured hereby in such order as Lender shall determine,
subject to the provisions of section 8.5 hereof. Any such actions of
Lender shall not, absent written ratification by Lender, be deemed to
impose upon Lender any of Borrower's obligations under any contracts.
(vi) Be entitled, without regard to the adequacy of the security
for the indebtedness secured hereby, to the appointment of a receiver
by any court having jurisdiction, without notice, to take possession
of and protect, collect, manage, liquidate, and sell the Collateral or
any portion thereof, collect the payments due with respect to the
Collateral or any portion thereof, and do anything that Lender is
authorized with respect thereto do do.
(vii) Notify all obligors of Collateral that the Collateral has
been assigned to Lender and that all payments thereon are to be made
directly to Lender or such other party as may be designated by Lender;
settle, compromise, or release, in whole or in part, any amounts owing
on the Collateral, any portion of the Collateral or any such obligor
on terms acceptable to Lender; enforce payment and prosecute any
action or proceeding with respect to any and all Collateral; and
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where any such Collateral is in default, foreclose on, and enforce
security interests in, such Collateral by any available judicial
procedure or without judicial process and sell property acquired as a
result of any such foreclosure in a commercially reasonable manner.
(viii) Act, or contract with a third party to act, as servicer of
each item of Collateral requiring servicing with any such third
party's fees to be paid by Borrower, deducted from payments received,
or deducted from Borrower's account, as Lender may elect in its sole
discretion.
(ix) Exercise all rights and remedies of a secured creditor under
the Uniform Commercial Code, including, but not limited to, selling
the Collateral at public or private sale.
(x) Exercise any and all other rights and remedies of Lender as
it shall deem appropriate at law, in equity, or otherwise.
(c) All remedies are cumulative. Any failure on the part of Lender to
exercise or any delay in exercising any right hereunder shall not operate
as a waiver thereof, nor shall any single or partial exercise by Lender of
any right hereunder preclude any other exercise thereof or the exercise of
any other right.
8.3 Application of Proceeds. Any money collected by Lender pursuant to this
Section 8 (whether upon voluntary payment, foreclosure or otherwise) shall be
promptly applied as follows unless otherwise required by provisions of
applicable law:
(a) First, to the payment of all expenses incurred by Lender in
enforcing its rights under this Agreement, including all costs and expenses
of collection, attorneys' fees, court costs and foreclosure expenses.
(b) Next, to the payment of all principal of and interest on Advances.
(c) Next, to Borrower.
9. INDEMNIFICATION.
9.1 (a) Borrower hereby agrees to protect, indemnify, defend and hold
harmless Lender, its subsidiaries and affiliates and assignees, and all of their
agents, employees, officers and directors, (collectively the Lender
Indemnitees") from and against any and all liabilities, costs, expenses,
judgments, damages, losses, claims, demands, offsets, defenses, counterclaims,
actions, or
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proceedings, by whomsoever asserted, arising from, connected with, or resulting
from: (i) any breach by Borrower of any covenant, representation, or warranty
contained herein or of any other term of this Agreement or any act of Borrower
or omission by Borrower where Borrower has a duty to act; and (ii) any assertion
or claim of any liability of Lender on account of any contamination, pollution
or other condition of any of the Subject Properties in violation of any
environmental law; provided, however, that Borrower's obligation to indemnify
pursuant to this section shall not extend to any liability arising from the
gross negligence or willful misconduct of any Lender Indemnitee or, as to any
particular Mortgage Loan, to any act committed by Lender after such Mortgage
Loan is sold to Lender, its assignee or successor.
(b) If any legal proceeding shall be instituted, or any claim asserted in
respect of which a Lender Indemnitee may seek indemnification from Borrower, the
Borrower shall have the right, at its option and at its own expense, to be
represented by counsel of its choice and to defend against, negotiate, settle,
or otherwise deal with such proceeding or claim.
9.2 (a) Lender hereby agrees to protect, indemnify, defend and hold
harmless Borrower, its subsidiaries and affiliates and assignees, and all of
their agents, employees, officers and directors (collectively, the "Borrower
Indemnitees") from and against any and all liabilities, costs, expenses,
judgments, damages, losses, claims, demands, offsets, defenses, counterclaims,
actions, or proceedings, by whomever asserted, arising from, connected with, or
resulting from any breach by Lender of any covenant, representation, or warranty
contained herein or of any other term of this Agreement or any act of Lender or
omission by Lender where Lender has a duty to act; provided, however, that
Lender's obligation to indemnify pursuant to this section shall not extend to
any liability arising, from the gross negligence or willful misconduct of any
Borrower Indemnitee.
(b) If any legal proceeding shall be instituted, or any claim asserted in
respect of which a Borrower Indemnitee may seek indemnification from Lender, the
Lender shall have the right, at its option and at its own expense, to be
represented by counsel of its choice and to defend against, negotiate, settle,
or otherwise deal with such proceeding or claim.
10. NOTICES.
All notices or other communications provided for herein shall be in
writing, and shall be deemed to have been qiven or
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<PAGE>
made when sent Certified Mail, Return Receipt Requested, postage prepaid, or, in
the case of telegraphic notice, when delivered to the telegraph company,
addressed as set forth below or to such other address as may be hereafter
designated in writing by the respective parties hereto:
Lender: The First National Bank of Boston
lOO Federal Street
Boston, Massachusetts, 02110
Attn: Gunther Fritze 01-15-01
Borrower: Industry Mortgage Company, L.P.
3450 W. Busch Blvd., Suite 250
Tampa, Florida 35618
Attn: George Nicholas
11. APPOINTMENT OF ATTORNEY.
Borrower hereby appoints any officer or employee of Lender its true and
lawful attorney to sign and deliver to Lender on behalf of Borrower any
instrument or document and also any other writing which may be used in
connection therewith to evidence any security interest in any Collateral. This
power of attorney shall not be used to create any new obligation of Borrower to
Lender or for the institution of suit in Borrower's name, except as may be set
forth in Section 8.2 hereof.
12. ACCESS TO BORROWER DOCUMENTS AND INFORMATION.
(a) Borrower shall deliver to Lender its annual (audited) financial
statements within 90 days of Borrower's fiscal year end, its quarterly
(unaudited) financial statements within 45 days of the end of each quarter, and
its monthly (unaudited) financial statements within 45 days of each month's end.
Borrower shall provide to Lender and its appointed agents access to
documentation and information regarding the Collateral and the Borrower as
Lender may request, including, but not limited to, the Mortgage Loans and any
and all accounting records and financial statements of Borrower, such access
being afforded without charge upon reasonable request and during normal business
hours at the offices of the Borrower designated by it.
(b) Borrower shall furnish to Lender within 30 days of each month's end
such other information as Lender may from time to time request, including,
without limitation, such other information as is set forth on Exhibit E hereto,
as the same may be amended by Lender from time to time.
(c) Borrower shall permit Lender or its agents to have access to and to
examine and audit any and all records of Borrower relating to the Eligible
Collateral, the Mortgage
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Loans or this Agreement at any time during normal business hours.
13. TERMINATION.
(a) Lender may terminate its obligations to make Advances under this
Agreement: (i) at any time after the commencement date of this Agreement in its
sole discretion for any or no reason whatsoever upon thirty (30) days' written
notice delivered to Borrower; or (ii) without any advance notice upon the
occurrence of any Event of Default.
(b) In the event of termination due to the occurrence of an Event of
Default, all outstanding Advances under the Note and this Agreement shall, at
the sole option of Lender, become immediately due and payable as of the
effective date of such termination.
(c) If not previously terminated under subsections 13(a) and 13(b), any
obligation of Lender to make Advances hereunder will terminate, without notice,
on a date which is 364 days after the date of this Agreement shown in the first
paragraph hereof (the "Expiration Date"). Lender may extend the Expiration Date
by written notice to Borrower.
14. MISCELLANEOUS.
14.1 Representation of Servicer and Lender. If any of the Mortgage Loans
are presently serviced by any third party, Borrower shall obtain and deliver on
the Closing Date a representation and warranty to Lender from each such servicer
that, as of the Closing Date, there are no taxes, ground, rents, water charges,
sewer rents, assessments payable in future installments, or other outstanding
charges affecting the lien of any Mortgage or Mortgaged Property, which amounts
are being escrowed and which are due and payable. If requested by the Lender,
each such servicer shall submit proof of the foregoing representation and
warranty.
14.2 Costs and Expenses. Borrower shall pay all out-of-pocket attorney's
fees, costs and expenses of Lender in preparation and documentation,
interpretation or amendment, enforcement of this Agreement, or any consumer
finance examination made by Lender (not more than semi-annually at its usual
fees). In all other respects, Borrower and Lender shall each fulfill their
obligations pursuant hereto at their own cost and expense.
14.3 Agency; Joint Venture. Neither this Agreement nor any action taken
pursuant hereto shall make either party an agent or representative of the other
or be deemed to create a joint venture between Borrower and Lender.
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14.4 Complete Agreement; Modification; Sale or Assignment. This Agreement
constitutes the complete agreement between Borrower and Lender with respect to
the subject matter hereof and may not be modified, altered, or amended except by
a writing signed by Borrower and Lender. Neither party hereto may sell, assign,
or transfer any of its rights or obligations pursuant hereto except with the
written consent of the other party, except that the Lender may assign this
Agreement to an affiliate. Nothing herein shall in any way limit Lender's right
to assign the Borrower's Note to any other person or entity.
14.5 No Waiver. No undertaking, agreement, covenant, representation or
warranty of Borrower contained herein shall be deemed to have been waived by
Lender, unless such waiver is by an instrument in writing signed by Lender. Any
such waiver by Lender shall not be deemed to be waiver of any other undertaking,
agreement, covenant, representation or warranty. Lender's failure, at any time,
to require strict performance of any provision hereof shall not waive, affect or
diminish any right of Lender thereafter to demand strict compliance therewith or
performance thereof.
14.6 Parties. This Agreement shall be binding upon, and inure to the
benefit of, the successors and permitted assigns of Borrower and Lender.
14.7 Governing Law. This Agreement shall, in all respects, be governed by,
and construed in accordance with, the laws of the Commonwealth of Massachusetts
applicable to contracts made and performed in such state without regard to the
conflict of laws provisions of such jurisdiction and the laws of the United
States of America.
14.8 Severability; Section Headings. Any invalidity of any provision of
Borrower's Note or this Agreement shall not affect the validity of any other
provision hereof. The section headings contained herein shall be without
substantive meaning and shall not be deemed to be a part of this Agreement.
14.9 Construction. Wherever from the context it appears appropriate, each
term stated in either the singular or plural shall include the singular and
plural, and pronouns stated in the masculine, feminine, or neuter gender shall
include the masculine, feminine, and the neuter. The words "herein," "hereof,"
"hereto," "hereby," and other words of similar import shall be deemed to refer
to this Agreement as a whole and not to any particular section, subsection, or
clause of this Agreement.
14.10 Regulatory Compliance. Without limiting and in addition to the above,
the Borrower acknowledges and understands that the Lender is committed to full
compliance with any and all applicable laws, rules, regulations and orders
relating to fair lending (the "Fair Lending Laws"). In connection with such
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commitment, the Borrower represents and warrants that it shall not engage in any
practice or transaction relating to a Mortgage Loan which would directly or
indirectly have the effect of discriminating against any Mortgage Loan applicant
on the basis of race, color, religion, national origin, sex, marital status or
age (provided that the applicant has the legal capacity to contract), the fact
that all or part of the applicant's income derives from any public assistance
program, or the fact that the applicant has in good faith exercised any rights
under the Consumer Credit Protection Act. The Lender and the Borrower shall
cooperate to develop and implement underwriting criteria and other Mortgage Loan
practices which: (a) are consistent with safe and sound banking practices and
the Lender's corporate policies, and (b) are consistent and comply with the Fair
Lending Laws.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties intending to be legally bound hereby, as of the date first written
above.
THE FIRST NATIONAL BANK OF BOSTON
By: GUNTHER FRITZE
-------------------------------------
Name: Gunther Fritze
-----------------------------------
Title: VP
---------------------------------
INDUSTRY MORTGAGE COMPANY, L.P.
By: INDUSTRY MORTGAGE CORPORATION
-------------------------------------
Its Managing,General Partner
By: GEORGE NICHOLAS
-------------------------------------
Name: George Nicholas
-----------------------------------
Title: CEO
---------------------------------
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<PAGE>
[BANK OF BOSTON LETTERHEAD]
September 27, 1994
Mr. Thomas A. Middleton
Industry Mortgage Company L.P.
3450 West Bush Boulevard
Suite 250
Tampa, FL 33618
Subject: First Amendment to the Loan and Securitv Agreement dated
March 18th, 1994
Dear Tom,
As agreed, we are pleased to open up the warehouse facility to "B" paper.
The new Exhibit D page 32, revised September, 1994, of the
Agreement hereby replaces the original Exhibit D. Furthermore, any
future reference to Exhibit D in the Loan Agreement will mean
Exhibit D - revised September, 1994.
With best regards.
Sincerely,
GUNTHER E.A. FRITZE
Gunther E.A. Fritze
Vice President
Agreed to by:
THOMAS G. MIDDLETON
Thomas G. Middleton
Chief Operating Officer
Industry Mortgage Company L.P.
authorized signature
THE FIRST NATIONAL BANK OF BOSTON, Boston, Massachusetts 02106
<PAGE>
<PAGE>
Exhibit D
(Underwriting Guidelines)
revised September 1994
THE PARAMETERS SET FORTH BELOW MAY NOT BE ALL INCLUSIVE
SECOND MORTGAGE LOAN PARAMETERS
Loan Classification A B
Loan Amount Maximum $400,000 $400,000
Warehouse Period 60 days 60
Debt to Income 45% 45%
Loan to Value 85% 80%
Delinquencies 2x30 days on mortgage 3x30 on mortgage loans; 30-
loans; 30-60 days on 60-90 days on revolving and
revolving and/or installment installment loans
loans
Employment Level of verification varies Level of verification varies
depending on product type depending on product type
Appraisal Required on all loans, Required on all loans,
performed by third party performed by third party
Closings Must be closed by counsel or Must be closed by counsel or
Title Company Title Company
<PAGE>
<PAGE>
[IMC INDUSTRY MORTGAGE COMPANY LETTERHEAD]
December 1, 1994
Mr. Gunther E. A. Fritze
Vice President
The First National Bank of Boston
100 Federal Street
Boston, MA 02110-1804
Subject: Second Amendment to the Loan and Security Agreement dated
March 18th, 1994
Dear Gunther:
As agreed, we would like to open up the warehouse facility to "G.E.C.C.
Preapproved" paper.
The new Exhibit D page 32, revised December, 1994, of the
Agreement hereby replaces the original Exhibit D.
Furthermore, any future reference to Exhibit D in the Loan
Agreement will mean Exhibit D - revised December, 1994.
Sincerely,
THOMAS G. MIDDLETON
Thomas G. Middleton
Chief Operating Officer
Agreed to by: All GECC high LTV loans put into the
warehouse facility will be subject to the
GUNTHER E.A. FRITZE Correspondent Agreement dated May 3, 1994
Gunther E.A. Fritze as amended. IMC will have a Conditional
Vice President Approval Letter in hand before putting such
The First National Bank of Boston loans into the warehouse.
<PAGE>
<PAGE>
Exhibit D
(Underwiting Guidelines)
revised December 1994
THE PARAMETERS SET FORTH BELOW MAY NOT BE ALL INCLUSIVE
SECOND MORTGAGE LOAN PARAMETERS
<TABLE>
<S> <C> <C> <C>
Loan Classification A B GE PreApproved Loans
Loan Amount Maximum $400,000 $400,000 $35,000
Warehouse Period 60 days 60 days 60 days
Debt to Income 45% 45% 40%
Loan to Value 85% 80% 100%
Delinquencies 2X30 days on mortgage 3X30 days on mortgage 0X30 days on mortgage
loans; 30-60 days on loans; 60-90 days on 0X30 on revolving and
revolving and/or revolving and installment loans
installment loans installment loans
Employment Level of verification Level of verification Level of verification
varies depending on varies depending on varies depending on
product type product type product type
Appraisal Required on all loans, Required on all loans Required on all loans,
performed by third performed by third performed by third
party party party
Closings Must be closed by Must be closed by Must be closed by
counsel or Title counsel or Title counsel or Title
Company Company Company
</TABLE>
<PAGE>
<PAGE>
THIRD AMENDMENT TO
LOAN AND SECURITY AGREEMENT
WHEREAS, Industry Mortgage Company, L.P. ("Borrower") and The First
National Bank of Boston ("Lender") entered into a Loan and Security Agreement
dated March 18, 1994, as amended by a certain First Amendment dated September
27, 1994, and later amended by a certain Second Amendment dated December 1,
1994, (as so amended, the "Loan and Security Agreement"); and
WHEREAS, Borrower and lender wish to adjust certain provisions of the Loan
Agreement for their mutual benefit;
NOW, THEREFORE, Borrower and Lender hereby amend the Loan and Security
Agreement as follows:
1. Section 2.1 is hereby amended to read, in its entirety, as follows:
2.1 Subject to the Borrower's reimbursement obligations set forth in
Section 6 hereof, Lender hereby agrees to make Advances from time to time
to Borrower, and Borrower hereby agrees to borrow Advances from Lender, in
accordance with the terms of the Borrower's Note and this Agreement;
provided, however, that: (i) the outstanding amount of Advances provided to
Borrower hereunder shall not exceed the lesser of $9,500,000
and ninety-eight percent (98%) of the Eligible Collateral; (ii) Lender
must pre-approve any investor to whom Borrower seeks to sell Mortgage
Loans funded under this Agreement; (iii) Lender may terminate its
obligation to make Advances under this agreement upon 60 days notice
to Borrower; (iv) Lender shall not be obligated to make any advance
in the amount less than $250,000, and shall not be obligated to
make more than one advance per Business Day; and (v) Lender shall not
be obligated to accept any repayment by Borrower of principal and
interest in an amount less than $250,000, except for Advances repaid in
accordance with section 6.5 hereof.
2. Section 3 PURCHASE OF MORTGAGE LOANS ADVANCED UNDER THE AGREEMENT is
hereby amended to read, in its entirety, as follows:
3. PURCHASE OF MORTGAGE LOANS ADVANCED UNDER THE AGREEMENT.
It is the express intention of the parties that Borrower may resell
any Mortgage Loan for which Advances are made hereunder; provided that
Borrower uses such sale proceeds for the repayment of Advances received
from Lender. Borrower hereby covenants and agrees that each Mortgage Loan
which is Elgible Collateral pursuant to this Agreement shall be sold to an
investor or withdrawn from Eligible Collateral and repaid in accordance
with Section 6.5 on or before the one-hundred and twentieth day after
Lender or its
<PAGE>
<PAGE>
designated custodian received the Essential Mortgage File Documents.
3. Section 5.1(i) is hereby amended to read, in its entirety, as follows:
(i) Borrower shall assure that the total of all outstanding Advances
does not exceed the lesser of: (i) 98% of the face amount of all Eligible
Collateral then held by Lender, and (ii) $9,500,000.
4. Section 5.2 is hereby amended by adding thereto subsection (x), as follows:
(x) Neither any Note nor any Mortgage is a "mortgage", as defined by
the federal Truth-In-Lending Act at section 103(aa) (15 U.S.C.
ss. 1602(aa)).
5. Section 6.1 Repayment is hereby amended to read, in its entirety, as
follows:
6.1 Repayment. When Borrower sells a Mortgage Loan, Borrower shall
repay to Lender the amount necessary to assure that the total of all
outstanding Advances does not exceed 98% of the total face amount of all
Eligible Collateral then held by Lender less the face amount of any sold
Mortgage Loan. Such repayment shall be paid to Lender by wire transfer in
immediately available funds on the Settlement Date. In any such case, after
such repayment, in the event that: (1) Borrower has provided Lender or
Lender's custodian with a Request for Release applicable to the sold
Mortgage Loan, and (2) Lender or Lender's custodian has verified repayment
in accordance with this Section, the Lender shall deliver to Borrower the
Essential Mortgage File Documents with respect to the sold Mortgage Loan
unless the Mortgage Loan was sold to Lender. Borrower shall not sell
Mortgage Loans, nor request Lender to release the same, in lots of less
than $250,000 aggregate face amount, except for Mortgage Loans for which
Advances have been repaid in accordance with section 6.5 hereof.
6. Section 6.2 Interests on Advances is hereby amended to read, in its
entirety, as follows:
6.2 Interest on Advances. Subject to Section 6.3 hereof, Borrower
shall pay to Lender on the fifteenth Business Day of each month interest on
all Advances outstanding during the prior month computed at an annual rate
equal to Lender's Base Rate in effect on the first Business Day of the
prior month.
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7. The second paragraph of Section 6.5 Repayment of Unpurchased Mortgage Loans,
is hereby amlended to read, in its entirety, as follows:
In addition, if any Mortgage Loan is not purchased within 120 days
after Lender received the Essential Mortgage File Documents with respect to
such Mortgage Loan, such Mortgage Loan shall no longer constitute Eligible
Collateral and Borrower shall repay Lender any Advance made with respect to
the unpurchased Mortgage Loan in an amount equal to such Advance. Such
repayment shall be made as specified in the preceding paragraph.
8. Exhibit D (Uhderwriting Guidelines), as amended by the First and Second
Amendments to the Loan and Security Agreement, is hereby deleted and replaced
with Exhibit D as attached hereto.
9. Subject to the foregoing amendments, the parties ratify and confirm the
validity and obllgations of the Loan and Security Agreement. This Third
Amendment and the said First and Second Amendments constitute the complete
agreement of the parties with respect to modifications made or proposed to the
Loan and Security Agreement from March 18, 1994 through the date hereof.
IN WITNESS WHEREOF, the parties hereto have executed this instrument as of the
15th day of March, 1995.
THE FIRST NATIONAL BANK OF BOSTON
By: GUNTHER E.A. FRITZE
--------------------------------------
Name: Gunther E.A. Fritze
------------------------------------
Title: VP
----------------------------------
INDUSTRY MORTGAGE COMPANY, L.P.
By: INDUSTRY MORTGAGE CORPORATION
--------------------------------------
Its Managing General Partner
By: GEORGE NICHOLAS
--------------------------------------
Name: George Nicholas
------------------------------------
Title: CEO
----------------------------------
3
<PAGE>
<PAGE>
Exhibit D
(Underwriting Guidelines)
revised February 1995
THE PARAMETERS SET FORTH BELOW MAY NOT BE ALL INCLUSIVE
SECOND MORTGAGE LOAN PARAMETERS
<TABLE>
<S> <C> <C> <C> <C>
Loan Classification A B C GE Pre-Approved Loans
Loan Amount Maximum $400,000 $400,000 $400,000 $35,000
Warehouse Period 60 days 60 days 60 days 60
Debt to Income 45% 45% 50%* 40%
Loan to Value 85%-90%** 80% 80%* 100%
Delinquencies 2x30 days on mortgage 3x30 on mortgage loans; 4x30, 1x60 0x30 days on mortgage
loans; 30-60 days on 30-60-90 days on revolving 30-60-90-120 days 0x30 on revolving and
revolving and/or and installment loans installment loans
installment loans
Employment Level of verification Level of verification varies Level of verification varies Level of verification
varies depending on depending on product type depending on product type varies depending on
product type product type
Appraisal Required on all loans, Required on all loans, Required on all loans, Required on all loans,
performed by third party performed by third party performed by third party performed by third party
Closings Must be closed by Must be closed by counsel Must be closed by counsel Must be closed by counsel
counsel or Title or Title Company or Title Company or Title Company
Company
**90% LTV restricted *These 2 parameters not to be at a maximum level conjunctively,
to 10% of the line. For example, if DTI=50%, then LTV=75%. If LTV=80%, then DTI=45%.
</TABLE>
<PAGE>
<PAGE>
NOTE MODIFICATION AND ALLONGE
This Note Modification and Allonge, dated as of March 15th, 1995, is by and
between Industry Mortgage Company, L.P., a Delaware limited partnership
("Borrower") and The First National Bank of Boston ("Bank").
RECITALS
A. On March 18, 1994, Borrower executed and delivered to Bank a Commercial
Line of Credit Note in the original principal amount of $5,000,000 (the "Note").
B. The parties now wish to modify the Note to change the principal amount
and interest rate.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, the parties hereby agree as follows:
1. The principal amount of the Note, as set forth in the first paragraph
thereof, is changed from "Five Million Dollars ($5,000,000)" to "Nine Million
Five Hundred Thousand Dollars ($9,500,000)".
2. The aggregate principal amount outstanding under the Note shall bear
interest at a floating rate equal to the Base Rate, as that term is defined in
the Note.
3. Section 3.0 shall be added to the Note as follows:
Borrower shall pay to the Bank a commitment fee based upon the average
daily outstanding balance of the Note subtracted from the principal
amount ($9,500,000)(the "Unused Principal"). The commitment fee shall
be equal to one-quarter of one percent (1/4%) per annum of the Unused
Principal, and shall be payable in arrears on the first day of each
calendar month.
4. No delay or omission on the part of the Bank in exercising any right
hereunder shall operate as a waiver of such right or of any other right under
this Note Modification and Allonge. No waiver of any right or amendment hereto
shall be effective unless in writing and signed by the Bank nor shall a waiver
on one occasion be construed as a bar to or waiver of any such right on any
future occasion.
5. The Note, as amended and restated herein is hereby ratified, confirmed
and approved in all respects. Borrower acknowledges and agrees that the Note as
modified herein shall continue to be secured by all collateral in which Borrower
has granted Bank a security interest as security
<PAGE>
<PAGE>
for the Note. Except as modified hereby, all of the terms and conditions
contained in the Note shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this Note Modification
and Allonge as of this 15th day of March, 1995.
THE FIRST NATIONAL BANK OF BOSTON
By: GUNTHER FRITZE
-------------------------------------
Name:FRITZE
-----------------------------------
Title: VP
----------------------------------
INDUSTRY MORTGAGE COMPANY, L.P.
By: INDUSTRY MORTGAGE CORPORATION
-------------------------------------
Its Managing General Partner
By: GEORGE NICHOLAS
-------------------------------------
Name: GEORGE NICHOLAS
-----------------------------------
Title: CEO
----------------------------------
2
<PAGE>
<PAGE>
FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
(November 1, 1995)
THIS FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (the "Amendment"),
dated as of November 1, 1995, is made between Industry Mortgage Company, L.P., a
Delaware limited partnership having its principal address at 3450 Buschwood Park
Drive, Suite 250, Tampa, Florida 33618 (the "Borrower"), and The First National
Bank of Boston, a national banking association having its principal address at
100 Federal Street, Boston, Massachusetts 02110 (the "Lender").
RECITALS:
A. The Borrower and the Lender are parties to a certain Loan and Security
Agreement dated March 18, 1994, as amended pursuant to a certain First Amendment
to Loan and Security Agreement dated September 27, 1994, a certain Second
Amendment to Loan and Security Agreement dated December 1, 1994, and a certain
Third Amendment to Loan and Security Agreement dated March 15, 1995 (as so
amended, the "Loan Agreement").
B. In connection with the Loan Agreement, the Borrower has delivered to the
Lender the Borrower's Note dated March 18, 1994, in the original principal
amount of $5,000,000.00, as amended and increased to $9,500,000.00 pursuant to a
certain Note Modification and Allonge dated March 15, 1995 (as so amended, the
"Borrower's Note").
C. The Borrower and the Lender wish to amend the Loan Agreement as set
forth herein.
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Borrower and the Lender hereby agree as follows:
1. Definitions. Capitalized terms used herein without definition have the
same meanings as in the Loan Agreement.
2. Amendment to Section 2.1. Section 2.1 of the Loan Agreement is hereby
amended by deleting such Section in its entirety and inserting the following
Section 2.1 in its place:
"2.1 Subject to the Borrower's reimbursement obligations set forth in
Section 6 hereof, Lender hereby agrees to make Advances from time to time
to Borrower, and Borrower hereby agrees to borrow Advances from Lender, in
accordance with the terms of the Borrower's Note and this Agreement;
provided, however, that: (i) the outstanding amount of Advances provided to
Borrower hereunder shall not exceed the lesser of $20,000,000.00
and ninety-eight percent (98%) of the Eligible Collateral; (ii) Lender
must pre-approve any investor to whom Borrower seeks to sell Mortgage
Loans funded under this Agreement; (iii) Lender may terminate its
obligation to make Advances under this Agreement upon sixty (60) days
notice to Borrower; (iv) Lender shall not be obligated
<PAGE>
<PAGE>
to make any Advance in an amount less than $250,000.00, and shall not be
obligated to make more than one Advance per Business Day; and (v) Lender
shall not be obligated to accept any repayment by Borrower of principal and
interest in an amount less than $250,000.00, except for Advances repaid in
accordance with section 6.5 hereof."
3. Amendment to Section 5.1. Section 5.1 of the Loan Agreement is hereby
amended by deleting such Section 5.1(i) in its entirety and inserting the
following Section 5.1(i) in its place:
"(i) Borrower shall assure that the total of all outstanding Advances
does not exceed the lesser of: (i) 98% of the face amount of all Eligible
Collateral then held by the Lender, and (ii) $20,000,000.00."
4. Restatement of Borrower's Note. To reflect and incorporate the within
and prior amendments to the Loan Agreement, Exhibit A to the Loan Agreement (the
form of the Borrower's Note) is hereby amended by deleting such Exhibit in its
entirety and inserting in its place Exhibit A to this Amendment.
5. Conditions Precedent. This Amendment shall be effective upon the
delivery by the Borrower to the Lender of the following documents:
(a) This Amendment duly executed by the Borrower and the Lender;
(b) The Borrower's Note;
(c) A copy, certified by Borrower's general partner as of the date of
this Amendment, of the partnership vote by all general and limited partners
of Borrower authorizing the execution and delivery of Borrower's Note to
Lender and borrowing of Advances as provided for in the Loan Agreement, as
amended hereby, and the execution, delivery and performance of this
Amendment by Borrower.
6. Ratifications. The terms and provisions of this Amendment shall modify
and supersede all inconsistent terms and provisions set forth in the Loan
Agreement and the documents related thereto and, except as expressly modified by
this Amendment, the terms and provisions of the Loan Agreement and such other
documents are ratified and confirmed and shall continue in full force and
effect. The Borrower hereby ratifies, affirms and acknowledges the security
interest granted to the Lender pursuant to the Loan Agreement.
7. Borrower's Representations. The Borrower hereby represents and warrants
that the representations and warranties set forth in Article 5 of the Loan
Agreement are true and correct in all material respects on and as of the date
hereof.
-2-
<PAGE>
<PAGE>
8. Miscellaneous
(a) This Amendment shall, in all respects, be governed by, and construed in
accordance with, the laws of the Commonwealth of Massachusetts applicable to
contracts made and performed in such state without regard to the conflict of
laws provisions of such jurisdiction and the laws of the United States of
America.
(b) This Amendment shall be binding upon, and inure to the benefit of, the
successors and permitted assigns of Borrower and Lender.
(c) This Amendment constitutes the complete agreement between Borrower and
Lender with respect to the subject matter hereof and may not be modified,
altered, or amended except by a writing signed by Borrower and Lender.
(d) This Amendment may be executed in one or more counterparts, each of
which when so executed shall be deemed to be an original, but all of which when
taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered by
the parties intending to be legally bound hereby, as of the date first written
above.
THE FIRST NATIONAL BANK OF BOSTON
By: PAUL CHMIELINSKI
--------------------------------------
Name: Paul Chmielinski
-----------------------------------
Title: Vice President
-----------------------------------
INDUSTRY MORTGAGE COMPANY, L.P.
BY: INDUSTRY MORTGAGE CORPORATION
-----------------------------------
Its Managing General Partner
By: GEORGE NICHOLAS
--------------------------------------
Name: George Nicholas
-----------------------------------
Title: CEO
-----------------------------------
-3-
<PAGE>
<PAGE>
EXHIBIT A
PROMISSORY NOTE
(Borrower's Note)
Boston, Massachusetts
$20,000,000.00 November 1, 1995
FOR VALUE RECEIVED, the undersigned promises to pay to the order of THE
FIRST NATIONAL BANK OF BOSTON (together with any successors or assigns, the
"Bank"), a national banking association with its Head Office at 100 Federal
Street, Boston, Massachusetts 02110, the principal amount of Twenty Million and
NO/100 Dollars ($20,000,000.00), or, if less, the aggregate principal amount
advanced to the undersigned by the Bank under this Note and pursuant to the
terms and conditions of a certain Loan and Security Agreement between the Bank
and the undersigned dated March 18, 1994, as amended from time to time (as so
amended, the "Loan Agreement"), with interest thereon at a floating rate equal
to the Base Rate. As used herein, "Base Rate" means the rate per annum equal to
the greater of (A) the Base Rate announced from time to time by the Bank at its
head office, or (B) the rate equal to the weighted average of the published
rates on overnight Federal Funds transactions with members of the Federal
Reserve System plus 1/2%. Interest shall be payable in arrears on the 15th
Business Day (as defined in the Loan Agreement) of each month on all Advances
(as defined in the Loan Agreement) outstanding during the previous calendar
month. Interest shall accrue in each month at the Base Rate in effect on the
first Business Day of each month and be calculated on the basis of a 360-day
year for the actual number of days elapsed including holidays and days on which
the Bank is not open for the conduct of banking business. Principal shall be
payable on the dates specified under the terms and conditions of the Loan
Agreement. Such principal payment dates and all interest payment dates are
collectively referred to as the "Due Date" herein.
SECTION 1. PAYMENT TERMS.
1.1 PAYMENTS. All payments hereunder shall be made by the undersigned
to the Bank in United States currency at the Bank's address specified above (or
at such other address as the Bank may specify), in immediately available funds,
on or before 2:00 p.m. (Boston, Massachusetts time) on the Due Date thereof.
Payments received by the Bank will be applied first to fees, expenses and other
amounts due hereunder (excluding principal and interest), second to accrued
interest; and third to outstanding principal. The Bank is hereby irrevocably
authorized by the undersigned to enter on the schedule forming a part of this
Note or otherwise in its records appropriate notations evidencing the date and
amount of each advance hereunder and the date and amount of each payment of
principal made with respect thereto, and to attach to and make a part of this
Note a continuation of any such schedule as and when required. No failure on
the part of the Bank to make any such notation shall in any way affect any
advance or the rights or obligations of the Bank or any Obligor with respect
thereto. The entries on the records of the Bank (including any appearing on this
Note and any schedule attached hereto), shall be prima
<PAGE>
<PAGE>
facie evidence of the aggregate principal amount outstanding under this Note and
interest accrued thereon.
Any amount prepaid may be reborrowed in accordance with the terms of
the Loan Agreement.
1.2 RATE AFTER DUE DATE. To the extent permitted by applicable law,
interest on amounts due hereunder after the Due Date shall, at the option of the
Bank, be payable on demand at a rate per annum equal to the floating rate of
5% above the Base Rate.
SECTION 2. MISCELLANEOUS.
2.0 COMMITMENT FEE. The Borrower shall pay to the Bank a commitment fee
equal to one quarter of one percent (1/4%) per annum of the amount by which the
maximum principal amount of this Note exceeds the average daily outstanding
balance hereunder, which fee shall be payable monthly in arrears on the first
calendar day of each month.
2.1 RIGHTS CUMULATIVE; WAIVER; AMENDMENT. All rights and remedies of
the Bank are cumulative and are exclusive of any rights or remedies provided by
law or in equity or any other agreement, and may be exercised separately or
concurrently. No delay or omission on the part of the Bank in exercising any
right hereunder shall operate as a waiver of such right or of any other right
under this Note. No waiver of any right or any amendment hereto shall be
effective unless in writing and signed by the Bank nor shall a waiver on one
occasion bar or waive the exercise of any such right on any future occasion.
Each Obligor waives presentment, notice of dishonor, protest, and all other
notices in connection with the delivery, acceptance, performance, default or
enforcement of this Note or of any collateral for the Obligations, and assents
to any extensions or postponements of the time of payment and to any other
indulgences under this Note or with respect to any such collateral, to any
substitutions, exchanges or releases of any other parties or persons primarily
or secondarily liable hereunder, that from time to time may be granted by the
Bank in connection herewith.
2.2 SECURITY; SET-OFF. In addition to the security set forth in the
Loan Agreement, the undersigned grants to the Bank, as security for the full and
punctual payment and performance of the Obligations, a continuing lien on and
security interest in all securities or other property belonging to the
undersigned now or hereafter held by the Bank and in all deposits (general or
special, time or demand, provisional or final) and other sums credited by or due
from the Bank to the undersigned or subject to withdrawal by the undersigned;
and regardless of the adequacy of any collateral or other means of obtaining
repayment of the Obligations, the Bank is hereby authorized at any time and from
time to time, without notice to the undersigned (any such notice being expressly
waived by the undersigned) and to the fullest extent permitted by law, to set
off and apply such deposits and other sums against any obligations of the
undersigned for which the Due Date has passed. In addition, upon the failure of
the undersigned to pay all amounts due hereunder after the Due Date, the Bank
shall have in any jurisdiction where
2
<PAGE>
<PAGE>
enforcement hereof is sought the rights and remedies of a secured party under
the Uniform Commercial Code of Massachusetts.
2.3 OBLIGATION; OBLIGOR. As used herein, "Obligation" means any
obligation hereunder or otherwise of any Obligor to the Bank or to any of its
affiliates whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising; and "Obligor" means the undersigned, any
guarantor or any other person primarily or secondarily liable hereunder or in
respect hereof, including any person or entity who has pledged or granted to the
Bank a security interest in, or other lien on property on behalf of the
undersigned as collateral for the obligations.
2.4 TAXES. The undersigned agrees to indemnify the Bank and hold it
harmless from and against any transfer taxes documentary taxes, assessments or
charges made by any governmental authority by reason of the execution, delivery,
and performance of this Note or any collateral for the obligations.
2.5. EXPENSES. The parties hereto shall pay expenses related to this
Note in accordance with the terms and conditions of the Loan Agreement.
2.6 INFORMATION. The undersigned shall provide to Lender all
information required under the Loan Agreement.
2.7 GOVERNING LAW; CONSENT TO JURISDICTION. This Note is intended to
take effect as a sealed instrument and shall be governed by, and construed in
accordance with, the laws of The Commonwealth of Massachusetts, without regard
to its conflicts of law rules. The undersigned agrees that any suit for the
enforcement of this Note may be brought in the courts of such state or any
Federal Court sitting in such state and consents to the non-exclusive
jurisdiction of each such court and to service of process in any such suit being
made upon the undersigned by mail at the address specified below. The
undersigned hereby waives any objection that it may now or hereafter have to the
venue of any such suit or any such court or that such suit was brought in an
inconvenient court.
2.8 SEVERABILITY; AUTHORIZATION TO COMPLETE; PARAGRAPH HEADINGS. If any
provision of this Note shall be invalid, illegal or unenforceable, such
provisions shall be severable from the remainder of this Note and the validity,
legality and enforceability of the remaining provisions shall not in any way be
effected or impaired thereby. The Bank is hereby authorized, without further
notice, to fill in any blank spaces on this Note, and to date this Note as of
the date funds are first advanced hereunder. Paragraph headings are for the
convenience of reference only and are not a part of this Note and shall not
affect its interpretation.
2.9 JURY WAIVER. THE BANK (BY ITS ACCEPTANCE OF THIS NOTE) AND THE
UNDERSIGNED AGREE THAT NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A)
SEEK A JURY TRIAL, IN ANY LAWSUIT, PROCEEDING,
3
<PAGE>
<PAGE>
COUNTERCLAIM, OR ANY OTHER ACTION BASED UPON, OR ARISING OUT OF, THIS NOTE, ANY
RELATED INSTRUMENTS. ANY COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP BETWEEN
OR AMONG ANY OF THEM, OR (B) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF
THIS PARAGRAPH SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE BANK NOR THE
UNDERSIGNED HAS AGREED WlTH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF
THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
THIS NOTE IS ISSUED IN MODIFICATION OF THE INDEBTEDNESS EVIDENCED BY
THAT CERTAIN COMMERCIAL LINE OF CREDIT NOTE DATED MARCH 18, 1994, IN THE FACE
AMOUNT OF $5,000,000.00, AS AMENDED, AND INCREASED TO A FACE AMOUNT OF
$9,500,000.00, PURSUANT TO A CERTAIN NOTE MODIFICATION AND ALLONGE DATED AS OF
MARCH 15, 1995.
BORROWER:
INDUSTRY MORTGAGE COMPANY, L.P.
BY: INDUSTRY MORTGAGE
CORPORATION
Its Managing General Partner
WITNESS:
By:
Name:
Title:
4
<PAGE>
<PAGE>
SCHEDULE TO PROMISSORY NOTE
$20,000,000.00 Promissory Note dated November 1, 1995 of payable to the
order of THE FIRST NATIONAL BANK OF BOSTON.
Date Advance Payment Balance
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
-1-
<PAGE>
<PAGE>
PROMISSORY NOTE
Boston, Massachusetts
$20,000,000.00 November 1, 1995
FOR VALUE RECEIVED, the undersigned promises to pay to the order of THE
FIRST NATIONAL BANK OF BOSTON (together with any successors or assigns, the
"Bank"), a national banking association with its Head Office at 100 Federal
Street, Boston, Massachusetts 02110, the principal amount of Twenty Million and
NO/100 Dollars ($20,000,000.00), or, if less, the aggregate principal amount
advanced to the undersigned by the Bank under this Note and pursuant to the
terms and conditions of a certain Loan and Security Agreement between the Bank
and the undersigned dated March 18, 1994, as amended from time to time (as so
amended, the "Loan Agreement"), with interest thereon at a floating rate equal
to the Base Rate. As used herein, "Base Rate" means the rate per annum equal to
the greater of (A) the Base Rate announced from time to time by the Bank at its
head office, or (B) the rate equal to the weighted average of the published
rates on overnight Federal Funds transactions with members of the Federal
Reserve System plus 1/2%. Interest hall be payable in arrears on the
15th Business Day (as defined in the Loan Agreement) of each month on all
Advances (as defined in the Loan Agreement) outstanding during the previous
calendar month. Interest shall accrue in each month at the Base Rate in effect
on the first Business Day of each month and be calculated on the basis of a
360-day year for the actual number of days elapsed including holidays and days
on which the Bank is not open for the conduct of banking business. Principal
shall be payable on the dates specified under the terms and conditions of the
Loan Agreement. Such principal payment dates and all interest payment dates
are collectively referred to as the "Due Date" herein.
SECTION 1. PAYMENT TERMS.
1.1 PAYMENTS. All payments hereunder shall be made by the undersigned to
the Bank in United States currency at the Bank's address specified above (or at
such other address as the Bank may specify), in immediately available funds, on
or before 2:00 p.m. (Boston, Massachusetts time) on the Due Date thereof.
Payments received by the Bank will be applied first to fees, expenses and other
amounts due hereunder (excluding principal and interest); second to accrued
interest; and third to outstanding principal. The Bank is hereby irrevocably
authorized by the undersigned to enter on the schedule forming a part of this
Note or otherwise in its records appropriate notations evidencing the date and
amount of each advance hereunder and the date and amount of each payment of
principal made with respect thereto, and to attach to and make a part of this
Note a continuation of any such schedule as and when required. No failure on the
part of the Bank to make any such notation shall in any way affect any advance
or the rights or obligations of the Bank or any Obligor with respect thereto.
The entries on the records of the Bank (including any appearing on this Note and
any schedule attached hereto), shall be prima facie evidence of the aggregate
principal amount outstanding under this Note and interest accrued thereon.
<PAGE>
<PAGE>
Any amount prepaid may be reborrowed in accordance with the terms of the
Loan Agreement.
1.2 RATE AFTER DUE DATE. To the extent permitted by applicable law,
interest on amounts due hereunder after the Due Date shall, at the option of
the Bank, be payable on demand at a rate per annum equal to the floating rate
of 5% above the Base Rate.
SECTION 2. MISCELLANEOUS.
2.0 COMMITMENT FEE. The Borrower shall pay to the Bank a commitment fee
equal to one quarter of one percent (1/4%) per annum of the amount by which the
maximum principal amount of this Note exceeds the average daily outstanding
balance hereunder, which fee shall be payable monthly in arrears on the first
calendar day of each month.
2.1 RIGHTS CUMULATIVE; WAIVER; AMENDMENT. All rights and remedies of the
Bank are cumulative and are exclusive of any rights or remedies provided by law
or in equity or any other agreement, and may be exercised separately or
concurrently. No delay or omission on the part of the Bank in exercising any
right hereunder shall operate as a waiver of such right or of any other right
under this Note. No waiver of any right or any amendment hereto shall be
effective unless in writing and signed by the Bank nor shall a waiver on one
occasion bar or waive the exercise of any such right on any future occasion.
Each Obligor waives presentment, notice of dishonor, protest, and all other
notices in connection with the delivery, acceptance, performance, default or
enforcement of this Note or of any collateral for the Obligations, and assents
to any extensions or postponements of the time of payment and to any other
indulgences under this Note or with respect to any such collateral, to any
substitutions, exchanges or releases of any other parties or persons primarily
or secondarily liable hereunder, that from time to time may be granted by the
Bank in connection herewith.
2.2 SECURITY; SET-OFF. In addition to the security set forth in the Loan
Agreement, the undersigned grants to the Bank, as security for the full and
punctual payment and performance of the Obligations, a continuing lien on and
security interest in all securities or other property belonging to the
undersigned now or hereafter held by the Bank and in all deposits (general or
special, time or demand, provisional or final) and other sums credited by or due
from the Bank to the undersigned or subject to withdrawal by the undersigned;
and regardless of the adequacy of any collateral or other means of obtaining
repayment of the Obligations, the Bank is hereby authorized at any time and
from time to time, without notice to the undersigned (any such notice being
expressly waived by the undersigned) and to the fullest extent permitted by law,
to set off and apply such deposits and other sums against any obligations of the
undersigned for which the Due Date has passed. In addition, upon the failure of
the undersigned to pay all amounts due hereunder after the Due Date, the Bank
shall have in any jurisdiction where enforcement hereof is sought the rights and
remedies of a secured party under the Uniform Commercial Code of Massachusetts.
-2-
<PAGE>
<PAGE>
2.3 OBLIGATION; OBLIGOR. As used herein, "Obligation" means any obligation
hereunder or otherwise of any Obligor to the Bank or to any of its affiliates
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising; and "Obligor" means the undersigned, any
guarantor or any other person primarily or secondarily liable hereunder or in
respect hereof, including any person or entity who has pledged or granted to the
Bank a security interest in, or other lien on property on behalf of the
undersigned as collateral for the obligations.
2.4 TAXES. The undersigned agrees to indemnify the Bank and hold it
harmless from and against any transfer taxes documentary taxes, assessments or
charges made by any governmental authority by reason of the execution, delivery,
and performance of this Note or any collateral for the obligations.
2.5. EXPENSES. The parties hereto shall pay expenses related to this Note
in accordance with the terms and conditions of the Loan Agreement.
2.6 INFORMATION. The undersigned shall provide to Lender all information
required under the Loan Agreement.
2.7 GOVERNING LAW; CONSENT TO JURISDICTION. This Note is intended to take
effect as a sealed instrument and shall be governed by, and construed in
accordance with, the laws of The Commonwealth of Massachusetts, without regard
to its conflicts of law rules. The undersigned agrees that any suit for the
enforcement of this Note may be brought in the courts of such state or any
Federal Court sitting in such state and consents to the non-exclusive
jurisdiction of each such court and to service of process in any such suit being
made upon the undersigned by mail at the address specified below. The
undersigned hereby waives any objection that it may now or hereafter have to the
venue of any such suit or any such court or that such suit was brought in an
inconvenient court.
2.8 SEVERABILITY; AUTHORIZATION TO COMPLETE; PARAGRAPH HEADINGS. If any
provision of this Note shall be invalid, illegal or unenforceable, such
provisions shall be severable from the remainder of this Note and the validity,
legality and enforceability of the remaining provisions shall not in any way be
effected or impaired thereby. The Bank is hereby authorized, without further
notice, to fill in any blank spaces on this Note, and to date this Note as of
the date funds are first advanced hereunder. Paragraph headings are for the
convenience of reference only and are not a part of this Note and shall not
affect its interpretation.
2.9 JURY WAIVER. THE BANK (BY ITS ACCEPTANCE OF THIS NOTE) AND THE
UNDERSIGNED AGREE THAT NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A)
SEEK A JURY TRIAL, IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER ACTION
BASED UPON, OR ARISING OUT OF, THIS NOTE, ANY RELATED INSTRUMENTS, ANY
COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG ANY OF THEM, OR
(B) SEEK TO
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CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT
BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH SHALL BE SUBJECT TO
NO EXCEPTIONS. NEITHER THE BANK NOR THE UNDERSIGNED HAS AGREED WITH OR
REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
This Note is issued in modification of the indebtedness evidenced by that
certain Commercial Line of Credit Note dated March 18, 1994, in the face amount
of $5,000,000.00, as amended, and increased to a face amount of $9,500,000.00,
pursuant to a certain Note Modification and Allonge dated as of March 15, 1995.
BORROWER:
INDUSTRY MORTGAGE COMPANY, L.P.
BY: INDUSTRY MORTGAGE CORPORATION
Its Managing General Partner
WITNESS:
By: GEORGE NICHOLAS
[SIGNATURE] ------------------------------------
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Name: George Nicholas
------------------------------------
Title: CEO
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SCHEDULE TO PROMISSORY NOTE
$20,000,000.00 Promissory Note dated November 1, 1995 of payable to the
order of THE FIRST NATIONAL BANK OF BOSTON.
Date Advance Payment Balance
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"THIS LOAN AND SECURITY AGREEMENT made this 18th day of March, 1994 by and
between The First National Bank of Boston, a national banking association, with
its principal place of business at 100 Federal Street, Boston, Massachusetts
("Lender"), and Industry Mortgage Company, L.P., a Delaware limited partnership,
with its principal place of business at 3450 Buschwood Park Drive, Suite 250,
Tampa, Florida 33618 (the "Parent") and IMC Corporation of America, a wholly
owned subsidiary of the Parent (the "Sub" and, together with the Parent, the
"Borrowers").
3. Amendment to Term "Borrower". To reflect and incorporate the inclusion
of the Sub as a Borrower under the Loan Agreement, the term "Borrower" (in any
form) wherever it appears in the Loan Agreement and all references to "Borrower"
in the Loan Agreement, are hereby amended to read and refer to (as the case may
be) "Borrowers" or to either one or to each of them, as the context may require
in order to fully implement the intention of the within Amendment.
4. Amendment to Section 2.1. Section 2.1 of the Loan Agreement is hereby
amended by deleting such Section in its entirety and inserting the following
Section 2.1 in its place:
"2.1 Subject to each Borrower's reimbursement obligations set forth in
Section 6 hereof, Lender hereby agrees to make Advances from time to time
to Borrowers, and Borrowers hereby agree to borrow Advances from Lender, in
accordance with the terms of each Borrower's Note and this Agreement;
provided, however, that : (i) the aggregate outstanding amount of Advances
provided to Borrowers hereunder shall not exceed the lesser of
$20,000,000.00 and ninety-eight percent (98%) of the Eligible Collateral;
(ii) the outstanding amount of Advances to either Borrower hereunder
shall not exceed the lesser of $20,000,000.00 (minus the amount of then
outstanding and pending Advances to the other Borrower) and ninety-eight
percent (98%) of the Eligible Collateral then granted by such
Borrower to Lender; (iii) Lender must pre-approve any investor to
whom Borrowers seek to sell Mortgage Loans funded under this Agreement;
(iv) Lender may terminate its obligation to make Advances under this
Agreement to either Borrower or both Borrowers upon sixty (60) days notice
to the affected Borrower(s); (v) Lender shall not be obligated to make any
Advance in an amount less than $250,000.00, and shall not be obligated to
make more than one Advance per Borrower per Business Day; and (vi) Lender
shall not be obligated to accept any repayment by either Borrower of
principal and interest in an amount less than $250,000.00, except for
Advances repaid in accordance with section 6.5 hereof."
5. Amendment to Section 10. Section 10 of the Loan Agreement is hereby
amended by deleting the address currently set forth therein for the Borrower and
inserting the following in its place:
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Parent: Industry Mortgage Company, L.P.
3450 Buschwood Park Drive, Suite 250
Tampa, Florida 33618
Attn: George Nicholas
Sub: IMC Mortgage Corporation of America
3450 Buschwood Park Drive, Suite 250
Tampa, Florida 33618
Attn: George Nicholas
6. Representations, Warranties and Covenants by Sub. To effectuate the
Sub's becoming a Borrower under the Loan Agreement, the Sub hereby represents,
warrants, covenants and agrees as follows:
(a) All of the representations and warranties set forth in Section 5.1
of the Loan Agreement are true and correct as to the Sub, except that (i) the
Sub is a corporation, duly organized under the laws of the State of Delaware;
and (ii) all references to partnership action, power and authority shall be to
corporate action, power and authority.
(b) By its execution of this Amendment (and the execution and delivery
of the other documents referred to in Section 6, below), the Sub hereby becomes
a Borrower under the Loan Agreement with the same force and effect as if
originally named therein as a Borrower (but effective as of the date hereof) and
agrees to all of the terms and conditions of the Loan Agreement thereby
applicable to it thereunder. In furtherance of the foregoing, the Sub, as
security for the payment of the Advances made to it and the performance of the
Sub's other obligations under the Loan Agreement (the "Sub's Obligations"),
hereby pledged and hypothecates to Lender, and grants a security interest in
favor of Lender in, the Collateral now or hereafter owned by the Sub.
(c) This Amendment has been duly authorized, executed and delivered by
the Sub.
(d) The Sub's chief executive offices are at the address set forth in
the Preamble to the Loan Agreement, as amended hereby.
7. Conditions Precedent to Amendment. This Amendment shall be effective upon the
delivery by the Borrowers to the Lender of the following documents:
(a) This Amendment, duly executed by the Parent, the Sub and the
Lender.
(b) A Borrower's Note in the form of Exhibit A hereto, duly executed by
the Sub.
(c) An Unlimited Guaranty of Payment and Performance of the Sub's
Obligations in the form of Exhibit B hereto, duly executed by the Parent (the
"Guaranty").
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(d) Appropriate UCC-1 Financing Statements naming the Sub as debtor and
the Lender as secured party, duly executed by the Sub, and a UCC search report
satisfactory to the Lender.
(e) A certificate of the Sub's legal existence and good standing issued
by the Secretary of State of Delaware.
(f) Certified copies of the Sub's charter documents and By-Laws.
(g) A Certificate of the Secretary of the Sub as of the date of this
Amendment as to (i) the vote of the Sub's Board of Directors authorizing the
execution and delivery of Sub's Borrower's Note to Lender, the borrowing and
repayment of Advances as provided for in the Loan Agreement, as amended hereby,
and the execution, delivery and performance of this Amendment by the Sub, and
(ii) the incumbency of the persons authorized on behalf of the Sub to execute
and deliver this Amendment and the documents contemplated hereby (including,
without limitation, the Sub's Borrower's Note) and to request Advances from the
Lender under the Loan Agreement.
(h) A Certificate of the Parent's general partner as of the date of
this Amendment as to the execution and delivery to Lender of the Guaranty, and
the execution and delivery of this Amendment by the Parent.
8. Ratifications. The terms and provisions of this Amendment shall modify
and supersede all inconsistent terms and provisions set forth in the Loan
Agreement and the documents related thereto. Except as expressly modified by
this Amendment, the terms and provisions of the Loan Agreement and such other
documents are ratified and confirmed and shall continue in full force and
effect. The Parent hereby ratifies, affirms and acknowledges the security
interest granted to the Lender pursuant to the Loan Agreement.
9. Parent's Representations. The Parent hereby represents and warrants that
the representations and warranties set forth in Article 5 of the Loan Agreement
are true and correct in all material respects on and as of the date hereof.
10. Miscellaneous.
(a) This Amendment shall, in all respects, be governed by, and
construed in accordance with, the laws of the Commonwealth of Massachusetts
applicable to contracts made and performed in such Commonwealth without regard
to the conflict of laws provisions of such jurisdiction and the laws of the
United States of America.
(b) This Amendment shall be binding upon, and inure to the benefit of,
the successors and permitted assigns of the Parent, the Sub, and the Lender.
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(c) This Amendment constitutes the complete agreement among the Parent,
the Sub and the Lender with respect to the subject matter hereof and may not be
modified, altered, or amended except by a writing signed by the Parent, the Sub
and the Lender.
(d) This Amendment may be executed in one or more counterparts, each of
which when so executed shall be deemed to be an original, but all of which when
taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered by
the parties intending to be legally bound hereby, as of the date first written
above.
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ PAUL CHMIELINSKI
--------------------------------------------
Name: PAUL CHMIELINSKI
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Title: Vice President
--------------------------------------------
INDUSTRY MORTGAGE COMPANY, L.P.
BY: INDUSTRY MORTGAGE CORPORATION
Its Managing General Partner
By: /s/ GEORGE NICHOLAS
--------------------------------------------
Name: George Nicholas
--------------------------------------------
Title: Chairman and Chief Executive Officer
--------------------------------------------
IMC CORPORATION OF AMERICA
By: /s/ GEORGE NICHOLAS
--------------------------------------------
Name: George Nicholas
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Title: Chairman and Chief Executive Officer
--------------------------------------------
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<PAGE>
EXHIBIT A
PROMISSORY NOTE
(Borrower's Note-Sub)
Boston, Massachusetts
$20,000,000.00 1, 199
FOR VALUE RECEIVED, the undersigned promises to pay to the order of THE
FIRST NATIONAL BANK OF BOSTON (together with any successors or assigns, the
"Bank"), a national banking association with its Head Office at 100 Federal
Street, Boston, Massachusetts 02110, the principal amount of Twenty Million and
NO/100 Dollars ($20,000,000.00), or, if less, the aggregate principal amount
advanced to the undersigned by the Bank under this Note and pursuant to the
terms and conditions of a certain Loan and Security Agreement between the Bank
and the undersigned dated March 18, 1994, as amended from time to time (as so
amended, the "Loan Agreement"), with interest thereon at a floating rate equal
to the Base Rate. As used herein, "Base Rate" means the rate per annum equal to
the greater of (A) the Base Rate announced from time to time by the Bank at its
head office, or (B) the rate equal to the weighted average of the published
rates on overnight Federal Funds transactions with members of the Federal
Reserve System plus 1/2% Interest shall be payable in arrears on the 15th
Business Day (as defined in the Loan Agreement) of each month on all Advances
(as defined in the Loan Agreement) outstanding during the previous calendar
month. Interest shall accrue in each month at the Base Rate in effect on the
first Business Day of each month and be calculated on the basis of a 360-day
year for the actual number of days elapsed including holidays and days on
which the Bank is not open for the conduct of banking business. Principal
shall be payable on the dates specified under the terms and conditions of the
Loan Agreement. Such principal payment dates and all interest payment dates are
collectively referred to as the "Due Date" herein.
SECTION 1. PAYMENT TERMS.
1.1 PAYMENTS. All payments hereunder shall be made by the undersigned to
the Bank in United States currency at the Bank's address specified above (or at
such other address as the Bank may specify), in immediately available funds, on
or before 2:00 p.m. (Boston, Massachusetts time) on the Due Date thereof.
Payments received by the Bank will be applied first to fees, expenses and other
amounts due hereunder (excluding principal and interest); second to accrued
interest; and third to outstanding principal. The Bank is hereby irrevocably
authorized by the undersigned to enter on the schedule forming a part of this
Note or otherwise in its records appropriate notations evidencing the date and
amount of each advance hereunder and the date and amount of each payment of
principal made with respect thereto, and to attach to and make a part of this
Note a continuation of any such schedule as and when required. No failure on the
part of the Bank to make any such notation shall in any way affect any advance
or the rights or obligations of the Bank or any Obligor with respect thereto.
The entries on the records of the
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Bank (including any appearing on this Note and any schedule attached hereto),
shall be prima facie evidence of the aggregate principal amount outstanding
under this Note and interest accrued thereon.
Any amount prepaid may be reborrowed in accordance with the terms of the
Loan Agreement.
1.2 RATE AFTER DUE DATE. To the extent permitted by applicable law,
interest on amounts due hereunder after the Due Date shall, at the option of the
Bank, be payable on demand at a rate per annum equal to the floating rate of
5% above the Base Rate.
SECTION 2. MISCELLANEOUS.
2.1 RIGHTS CUMULATIVE; WAIVER; AMENDMENT. All rights and remedies of the
Bank are cumulative and are exclusive of any rights or remedies provided by law
or in equity or any other agreement, and may be exercised separately or
concurrently. No delay or omission on the part of the Bank in exercising any
right hereunder shall operate as a waiver of such right or of any other right
under this Note. No waiver of any right or any amendment hereto shall be
effective unless in writing and signed by the Bank nor shall a waiver on one
occasion bar or waive the exercise of any such right on any future occasion.
Each Obligor waives presentment, notice of dishonor, protest, and all other
notices in connection with the delivery, acceptance, performance, default or
enforcement of this Note or of any collateral for the Obligations, and assents
to any extensions or postponements of the time of payment and to any other
indulgences under this Note or with respect to any such collateral, to any
substitutions, exchanges or releases of any other parties or persons primarily
or secondarily liable hereunder, that from time to time may be granted by the
Bank in connection herewith.
2.2 SECURITY; SET-OFF. In addition to the security set forth in the Loan
Agreement, the undersigned grants to the Bank, as security for the full and
punctual payment and performance of the Obligations, a continuing lien on and
security interest in all securities or other property belonging to the
undersigned now or hereafter held by the Bank and in all deposits (general or
special, time or demand, provisional or final) and other sums credited by or due
from the Bank to the undersigned or subject to withdrawal by the undersigned;
and regardless of the adequacy of any collateral or other means of obtaining
repayment of the Obligations, the Bank is hereby authorized at any time and from
time to time, without notice to the undersigned (any such notice being expressly
waived by the undersigned) and to the fullest extent permitted by law, to set
off and apply such deposits and other sums against any obligations of the
undersigned for which the Due Date has passed. In addition, upon the failure of
the undersigned to pay all amounts due hereunder after the Due Date, the Bank
shall have in any jurisdiction where enforcement hereof is sought the rights and
remedies of a secured party under the Uniform Commercial Code of Massachusetts.
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2.3 OBLIGATION; OBLIGOR. As used herein, "Obligation" means any obligation
hereunder or otherwise of any Obligor to the Bank or to any of its affiliates
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising; and "Obligor" means the undersigned, any
guarantor or any other person primarily or secondarily liable hereunder or in
respect hereof, including any person or entity who has pledged or granted to the
Bank a security interest in, or other lien on property on behalf of the
undersigned as collateral for the obligations.
2.4 TAXES. The undersigned agrees to indemnify the Bank and hold it
harmless from and against any transfer taxes documentary taxes, assessments or
charges made by any governmental authority by reason of the execution, delivery,
and performance of this Note or any collateral for the obligations.
2.5. EXPENSES. The parties hereto shall pay expenses related to this Note
in accordance with the terms and conditions of the Loan Agreement.
2.6 INFORMATION. The undersigned shall provide to Lender all information
required under the Loan Agreement.
2.7 GOVERNING LAW; CONSENT TO JURISDICTION. This Note is intended to take
effect as a sealed instrument and shall be governed by, and construed in
accordance with, the laws of The Commonwealth of Massachusetts, without regard
to its conflicts of law rules. The undersigned agrees that any suit for the
enforcement of this Note may be brought in the courts of such state or any
Federal Court sitting in such state and consents to the non-exclusive
jurisdiction of each such court and to service of process in any such suit being
made upon the undersigned by mail at the address specified below. The
undersigned hereby waives any objection that it may now or hereafter have to the
venue of any such suit or any such court or that such suit was brought in an
inconvenient court.
2.8 SEVERABILITY; AUTHORIZATION TO COMPLETE; PARAGRAPH HEADINGS. If any
provision of this Note shall be invalid, illegal or unenforceable, such
provisions shall be severable from the remainder of this Note and the validity,
legality and enforceability of the remaining provisions shall not in any way be
effected or impaired thereby. The Bank is hereby authorized, without further
notice, to fill in any blank spaces on this Note, and to date this Note as of
the date funds are first advanced hereunder. Paragraph headings are for the
convenience of reference only and are not a part of this Note and shall not
affect its interpretation.
2.9 JURY WAIVER. THE BANK (BY ITS ACCEPTANCE OF THIS NOTE) AND THE
UNDERSIGNED AGREE THAT NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A)
SEEK A JURY TRIAL, IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER ACTION
BASED UPON, OR ARISING OUT OF, THIS NOTE, ANY RELATED INSTRUMENTS, ANY
COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG ANY OF THEM, OR
(B) SEEK TO
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CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT
BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH SHALL BE SUBJECT TO
NO EXCEPTIONS. NEITHER THE BANK NOR THE UNDERSIGNED HAS AGREED WITH OR
REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
BORROWER:
IMC CORPORATION OF AMERICA
WITNESS:
By:
--------------------------------------
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(SIGNATURE) Name:
-----------------------------------
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(PRINT NAME)
Address: Title:
----------------------------------
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SCHEDULE TO PROMISSORY NOTE
$20,000,000.00 Promissory Note dated , 199 , of IMC Corporation
of America payable to the order of THE FIRST NATIONAL BANK OF BOSTON.
Date Advance Payment Balance
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EXHIBIT B
UNLIMITED GUARANTY OF PAYMENT AND PERFORMANCE
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and for the purpose of seeking to induce THE FIRST
NATIONAL BANK OF BOSTON, a national banking association (hereinafter referred to
as 'Lender') to extend credit or otherwise provide financial accommodations to
IMC Corporation of America, a Delaware corporation (hereinafter, with any
successor, assign, or replacement hereafter approved by the Bank, in its
discretion, referred to as 'Customer'), which extension of credit and provision
of financial accommodations will be to the direct interest, advantage and
benefit of the undersigned. Industry Mortgage Company, L.P., a Delaware limited
partnership having its principal address at 3450 Buschwood Park Drive, Suite
250, Tampa, Florida 33618 (hereinafter referred to as 'Guarantor'). Guarantor
does hereby agrees as follows:
1. GUARANTY OF PAYMENT AND PERFORMANCE. The Guarantor hereby
unconditionally guarantees to the Bank the full and punctual payment when due
(whether at maturity, by acceleration or otherwise), and the performance, of all
liabilities, agreements and other obligations of the Customer to the Bank,
whether direct or indirect, absolute or contingent due or to become due, secured
or unsecured, now existing or hereafter arising or acquired (whether by way of
discount, letter of credit, lease, loan, overdraft or otherwise) (the
'Obligations'). This Guaranty is an absolute, unconditional and continuing
guaranty of the full and punctual payment and performance of the Obligations and
not of their collectibility only and is in no way conditioned upon any
requirement that the Bank first attempt to collect any of the Obligations from
the Customer or resort to any security or other means of obtaining their
payment. Should the Customer default in the payment or performance of any of the
Obligations, the obligations of the Guarantor hereunder shall become immediately
due and payable to the Bank, without demand or notice of any nature, all of
which are expressly waived by the Guarantor. Payments by the Guarantor hereunder
may be required by the Bank on any number of occasions.
2. GUARANTOR'S AGREEMENT TO PAY. The Guarantor further agrees, as the
principal obligor and not as a guarantor only, to pay to the Bank, on demand,
all costs and expenses (including court costs and legal expenses) incurred or
expended by the Bank in connection with the Obligations, this Guaranty and the
enforcement thereof together with interest on amounts recoverable under this
Guaranty from the time such amounts become due until payment, at the rate
per annum equal to 18%, or if higher, the rate of interest announced by the Bank
from time to time at its head office as its Base Rate, plus 4% provided that if
such interest exceeds the maximum amount permitted to be paid under applicable
law, then such interest shall be reduced to such maximum permitted amount.
3. UNLIMITED GUARANTY. The liability of the Guarantor hereunder shall be
unlimited.
4. WAIVERS BY GUARANTOR; BANK'S FREEDOM TO ACT. The Guarantor agrees that
the Obligations will be paid and performed strictly in accordance with their
respective
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terms regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the Bank
with respect thereto. The Guarantor waives presentment, demand, protest, notice
of acceptance, notice of Obligations incurred and all other notices of any
kind, all defenses which may be available by virtue of any valuation, stay,
moratorium law or other similar law now or hereafter in effect, any right to
require the marshalling of assets of the Customer, and all suretyship defenses
generally. Without limiting the generality of the foregoing, the Guarantor
agrees to the provisions of any instrument evidencing, securing or otherwise
executed in connection with any Obligation and agrees that the obligations of
the Guarantor hereunder shall not be released or discharged in whole or in part,
or otherwise affected by (i) the failure of the Bank to assert any claim or
demand or to enforce any right or remedy against the Customer; (ii) any
extensions or renewals of any Obligation; (iii) any rescissions, waivers,
amendments or modifications of any of the terms or provisions of any agreement
evidencing, securing or otherwise executed in connection with any Obligation;
(iv) the substitution or release of any entity primarily or secondarily liable
for any Obligation; (v) the adequacy of any rights the Bank may have against any
collateral or other means of obtaining repayment of the Obligations; (vi) the
impairment of any collateral securing the Obligations, including without
limitation the failure to perfect or preserve any rights the Bank might have in
such collateral or the substitution, exchange, surrender, release, loss or
destruction of any such collateral; or (vii) any other act or omission which
might in any manner or to any extent vary the risk of the Guarantor or otherwise
operate as a release or discharge of the Guarantor, all of which may be done
without notice to the Guarantor.
5. UNENFORCEABILITY OF OBLIGATIONS AGAINST CUSTOMER. If for any reason the
Customer has no legal existence or is under no legal obligation to discharge any
of the Obligations, or if any of the Obligations have become irrecoverable from
the Customer by operation of law or for any other reason, this Guaranty shall
nevertheless be binding on the Guarantor to the same extent as if the Guarantor
at all times had been the principal obligor on all such Obligations. In the
event that acceleration of the time for payment of the Obligations is stayed
upon the insolvency, bankruptcy or reorganization of the Customer, or for any
other reason, all such amounts otherwise subject to acceleration under the terms
of any agreement evidencing, securing or otherwise executed in connection with
any Obligation shall be immediately due and payable by the Guarantor.
6. SUBROGATION; SUBORDINATION. The Guarantor shall not exercise any rights
against the Customer arising as a result of payment by the Guarantor hereunder,
by way of subrogation or otherwise, and will not prove any claim in competition
with the Bank or its affiliates in respect of any payment hereunder in
bankruptcy or insolvency proceedings of any nature; the Guarantor will not claim
any set-off or counterclaim against the Customer in respect of any liability of
the Guarantor to the Customer; and the Guarantor waives any benefit of and any
right to participate in any collateral which may be held by Bank or any such
affiliate. The payment of any amounts due with respect to any indebtedness of
the Customer now or hereafter held by the Guarantor is hereby subordinated to
the prior payment in full of the Obligations, provided that so long as no
default in the payment or performance of the Obligations has occurred and is
continuing, or no demand for payment of any of the Obligations has been made
that remains unsatisfied, the Customer may make, and the Guarantor may demand
and accept any scheduled payments of principal of and interest on such
subordinated indebtedness in the amounts at the rates and on the dates specified
in such instruments, securities or other
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writings as shall evidence such subordinated indebtedness. The Guarantor agrees
that after the occurrence of any default in the payment or performance of the
Obligations, the Guarantor will not demand, sue for or otherwise attempt to
collect any such indetedness of the Customer to the Guarantor until the
Obligations shall have been paid in full. If, notwithstanding the foregoing
sentence, the Guarantor shall collect, enforce or receive any amounts in respect
of such indebtedness, such amounts shall be collected, enforced and received by
the Guarantor as trustee for the Bank and be paid over to the Bank on account
of the Obligations without affecting in any manner the liability of the
Guarantor under the other provisions of this Guaranty.
7. SECURITY; SET-OFF. The Guarantor grants to the Bank, as security for the
full and punctual payment and performance of the Guarantor's obligations
hereunder, a continuing lien on and security interest in all securities or other
property belonging to the Guarantor now or hereafter held by the Bank and in all
deposits (general or special, time or demand, provisional or final) and other
sums credited by or due from the Bank to the Guarantor or subject to withdrawal
by the Guarantor; and regardless of the adequacy of any collateral or other
means of obtaining repayment of the Obligations, the Bank is hereby authorized
at any time and from time to time, without notice to the Guarantor (any such
notice being expressly waived by the Guarantor) and to the fullest extent
permitted by law, to set off and apply such deposits and other sums against the
obligations of the Guarantor under this Guaranty, whether or not the Bank shall
have made any demand under this Guaranty and although such obligations may be
contingent or unmatured.
8. FURTHER ASSURANCES. The Guarantor agrees that the Guarantor will, from
time to time at the request of the Bank, provide to the Bank such financial
information as the Bank may request, including personal financial statements (on
such forms as the Bank may prescribe) and federal and state income tax returns
and such other information relating to the business and affairs of the Guarantor
as the Bank may reasonably request. The Guarantor also agrees, upon demand after
any change in the condition or affairs (financial or otherwise) of the Guarantor
deemed by the Bank to be adverse and material, to secure the payment and
performance of its obligations hereunder by delivering, assigning or
transferring to the Bank or granting the Bank a security interest in additional
collateral of a value and character satisfactory to the Bank, and authorizes the
Bank to file any financing statement deemed by the Bank to be necessary or
desirable to perfect any security interest granted by the Guarantor to the Bank
and as agent for the Guarantor, to sign the name of the Guarantor thereto. The
Guarantor also agrees to do all such things and execute all such documents,
including financing statements, as the Bank may consider necessary or desirable
to give full effect to this Guaranty and to perfect and preserve the rights and
posers of the Bank hereunder.
9. TERMINATION; REINSTATEMENT. This Guaranty shall remain in full force and
effect until the Bank is given written notice of the Guarantor's intention to
discontinue this Guaranty, notwithstanding any intermediate or temporary payment
or settlement of the whole or any part of the Obligations. No such notice shall
be effective unless received and acknowledged by an officer of the Bank at its
head office or at the branch of the Bank where this Guaranty is given. No such
notice shall affect any rights of the Bank or of any affiliate hereunder
including, without limitation, the rights set forth in Sections 4 and 6, with
respect to Obligations incurred prior to the receipt of such notice or
Obligations incurred pursuant to any contract or commitment in existence prior
to such receipt and all checks, drafts, notes, instruments (negotiable or
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otherwise) and writings made by or for the account of the Customer and drawn on
the Bank or any of its agents purporting to be dated on or before the date of
receipt of such notice, although presented to and paid or accepted by the Bank
after that date, shall form part of the Obligations. This Guaranty shall
continue to be effective or be reinstated, notwithstanding any such notice, if
at any time any payment made or value received with respect to an Obligation is
rescinded or must otherwise be returned by the Bank upon the insolvency,
bankruptcy or reorganization of the Customer, or otherwise, all as though such
payment had not been made or value received.
10. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon the
Guarantor, its successors and assigns, and shall inure to the benefit of and be
enforceable by the Bank and its successors, transferees and assigns. Without
limiting the generality of the foregoing sentence, the Bank may assign or
otherwise transfer any agreement or any note held by it evidencing, securing or
otherwise executed in connection with the Obligations, or sell participations in
any interest therein to any other person or entity, and such other person or
entity shall thereupon become vested, to the extent set forth in the agreement
evidencing such assignment, transfer or participation, with all the rights in
respect thereof granted to the Bank herein.
11. AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of this
Guaranty nor consent to any departure by the Guarantor therefrom shall be
effective unless the same shall be in writing and signed by the Bank. No failure
on the part of the Bank to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right.
12. NOTICES. All notices and other communications called for hereunder
shall be made in writing and, unless otherwise specifically provided herein,
shall be deemed to have been duly made or given when delivered by hand or mailed
first class mail postage prepaid or, in the case of telegraphic or telexed
notice, when transmitted, answer back received, addressed as follows: if to the
Guarantor, at the address set forth beneath its signature hereto, and if to the
Bank, at 100 Federal Street, Boston, Massachusetts 02110, Attention: Paul
Chmielinski, or at such address as either party may designate in writing.
13. GOVERNING LAW; CONSENT TO JURISDICTION. This Guaranty is intended to
take effect as a sealed instrument and shall be governed by, and construed in
accordance with, the laws of The Commonwealth of Massachusetts. The Guarantor
agrees that any suit for the enforcement of this Guaranty may be brought in the
courts of The Commonwealth of Massachusetts or any Federal Court sitting therein
and consents to the non-exclusive jurisdiction of such court and to service of
process in any such suit being made upon the Guarantor by mail at the address
specified in Section 12 hereof. The Guarantor hereby waives any objection that
it may now or hereafter have to the venue of any such suit or any such court or
that such suit was brought in an inconvenient court.
14. MISCELLANEOUS. This Guaranty constitutes the entire agreement of the
Guarantor with respect to the matters set forth herein. The rights and remedies
herein provided are cumulative and not exclusive of any remedies provided by law
or any other agreement and this Guaranty shall be in addition to any other
guaranty of the Obligations. The invalidity or
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unenforceability of any one or more sections of this Guaranty shall not affect
the validity or enforceability of its remaining provisions. Captions are for the
ease of reference only and shall not affect the meaning of the relevant
provisions. The meanings of all defined terms used in this Guaranty shall be
equally applicable to the singular and plural forms of the terms defined.
15. JURY WAIVER. THE BANK (BY ITS ACCEPTANCE HEREOF) AND THE GUARANTOR
AGREE THAT NEITHER OF THEM, INCLUDING ANY ASSIGNEE OR SUCCESSOR SHALL SEEK A
JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION
PROCEDURE BASED UPON, OR ARISING OUT OF, THIS GUARANTY, ANY RELATED INSTRUMENTS,
ANY COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG ANY OF THEM.
NEITHER THE BANK NOR THE GUARANTOR SHALL SEEK TO CONSOLIDATE ANY SUCH ACTION
WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.
THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE BANK AND THE
GUARANTOR AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE
BANK NOR THE GUARANTOR HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT THE
PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty under seal on the
day of , 199 .
INDUSTRY MORTGAGE COMPANY, L.P.
BY: INDUSTRY MORTGAGE
CORPORATION
Its Managing General Partner
By:____________________________
Name:__________________________
Title__________________________
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PROMISSORY NOTE
(Borrower's Note/sub)
Boston, Massachusetts
$20,000,000.00 January 31, 1995
FOR VALUE RECEIVED, the undersigned promises to pay to the order of THE
FIRST NATIONAL BANK OF BOSTON (together with any successors or assigns, the
"Bank"), a national banking association with its Head Office at 100 Federal
Street, Boston, Massachusetts 02110, the principal amount of Twenty Million and
NO/100 Dollars ($20,000,000.00), or, if less, the aggregate principal amount
advanced to the undersigned by the Bank under this Note and pursuant to the
terms and conditions of a certain Loan and Security Agreement between the Bank
and the undersigned dated March 18, 1994, as amended from time to time, and to
which the undersigned became a party pursuant to a certain Fifth Amendment
to (loan and security Agreement of early date herewith (as so amended,
the "Loan Agreement"), with interest thereon at a floating rate equal
to the Base Rate. As used herein, "Base Rate" means the rate per annum equal to
the greater of (A) the Base Rate announced from time to time by the Bank at its
head office or (B) the rate equal to the weighted average of the published rates
on overnight Federal Funds transactions with members of the Federal Reserve
System plus 1/2%. Interest shall be payable in arrears on the 15th
Business Day (as defined in the Loan Agreement) of each month
on all Advances (as defined in the Loan Agreement) outstanding during the
previous calendar month. Interest shall accrue in each month at the Base
Rate in effect on the first Business Day of each month and be calculated
on the basis of a 360-day year for the actual number of days elapsed
including holidays and days on which the Bank is not open for the
conduct of banking business. Principal shall be payable on the dates
specified under the terms and conditions of the Loan Agreement. Such
principal payment dates and all interest payment dates are collectively
referred to as the "Due Date" herein.
SECTION 1. PAYMENT TERMS.
1.1 PAYMENTS. All payments hereunder shall be made by the undersigned to
the Bank in United States currency at the Bank's address specified above (or at
such other address as the Bank may specify), in immediately available funds, on
or before 2:00 p.m. (Boston, Massachusetts time) on the Due Date thereof.
Payments received by the Bank will be applied first to fees, expenses and other
amounts due hereunder (excluding principal and interest); second to accrued
interest; and third to outstanding principal. The Bank is hereby irrevocably
authorized by the undersigned to enter on the schedule forming a part of this
Note or otherwise in its records appropriate notations evidencing the date and
amount of each advance hereunder and the date and amount of each payment of
principal made with respect thereto, and to attach to and make a part of this
Note a continuation of any such schedule as and when required. No failure on the
part of the Bank to make any such notation shall in any way affect any advance
or the rights or obligations of the Bank or any Obligor with respect thereto.
The entries on the records of the Bank (including any appearing on this Note and
any schedule attached hereto), shall be prima
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facie evidence of the aggregate principal amount outstanding under this Note
and interest accrued thereon.
Any amount prepaid may be reborrowed in accordance with the terms of the
Loan Agreement.
1.2 RATE AFTER DUE DATE. To the extent permitted by applicable law,
interest on amounts due hereunder after the Due Date shall, at the option of the
Bank, be payable on demand at a rate per annum equal to the floating rate of
5% above the Base Rate.
SECTION 2. MISCELLANEOUS.
2.1 RIGHTS CUMULATIVE; WAIVER; AMENDMENT. All rights and remedies of the
Bank are cumulative and are exclusive of any rights or remedies provided by law
or in equity or any other agreement, and may be exercised separately or
concurrently. No delay or omission on the part of the Bank in exercising any
right hereunder shall operate as a waiver of such right or of any other right
under this Note. No waiver of any right or any amendment hereto shall be
effective unless in writing and signed by the Bank nor shall a waiver on one
occasion bar or waive the exercise of any such right on any future occasion.
Each Obligor waives presentment, notice of dishonor, protest, and all other
notices in connection with the delivery, acceptance, performance, default or
enforcement of this Note or of any collateral for the Obligations, and assents
to any extensions or postponements of the time of payment and to any other
indulgences under this Note or with respect to any such collateral, to any
substitutions, exchanges or releases of any other parties or persons primarily
or secondarily liable hereunder, that from time to time may be granted by the
Bank in connection herewith.
2.2 SECURITY; SET-OFF. In addition to the security set forth in the Loan
Agreement, the undersigned grants to the Bank, as security for the full and
punctual payment and performance of the Obligations, a continuing lien on and
security interest in all securities or other property belonging to the
undersigned now or hereafter held by the Bank and in all deposits (general or
special, time or demand, provisional or final) and other sums credited by or due
from the Bank to the undersigned or subject to withdrawal by the undersigned;
and regardless of the adequacy of any collateral or other means of obtaining
repayment of the Obligations, the Bank is hereby authorized at any time and from
time to time, without notice to the undersigned (any such notice being expressly
waived by the undersigned) and to the fullest extent permitted by law, to set
off and apply such deposits and other sums against any obligations of the
undersigned for which the Due Date has passed; provided, however, that such
right of set off shall not apply to deposits of escrow monies being held in
designated accounts on behalf of the Mortgagors under Mortgage Loans or
investors in Mortgage Loans (with the capitalized terms used in the within
proviso having the meanings ascribed to them in the Loan Agreement). In
addition, upon the failure of the undersigned to pay all amounts due hereunder
after the Due Date, the Bank shall have in any jurisdiction where enforcement
hereof is sought the rights and remedies of a secured party under the Uniform
Commercial Code of Massachusetts.
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2.3 OBLIGATION; OBLIGOR. As used herein, "Obligation" means any obligation
hereunder or otherwise of any Obligor to the Bank or to any of its affiliates
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising; and "Obligor" means the undersigned, any
guarantor or any other person primarily or secondarily liable hereunder or in
respect hereof, including any person or entity who has pledged or granted to the
Bank a security interest in, or other lien on property on behalf of the
undersigned as collateral for the obligations.
2.4 TAXES. The undersigned agrees to indemnify the Bank and hold it
harmless from and against any transfer taxes documentary taxes, assessments or
charges made by any governmental authority by reason of the execution, delivery,
and performance of this Note or any collateral for the obligations.
2.5. EXPENSES. The parties hereto shall pay expenses related to this Note
in accordance with the terms and conditions of the Loan Agreement.
2.6 INFORMATION. The undersigned shall provide to Lender all information
required under the Loan Agreement.
2.7 GOVERNING LAW; CONSENT TO JURISDICTION. This Note is intended to take
effect as a sealed instrument and shall be governed by, and construed in
accordance with, the laws of The Commonwealth of Massachusetts, without regard
to its conflicts of law rules. The undersigned agrees that any suit for the
enforcement of this Note may be brought in the courts of such state or any
Federal Court sitting in such state and consents to the non-exclusive
jurisdiction of each such court and to service of process in any such suit being
made upon the undersigned by mail at the address specified below. The
undersigned hereby waives any objection that it may now or hereafter have to the
venue of any such suit or any such court or that such suit was brought in an
inconvenient court.
2.8 SEVERABILITY; AUTHORIZATION TO COMPLETE; PARAGRAPH HEADINGS. If any
provision of this Note shall be invalid, illegal or unenforceable, such
provisions shall be severable from the remainder of this Note and the validity,
legality and enforceability of the remaining provisions shall not in any way be
effected or impaired thereby. The Bank is hereby authorized, without further
notice, to fill in any blank spaces on this Note, and to date this Note as of
the date funds are first advanced hereunder. Paragraph headings are for the
convenience of reference only and are not a part of this Note and shall not
affect its interpretation.
2.9 JURY WAIVER. THE BANK (BY ITS ACCEPTANCE OF THIS NOTE) AND THE
UNDERSIGNED AGREE THAT NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A)
SEEK A JURY TRIAL, IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER ACTION
BASED UPON, OR ARISING OUT OF, THIS NOTE, ANY RELATED INSTRUMENTS, ANY
COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG ANY OF THEM, OR
(B) SEEK TO
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CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT
BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH SHALL BE SUBJECT
TO NO EXCEPTIONS. NEITHER THE BANK NOR THE UNDERSIGNED HAS AGREED WITH OR
REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
BORROWER:
IMC CORPORATION OF AMERICA
WITNESS:
By: GEORGE NICHOLAS
GEORGE FREEMAN --------------------------------------
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(SIGNATURE) GEORGE NICHOLAS
GEORGE FREEMAN --------------------------------------
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(PRINT NAME) Title: Chairman and Chief Executive officer
----------------------------------
Address:
3450 Bushwood Park Drive
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Tampa, FL 33618
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SCHEDULE TO PROMISSORY NOTE
$20,000,000.00 Promissory Note dated January 31, 1996 of IMC Corporation
of America payable to the order of THE FIRST NATIONAL BANK OF BOSTON.
Date Advance Payment Balance
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UNLIMITED GUARANTY OF PAYMENT AND PERFORMANCE
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and for the purpose of seeking to induce THE FIRST
NATIONAL BANK OF BOSTON, a national banking association (hereinafter referred to
as "Lender") to extend credit or otherwise provide financial accommodations to
IMC Corporation of America, a Delaware corporation (hereafter, with any
successor, assign, or replacement hereafter approved by the Bank, in its
discretion, referred to as "Customer"), which extension of credit and provision
of financial accommodations will be to the direct interest, advantage and
benefit of the undersigned. Industry Mortgage Company, L.P., a Delaware limited
partnership having its principal address at 3450 Buschwood Park Drive, Suite
250, Tampa, Florida 33618 (hereinafter referred to as "Guarantor"), Guarantor
does hereby agree as follows:
1. GUARANTY OF PAYMENT AND PERFORMANCE. The Guarantor hereby
unconditionally guarantees to the Bank the full and punctual payment when due
(whether at maturity, by acceleration or otherwise), and the performance, of all
liabilities, agreements and other obligations of the Customer to the Bank,
whether direct or indirect, absolute or contingent, due or to become due,
secured or unsecured, now existing or hereafter arising or acquired (whether by
way of discount, letter of credit, loan, overdraft or otherwise) (the
"Obligations"). This Guaranty is an absolute, unconditional and continuing
guaranty of the full and punctual payment and performance of the Obligations and
not of their collectibility only and is in no way conditioned upon any
requirement that the Bank first attempt to collect any of the Obligations from
the Customer or resort to any security or other means of obtaining their
payment. Should the Customer default in the payment or performance of any of the
Obligations, the obligations of the Guarantor hereunder shall become immediately
due and payable to the Bank, without demand or notice of any nature, all of
which are expressly waived by the Guarantor. Payments by the Guarantor hereunder
may be required by the Bank on any number of occasions.
2. GUARANTOR'S AGREEMENT TO PAY. The Guarantor further agrees, as the
principal obligor and not as a guarantor only, to pay to the Bank, on demand,
all costs and expenses (including court costs and legal expenses) incurred or
expended by the Bank in connection with the Obligations, this Guaranty and the
enforcement thereof, together with interest on amounts recoverable under this
Guaranty from the time such amounts become due until payment, at the rate
per annum equal to 18% or, if higher, the rate of interest announced by the Bank
from time to time at its head office as its Base Rate, plus 4% provided that if
such interest exceeds the maximum amount permitted to be paid under applicable
law, then such interest shall be reduced to such maximum permitted amount.
3. UNLIMITED GUARANTY. The liability of the Guarantor hereunder shall be
unlimited.
4. WAIVERS BY GUARANTOR: BANK'S FREEDOM TO ACT. The Guarantor agrees that
the Obligations will be paid and performed strictly in accordance with their
respective
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terms regardless of any law, regulation or order now or hereafter in effect in
any jurisdiction affecting any of such terms or the rights of the Bank with
respect thereto. The Guarantor waives presentment, demand, protest, notice of
acceptance, notice of Obligations incurred and all other notices of any kind,
all defenses which may be available by virtue of any valuation, stay, moratorium
law or other similar law now or hereafter in effect, any right to require the
marshalling of assets of the Customer, and all suretyship defenses generally.
Without limiting the generality of the foregoing, the Guarantor agrees to the
provisions of any instrument evidencing, securing or otherwise executed in
connection with any Obligation and agrees that the obligations of the Guarantor
hereunder shall not be released or discharged, in whole or in part, or otherwise
affected by (i) the failure of the Bank to assert any claim or demand or to
enforce any right or remedy against the Customer; (ii) any extensions or
renewals of any Obligation; (iii) any rescissions, waivers, amendments or
modifications of any of the terms or provisions of any agreement evidencing,
securing or otherwise executed in connection with any Obligation; (iv) the
substitution or release of any entity primarily or secondarily liable for any
Obligation; (v) the adequacy of any rights the Bank may have against any
collateral or other means of obtaining repayment of the Obligations; (vi) the
impairment of any collateral securing the Obligations, including without
limitation the failure to perfect or preserve any rights the Bank might have in
such collateral or the substitution, exchange, surrender, release,, loss or
destruction of any such collateral; or (vii) any other act of omission which
might in any manner or to any extent vary the risk of the Guarantor or otherwise
operate as a release or discharge of the Guarantor, all of which may be done
without notice to the Guarantor.
5. UNENFORCEABILITY OF OBLIGATIONS AGAINST CUSTOMER. If for any reason the
Customer has no legal existence or is under no legal obligation to discharge any
of the Obligations, or if any of the Obligations have become irrecoverable from
the Customer by operation of law or for any other reason, this Guaranty shall
nevertheless be binding on the Guarantor to the same extent as if the Guarantor
at all time has been the principal obligor on all such Obligations. In the event
that acceleration of the time for payment of the Obligations is stayed upon the
insolvency, bankruptcy or reorganization of the Customer, or for any other
reason, all such amounts otherwise subject to acceleration under the terms of
any agreement evidencing, securing or otherwise executed in connection with any
Obligation shall be immediately due and payable by the Guarantor.
6. SUBROGATION: SUBORDINATION. The Guarantor shall not exercise any rights
against the Customer arising as a result of payment by the Guarantor hereunder,
by way of subrogation or otherwise, and will not prove any claim in competition
with the Bank or its affiliates in respect of any payment hereunder in
bankruptcy or insolvency proceedings of any nature; the Guarantor will not claim
any set-off or counterclaim against the Customer in respect of any liability of
the Guarantor to the Customer; and the Guarantor waives any benefit of and any
right to participate in any collateral which may be held by the Bank or any such
affiliate. The payment of any amounts due with respect to any indebtedness of
the Customer now or hereafter held by the Guarantor is hereby subordinated to
the prior payment in full of the Obligations, provided that so long as no
default in the payment or performance of the Obligations has occurred and is
continuing, or no demand for payment of any of the Obligations has been made
that remains unsatisfied, the Customer may make, and the Guarantor may demand
and
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accept, any scheduled payments of principal of and interest on such subordinated
indebtedness in the amounts, at the rates and on the dates specified in such
instruments, securities or other writings as shall evidence such subordinated
indebtedness. The Guarantor agrees that after the occurrence of any default in
the payment or performance of the Obligations, the Guarantor will not demand,
sue for or otherwise attempt to collect any such indebtedness of the Customer to
the Guarantor until the Obligations shall have been paid in full. If,
notwithstanding the foregoing sentence, the Guarantor shall collect, enforce or
receive any amounts in respect of such indebtedness, such amounts shall be
collected, enforced and received by the Guarantor as trustee for the Bank and be
paid over to the Bank on account of the Obligations without affecting in any
manner the liability of the Guarantor under the other provisions of this
Guaranty.
7. SECURITY: SET OFF. The Guarantor grants to the Bank, as security for the
full and punctual payment and performance of the Guarantor's obligations
hereunder, a continuing lien on and security interest in all securities or other
property belonging to the Guarantor now or hereafter held by the Bank and in all
deposits (general or special, time or demand, provisional or final) and other
sums credited by or due from the Bank to the Guarantor or subject to withdrawal
by the Guarantor; and regardless of the adequacy of any collateral or other
means of obtaining repayment of the Obligations, the Bank is hereby authorized
at any time and from time to time, without notice to the Guarantor (any such
notice being expressly waived by the Guarantor) and to the fullest extent
permitted by law, to set off and apply such deposits and other sums against the
obligations of the Guarantor under this Guaranty, whether or not the Bank shall
have made any demand under this Guaranty and although such obligations may be
contingent or unmatured.
8. FURTHER ASSURANCES. The Guarantor agrees that the Guarantor will, from
time to time at the request of the Bank, provide to the Bank such financial
information as the Bank may request, including personal financial statements (on
such forms as the Bank may prescribe) and federal and state income tax returns
and such other information relating to the business and affairs of the Guarantor
as the Bank may reasonably request. The Guarantor also agrees, upon demand after
any change in the condition or affairs (financial or otherwise) of the Guarantor
deemed by the Bank to be adverse and material, to secure the payment and
performance of its obligations hereunder by delivering, assigning or
transferring to the Bank or granting the Bank a security interest in additional
collateral of a value and character satisfactory to the Bank, and authorizes the
Bank to file any financing statement deemed by the Bank to be necessary or
desirable to perfect any security interest granted by the Guarantor to the Bank,
and as agent for the Guarantor, to sign the name of the Guarantor thereto. The
Guarantor also agrees to do all such things and execute all such documents,
including financing statements, as the Bank may consider necessary or desirable
to give full effect to this Guaranty and to perfect and preserve the rights and
powers of the Bank hereunder.
9. TERMINATION: REINSTATEMENT. This Guaranty shall remain in full force and
effect until the Bank is given written notice of the Guarantor's intention to
discontinue this Guaranty, notwithstanding any intermediate or temporary payment
or settlement of the whole or any part of the Obligations. No such notice shall
be effective unless received and acknowledged by an officer of the Bank at its
head office or at the branch of the Bank where this Guaranty is
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given. No such notice shall affect any rights of the Bank or of any affiliate
hereunder including, without limitation, the rights set forth in Sections 4 and
6, with respect to Obligations incurred prior to the receipt of such notice or
Obligations incurred pursuant to any contract or commitment in existence prior
to such receipt, and all checks, drafts, notes, instruments (negotiable or
otherwise) and writings made by or for the account of the Customer and drawn on
the Bank or any of its agents purporting to be dated on or before the date of
such receipt of such notice, although presented to and paid or accepted by the
Bank after that date, shall form part of the Obligations. This Guaranty shall
continue to be effective or be reinstated, notwithstanding any such notice, if
at any time any payment made or value received with respect to an Obligation is
rescinded or must otherwise be returned by the Bank upon the insolvency,
bankruptcy or reorganization of the Customer, or otherwise, all as though such
payment had not been made or value received.
10. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon the
Guarantor, its successors and assigns, and shall inure to the benefit of and be
enforceable by the Bank and its successors, transferees and assigns. Without
limiting the generality of the foregoing sentence, the Bank may assign or
otherwise transfer any agreement or any note held by it evidencing, securing or
otherwise executed in connection with the Obligations, or sell participations in
any interest therein, to any other person or entity, and such other person or
entity shall thereupon become vested, to the extent set forth in the agreement
evidencing such assignment, transfer or participation, with all the rights in
respect thereof granted to the Bank herein.
11. AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of this
Guaranty nor consent to any departure by the Guarantor therefrom shall be
effective unless the same shall be in writing and signed by the Bank. No failure
on the part of the Bank to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right.
12. NOTICES. All notices and other communications called for hereunder
shall be made in writing and, unless otherwise specifically provided herein,
shall be deemed to have been duly made or given when delivered by hand or mailed
first class mail postage prepaid or, in the case of telegraphic or telexed
notice, when transmitted, answer back received, addressed as follows: if to the
Guarantor, at the address set forth beneath its signature hereto, and if to the
Bank, at 100 Federal Street, Boston, Massachusetts 02110, Attention: Paul
Chmielinski, or at such address as either party may designate in writing.
13. GOVERNING LAW: CONSENT TO JURISDICTION. This Guaranty is intended to
take effect as a sealed instrument and shall be governed by, and construed in
accordance with, the laws of The Commonwealth of Massachusetts. The Guarantor
agrees that any suit for the enforcement of this Guaranty may be brought in the
courts of The Commonwealth of Massachusetts or any Federal Court sitting therein
and consents to the non-exclusive jurisdiction of such court and to service of
process in any such suit being made upon the Guarantor by mail at the address
specified in Section 12 hereof. The Guarantor hereb y waives any objection that
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it may now or hereafter have to the venue of any such suit or any such court or
that such suit was brought in an inconvenient court.
14. MISCELLANEOUS. This Guaranty constitutes the entire agreement of the
Guarantor with respect of the matters set forth herein. The rights and remedies
herein provided are cumulative and not exclusive of any remedies provided by law
or any other agreement, and this Guaranty shall be in addition to any other
guaranty of the Obligations. The invalidity or unenforceability of any one or
more sections of this Guaranty shall not affect the validity or enforceability
of its remaining provisions. Captions are for the ease of reference only and
shall not affect the meaning of the relevant provisions. The meanings of all
defined terms used in this Guaranty shall be equally applicable to the singular
and plural forms of the terms defined.
15. JURY WAIVER. THE BANK (BY ITS ACCEPTANCE HEREOF) AND THE GUARANTOR
AGREE THAT NEITHER OF THEM INCLUDING ANY ASSIGNEE OR SUCCESSOR SHALL SEEK A JURY
TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION
PROCEDURE BASED UPON, OR ARISING OUT OF, THIS GUARANTY, ANY RELATED INSTRUMENTS,
ANY COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG ANY OF
THEM. NEITHER THE BANK NOR THE GUARANTOR SHALL SEEK TO CONSOLIDATE ANY SUCH
ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN
WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE BANK
AND THE GUARANTOR, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS.
NEITHER THE BANK NOR THE GUARANTOR HAS AGREED WITH OR REPRESENTED TO THE OTHER
THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL
INSTANCES.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty under seal on the
31st day of January, 1996.
INDUSTRY MORTGAGE COMPANY, L.P.
BY: INDUSTRY MORTGAGE CORPORATION
Its Managing General Partner
By: GEORGE NICHOLAS
-------------------------------------------
Name: George Nicholas
-------------------------------------------
Title: Chairman and Chief Executive Officer
-------------------------------------------
-5-
<PAGE>
<PAGE>
UNIFORM COMMERCIAL CODE FINANCING STATEMENT FORM UCC-1 (REV. 1993)
THIS FINANCING STATEMENT is presented to a filing officer to filing pursuant to
the Uniform Commercial Code
- --------------------------------------------------------------------------------
1. Debtor (Last Name First if an individual) 1a. Date of Birth or FEE
IMC Corporation of America
- --------------------------------------------------------------------------------
1b. Mailing Address 1c. City, State 1d. Zip Code
3450 Bushwood Park Drive, Suite 250 Tampa, FL 33618
- --------------------------------------------------------------------------------
2. Additional Debtor or Trade Name (Last Name First if an individual)
2a. Date of Birth or FEE
- --------------------------------------------------------------------------------
2b. Mailing Address 2c. City, State 2d. Zip Code
- --------------------------------------------------------------------------------
3. Secured Party (Last Name First if an individual)
The First National Bank of Boston
- --------------------------------------------------------------------------------
3a. Mailing Address 3b. City, State 3c. Zip Code
100 Federal Street Boston, MA 02110
- --------------------------------------------------------------------------------
4. Additional Secured Party (Last Name First if an individual)
- --------------------------------------------------------------------------------
4a. Mailing Address 4b. City, State 4c. Zip Code
- --------------------------------------------------------------------------------
4. The Financing Statement covers the following types or items or property
[Include description of real property on which located and owner of record
when required, if more space is required, attach additional sheet(s)]
All Mortgage Loans, Mortgages, Mortgage Notes and other documents and
property deposited with or possessed by or for the account of Secured
Party, or held for delivery to Secured Party, and all proceeds thereof, and
all other property and proceeds thereof described in the attached Rider.
- --------------------------------------------------------------------------------
6. Check only of Applicable:
[X] Products of collateral are also covered.
[X] Proceeds of collateral are also covered.
[ ] Debtor is transmitting utility.
- --------------------------------------------------------------------------------
7. Check appropriate box: (One box must be marked)
[ ] All documentary stamp taxes due and payable or to become due and payable
pursuant to a. 201.22 F.S. have been paid.
[X] Florida Documentary Stamp Tax is not required.
- --------------------------------------------------------------------------------
8. In accordance with s. 679.402(2), F.S., this statement is filed without the
Debtor's signature to perfect a security interest in collateral:
[ ] already subject to a security interest in another jurisdiction when it was
brought into this state of debtor's location changed to this state.
[ ] which is proceeds of the original collateral described above in which
a security interest was perfected.
[ ] as to which the filing has lapsed. Date filed _______________and previous
UCC-1 file number____________________________
[ ] acquired after a change of name, identity or corporate structure of the
debtor.
- --------------------------------------------------------------------------------
9. Number of additional sheets presented: 1
This Space for Use of Filing Officer
- --------------------------------------------------------------------------------
10. Signature(s) of Debtor(s)
IMC Corporation of America
By: /s/ XXXXXX
- --------------------------------------------------------------------------------
11. Signature(s) of Secured Party or if Assigned, by Assignee(s).
- --------------------------------------------------------------------------------
12. Return Copy to:
Name
Address
Address
City, State, Zip
- --------------------------------------------------------------------------------
FILING OFFICER/ACKNOWLEDGMENT COPY
- --------------------------------------------------------------------------------
STANDARD FORM-FORM UCC-1 Approved by Secretary of State, State of Florida
<PAGE>
<PAGE>
SCHEDULE A
Capacity as Secured Party
The First National Bank of Boston (the "Lender") is the "Secured Party" in
its capacity as Lender under a certain Loan and Security Agreement dated March
18, 1994, as from time to time amended, restated, renewed, extended, increased
or reduced (the "Agreement"), to which the Lender and IMC Corporation of America
(the "Borrower") are parties.
Collateral
(a) All Mortgage Loans, Mortgages and Mortgage Notes and other documents
and property as shall be deposited with or held by Lender or its designated
custodian pursuant to the Agreement, whether or not the same shall be determined
to be Eligible Collateral for purposes of the Agreement;
(b) All payments and prepayments of principal, interest, penalties and
other income due or to become due (other than amounts received by Borrower for
the purpose of payment of real property taxes, assessments and insurance
premiums pursuant to the terms of Mortgage Notes) on all Mortgage Loans,
Mortgages and Mortgage Notes referred to in Paragraph (a) above, and all
proceeds thereof, all the right, title and interest of every nature whatsoever
of Borrower in and to the same and all property used in connection therewith
(subject to Borrower's right under the Agreement to collect certain payments so
long as no Event of Default shall have occurred and be continuing) including,
without limitation, the following:
(i) All rights, liens and security interests existing with respect to,
or as security for, all such Mortgage Loans;
(ii) All hazard insurance policies, title insurance policies or
condemnation proceeds with respect to each such Mortgage Loan;
(iii) All insurance and guaranties provided by the FHA or VA, as the
case may be, with respect to each such Mortgage Loan; and
(iv) All private mortgage insurance policies with respect to each such
Mortgage Loan.
(c) All files, surveys, certificates, correspondence, appraisals, computer
programs, tapes, discs, cards, accounting records and other records and data of
Borrower related to the Mortgage Loans referred to in Paragraph (a) above; and
(d) All products and proceeds of any of the property described in the
foregoing Paragraphs (a), (b) and (c) (including, without limitation, cash
proceeds and any other type of property, but excluding any interest of the
Debtor in the residual portion and in the interest-only portion of any
mortgage-backed security issued in respect of a pool which includes a Mortgage
Loan which is no longer included as Eligible Collateral (as defined in the
Agreement)) and any other property or documents relating to any of the
foregoing.
Copies of the Agreement referred to herein are on file with the Lender.
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INTERIM LOAN AND SECURITY AGREEMENT
Dated as of February 28, 1996
by and between
NATIONAL WESTMINSTER BANK PLC, NEW YORK BRANCH,
as Lender
and
IMC CORPORATION OF AMERICA and
INDUSTRY MORTGAGE COMPANY, L.P.,
as Borrowers
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C> <C>
SECTION 1. Definitions.......................................................... 1
SECTION 2. The Advances......................................................... 7
SECTION 3. Additional Terms and Conditions for All Advances..................... 8
SECTION 4. Purpose of Advances.................................................. 11
SECTION 5. Mortgage Files and Custodian; Secured Obligations.................... 11
SECTION 6. Representations and Warranties....................................... 12
SECTION 7. Rights of Lender; Limitations on Lender's Obligations................ 15
SECTION 8. Covenants............................................................ 15
SECTION 9. Repayment of Advances If Mortgage Loan Found Defective............... 20
SECTION 10. Release of Mortgage Files Following Payment of Secured Obligation(s). 20
SECTION 11. Servicing Matters.................................................... 20
SECTION 12. No Oral Modifications; Successors and Assigns........................ 21
SECTION 13. Delinquent Mortgage Loans............................................ 21
SECTION 14A. Events of Default.................................................... 21
SECTION 14B. Events of Termination................................................ 23
SECTION 15. Remedies Upon Default or Termination................................. 23
SECTION 16. Indemnification and Expenses......................................... 25
SECTION 17. Takeouts and Releases of Collateral.................................. 27
SECTION 18. Power of Attorney.................................................... 27
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 19. No Duty on Lender's Part............................................. 27
SECTION 20. Limitation on Duties Regarding Preservation of Collateral............ 28
SECTION 21. Powers Coupled with an Interest...................................... 28
SECTION 22. Severability......................................................... 28
SECTION 23. Notices.............................................................. 28
SECTION 24. Paragraph Headings................................................... 28
SECTION 25. No Waiver; Cumulative Remedies....................................... 28
SECTION 26. Assignment........................................................... 29
SECTION 27. Counterparts......................................................... 29
SECTION 28. Agreement Constitutes Security Agreement............................. 29
SECTION 29. Hypothecation or Pledge of Collateral................................ 29
SECTION 30. Waivers.............................................................. 29
SECTION 31. Further Assurances................................................... 30
SECTION 32. Governing Law........................................................ 30
</TABLE>
Schedules and Exhibits
<TABLE>
<S> <C>
Schedule 1 Representations and Warranties of the Related
Borrower in Respect of each of the Mortgage Loans
Exhibit A Secured Note
Exhibit B-1 Notice of Extension
Exhibit B-2 Opinion of Counsel
Exhibit B-3 Secured Note Endorsement
Exhibit C Opinion of Counsel
Exhibit D Notice of Borrowing
</TABLE>
ii
<PAGE>
<PAGE>
INTERIM LOAN AND SECURITY AGREEMENT
INTERIM LOAN AND SECURITY AGREEMENT, dated as of February 28,
1996 (as amended, supplemented or otherwise modified from time to time in
accordance herewith, this "Agreement"), between (i) 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
(the "Lender"), and (ii) Industry Mortgage Company, L.P., a Delaware limited
partnership (the "Parent"), and IMC Corporation of America, a Delaware
corporation and a wholly-owned subsidiary of the Parent (the "Subsidiary" and,
together with the Parent, the "Borrowers").
PRELIMINARY STATEMENT
WHEREAS, the Lender has agreed, subject to the terms and
conditions contained herein, to provide interim funding from time to time to
finance the origination or acquisition of fixed rate and adjustable rate first
and second lien mortgage loans (the "Mortgage Loans"), which Mortgage Loans (and
the remainder of the Collateral (as defined herein)) are to be pledged to secure
the Advances to be made by the Lender hereunder;
NOW, THEREFORE, the parties to this Agreement hereby agree as
follows:
SECTION 1. Definitions. In addition to the terms defined above,
the following capitalized terms shall have the meanings set forth in this
Agreement. Capitalized terms used but not defined herein shall have the meanings
assigned to them in the Custodial Agreement. (Terms defined in the singular have
the same meanings when used in the plural and vice versa.)
ADJUSTED LIBOR: With respect to each Interest Accrual Period, the
rate obtained by dividing (i) LIBOR for the related Interest Accrual Period by
(ii) a percentage equal to one minus the stated maximum rate (stated as a
decimal) of all reserves required to be maintained against "Eurodollar (London)
liabilities" as specified in Regulation D of the Board of Governors of the
Federal Reserve System from time to time in effect (or against any other
category of liabilities that includes deposits by reference to which the
interest rate on Advances is determined or any category of extensions of credit
or other assets that includes loans by a non-United States office of the Lender
to United States residents) or by any other requirement of law relating to
reserve or capital adequacy requirements.
ADVANCE: An advance in a minimum amount of $500,000 and secured
by the Collateral.
AFFILIATE: With respect to any Person, any other Person
controlling, controlled by or under common control with such Person. For
purposes of this definition, "control" means the power to direct the management
and policies of a Person, directly or indirectly, whether through ownership of
voting securities, by contract or otherwise and "controlling" and "controlled"
shall have meanings correlative to the foregoing.
<PAGE>
<PAGE>
AGREEMENT: This Interim Loan and Security Agreement, dated as of
February 28, 1996, between the Lender and the Borrowers.
APPLICABLE SPREAD: 1.00%
On each date of determination on which there exists a Total Net
Worth Deficiency, the Applicable Spread will be 2.50%
BORROWERS: Industry Mortgage Company, L. P., a Delaware limited
partnership, and IMC Corporation of America, a Delaware corporation and a
wholly-owned subsidiary of the Parent.
BUSINESS DAY: A day other than a 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. When used with respect to the
determination of LIBOR, a day on which banks are open for dealing in foreign
currency and exchange in London and New York City.
CERTIFICATES: The mortgage pass-through certificates to be
issued by the related Designated Trust.
CLOSING DATE: February 28, 1996.
COLLATERAL: The Mortgage Loans; any and all cash deposited by the
Borrowers in any cash collateral account securing any of the Borrowers'
obligations established by the Custodian for the benefit of the Lender,
including without limitation the Concentration Account; any and all interest of
the Borrowers in a Servicing Agreement, the Borrowers' interest in any fire,
casualty, flood or hazard insurance policies and awards made by any public body
or decreed by any court of competent jurisdiction for a taking or for
degradation of value in any eminent domain proceeding as such relates to the
Mortgage Loans; cash and non-cash proceeds of the Collateral and the documents
pertaining thereto, together with whatever is receivable or received when the
Collateral is sold, collected, exchanged or otherwise disposed of, whether such
disposition is voluntary or involuntary, including, without limitation, all
rights to payment with respect to any cause of action affecting or relating to
the foregoing; all of the Borrowers' interest in any Hedge Transactions; and the
collateral relating to any Residual Facility.
Collateral shall not include the residual Certificates issued by
any Designated Trust except to the extent that any such residual Certificates
are used as collateral to secure the loan made pursuant to a Residual Facility.
CONCENTRATION ACCOUNT: The segregated cash collateral account or
accounts established by the Borrowers and maintained with the Custodian for the
benefit of the Lender, into which all proceeds of the Collateral shall be
deposited on a daily basis upon the occurrence of a Default, an Event of Default
or an Event of Termination. Neither Borrower shall withdraw funds from a
Concentration Account without the prior written consent of the Lender.
2
<PAGE>
<PAGE>
CUSTODIAL AGREEMENT: The Custodial Agreement, dated as of the
date of this Agreement, among the Borrowers, the Lender and the Custodian.
CUSTODIAN: The First National Bank of Boston.
DEFAULT: An event or condition the occurrence of which would,
with the lapse of time or the giving of notice, or both, become an Event of
Default hereunder.
DEFAULT SPREAD: 3.00%
DESIGNATED SALE: A sale of Mortgage Loans as whole loans.
DESIGNATED TRUST: A trust in which Mortgage Loans will be
included and which shall issue Certificates.
ELIGIBLE MORTGAGE LOANS: Any Mortgage Loan (i) as to which no
default, whether monetary or non-monetary, exists (except to the extent that
requirement (iv) below is subject to Section 3(g) and Section 13), (ii) as to
which the Custodian is in possession of the Mortgage Loan Documents as provided
herein and in the Custodial Agreement, (iii) that is covered by a standard
hazard insurance policy (that also provides for fire and extended coverage, if
applicable) and, if the related Mortgaged Property is in an area identified in
the Federal Register by the Federal Emergency Management Agency as having
special flood hazards, a flood insurance policy in a form meeting the
requirements of the current guidelines of the Federal Insurance Administration,
if obtainable with respect to such property, with a generally acceptable carrier
in an amount representing coverage not less than the least of (A) the
outstanding principal balance of the related Mortgage Loan (together, in the
case of a second priority Mortgage loan, with the outstanding principal balance
of the related first priority Mortgage loan), (B) the minimum amount required to
compensate for damage or loss on a replacement cost basis (where available) or
(C) the maximum amount of insurance that is available under the Flood Disaster
Protection Act of 1973, (iv) that is less than two contractual payments
delinquent and (v) that is otherwise acceptable to the Lender in its sole
discretion.
Requirement (iv) listed above is subject to Section 3(g) and
Section 13.
ELIGIBLE TAKEOUT: A Securitization or Designated Sale with
respect to which net proceeds exceed $75 million.
ERISA: The Employee Retirement Income Security Act of 1974, and
all rules and regulations from time to time promulgated thereunder.
EVENT OF DEFAULT: Has the meaning provided in Section 14A hereof.
EVENT OF TERMINATION: Has the meaning provided in Section 14B
hereof.
3
<PAGE>
<PAGE>
FEDERAL FUNDS RATE: For any day, a fluctuating per annum rate of
interest equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business Day, the
average of the quotations for such day for such transactions received by the
Lender from three federal funds brokers of recognized standing selected by it.
FUNDING DATE: Each date on which an Advance is made.
FUNDING PERIOD: From the date of this Agreement to the Funding
Termination Date. If the Funding Termination Date is extended in accordance with
Section 3(a) hereof, the Funding Period shall be the period beginning with the
date of such extension to the extended Funding Termination Date as so provided
therein.
FUNDING TERMINATION DATE: February 28, 1997.
GAAP: Generally accepted accounting principles in the United
States of America in effect from time to time.
GUARANTY: The Guaranty of the Parent, dated the date hereof, in
favor of the Lender, guaranteeing the payment and performance of the Subsidiary
under this Agreement and the Note.
HEDGE TRANSACTION: Any transaction between the Lender and the
Parent or between the Lender and the Subsidiary entered into under an ISDA
Master Agreement between such parties.
INDEBTEDNESS: When used with reference to a Person, any
indebtedness or other obligation created, incurred, assumed or guaranteed by a
party or with respect to which such Person has become liable, directly or
indirectly, contingently, secondarily or otherwise (other than by endorsement of
instruments in the course of collection), including, without limitation,
liability by way of agreement to sell and repurchase any asset, liability
relating to the issuance of letters of credit or other forms of payment
guarantee or otherwise to insure a creditor against loss, and any indebtedness
representing or incurred to finance the acquisition of any asset acquired by
such Person or to enable such Person to make a loan or extend credit to any
other party. For purposes of this definition, "Indebtedness" shall not include
the Borrower's purchase obligations which have not yet become due.
INTEREST ACCRUAL PERIOD: With respect to any Interest Payment
Date, the period from and including the immediately preceding Interest Payment
Date to and excluding such Interest Payment Date; provided, however, that the
first Interest Accrual Period shall be from the initial Funding Date until March
7, 1996.
4
<PAGE>
<PAGE>
INTEREST PAYMENT DATE: The fifth Business Day of each calendar
month commencing on March 7, 1996.
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.
LIBOR: With respect to each Interest Accrual Period, the offered
quotation, if any, to first-class banks in the London interbank Eurodollar
market by the Lender in good faith for one-month U.S. dollar deposits of amounts
comparable to the principal amount of the Advance for which LIBOR is being
determined, with maturities comparable to such Interest Accrual Period, as of
the LIBOR Determination Date.
LIBOR DETERMINATION DATE: With respect to each Advance and the
first Interest Payment Date for such Advance, approximately 10:00 a.m. (New York
City time) two Business Days prior to the Funding Date for such Advance, and
with respect to each Payment Date thereafter, approximately 10:00 a.m. (New York
City time) two Business Days prior to the commencement of the related Interest
Accrual Period.
LIMITED PARTNERSHIP AGREEMENT: With respect to the Parent, the
limited partnership agreement dated as of November 1, 1995, as amended from time
to time.
MATURITY DATE: With respect to each Advance, the earliest of (i)
the last day of the six-month period beginning on the related Funding Date, (ii)
the Funding Termination Date, (iii) the date of the related Securitization and
(iv) the date of the related Designated Sale.
MAXIMUM AMOUNT ADVANCED: An amount equal to the lesser of (i) the
Maximum Funding Amount and (ii) the lesser of (a) the outstanding principal
balance of the Mortgage Loans and (b) 95% of the aggregate market value of the
Mortgage Loans (as determined by the Lender in its sole discretion).
On each Funding Date on which there exists a Total Net Worth
Deficiency, the Lender, at its sole option, may deem the Maximum Amount Advanced
to be an amount equal to the lesser of (i) the Maximum Funding Amount and (ii)
the lesser of (a) the outstanding principal balance of the Mortgage Loans and
(b) 90% of the aggregate market value of the Mortgage Loans (as determined by
the Lender in its sole discretion).
For purposes of this definition, "Mortgage Loans" shall not
include those Mortgage Loans the Advances relating to which have not been repaid
in full on the related Maturity Date.
MAXIMUM FUNDING AMOUNT: An amount equal to (i) for the period
from the date of the Agreement to and including the Funding Termination Date,
$100,000,000, and (ii) if the Funding Termination Date is extended in accordance
with Section 3(a) hereof, for each
5
<PAGE>
<PAGE>
subsequent Funding Period the amount specified in the Notice of Extension of
Agreement delivered in accordance with Section 3(a) hereof in respect of such
Funding Period.
MORTGAGE LOAN DOCUMENTS: All documents and instruments
evidencing and relating to the Mortgage Loans and delivered to the Custodian
pursuant to the Custodial Agreement.
MORTGAGE LOANS: The Mortgage Loans delivered to the Custodian
and held by it on behalf of the Lender as Collateral for the repayment of the
Secured Obligations.
NY UCC: The Uniform Commercial Code as in effect in the State of
New York from time to time.
PARTICIPATION: A sale by the Lender of a participation interest
(not to exceed 50%) in the Secured Note pursuant to Section 26 hereof.
PERSON: Includes any of the following: Natural persons,
corporations, limited partnerships, general partnerships, joint stock companies,
joint ventures, associations, companies, trusts, banks, trust companies, land
trusts, business trusts or other organizations, whether or not legal entities,
and governments and agencies and political subdivisions thereof.
PLAN: An "employee benefit plan" or "governmental plan" as such
terms are defined in Section 3(3) of ERISA.
REFINANCED MORTGAGE LOANS: Mortgage Loans which were made by
either of the Borrowers or an Affiliate of the Borrowers in connection with the
refinancing of a mortgage loan previously made by such Borrower or such
Affiliate as to which at the time of such refinancing any monthly payment due
thereunder was thirty (30) or more days past the date such monthly payment was
first due.
RESIDUAL FACILITY: Any of the facilities between Lender and the
Parent pursuant to which Lender has agreed to provide financing for the general
corporate purposes of the Parent the advances on which are secured by residual
and/or interest-only mortgage pass-through certificates.
SECURED NOTE: The secured promissory note of the Borrowers in
the form attached hereto as Exhibit A.
SECURED OBLIGATIONS: The Advances, all renewals, increases,
extensions, modifications, rearrangements or restatements thereof, and all other
debts, liabilities, obligations, covenants and duties owing, arising, due or
payable from Borrowers to Lender of any kind or nature, present or future,
arising under or with respect to this Agreement, any Hedge Transaction, any
Residual Facilities or any of the other Transaction Documents, whether direct or
indirect, absolute or contingent, primary or secondary, due or to become due,
now existing or hereafter arising. The term includes, without limitation, all
interest, charges, expenses, fees,
6
<PAGE>
<PAGE>
attorneys' fees and any other sums chargeable to Borrowers under any of the
Transaction Documents.
SECURITIZATION: A transaction pursuant to which Certificates are
issued by a Designated Trust.
SERVICING AGREEMENT: A Servicing Agreement between the Lender and
the Borrowers relating to the Mortgage Loans and entered into pursuant to
Section 11 hereto.
TOTAL NET WORTH DEFICIENCY: Shall mean that the Parent's total
net worth is below the sum of (i) $7.54 million and (ii) 50% of the difference
between (a) the net income of the Parent from December 31, 1994 through the most
recently ended fiscal quarter (no loss considered) and (b) the tax distributions
made by the Parent during such period pursuant to the Limited Partnership
Agreement.
TRANSACTION DOCUMENTS: This Agreement, the Guaranty, any Hedge
Transaction, the Servicing Agreement, if any, the Secured Note and the Custodial
Agreement.
UNDERWRITING GUIDELINES: The underwriting guidelines of the
Borrowers, as delivered to the Lender.
SECTION 2. The Advances. Subject to the terms and conditions of
this Agreement, the Lender agrees to lend to the Borrowers from time to time an
aggregate principal amount not to exceed at any one time outstanding the Maximum
Funding Amount. Each Advance shall be made (i) on a Business Day that is prior
to the Funding Termination Date and (ii) in all amount which is not less than
$500,000 and which, when added to the outstanding principal amount of aggregate
Advances, does not exceed the Maximum Amount Advanced; provided that:
(a) the representations and warranties of the Borrowers in
Section 6 hereof and Schedule 1 hereto shall be true and correct on and
as of such Funding Date and each date thereafter;
(b) no Event of Termination shall have occurred and no
Default or Event of Default shall have occurred and be continuing or
would exist after the making of any Advance on such Funding Date;
(c) if requested by the Lender, the Lender shall have
conducted a due diligence review of the mortgage files relating to the
Mortgage Loans, the results of which shall have been satisfactory to the
Lender, including, without limitation, that the Mortgage Loans conform
to the Borrowers' then current Underwriting Guidelines;
(d) the Lender shall have received (i) a timely Notice of
Borrowing as provided in Section 3(b) hereof, (ii) a Trust Receipt and
Certification from the Custodian as provided in Section 3(b) hereof to
the effect that the Custodian has received and
7
<PAGE>
<PAGE>
reviewed (in accordance with the Custodial Agreement) the Mortgage Loan
Documents for the Mortgage Loans to which the Advance proposed to be
made on such Funding Date relates and has found no material deficiencies
in such Mortgage Loan Documents as so reviewed, and (iii) in connection
with the first Advance, (A) a legal opinion from counsel to the
Borrowers, in the form of Exhibit C attached hereto (which opinion also
shall be delivered to the Lender on each subsequent Funding Date if so
requested by it), (B) the Secured Note, (C) written consent of the
general partner of the Parent authorizing the transactions contemplated
hereby, (D) written consent of the board of directors of the Subsidiary
authorizing the transactions contemplated hereby, (E) the Custodial
Agreement duly executed by the parties thereto and (F) the Guaranty duly
executed by the Parent;
(e) the Lender shall not have determined, in its sole
discretion, that the Securitization or Designated Sale, as the case may
be, is not reasonably likely to be completed on substantially the terms
agreed upon at the time of the specifying of the Securitization or
Designated Sale, as the case may be, hereunder;
(f) all fees and expenses payable on or prior to the date
hereof to the Lender pursuant hereto shall have been paid;
(g) any general conditions for the making of Advances
specified in Section 3 below, as appropriate, shall have been satisfied
and will continue to be satisfied following the making of such Advance;
(h) in connection with the first Advance, each of the
Borrowers shall have delivered to the Lender a list of the entities from
whom the Borrowers have purchased in excess of $10 million of mortgage
loans (by outstanding principal balance) (each of such lists, as amended
from time to time, an "Approved Seller List");
(i) if either Borrower intends to use a portion of an
Advance to purchase Eligible Mortgage Loans with an outstanding
principal balance in excess of $10 million from an entity not listed on
the related Approved Seller List, such Borrower shall have notified the
Lender of the identity of such entity at least three Business Days prior
to the related Funding Date and, if the Lender so requests at least two
Business Days prior to such Funding Date, the Lender shall have
completed a due diligence review of the Mortgage Files related to such
Eligible Mortgage Loans, the result of which shall have been
satisfactory to the Lender; and
(j) all information with respect to the Borrowers provided
to the Lender by the Borrowers or by any party at the request of the
Borrowers shall be true and correct in all material respects to the best
of Borrowers' knowledge and belief.
SECTION 3. Additional Terms and Conditions for All Advances.
(a) Each outstanding Advance shall mature on the related Maturity
Date, and the obligation of the Lender to make any Advances hereunder shall
terminate on the Funding
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Termination Date; provided that the Funding Termination Date may be extended
from time to time, in the sole and absolute discretion of the Lender, upon (i)
the execution and delivery by the parties hereto of a Notice of Extension of
Agreement substantially in the form of Exhibit B-1 annexed hereto, (ii) the
delivery to the Lender of an opinion of counsel to the Borrowers substantially
in the form of Exhibit B-2 annexed hereto and (iii) in connection with an
increase of the Maximum Funding Amount to an amount greater than the then
maximum principal amount of the Secured Note, the execution and delivery by the
parties hereto of an Endorsement to the Secured Note, substantially in the form
of Exhibit B-3 hereto.
(b) If a Borrower wishes to receive an Advance, then such
Borrower shall give the Lender written notice by no later than 5:00 p.m. (New
York City time) on the third Business Day prior to the related Funding Date of
the amount of such Advance to be requested on such Funding Date by delivering a
Notice of Borrowing substantially in the form of Exhibit D attached hereto, and
the Custodian shall have delivered a Trust Receipt and Certification to the
Lender no later than 5:00 p.m. (New York City time) on the Business Day prior to
the related Funding Date. Notwithstanding the foregoing, at its option, a
Borrower may request an Advance by giving the Lender written notice by no later
than 10:30 a.m. (New York City time) on the related Funding Date of the amount
of such Advance to be requested on such Funding Date by delivering a Notice of
Borrowing substantially in the form of Exhibit D attached hereto, and the
Custodian shall have delivered a Trust Receipt and Certification to the Lender
no later than 2:30 p.m. (New York City time) on the Funding Date; provided,
however, that any such Advance shall accrue interest at the Federal Funds Rate
plus the Applicable Spread from the related Funding Date to but excluding the
related Maturity Date.
(c) Each Advance shall bear interest from the related Funding
Date to but excluding the Maturity Date for such Advance at a per annum rate
equal to Adjusted LIBOR plus the Applicable Spread and thereafter as provided in
Section 3(e); provided, however, that if, at any time, the making or continuance
of any Advance has become unlawful or impracticable by compliance of the Lender
in good faith with any law, governmental rule, regulation, guideline or order,
or has become impracticable as a result of a contingency occurring after the
date of this Agreement which materially and adversely affects the London
interbank Eurodollar market, then during such period, interest on Advances shall
be calculated at a per annum rate equal to the Federal Funds Rate plus the
Applicable Spread. Interest on each Advance shall be calculated on the basis of
the actual number of days elapsed in a year consisting of 360 days. Interest on
each Advance shall be paid on each Interest Payment Date and on the Maturity
Date for such Advance. In the event that an Advance is not repaid in full on the
date when due, interest thereafter shall be payable on demand.
(d) Subject to the next succeeding sentence, all Advances are
prepayable, in whole or in part, at any time without premium or penalty. Any
amounts prepaid shall be applied to repay the outstanding principal amount of
any Advances (together with accrued and unpaid interest thereon) until paid in
full. If a Borrower intends to prepay an Advance in whole or in part from a
source other than the proceeds of a Securitization or Designated Sale, such
Borrower shall give two Business Days' prior notice thereof to the Lender. The
Borrowers shall compensate the Lender, upon its written request (which request
shall set forth in reasonable
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detail the basis for requesting such amounts), for all losses, expenses and
liabilities (other than loss of profits) which such Lender may sustain: (i) if
for any reason (other than a default by such Lender) an Advance does not occur
on a date specified therefor in a Notice of Borrowing (whether or not
withdrawn), (ii) in connection with any prepayment of Advances or (iii) as a
consequence of any other Default or Event of Default by the Borrowers to repay
their Advances when required by the terms of this Agreement.
(e) If an Advance is not repaid in whole on the related Maturity
Date, such unpaid Advance shall, commencing on such date, bear interest at a per
annum rate equal to Adjusted LIBOR plus the Default Spread until repaid.
(f) The Advances shall be evidenced collectively by the Secured
Note. The amount of each Advance and the date and amount of each repayment of
principal thereof shall be forwarded by the Lender to the related Borrower, by
facsimile transmission upon request therefor, and shall be conclusive evidence
of the accuracy of such amounts (absent manifest error).
(g) Not more than 2.0% of the Mortgage Loans (by outstanding
principal balance) are delinquent in respect of two or more contractual
payments.
(h) (i) If, due to either (A) the introduction of, or any change
in the administration or interpretation of, any law, rule or regulation
(domestic or foreign) or (B) the compliance with any directive, guideline or
request from any central bank or other governmental or monetary authority
(whether or not having the force of law) promulgated or made after the date
hereof, (1) there shall be an increase in the cost to the Lender or any
transferee of making, funding or maintaining its commitment or any Advance
(including, without limitation, as a result of the imposition or modification of
any reserve, special deposit or similar requirement or any assessment by the
FDIC against the Advances) or (2) any amount receivable by the Lender hereunder
shall be reduced or the Lender shall be required to make a payment calculated by
reference to the principal of, or interest on, any Advance or any fee payable to
it, then the Borrowers shall, from time to time, upon demand by the Lender,
which demand shall be accompanied by reasonable documentation of the basis for
and calculation of the amount of such demand, pay the Lender additional amounts
sufficient to compensate the Lender or any transferee for such increased cost,
reduction or payment; and (ii) if either (A) the introduction of, or any change
in the administration or interpretation of, any law, rule or regulation
(domestic or foreign) or (B) the compliance with any directive, guideline or
request (including, any law, rule, regulation, interpretation, guideline or
request contemplated by or arising out of the report dated July 1988 entitled
"International Convergence of Capital Measurement and Capital Standards" issued
by the Basle Committee on Banking Regulations and Supervisory Practices) from
any central bank or other governmental or monetary authority (whether or not
having the force of law) promulgated or made after the date hereof affects or
would affect the amount of capital required or expected to be maintained by the
Lender and the Lender reasonably determines that the amount of such capital is
increased by or based upon the existence of the Lender's agreement to make
Advances hereunder (taking into account the Lender's policies with respect to
capital adequacy), then upon demand by the Lender, which demand shall be
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accompanied by reasonable documentation of the basis for and calculation of the
amount of such demand, the Borrowers shall immediately pay to the Lender
additional amounts sufficient to compensate the Lender for such increased costs
in light of such circumstances, to the extent that the Lender reasonably
determines such increase in capital to be allocable to the existence of the
Lender's agreements hereunder (taking into account the Lender's policies with
respect to capital adequacy).
(i) If any payment hereunder becomes due and payable, or any
action hereunder is required to be taken, on a day other than a Business Day,
the date for such payment or action shall be extended to the next succeeding
Business Day and, with respect to payments of principal, interest thereon shall
accrue at the then applicable rate during such extension.
(j) If at any time Lender notifies the Borrowers that the
aggregate outstanding principal amount of all Advances exceeds the Maximum
Amount Advanced, the Borrowers shall no later than one Business Day after
receipt of notice of such excess, either prepay such Advances (together with
accrued and unpaid interest thereon) in whole or in part or pledge additional
Collateral to the Lender, such that after giving effect to such prepayment or
pledge the aggregate outstanding principal amount of all Advances does not
exceed the Maximum Amount Advanced.
SECTION 4. Purpose of Advances. Each Advance shall be used only
as interim financing for the origination or acquisition of Eligible Mortgage
Loans; provided, however, that to the extent that the Maximum Amount Advanced is
greater than the outstanding principal amount of aggregate Advances on the
related Funding Date, such Advance (to the extent of such excess) may be used
for general corporate purposes.
SECTION 5. Mortgage Files and Custodian; Secured Obligations. (a)
In connection with each Advance, the related Borrower shall deliver to the
Custodian, on behalf of the Lender, the documents and instruments listed in
Section 2 of the Custodial Agreement, and such Borrower shall further cause to
be delivered to the Custodian the documents and instruments described in the
last sentence of Section 2 of the Custodial Agreement as and to the extent
required to be delivered to the Custodian pursuant thereto. The related Borrower
shall cause the Custodian to hold the Mortgage Loan Documents on behalf of the
Lender pursuant to terms of the Custodial Agreement and shall cause the
Custodian to deliver to the Lender a Trust Receipt and Certification to the
effect that it has reviewed such Mortgage Loan Documents in the manner required
by the Custodial Agreement and identifying any deficiencies in such Mortgage
Loan Documents as so reviewed.
(b) The Borrowers hereby pledge and grant a security interest in
all of their respective right, title and interest in and to the Collateral to
the Lender to secure the repayment of the Secured Obligations. The Borrowers
agree to mark their computer records and tapes to evidence the security
interests granted to the Lender hereunder.
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SECTION 6. Representations and Warranties. (a) Each of the
Borrowers represents and warrants to the Lender as of the date hereof and as of
each date thereafter that:
(i) Organization. The Parent has been duly organized and is
validly existing as a limited partnership in good standing under the
laws of the State of Delaware or the Subsidiary has been duly organized
and is validly existing as a corporation in good standing under the laws
of the State of Delaware, as the case may be.
(ii) Power and Authority. Each of the Transaction Documents
has been duly authorized, executed and delivered by the Borrower, all
requisite action having been taken, and each is legal, valid and binding
and enforceable against the Borrower in accordance with its terms.
(iii) Solvency. The Borrower is solvent and will not be
rendered insolvent by the transactions contemplated by the Agreement and
the other Transaction Documents and, after giving effect to such
transactions, the Borrower will not be left with an unreasonably small
amount of capital with which to engage in its business. The Borrower
does not intend to incur, or believe that it has incurred, debts beyond
its ability to pay such debts as they mature. The Borrower does not
contemplate the commencement of insolvency, bankruptcy, liquidation or
consolidation proceedings or the appointment of a receiver, liquidator,
conservator, trustee or similar official in respect of the Borrower or
any of its assets.
(iv) Financial Statements. All financial statements or
certificates of the Borrower or any of its officers furnished to the
Lender are true and complete, except to the extent that quarterly
financial statements are subject to normal year-end adjustments, and do
not omit to disclose any material liabilities or other facts relevant to
the Borrower's condition. Since the date of the financial statements
that were delivered to the Lender, there has been no material adverse
change with respect to the Borrower's financial condition. All such
financial statements have been prepared in accordance with GAAP. No
financial statement or other financial information as of a date later
than September 30, 1995, has been furnished by the Borrower to any
lender that has not been furnished to the Lender.
(v) Consents, Etc. No consent, approval, authorization or
order of, registration or filing with, or notice to any governmental
authority or court is required under applicable law in connection with
the execution, delivery and performance by the Borrower of the
Transaction Documents, where the failure to obtain any of the foregoing
would materially adversely affect the business, operations, property or
financial condition of the Borrower taken as a whole, the ability of the
Borrower to perform their obligations under the Transaction Documents or
the validity or enforceability of the Transaction Documents, except as
have been obtained and are in full force and effect.
(vi) Pending Proceedings. There are no actions, suits,
proceedings or investigations pending, or, to the knowledge of the
Borrower, threatened, against or
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affecting the Borrower in any court or before any governmental authority
or arbitration board or tribunal (i) that might materially and adversely
affect the ability of the Borrower to perform its obligations under any
of the Transaction Documents or (ii) that might materially and adversely
affect the enforceability of any Transaction Document.
(vii) No Adverse Change. There has been no material adverse
change in the business, operations, financial condition, properties or
prospects of the Borrower since September 30, 1995.
(viii) No Default; No Conflict. The Borrower is not in
default under any mortgage, borrowing agreement or other instrument or
agreement pertaining to Indebtedness for borrowed money. Neither the
execution and delivery of each of the Transaction Documents nor the
performance of the Borrower's obligations thereunder (i) will violate
any provision of any law, statute, or order of any governmental
authority in any respect material to the transactions contemplated in
the Transaction Documents, (ii) requires the consent or approval of any
Person that has not been obtained as of the date of this Agreement,
(iii) contravenes the organizational documentation of the Borrower or
(iv) will conflict with, result in a breach of or constitute a default
under any agreement or other instrument to which the Borrower is a party
or by which it is bound.
(ix) Priority of Security Interest. Upon receipt by the
Custodian of the Mortgage Notes with respect to any Mortgage Loan and
for so long as the Custodian maintains actual physical possession of the
Mortgage Notes, the Custodian shall have, for the benefit of the Lender,
a fully-perfected first priority security interest in such Mortgage
Notes.
(x) ERISA Compliance. The Borrower is in compliance in all
material respects with the requirements of ERISA. The Borrower does not
maintain or contribute to any Plan and does not have any withdrawal
liability in connection with a "Multi-Employer Plan" as such term is
defined in Section 4001(a)(3) of ERISA.
(xi) Taxes and Assessments. All federal, state, local and
foreign tax returns, reports and statements required to be filed by the
Borrower have been filed with the appropriate governmental authority and
all charges and other impositions shown thereon to be due and payable
have been paid prior to the date on which any fine, penalty, interest or
late charge may be added thereto for nonpayment thereof, or any such
fine, penalty, interest, late charge or loss has been paid. The Borrower
has paid when due and payable all charges required to be paid by it.
Proper and accurate amounts have been withheld by the Borrower from its
employees for all periods in full and complete compliance with the tax,
social security and unemployment withholding provisions of applicable
federal, state, local and foreign law and such withholdings have been
timely paid to the respective governmental agencies. The Borrower has
not executed or filed with the Internal Revenue Service or any other
governmental authority any agreement or other document extending, or
having the effect of extending, the period for assessment or collection
of any charges. The Borrower has not agreed or been
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requested to make any adjustment under Internal Revenue Code Section
481(a) by reason of a change in accounting method or otherwise. The
Borrower does not have any obligation under any written tax sharing
agreement.
Notwithstanding the immediately preceding paragraph, the
Borrower shall, at their own expense, be entitled to contest the
imposition of any tax or other charge or imposition of a governmental
authority.
(xii) Not Foreign Person. The Borrower is not a "foreign
person" within the meaning of Section 1445(f)(3) of the Internal Revenue
Code.
(xiii) Investment Company Act. The Borrower is not an
"investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as
amended. None of the making of the Advances by the Lender hereunder, the
application of the proceeds and repayment thereof by the Borrower or the
consummation of the transactions contemplated by the Transaction
Documents will violate any provision of such Act or any rule, regulation
or order issued by the Securities and Exchange Commission thereunder.
(xiv) Material Facts. The Borrower has disclosed to Lender
all material facts and has not failed to disclose any material fact in
each case that could cause any representation or warranty made herein to
be materially misleading.
(xv) Existence. The Borrower, at all times since its
formation, has (i) been a duly formed and existing limited partnership,
in the case of the Parent, (ii) been a duly formed and existing
corporation, in the case of the Subsidiary, (iii) complied with the
provisions of its organizational documentation and the laws of the
jurisdiction of its organization, (iv) observed all material legal
requirements regarding its existence in Delaware, (v) accurately
maintained in all material respects its financial statements, accounting
records and other books and records separate from those of any other
Person, (vi) accurately maintained its own bank accounts and separate
books of account, (vii) paid its own liabilities from its own separate
assets, and (viii) identified itself in all dealings with the public,
under its own name and as a separate and distinct entity, and not as a
division or a part of any other entity. The Borrower has not at any time
since its formation commingled its assets with those of any other
Person.
(xvi) Compliance with Laws. The Borrower has complied in
all material respects with all federal, state and local laws, rules and
regulations applicable to them, their assets or the conduct of their
respective businesses.
(xvii) Margin Regulations. The Advances will not be used,
directly or indirectly, for the purpose of purchasing or carrying any
"margin security" as that term is defined in Regulations G and U of the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), for the purpose of reducing or retiring any indebtedness that
was originally incurred to purchase or carry any margin security or for
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any other purpose that might cause any Advance to be considered a
"purpose credit" within the meaning of Regulations G, T, U or X of the
Federal Reserve Board. The Borrowers will not take or permit any agent
acting on their behalf to take any action that might cause this
Agreement or any document or instrument delivered pursuant hereto to
violate any regulation of the Federal Reserve Board.
(b) With respect to each Mortgage Loan delivered or to be
delivered to the Custodian and as of the related Funding Date, the related
Borrower makes the representations and warranties set forth in Schedule 1
hereof.
SECTION 7. Rights of Lender; Limitations on Lender's Obligations.
(a) Anything herein to the contrary notwithstanding, each of the Borrowers shall
remain liable under each of the Mortgage Loan Documents to which it is a party
to observe and perform all the conditions and obligations to be observed and
performed by it thereunder, all in accordance with and pursuant to the terms and
provisions of each such Mortgage Loan Document. The Lender shall not have any
obligation or liability under any Mortgage Loan Document by reason of or arising
out of this Agreement or the receipt by the Lender of any payment relating to
such Mortgage Loan Document pursuant hereto, nor shall the Lender be obligated
in any manner to perform any of the obligations of either of the Borrowers under
or pursuant to any Mortgage Loan Document, to make any payment, to make any
inquiry as to the nature or the sufficiency of any payment received by it or as
to the sufficiency of any performance by any party under any Mortgage Loan
Document, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
(b) Upon the request of the Lender at any time after the
occurrence of an Event of Termination or after the occurrence and during the
continuance of an Event of Default, the related Borrower shall notify parties to
the Mortgage Loan Documents that the Mortgage Loan Documents have been assigned
to the Lender and that payments in respect thereof shall be made directly to the
Lender. The Lender may in its own name or in the name of others communicate with
parties to the Mortgage Loan Documents to verify with them to its satisfaction
the existence, amount and terms of any Mortgage Loan Documents.
SECTION 8. Covenants. Each of the Borrowers covenants and agrees
with the Lender that, from and after the date of this Agreement until the
obligations, including, without limitation, the Secured Obligations, of the
Borrowers hereunder and under the Secured Note are paid in full:
(a) Further Documentation. At any time and from time to time,
upon the written request of the Lender, and at the sole expense of the
Borrower, the Borrower will promptly and duly execute and deliver such
further instruments and documents and take such further action as the
Lender may reasonably request for the purpose of obtaining or preserving
the full benefits of this Agreement and of the rights and powers herein
granted, including, without limitation, the filing of any financing or
continuation statements under the Uniform Commercial Code in effect in
any jurisdiction with respect
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to the security interests created hereby. The Borrower also hereby
authorizes the Lender to file any such financing or continuation
statement without the signature of the Borrower to the extent permitted
by applicable law. Lender will promptly give notice of such filing to
Borrower. A carbon, photographic or other reproduction of this Agreement
shall be sufficient as a financing statement for filing in any
jurisdiction.
(b) Limitation on Liens on Collateral. The Borrower will not
create, incur or permit to exist, will defend the Collateral against,
and will take such other action as is necessary to remove, any lien,
security interest or claim on or to the Collateral, other than the
security interests created hereby, and will defend the right, title and
interest of the Lender in and to any of the Collateral against the
claims and demands of all Persons whomsoever.
(c) Limitations on Modifications, Waivers and Extensions of
Mortgage Loan Documents. The Borrower will not (i) amend, modify,
terminate or waive any provision of any Mortgage Loan Document to which
the Borrower is a party in any manner which could reasonably be expected
to materially adversely affect the value of such Mortgage Loan Document
as Collateral (including, without limitation, changing the mortgage
rate, reducing or increasing the principal balance (except for
reductions resulting from actual payments of principal) or change the
final maturity date of Mortgage Loans), (ii) fail to exercise promptly
and diligently each and every material right which the Borrower may have
under each such Mortgage Loan Document (other than any right of
termination) where the failure to so act could materially adversely
affect the Collateral relating to such Mortgage Loan Document or (iii)
fail to deliver to the Lender a copy of each material demand, notice or
document received by it relating in any way to any such Mortgage Loan
Document other than any such demand, notice or document relating to the
delinquency of a Mortgage Loan Document or the bankruptcy of the obligor
thereunder.
(d) Further Identification of Collateral; Financial Information.
The Borrower will furnish to the Lender from time to time statements and
schedules further identifying and describing the Collateral and such
other reports in connection with the Collateral as the Lender may
reasonably request, all in reasonable detail. In connection therewith,
on each Interest Payment Date, the Borrower shall deliver to the Lender
(i) the most recently updated computer tape containing such statistical
information as the Lender shall reasonably request and (ii) a
certificate from an Authorized Representative of the Borrower containing
information relating to the delinquency status of the Mortgage Loans at
the end of the immediately preceding calendar month. Such computer tape
and certification shall be further updated from time to time as
reasonably requested by the Lender to the Borrower in writing. Any such
revisions by the Lender shall be provided to the Borrower with
sufficient advance notice in order to enable the Borrower to deliver to
the Lender the revised computer tape and certification on the
immediately succeeding Interest Payment Date. The Borrower will furnish
to the Lender from time to time financial statements and such other
business reports relating to the Borrower as the Lender may reasonably
request, all in reasonable detail.
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(e) Limitation on Foreclosure. The Borrower will not take title
to any real property securing a Mortgage Loan, whether by means of a
foreclosure action (judicial or non-judicial), acceptance of a deed in
lieu of foreclosure, or otherwise, without the express written consent
of the Lender.
(f) Notices. The Borrower will notify the Lender promptly, in
reasonable detail and in accordance with Section 23 of this Agreement,
(i) of any lien or security interest (other than security interests
created hereby) on, or claim asserted against, any of the Collateral,
(ii) of the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereunder, and (iii) of
the existence of circumstances requiring the Borrower, or permitting the
Lender to require the Borrower, to prepay the Advances pursuant to the
terms hereof.
(g) Compliance with Law; Books and Records; Inspections. At all
times during the existence of this Agreement and until payment in full
of the Secured Obligations, the Borrower will not commit any act in
violation of applicable laws, or regulations promulgated pursuant
thereto. The Borrower shall keep adequate records and books of account
with respect to its business activities in which proper entries are made
in accordance with industry standards so as to enable the Borrower to
file its financial statements in accordance with GAAP, consistently
applied, reflecting all its material financial transactions. The
Borrower shall, upon reasonable notice, permit representatives of the
Lender, from time to time, as often as may be reasonably requested, but
only during normal business hours, to inspect and make extracts from its
books and records, and discuss with its executive officers, its
employees and its independent accountants, the Borrower's business,
assets, liabilities, financial condition, business prospects and results
of operations.
(h) Transactions with Affiliates. The Borrower only shall engage
in transactions with its Affiliates that are in the ordinary course of
business of the Borrower and shall be on terms equivalent to those
obtainable in arm's length transactions.
(i) Distributions. The Borrower shall not declare or make any
distributions of any of its assets, income or profits to any of its
partners if (i) an Event of Termination has occurred or an Event of
Default exists and is continuing or (ii) such distributions would cause
the occurrence of a Default or an Event of Default.
(j) New Place of Business. The Borrower shall not change its
principal place of business or chief executive office, except upon at
least 30 days' prior written notice to the Lender and after the delivery
to Lender of financing statements, if required by applicable law, in
form satisfactory to the Lender to perfect or continue the perfection of
Lender's liens and security interest under this Agreement.
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(k) New Businesses. Borrower shall not enter into any new
business or make any material change in any of its business objectives,
purposes and operations as set forth in its organizational documentation
as in effect as of the date of this Agreement.
(l) Fictitious Name, etc. The Borrower shall not use any
fictitious name or "d/b/a" (unless, after notice to the Lender and the
execution and filing of any financing statements requested by the
Lender, required in order to qualify to do business in any state) or
fail to hold itself out to the public as a legal entity separate and
distinct from any other Person.
(m) ERISA. Borrower shall not (i) constitute a Plan, (ii)
participate in or maintain any Plan or (iii) permit any of its assets to
constitute "plan assets" of any Plan as such term is defined in ERISA.
(n) Dissolution, Merger, etc. The Borrower shall not liquidate or
otherwise terminate its existence or merge or consolidate with any
Person, unless the Borrower is the surviving entity of such merger or
consolidation and such merger or consolidation would not create a
material adverse change in the financial status of the Borrower as
determined by the Lender in its sole discretion.
(o) Status. The Parent at all times will be a duly formed and
existing limited partnership. The Parent shall continue to comply with
and shall not amend the provisions of its certificate of limited
partnership or limited partnership agreement. The Subsidiary at all
times will be a duly formed and existing corporation. The Subsidiary
shall continue to comply with and shall not amend the provisions of its
certificate of incorporation or by-laws. The Borrower shall continue to
accurately maintain its financial statements, accounting records and
other documents separate from those of any other Person. The Borrower
shall not commingle its assets with those of any other Person. The
Borrower shall continue to accurately maintain its own bank accounts and
separate books of account. The Borrower shall continue to pay its own
liabilities from its own separate assets. The Borrower shall continue to
identify itself in all dealings with the public under its own name and
as a separate and distinct entity. The Borrower shall not change its
fiscal year. The Borrower shall not create any subsidiary if such
creation would result in a material adverse effect on the Borrower's
financial condition as determined by the Lender in its sole discretion.
The Borrower shall not change its accounting policies or reporting
practices, except as required by GAAP, if such change would result in
the Borrower's auditors issuing a qualified opinion with regard to the
Borrower's audited financial statements.
(p) Hedge Contracts. The Borrower hereby agrees to comply
with any hedging requirements of the Lender.
(q) Litigation. The Borrower shall give prompt written notice to
the Lender of any litigation or governmental proceedings commenced or
threatened in writing against the Borrower which could reasonably be
expected to have a material adverse effect on
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its condition, financial or otherwise. The Borrower shall promptly
deliver to the Lender all copies of pleadings and other documentation
relating to such litigation or governmental proceedings.
(r) Forms of Mortgage Loan Documents. The Borrower shall promptly
notify the Lender of any material change to the forms of Mortgage Loan
Documents previously approved by the Lender. If within 30 days after
such notice, the Lender shall notify the Borrower that such new form is
not satisfactory to the Lender, the Borrower agrees to revise such form
in a manner satisfactory to the Lender.
(s) Independent Accountant's Reports. Borrower hereby agrees to
promptly deliver to Lender all independent accountant's reports required
by each pooling and servicing agreement or other similar agreement to
which Borrower is a party as a servicer thereunder. Borrower also agrees
to annually provide a report from a firm of independent certified public
accountants as to, among other things, the Borrower's delivery of the
documentation required under this Agreement and the Borrower's proper
calculation of the various collateral valuation amounts under this
Agreement. Unless otherwise noted in writing by the Lender, the Uniform
Single Attestation Program shall be an acceptable form in fulfilling the
requirements listed above.
(t) Use of Advances. The Borrower only shall use the Advances for
the purpose set forth in Section 4 hereof.
(u) Transfer of Servicing. The Borrower shall not sell, pledge or
otherwise transfer or encumber any part of its servicing rights with
respect to any Mortgage Loan or the income therefrom without the prior
written consent of the Lender.
(v) No Default. The Borrower shall not default under a Servicing
Agreement, any pooling and servicing agreement or other servicing
arrangement with respect to the Borrower such that any counterparties
thereto seek remedies thereunder or permit the cancellation, termination
or amendment (except with the approval of the Lender) of any such
servicing arrangement.
(w) The Borrower shall not permit any future sales of mortgage
loans to third parties which provide recourse (except to the extent
representations and warranties made in the normal course of business
provide such recourse) to the Borrower or any affiliate thereof due to
the delinquency, default or foreclosure of such mortgage loans.
(x) The Borrower shall not make any material changes to the
Underwriting Guidelines except such changes which have been approved in
writing by the Lender.
(y) Other Indebtedness. The Borrower shall not (i) create, incur,
assume, become or be liable in any manner or suffer to exist, any
Indebtedness other than in connection with (A) the obligations created
hereby, (B) obligations of the Borrower under interest rate swaps,
hedges, collars or similar agreements provided by counterparties who
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are either approved by the Lender or rated at least "A" by either
Standard & Poor's Ratings Services or Moody's Investors Service, Inc. in
connection with the facility contemplated by this Agreement, (C)
warehouse lines similar to the facility contemplated by this Agreement
(and interest rate swaps, hedges, collars or agreements similar to those
included in (i)(B) above in connection with such warehouse lines)
consistent with facilities the Borrower has entered into in the past
(including those warehouse lines currently in use by the Borrower), (D)
bridge loans, secured or unsecured, in an amount not to exceed $15
million, (E) any subordinated debt, and (F) facilities secured by
residual or interest-only mortgage-backed securities issued by the
Borrower, or (ii) guarantee the Indebtedness of any other Person (other
than the Indebtedness referred to in clause (i) above).
(z) The Borrower shall not permit, at any time, the ratio of its
aggregate Indebtedness (excluding warehouse lines similar to the
facility contemplated by this Agreement) to total net worth to exceed
3.5 to 1.
Covenant (z) above shall be verified quarterly by the Borrower to
the Lender in the form of a certificate of an officer of the Borrower.
SECTION 9. Repayment of Advances If Mortgage Loan Found
Defective. (a) Upon discovery by the related Borrower or the Lender of any
breach of any of the representations and warranties listed in Section 6 hereof
or Schedule l hereto (which representations and warranties shall be deemed
breached for purposes of this Agreement notwithstanding any qualification that
such representation or warranty is to the best of such Borrower's knowledge) or
any inaccuracy in a Mortgage Loan Schedule, the party discovering such breach
shall promptly give notice of such discovery to the other and to the Custodian.
(b) The Lender has the right, in its sole discretion, to require
the related Borrower to prepay the amount of any Advance made in respect of any
Mortgage Loan as to which one or more of the representations and warranties
listed in Schedule 1 hereto has been breached, or in respect of which there is
an inaccuracy in the related Mortgage Loan Schedule, no later than one Business
Day after notice from the Lender to such Borrower of such breach or inaccuracy,
as the case may be.
SECTION 10. Release of Mortgage Files Following Payment of
Secured Obligation(s). The Lender agrees to cause to be delivered the documents
and instruments held by the Custodian on the Lender's behalf pursuant to Section
5 hereof upon request of the Borrowers upon payment in full of the Secured
Obligation(s) related thereto.
SECTION 11. Servicing Matters. The Parent shall service and
administer the Mortgage Loans with due care and in accordance with the customary
and prudent servicing procedures for mortgage loans of a similar type and in the
same manner in which it services other mortgage loans pursuant to pooling and
servicing agreements, or other similar agreements utilized in securitizations as
to which the Parent acts as servicer; provided, however, that the Parent and the
Lender may execute a Servicing Agreement with respect to the Mortgage Loans
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in which case the Mortgage Loans would be serviced by the Parent pursuant to
such Servicing Agreement as of the date thereof.
SECTION 12. No Oral Modifications; Successors and Assigns. No
provisions of this Agreement shall be waived or modified except by a writing
duly signed by the authorized agents of the Lender and the Borrowers. This
Agreement shall be binding upon the successors and assigns of the parties
hereto.
SECTION 13. Delinquent Mortgage Loans. If greater than 2.0% of
the Mortgage Loans by outstanding principal balance are delinquent in respect of
two or more contractual payments as of the end of any calendar month, the
Borrowers, within five Business Days following the end of such month, shall
prepay the amount of the Advances made in respect of the Mortgage Loans that
constitute the excess of such 2.0% or pledge one or more replacement Mortgage
Loans having an aggregate unpaid principal amount of not less than the excess of
such 2.0% and otherwise meeting the requirements of this Agreement and the
Custodial Agreement.
SECTION 14A. Events of Default. Any of the following shall
constitute an "Event of Default" hereunder:
(a) Failure of either of the Borrowers to make any payment of (i)
principal of the Secured Note, this Agreement or any other document
evidencing or securing Indebtedness of the Borrowers to the Lender on
the date that such payments of principal is first due or (ii) interest
or any other sum which has become due, whether by acceleration or
otherwise, under the terms of the Secured Note, this Agreement or any
other document evidencing or securing indebtedness of the Borrowers to
the Lender within two Business Days of the date on which such payment is
first due; provided, however, that any failure to pay a sum pursuant to
any documents other than this Agreement and the Secured Note shall only
become an Event of Default five Business Days following the earlier of
(i) knowledge by the related Borrower of such failure to make payment
and (ii) notice from the Lender of such failure to make payment;
(b) Failure of either of the Borrowers to prepay Advances or
pledge additional Collateral when required to do so pursuant to the
terms hereof;
(c) Failure of either of the Borrowers to observe or perform any
other agreement or covenant contained in the Transaction Documents which
failure to observe or perform has not been cured within fifteen (15)
days of the earlier of (i) knowledge by the related Borrower of such a
failure to observe or perform, and (ii) notice from the Lender of the
occurrence of such a failure to observe or perform;
(d) Any representation or warranty made by either of the
Borrowers or any of its subsidiaries herein (other than in Section 6(b)
hereof and Schedule 1 hereto with respect to the Mortgage Loans, as to
which the Borrowers shall prepay the Advances or provide substitute
Collateral in accordance with Section 9(b) or Section 13 hereof, as
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applicable) in connection with any Advance made hereunder or in any
certificate, document or financial or other statement furnished at any
time under or in connection with the Transaction Documents shall prove
to have been incorrect in any material respect on or as of the date
made;
(e) An assignment or attempted assignment by either of the
Borrowers of this Agreement or any rights hereunder, without first
obtaining the specific written consent of Lender, or the grant or
attempted grant by either of the Borrowers of any security interest,
lien or other encumbrance on any Collateral to other than the Lender;
(f) The filing by or against either of the Borrowers or any
subsidiary of either of the Borrowers of a petition for liquidation,
reorganization, arrangement or adjudication as a bankrupt or similar
relief under the bankruptcy, insolvency or similar laws of the United
States or any state or territory thereof or of any foreign jurisdiction;
the failure of the related Borrower or such subsidiary to secure
dismissal or stay of any such petition filed against it within thirty
(30) days of such filing; the making of any general assignment by either
of the Borrowers or any subsidiary for the benefit of creditors; the
appointment of a receiver or trustee for either of the Borrowers or any
subsidiary, or for any part of either of the Borrowers' or such
subsidiary's assets; the institution by either of the Borrowers or any
subsidiary of any other type of insolvency proceeding (under the
Bankruptcy Code or otherwise) or of any formal or informal proceeding,
for the dissolution or liquidation of, settlement of claims against, or
winding up of the affairs of, either of the Borrowers or any subsidiary;
the institution of any such proceeding against either of the Borrowers
or any subsidiary if the related Borrower or such subsidiary shall fail
to secure dismissal or stay thereof within thirty (30) days thereafter;
the consent by either of the Borrowers or any subsidiary to any type of
insolvency proceeding against the related Borrower or such subsidiary
(under the Bankruptcy Code or otherwise);
(g) Any materially adverse change in the business, operations,
financial condition, properties or prospects of either of the Borrowers
or of any subsidiary as determined by the Lender in its discretion or
the existence of any other condition which, in the Lender's
determination, constitutes an impairment of such Borrower's or such
subsidiary's ability to perform their obligations under the Transaction
Documents;
(h) An event of default under any pooling and servicing
agreement, Servicing Agreement or other servicing arrangement with
respect to either of the Borrowers resulting in the exercise of rights
and remedies under any such agreement;
(i) If any proceeding, the adverse determination of which would
(i) result in a monetary judgment against either of the Borrowers in
excess of $100,000 and (ii) materially adversely affect the value of, or
the interest of the Lender in, the Collateral, is commenced in
connection with any attachment, levy, garnishment or other judicial
process of, upon or in respect of the Collateral; or the Borrower shall
have concealed, removed or permitted to be concealed or removed, any
part of its property, with intent
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to hinder, delay or defraud any of its creditors or made or suffered a
transfer of its property or incurred or suffered the incurrence of an
obligation that may be fraudulent under any bankruptcy, fraudulent
conveyance or other similar law;
(j) Either of the Borrowers shall be dissolved or its existence
as a limited partnership or corporation, as the case may be, otherwise
terminated or a material adverse change shall have occurred with respect
to the business, operations, financial conditions, properties or
prospects of either of the Borrowers or any subsidiary thereof;
(k) The occurrence of an event of default by the Parent under a
Residual Facility; and
(l) The occurrence of an event of default by either of the
Borrowers under any Hedge Transaction.
SECTION 14B. Events of Termination. Any of the following shall
constitute an "Event of Termination" hereunder:
(a) Any provision of the Transaction Documents shall for any
reason cease to be valid or enforceable in accordance with its terms, or
any security interest created hereunder shall cease to be a valid and
perfected first priority security interest, except as otherwise
permitted hereunder, in any of the Collateral purported to be covered
thereby; and
(b) A material portion of the Mortgage Loan Documents shall cease
to be enforceable against the related Borrower.
SECTION 15. Remedies Upon Default or Termination. (a) Upon the
happening of one or more Events of Default or Events of Termination, the Lender
may declare immediately the principal of all Advances under the Secured Note
then outstanding to be due and payable immediately, together with all accrued
and unpaid interest thereon and fees and expenses accruing under this Agreement;
provided that upon the occurrence of the Event of Default referred to in Section
14(f), such amounts shall become due and payable immediately and automatically
without any further action by any Person or entity. Upon such declaration or
such automatic acceleration, the balance then outstanding on the Secured Note
shall become due and payable immediately without presentation, demand or further
notice of any kind to the Borrowers.
(b) Upon the happening of one or more Events of Default or Events
of Termination, the Lender shall have the right to obtain physical possession of
all files of the Borrowers relating to the Collateral and all documents relating
to the Collateral which are then or may thereafter come into the possession of
either of the Borrowers or any third party acting for the Borrowers, and the
Borrowers shall deliver to the Lender such assignments of mortgage as the Lender
shall request. The Lender shall be entitled to specific performance of all
agreements of the Borrowers contained in this Agreement.
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(c) Upon the happening of one or more Events of Default or Events
of Termination, the Lender shall have the right to collect and receive all
further payments made on the Collateral, and if any such payments are received
by either of the Borrowers, the related Borrower shall not commingle the amounts
received with other funds of such Borrower and shall promptly pay them over to
the Lender. In addition to all rights and remedies provided to the Lender at
law, in equity and under the Transaction Documents, upon the occurrence of any
Event of Default or Event of Termination, the Lender may exercise any one or
more of the following rights and remedies:
(i) Exercise all the rights and remedies available to secured
parties under the provisions of the NY UCC.
(ii) Institute legal proceedings to foreclose upon and
against the lien and security interest granted by this Agreement, to
recover judgment for the Secured Obligations and to collect the same out
of any of the Collateral or the proceeds of any sale thereof.
(iii) Without being responsible for loss or damage to such
Collateral, sell and dispose of, or cause to be sold and disposed of,
all or any part of the Collateral at one or more public or private
sales, or other dispositions, at such places and times and on such terms
and conditions and in such order as the Lender may deem fit, without any
previous demand or advertisement but with reasonable notification to the
Borrower of any such sale or other disposal. The specification in this
Section 15 of manners of disposition of collateral as being commercially
reasonable shall not preclude the use of other commercially reasonable
methods (as contemplated by the NY UCC) at the option of the Lender.
(d) Any notice of sale or other disposition, advertisement and
other notice or demand, any right or equity of redemption and any obligation of
a prospective purchaser to inquire as to the power and authority of the Lender
to sell or otherwise dispose of the Collateral or as to the application of the
proceeds of sale or otherwise, which would otherwise be required by, or
available to the Borrowers under, applicable law are hereby expressly waived by
the Borrowers to the fullest extent permitted by such law.
(e) At any sale pursuant to this Agreement, whether under the
power of sale or by virtue of judicial proceedings, it shall not be necessary
for the Lender or a public officer under order of a court to have present
physical or constructive possession of the Collateral to be sold. The recitals
contained in any conveyances and receipts made and given by the Lender or such
public officer to any purchaser at any sale made pursuant to this Agreement
shall, to the extent permitted by applicable law, conclusively establish the
truth and accuracy of the matters therein stated (including, without limiting
the generality of the foregoing, the amount of the principal and interest of the
Secured Obligations, the accrual and nonpayment thereof and advertisement and
conduct of such sale in the manner provided herein and by applicable law) and
all prerequisites to such sale shall be presumed to have been satisfied and
performed. Upon any sale hereunder of any of the Collateral or any interest
therein, the receipt of the officer
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making such sale under judicial proceedings or of the Lender shall be sufficient
discharge to the purchaser for the purchase price and such purchaser shall not
be obligated to see to the application thereof. Any sale hereunder of any of the
Collateral or any interest therein shall forever be a perpetual bar against the
Borrowers with respect to such Collateral.
(f) All moneys received or collected by the Lender pursuant to
this Agreement shall be applied first, to the payment of all costs incurred in
the collection of such moneys (including reasonable attorneys' fees and legal
expenses), second, to the payment of interest due under the Secured Note and
fees due hereunder, third, to the principal balance of the Secured Note and
fourth, to any other costs and expenses due to the Lender from the Borrowers
hereunder. The balance, if any, of such moneys remaining after payment in full
of the Obligations shall be remitted to the Borrowers or as otherwise directed
by a court of competent jurisdiction.
(g) The Lender or anyone else may bid and be the purchaser of any
or all of the Collateral so sold and shall hold the same thereafter in its own
right, free from any claim of the Borrowers or any other person; provided,
however, that any such purchase shall be pursuant to an arm's-length
transaction. Any sale hereunder may be conducted by an officer of the Lender or
any other party so authorized.
(h) Upon the occurrence of a Default, an Event of Default or an
Event of Termination or at such other time as the Lender in its sole discretion
shall determine that there has been a material adverse change in the business
operations or financial condition of either of the Borrowers, the Borrowers
hereby authorize the Lender in its discretion at any time and from time to time
to complete any assignment of a mortgage which heretofore was, or hereafter at
any time may be, executed and delivered by the related Borrower to Lender so
that such assignment describes a mortgage that is security for the Secured Note
now or hereafter at any time constituting Collateral and to record the same, the
cost and expense of any such recording to be paid by the Borrowers, and complete
any other assignment or endorsement that was delivered in blank hereunder or
under the Custodial Agreement or pursuant to the terms hereof or pursuant to the
terms of the Custodial Agreement.
SECTION 16. Indemnification and Expenses. Each of the Borrowers
(the "Indemnifying Parties") shall indemnify, protect and hold Lender and its
parent, subsidiaries Affiliates, directors, officers, employees,
representatives, agents, successors and attorneys (collectively, the
"Indemnified Parties") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs and expenses, including, without limitation, reasonable attorneys' fees
and legal expenses, whether or not suit is brought, and settlement costs, and
disbursements of any kind or nature whatsoever that may be imposed on, incurred
by or asserted against the Indemnified Parties, in any way relating to or
arising out of the Transaction Documents or any of the transactions contemplated
therein (collectively, the "Indemnified Liabilities"), to the extent that any of
the Indemnified Liabilities results, directly or indirectly, from any claim
made, whether or not in connection with any legal action, suit, or proceeding,
by or on behalf of any Person. However, no Indemnified Party shall have the
right to be indemnified hereunder for its own or any other Indemnified Party's
gross
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negligence or willful misconduct. The Borrowers also agree to reimburse the
Lender for all its costs and expenses incurred in connection with the
enforcement or the preservation of the Lender's rights under any of the
Transaction Documents or any transaction contemplated hereby or thereby,
including, without limitation, the reasonable fees and disbursements of counsel.
The Borrowers hereby acknowledge that, notwithstanding the fact that the Secured
Note is secured by the Collateral, the obligation of the Borrowers under the
Secured Note is a recourse obligation of the Borrowers.
The Indemnifying Parties shall be entitled to appoint counsel of
the Indemnifying Party's choice at the Indemnifying Parties' expense to
represent any of the Indemnified Parties in any action for which indemnification
is sought (in which case the Indemnifying Parties shall not thereafter be
responsible for the fees and expenses of any separate counsel retained by the
Indemnified Parties except as set forth below); provided, however, that such
counsel shall be satisfactory to the related Indemnified Parties.
Notwithstanding the Indemnifying Parties' election to appoint counsel for the
Indemnified Parties in an action, the Indemnified Parties shall have the right
to employ separate counsel (including local counsel), and the Indemnifying
Parties shall bear the reasonable fees, costs and expenses of such separate
counsel if (i) the use of counsel chosen by the Indemnifying Parties to
represent the Indemnified Parties would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both an Indemnified Party and the Indemnifying Parties and the
related Indemnified Party shall have reasonably concluded that there may be
defenses available to it that are different from or additional to those
available to the Indemnifying Parties, (iii) the Indemnifying Parties shall not
have employed counsel satisfactory to the related Indemnified Parties within a
reasonable time after the notice of the institution of such action, (iv) the
related Indemnified Parties shall have reasonably concluded that, due to the
financial condition of the Indemnifying Parties, not employing separate counsel
would have a material adverse effect on the outcome of such action as it relates
to such Indemnified Parties, or (v) the Indemnifying Parties shall authorize the
Lender and/or other Indemnified Parties to employ separate counsel at the
expense of the Indemnifying Parties. The Indemnifying Parties will not, without
the prior written consent of the Lender and all other Indemnified Parties
involved in the related action, settle or compromise or consent to the entry of
any judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder (whether
or not the Indemnified Parties are actual or potential parties to such claim or
action) unless such settlement, compromise or consent includes an unconditional
release of each Indemnified Party from all liability arising out of such claim,
action, suit or proceeding.
(a) The Borrowers agree to pay as and when billed by the Lender
all of the out-of-pocket costs and expenses reasonably incurred in connection
with the development, preparation and execution of, and any amendment,
supplement or modification to any of the Transaction Documents or any other
documents prepared in connection herewith or therewith, and the consummation and
administration of the transactions contemplated hereby and thereby including,
without limitation, (i) all the reasonable fees, disbursements and expenses of
Lender's counsel (such fees of Lender's counsel not to exceed $10,000), (ii) all
the reasonable due diligence, inspection, transportation, computer, duplication,
appraisal, audit, insurance, consultant, search, filing and recording fees,
testing and review costs and expenses incurred by
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the Lender, with respect to Mortgage Loans pledged as Collateral under this
Agreement and (iii) all the fees and expenses incurred by the Custodian in
connection with its duties under the Custodial Agreement.
(b) The Borrowers' agreements in this Section 16 shall survive
the payment in full of the Secured Obligations and the expiration or termination
of this Agreement.
SECTION 17. Takeouts and Releases of Collateral. (a) In
connection with the permanent refinancing, in whole or in part, of the Advances,
the Lender hereby agrees to consent to such permanent refinancings and to permit
the release therefor of a portion of the Mortgage Loans as the Borrowers may
request, provided, that after giving effect to any such release: (i) the
Collateral that remains pledged to the Lender hereunder shall not have been
selected in a manner which adversely affects the Lender as determined by the
Lender in its sole discretion; (ii) there shall not be a material adverse change
in the business operations or financial condition of the Borrower; and (iii) in
the case of a reduction of the total revolving loan commitment contemplated by
this Agreement, the Maximum Funding Amount shall be reduced accordingly. At
least 3 Business Days prior to the closing of any such permanent refinancing,
the Borrowers shall deliver a certificate to the Lender to the effect that any
such permanent refinancing is in compliance with the requirements set forth in
clauses (i) and (ii) of this Section 17. Any permanent refinancing that does not
comply with the requirements of clauses (i) and (ii) above shall require the
prior written consent of the Lender.
(b) The Borrowers will cause an Eligible Takeout to occur no
later than July __, 1996 (the "Initial Eligible Takeout"), and at least once
within every six-month period following the Initial Eligible Takeout. Each
Eligible Takeout caused by the Borrowers shall comply with the provisions of
Section 17(a) hereof.
SECTION 18. Power of Attorney. The Borrowers hereby authorize,
without requiring, the Lender, at the Borrowers' expense, to file such financing
statement or statements relating to the Collateral without the related
Borrower's signature thereon as the Lender at its option may deem appropriate,
and appoints the Lender as the Borrowers' attorney-in-fact to execute any such
financing statement or statements in the Borrowers' name and to perform all
other acts which the Lender deems appropriate to perfect and continue the
security interest granted hereby and to protect, preserve and realize upon the
Collateral, including, but not limited to, the right to endorse notes, complete
blanks in documents and sign assignments on behalf of the Borrowers as its
attorney-in-fact. This Power of Attorney is coupled with an interest and is
irrevocable without the Lender's consent.
SECTION 19. No Duty on Lender's Part. Nothing herein contained
shall be construed to constitute the Lender as agent of the Borrowers or as a
partner in or with the Borrowers for any purpose whatsoever. The Lender does
not, by anything contained herein, assume any of Borrowers' obligations under
any contract or agreement constituting part of or relating to the Collateral and
the Lender will not be responsible in any way for the Borrowers' performance of
any of the terms or conditions thereof. The powers conferred on the Lender
hereunder are solely to protect the Lender's interests in the Collateral and
shall not impose any
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duty upon it to exercise any such powers. The Lender shall be accountable only
for amounts that it actually receives as a result of the exercise of such
powers, and neither it nor any of its officers, directors, employees or agents
shall be responsible to the Borrowers for any act or failure to act hereunder,
except for the gross negligence or willful misconduct of the Lender.
SECTION 20. Limitation on Duties Regarding Preservation of
Collateral. The obligation of the Lender with respect to the Collateral shall be
limited strictly to the duty to exercise reasonable care in the custody of such
Collateral and such duty shall not include any obligation to ascertain or to
initiate any action with respect to, or to inform the Borrower of, maturity
dates, conversion, call rights, offers to purchase the Collateral or any similar
matters, notwithstanding the knowledge of the Lender of the same. The Lender
shall have no duty (i) to take any steps necessary to preserve the rights of the
Borrowers against prior parties or to initiate any action to protect against the
possibility of a decline in the market value of the Collateral, (ii) to take any
action with respect to the Collateral requested by Borrowers, or (iii) to make
or give any presentments, demands for performance, notices of nonperformance,
notices of protest or notices of dishonor in connection with any of the
Collateral or to take any other action to preserve, protect or defend any right,
title or interest of the Borrowers, or the Lender with respect thereto or to
preserve any value thereof. Neither the Lender nor any of its directors,
officers, employees or agents shall be liable for failure to demand, collect or
realize upon all or any part of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of the Borrowers or otherwise.
SECTION 21. Powers Coupled with an Interest. All authorizations
and agencies herein granted to the Lender with respect to the Collateral are
irrevocable and powers coupled with an interest.
SECTION 22. Severability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 23. Notices. All written communications hereunder shall
be mailed, telecopied or delivered to the respective addresses as listed in the
Custodial Agreement or to such other address as shall be designated by a party
in a written notice to the other parties. All such notices and communications
shall be effective when delivered to the party to which such notice is to be
given.
SECTION 24. Paragraph Headings. The paragraph headings used in
this Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
SECTION 25. No Waiver; Cumulative Remedies. The Lender shall not
by any act (except by a written instrument pursuant to Section 12 hereof),
delay, indulgence,
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omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any Event of Default, Event of Termination or in any
breach of any of the terms and conditions hereof. No failure to exercise, nor
any delay in exercising, on the part of the Lender, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by the Lender of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which the Lender would
otherwise have on any future occasion. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any rights or remedies provided by law.
SECTION 26. Assignment. Neither of the Borrowers may assign its
rights or delegate its obligations under this Agreement without the express
written consent of the Lender. The Lender may assign its rights and obligations
hereunder upon written notice thereof to the Borrowers. If the Lender determines
and notifies the Borrowers that a Participation is a desirable course of action
with respect to the Secured Note, then the Borrowers shall cooperate with the
Lender in the preparation of any information reasonably necessary or incidental
to such Participation which is reasonably within the possession or control of
the Borrowers or is obtainable by the Borrowers without undue burden or expense
and shall in good faith enter into any amendments to this Agreement necessary to
accomplish the Participation. In the event of a Participation, the Lender shall
remain liable for all its responsibilities hereunder and under the Secured Note
and the Borrowers shall not be expected to communicate with any participants.
Notwithstanding any provision of this Agreement, the Borrowers shall not be
required to take, and the Lender agrees that neither the Lender nor any of its
Affiliates will take, any action inconsistent with the requirements of
applicable law, including the Securities Act of 1933, as amended, and state
securities laws.
SECTION 27. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and all
of which taken together shall constitute one and the same instrument.
SECTION 28. Agreement Constitutes Security Agreement. This
Agreement is intended by the parties hereto to constitute a security agreement
within the meaning of the NY UCC.
SECTION 29. Hypothecation or Pledge of Collateral. Nothing in
this Agreement shall preclude Lender from pledging, repledging, hypothecating,
or rehypothecating any of the Collateral, but no such transaction shall relieve
the Lender of its obligations to the Borrowers under this Agreement or the
Custodial Agreement with respect to the Collateral or impair the Borrowers'
right to obtain the Collateral as provided herein.
SECTION 30. Waivers. The Borrowers waive any right to require the
Lender to (i) proceed against any other Person; (ii) proceed against or exhaust
any Collateral; (iii) pursue any other remedy in the Lender's power; or (iv)
make or give any presentments,
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demands for performance, notices of dishonor in connection with any obligations
or evidence of indebtedness which constitute in whole or in part the Secured
Obligations.
SECTION 31. Further Assurances. (a) The Borrowers agree to do
such further reasonable acts and things, and to execute and deliver such
additional conveyances, assignments, agreements or financing statements, as the
Lender may at any time reasonably request in connection with the creation,
perfection, administration or enforcement of this Agreement and the other
Transaction Documents (including, without limitation, to aid the Lender, if
there has been an Event of Default or Event of Termination, in the sale of all
or any part of the Collateral) or related to the Collateral or any part thereof
or to give any necessary or desirable notice of the security interest in the
Collateral granted by this Agreement or in order better to assure and confirm to
the Lender its rights, powers and remedies hereunder.
(b) If requested by the Borrowers, and to facilitate the timely
disposition of the Collateral, the Lender hereby agrees to underwrite for its
own account Certificates issued by a Designated Trust; provided, however, that
any Certificates so underwritten will have credit enhancement provided by a
monoline insurance company rated "AAA" (or the equivalent thereof) by a
nationally recognized statistical rating organization, with terms and conditions
acceptable to the Lender and comparable to prior transactions involving the
Parent as issuer. The purchase price to be paid by the Lender will be at an
underwriting discount consistent with then-existing market standards. The
interest rate on the Certificates will be determined by the Lender in its sole
discretion but will be consistent with (i) then current market pricing for
securities backed by collateral similar to the Collateral and (ii) prior
discussions between the Lender and the Borrowers.
SECTION 32. Governing Law. (a) This Agreement was negotiated in
New York, and made by Lender and accepted by the Borrowers in the State of New
York, and the Advances will be disbursed from New York, which State the parties
agree has a substantial relationship to the parties and to the underlying
transaction embodied hereby, and in all respects, including without limitation
matters of construction, validity and performance, this Agreement and the
obligations arising hereunder shall be governed by, and construed in accordance
with, the laws of the State of New York, without giving effect to the principles
of conflicts of laws, applicable to contracts made and performed in such State
and any applicable law of the United States of America. To the fullest extent
permitted by law, the Borrowers unconditionally and irrevocably waive any claim
to assert that the law of any other jurisdiction governs this Agreement and the
Secured Note, and this Agreement and the Secured Note shall be governed by and
construed in accordance with the laws of the State of New York pursuant to
Section 5-1401 of the New York General Obligations Law.
(b) Any legal suit, action or proceeding against the Lender or
the Borrowers arising out of or relating to this Agreement shall be instituted
in any federal or state court in New York, New York, pursuant to Section 5-1402
of the New York General Obligations Law, and the Borrowers waive any objection
which they may now or hereafter have to the determination of venue of any such
suit, action or proceeding, and the Borrowers hereby irrevocably submit to the
jurisdiction of any such court in any suit, action or proceeding.
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IN WITNESS WHEREOF, the parties have executed this Agreement the
day and year first above written.
Borrower: INDUSTRY MORTGAGE COMPANY, L.P.
By: Industry Mortgage Corporation,
its General Partner
/s/ GEORGE NICHOLAS
By:____________________________________________
Name: George Nicholas
Title: Chief Executive Officer
Borrower: IMC CORPORATION OF AMERICA
/s/ GEORGE NICHOLAS
By:____________________________________________
Name: George Nicholas
Title: Chief Executive Officer
Lender: NATIONAL WESTMINSTER BANK PLC,
NEW YORK BRANCH
By:____________________________________________
Name:
Title:
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IN WITNESS WHEREOF, the parties have executed this Agreement the
day and year first above written.
Borrower: INDUSTRY MORTGAGE COMPANY, L.P.
By: Industry Mortgage Corporation,
its General Partner
By:_________________________________________
Name:
Title:
Borrower: IMC CORPORATION OF AMERICA
By:____________________________________________
Name:
Title:
Lender: NATIONAL WESTMINSTER BANK PLC,
NEW YORK BRANCH
/s/ JOSEPH N. WALSH III
By:____________________________________________
Name: Joseph N. Walsh III
Title: Managing Director
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Schedule 1
REPRESENTATIONS AND WARRANTIES OF THE RELATED BORROWER
IN RESPECT OF EACH OF THE MORTGAGE LOANS
(a) The information in respect of the Mortgage Loan set forth in
the related Mortgage Loan Schedule is true and correct;
(b) The Mortgage Loan is being and will be serviced by the Parent
pursuant to the terms of the Interim Loan and Security Agreement;
(c) The Mortgage Loan Documents are complete and authentic and
all signatures are genuine, and the Mortgage related to the Mortgage Loan is a
valid and subsisting first or second lien on real property subject, in the case
of any second Mortgage Loan, only to a lien of a first Mortgage on such real
property and subject in all cases to the exceptions to title set forth in the
title insurance policy or the other evidence of title in respect of the related
Mortgage Loan, which exceptions are generally acceptable to prudent home equity
Mortgage lending companies, and such other exceptions to which similar
properties are commonly subject and which do not individually, or in the
aggregate, materially and adversely affect the benefits of the security intended
to be provided by such Mortgage;
(d) There is no delinquent tax or assessment lien on any real
property mortgaged in connection with the related Mortgage Loan;
(e) All parties to the Mortgage Loan Documents had legal capacity
to execute them and each such document has been duly and properly executed by
such parties; the Mortgage Loan arose from a bona fide loan and is not subject
to any right of rescission, set-off, counterclaim or defense, including the
defense of usury, nor will the operation of any of the terms of the related
Mortgage Note or the related Mortgage, or the exercise of any right thereunder,
render either such Mortgage Note or such Mortgage (i) unenforceable in whole or
in part, or (ii) subject to any right of rescission, set-off, counterclaim or
defense, including the defense of usury, and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect thereto;
(f) There is no mechanics' lien or claim for work, labor or
material affecting any real property mortgaged in connection with the related
Mortgage Loan which is or may be a lien prior to, or equal with, the lien of the
Mortgage securing the related Mortgage Loan except those which are insured
against by a title insurance policy;
(g) All disclosures relating to the Mortgage Loan required by
Regulation Z of the Board of Governors of the Federal Reserve System promulgated
pursuant to the statute commonly known as the Truth-in-Lending Act and the
Notice of the Right of Rescission required by said statute and regulation have
been properly made and given, and the Mortgage Loan, at
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the time it was made, otherwise complied in all material respects with
applicable state and federal laws and regulations, including, without
limitation, equal credit opportunity laws;
(h) With respect to the Mortgage Loan, a written commitment for a
lender's title insurance policy or a title insurance policy, issued in Standard
American Land Title Association form, or other form acceptable in a particular
jurisdiction, by a title insurance company generally acceptable to prudent
Mortgage lending companies and authorized to transact business in the state in
which the real property mortgaged in connection with such Mortgage Loan is
situated (together with a condominium endorsement, if applicable, in an amount
at least equal to the original principal amount of such Mortgage Loan), insuring
the Mortgagee's interest under the related Mortgage Loan as the holder of a
valid first or second Mortgage lien of record on the real property described in
the Mortgage (subject to the exception noted in paragraph (r)), was effective on
the date of the origination of such Mortgage Loan and as of the related Funding
Date for an Advance in connection with such Mortgage Loan; such commitment will
be valid and thereafter the policy issued pursuant to such commitment shall
continue in full force and effect;
(i) The improvements upon the real property mortgaged in
connection with the related Mortgage Loan are covered by a valid and existing
hazard insurance policy (that also provides for fire and extended coverage,
where available) with a generally acceptable carrier;
(j) If the property securing any Mortgage Loan is in an area
identified in the Federal Register by the Federal Emergency Management Agency as
having special flood hazards, a flood insurance policy in a form meeting the
requirements of the current guidelines of the Federal Insurance Administration,
if obtainable with respect to such property, is in effect with respect to such
property with a generally acceptable carrier in an amount representing coverage
not less than the least of (A) the outstanding principal balance of the related
Mortgage Loan (together, in the case of a second priority mortgage loan, with
the outstanding principal balance of the related first priority mortgage loan),
(B) the minimum amount required to compensate for damage or loss on a
replacement cost basis or (C) the maximum amount of insurance that is available
under the Flood Disaster Protection Act of 1973;
(k) The Mortgage Loan Documents for the Mortgage Loan are the
legal, valid and binding obligation of the maker thereof and are enforceable in
accordance with their terms, except only as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (whether considered in a proceeding or action in equity or
at law);
(l) The Borrower has performed any and all acts required to be
performed to preserve the rights and remedies of the Lender in any insurance
policies applicable to the Mortgage Loans;
(m) The terms of the original Mortgage Note and the original
Mortgage have not been impaired, altered or modified in any material respect,
except by a written instrument and a certified copy (as defined in Section 2 of
the Custodial Agreement) of which has been
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delivered to the Lender or the Custodian; the substance of any such alteration
or modification is reflected on the Mortgage Loan Schedule; the original
Mortgage was recorded (or will be duly submitted for recordation as of the time
of origination of the related Mortgage Loan and the Lender or the Custodian has
been provided with such a certified copy thereof), and all subsequent
assignments of such Mortgage have been recorded (or will be duly submitted for
recordation and the Lender or the Custodian has been provided with such a
certified copy thereof) in the appropriate jurisdictions wherein such
recordation is necessary to perfect the lien thereof;
(n) No monetary default has occurred in any provisions of the
Mortgage Loan that would have caused or will cause a prepayment of Advances made
in respect of the Mortgage Loan pursuant to Section 13 of the Agreement, no
non-monetary default has occurred in any provisions of the Mortgage Loan, no
instrument of release or waiver has been executed in connection with the
Mortgage Loan, and no borrower in respect of such Mortgage Loan has been
released, in whole or in part;
(o) All taxes, governmental assessments, insurance premiums,
water, sewer and municipal charges, leasehold payments or ground rents which
previously became due and owing have been paid, or an escrow of funds has been
established in an amount sufficient to pay for every such item which remains
unpaid;
(p) There is no proceeding pending or threatened, for the total
or partial condemnation of the real property mortgaged in connection with the
related Mortgage Loan, nor is such a proceeding currently occurring; such
property is in no less than fair condition, as stated in the related appraisal;
such property has not been damaged by waste, fire, earthquake or earth movement,
windstorm, flood, tornado or other casualty or otherwise damaged so as to affect
adversely the value of such real property as security for the Mortgage Loan or
the use for which the premises were intended;
(q) All of the improvements which were included for the purpose
of determining the appraised value of the real property mortgaged in connection
with the related Mortgage Loan lie wholly within the boundaries and building
restriction lines of such property, and no improvements on adjoining properties
encroach upon such real property except those identified in the related title
insurance policy and which are affirmatively insured against;
(r) No improvement located on or being part of the real property
mortgaged in connection with the related Mortgage Loan is in violation of any
applicable zoning law or regulation. All inspections, licenses and certificates
required to he made or issued with respect to all occupied portions of such real
property and, with respect to the use and occupancy of the same, including (but
not limited to) certificates of occupancy and fire underwriting certificates,
have been made or obtained from the appropriate authorities and such real
property is lawfully occupied under applicable law;
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(s) The Mortgage Note related to the Mortgage Loan is not and has
not been secured by any collateral, pledged account or other security except the
lien of the corresponding Mortgage;
(t) No Mortgage Loan was originated under a buy down plan
(whereby the seller of the mortgaged property or any third party, other than the
mortgagor, has agreed, or is obligated, to supplement or pay a portion of the
mortgagor's mortgage payments in respect of such Mortgage Loan);
(u) There is no obligation on the part of the mortgagor or any
other party to make payments in addition to those made by the mortgagor in
respect of the Mortgage Loan, except for payments in the nature of escrow
payments, including, without limitation, taxes and insurance payment, to be made
by such borrower;
(v) No Mortgage Loan has a shared appreciation feature, or other
contingent interest feature;
(w) With respect to the Mortgage Loan secured by a second
priority Mortgage, either (i) no consent for the Mortgage Loan is required by
the holder of the related first Mortgage, or (ii) such consent has been obtained
and is part of the Mortgage Loan Documents;
(x) All parties which have had any interest in the Mortgage Loan,
whether as Mortgagee, assignee, pledgee or otherwise, are (or, during the period
in which they held and disposed of such interest, were) (1) in compliance with
any and all applicable licensing requirements of the laws of the state wherein
the real property mortgaged in connection with the Mortgage Loan is located, and
(2) (A) organized under the laws of such state, or (B) qualified to do business
in such state, or (C) federal savings and loan associations or national banks
having principal offices in such state, or (D) not doing business in such state
in a manner requiring qualification or licensing;
(y) Either the Mortgage or the Mortgage Note (or both) related to
the Mortgage Loan contains a customary provision for the acceleration of the
payment of the unpaid principal balance of the Mortgage Loan in the event the
real property mortgaged in connection with the Mortgage Loan is sold without the
prior consent of the Mortgagee thereunder;
(z) The Mortgage related to the Mortgage Loan contains customary
and enforceable provisions which render the rights and remedies of the holder
thereof adequate for the realization against the real property mortgaged in
connection with such Mortgage Loan of the benefits of the security, including,
(i) in the case of a Mortgage designated as a deed of trust, by trustee's sale,
and (ii) otherwise by judicial or non-judicial foreclosure. There is no
homestead or other exemption available to the mortgagor which would materially
interfere with the right to sell such real property at a trustee's sale or the
right to foreclose such Mortgage;
(aa) There is no monetary default (except as contemplated by
Section 3(g) and Section 13 of the Agreement), breach, violation or event of
acceleration existing under the
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Mortgage or the Mortgage Note for the related Mortgage Loan and
no event which, with the passage of time or with notice and the expiration of
any grace or cure period, would constitute a monetary default, breach, violation
or event of acceleration that has or will cause a prepayment of Advances made in
respect of such Mortgage Loan pursuant to Section 13 of the Agreement; there is
no non-monetary default, breach, violation or event of acceleration existing
under the Mortgage or the Mortgage Note for the related Mortgage Loan and no
event which, with the passage of time or with notice and the expiration of any
grace or cure period, would constitute a non-monetary default, breach, violation
or event of acceleration; and the Borrower has not waived any monetary or
non-monetary default, breach, violation or event of acceleration in respect of
the Mortgage or the Mortgage Note for the related Mortgage Loan;
(bb) The Mortgage Loans were not selected by the Borrower on any
basis intended to adversely affect the value of the Lender's security interest
therein;
(cc) An appraisal consistent with Borrower's underwriting
guidelines was performed in connection with the real property mortgaged in
connection with the Mortgage Loan;
(dd) There has not occurred, nor has any person or entity alleged
that there has occurred, upon the real property securing the Mortgage Loan any
spillage, leakage, discharge or release into the air, soil or groundwater of any
hazardous material or regulated wastes which spillage, leakage, discharge or
release has not been remediated to the extent necessary to bring the mortgaged
property into compliance with all applicable environmental laws and regulations;
(ee) The Borrower held good and indefeasible title to, and was
the sole owner of, the Mortgage Loan subject to no liens, charges, Mortgages,
participations, encumbrances or rights of others or other liens released
simultaneously with such pledge;
(ff) Except as otherwise expressly approved by the Lender in
writing, the Mortgage Loan is not a Refinanced Mortgage Loan;
(gg) The Mortgage Loan was underwritten in accordance with the
Underwriting Guidelines: and
(hh) The Mortgage Loan is an Eligible Mortgage Loan.
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Exhibit A
SECURED NOTE
$100,000,000 February 28, 1996
New York, New York
FOR VALUE RECEIVED, Industry Mortgage Company, L.P., a Delaware
limited partnership (the "Parent") and IMC Corporation of America (the
"Subsidiary" and, together with the Parent, the "Borrower"), hereby promise to
pay to the order of 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, whose address is 175
Water Street, New York, New York 10038 (the "Lender"), the lesser of (a)
$100,000,000 and (b) the outstanding principal amount of all Advances (as
defined in the Agreement hereinafter referred to) made by the Lender to the
undersigned pursuant to that certain Interim Loan and Security Agreement, dated
as of February 28, 1996 (as amended or otherwise modified from time to time, the
"Agreement"), by and between the Lender and the Borrowers plus interest thereon
from the date of each such Advance as provided in the Agreement. All such
payment obligations (whether in respect of the aggregate principal amount of
outstanding Advances made, interest thereon, or other payment obligations of the
Borrower under the Agreement) shall be made in lawful money of the United States
of America, in immediately available funds, on the dates and in the amounts,
specified in or determined in accordance with, the Agreement.
The amount of each Advance and the date and amount of each
repayment of principal thereof shall be forwarded by the Lender to the related
Borrower, by facsimile transmission upon request therefor, and shall be
conclusive evidence of the accuracy of such amounts (absent manifest error).
It is intended that the rate of interest herein shall never
exceed the maximum rate, if any, which may be legally charged on the loan
evidenced by this Secured Note (the "Maximum Rate"), and if the provisions for
interest contained in this Secured Note would result in a rate higher than the
Maximum Rate, interest shall nevertheless be limited to the Maximum Rate, and
any amounts which may be paid toward interest in excess of the Maximum Rate
shall be applied to the reduction of principal, or, at the option of the Lender,
returned to the related Borrower.
All payments hereon shall be made, and all notices to the Lender
required or authorized hereby shall be given, at the office of the Lender at the
address designated in the Agreement, or to such other place as the Lender may
from time to time direct by written notice to the Borrowers. Payments remitted
by either of the Borrowers via wire transfer initiated after 4:00 p.m. New York
City time shall include interest through the next Business Day.
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The Borrowers agree to pay all the Lender's costs of collection
and enforcement (including reasonable fees and disbursements of the holder's
counsel) in respect of this Secured Note when incurred, including, without
limitation, reasonable attorneys' fees through appellate proceedings.
Capitalized terms not otherwise defined herein shall have the
respective meanings ascribed to them in the Agreement. Notwithstanding the
pledge of the Collateral, the Borrowers hereby acknowledge, admit and agree that
the Borrowers' obligations under this Secured Note are recourse obligations of
the Borrowers to which the Borrowers pledge their full faith and credit.
The Borrowers, and any indorsers or guarantors hereof, (a)
severally waive diligence, presentment, protest and demand and also notice of
protest, demand, dishonor and nonpayments of this Secured Note, (b) expressly
agree that this Secured Note, or any payment hereunder, may he extended from
time to time, and consent to the acceptance of further Collateral, the release
of any Collateral for this Secured Note, the release of any party primarily or
secondarily liable hereon, and (c) expressly agree that it will not be necessary
for the Lender, in order to enforce payment of this Secured Note, to first
institute or exhaust its remedies against such Borrower or any other party
liable hereon or against any Collateral for this Secured Note. No extension of
time for the payment of this Secured Note, or any installment hereof, made by
agreement by the Lender with any Person now or hereafter liable for the payment
of this Secured Note, shall affect the liability under this Secured Note of the
Borrowers, even if the Borrowers are not a party to such agreement; provided,
however, that the Lender and the Borrowers, by written agreement between them,
may affect the liability of the Borrowers.
Any reference herein to the Lender shall he deemed to include and
apply to every subsequent holder of this Secured Note.
Reference is made to the Agreement for provisions concerning
mandatory principal repayments, Collateral, acceleration and other material
terms affecting this Secured Note.
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THIS SECURED NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE
LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO CHOICE OF LAW DOCTRINE)
WHOSE LAWS THE BORROWERS EXPRESSLY ELECT TO APPLY TO THE SECURED NOTE. THE
BORROWERS AGREE THAT ANY ACTION OR PROCEEDING BROUGHT TO ENFORCE OR ARISING OUT
OF THIS SECURED NOTE MAY BE COMMENCED IN THE SUPREME COURT OF THE STATE OF NEW
YORK, BOROUGH OF MANHATTAN, OR IN THE DISTRICT COURT OF THE UNITED STATES FOR
THE SOUTHERN DISTRICT OF NEW YORK.
INDUSTRY MORTGAGE COMPANY, L.P.
By: Industry Mortgage Corporation
By:________________________________________________
Name:
Title:
IMC CORPORATION OF AMERICA
By:________________________________________________
Name:
Title:
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Exhibit B-1
NOTICE OF EXTENSION OF AGREEMENT NO. _____
National Westminster Bank Plc
175 Water Street, 20th Floor
New York, New York 10038
Attention: Mortgage and Asset-Backed
Securities Group
Telecopy: 212-602-5726
Confirmation: 212-602-5470
1. Pursuant to the Interim Loan and Security Agreement, dated as
of February 28, 1996 (as amended from time to time, the "Agreement"), between
you and Industry Mortgage Company, L.P. and IMC Corporation of America (the
"Borrowers"), the undersigned Borrowers hereby request:
(i) that the Funding Period be extended to the period from
[insert date] to but excluding [insert date] (the "Termination Date");
and
(ii) that the Maximum Funding Amount for the Funding Period as
so extended [be increased/decreased to] [remain] [$----------].
The undersigned Borrowers agree that, upon acceptance by the Lender of this
Notice of Extension of Agreement No. _____ by signing and dating the same below,
the Borrowers will be bound by the terms of the Agreement as amended by this
Notice of Extension of Agreement in the manner set forth in this paragraph 1.
2. The undersigned Borrowers hereby certify that the following
statements are true and correct on the date hereof and shall be true and correct
on the date of the extension of the Funding Termination Date requested herein,
before and after giving effect thereto:
A. Each of the representations and warranties of the Borrowers
contained in the Agreement and the other Transaction Documents
are true and correct in all material respects; provided that the
reference to __________, 199__ in Section 6(a)(iv) of the
Agreement shall be deemed to be a reference to [insert date of
most recently delivered financial statements]; and
B. No Event of Termination has occurred and no Default or Event of
Default has occurred and is continuing.
3. Unless otherwise defined in this Notice of Extension of
Agreement No. _____, terms defined in the Agreement shall have their defined
meanings when used herein.
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4. Except as expressly modified by this Notice of Extension of
Agreement No. _____, the Agreement shall be in full force and effect.
5. This Notice of Extension of Agreement No. _____ and the rights
and obligations of the parties hereunder and under the Agreement as amended
hereby shall be governed by, and construed and interpreted in accordance with,
the laws of the State of New York.
6. The undersigned Borrowers are delivering herewith to the
Lender an opinion of counsel to the Borrowers, substantially in the form of
Exhibit B-2 to the Agreement [and an Endorsement to the Secured Note,
substantially in the form of Exhibit B-3 to the Agreement.](1)
- --------
(1) Required if the Maximum Funding Amount is being increased to an amount
greater than the then maximum principal amount of the Secured Note.
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IN WITNESS WHEREOF, the undersigned Borrowers have caused this
Notice of Extension of Agreement No. _____ to be executed and delivered by its
proper and duly authorized officers as of the day and year first above written.
INDUSTRY MORTGAGE COMPANY, L. P.
By: Industry Mortgage Corporation,
its General Partner
By:________________________________________________
Name:
Title:
IMC CORPORATION OF AMERICA
By:_____________________________________________________
Name:
Title:
AGREED TO AND ACCEPTED:
NATIONAL WESTMINSTER BANK PLC,
NEW YORK BRANCH
By:_______________________________________
Name:
Title:
Date:_____________________________________
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Exhibit B-2
[Letterhead of Counsel to Borrowers]
____________________, 199__
National Westminster Bank Plc
175 Water Street
New York, New York 10038
Gentlemen:
This opinion is being delivered to you pursuant to Section 3(a)
of the Agreement.
[Opinion to be modified to reflect the inclusion of the
Subsidiary as a Borrower.]
Capitalized terms used herein and not defined herein shall have
the meanings assigned to them in the Interim Loan and Security Agreement.
[Assumptions and Qualifications Acceptable to Lender]
Based upon the foregoing, I am of the opinion that:
1. The Borrower is a [limited partnership] duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is qualified or licensed to do business in each state wherein it owns
property or is required to be so qualified or licensed.
2. The Borrower has the power and legal right to enter into and
deliver [the Endorsement and] the Notice of Extension, to borrow under the
Interim Loan and Security Agreement, as amended by the Notice of Extension, and
the Note [as amended by the Endorsement], and to grant liens under the Interim
Loan and Security Agreement, as amended by the Notice of Extension, and has
taken all necessary action to authorize such borrowing and such granting of
liens upon the terms and conditions of the Interim Loan and Security Agreement,
as amended by the Notice of Extension, and to authorize the execution and
delivery of the Notice of Extension. No consent of any other Person (including,
without limitation, stockholders of the Borrower), and no consent, license,
permit, approval or authorization of, or registration or declaration with, any
governmental authority, bureau or agency is required in connection with the
execution and delivery or enforceability of [the Endorsement and] the Notice of
Extension or the enforceability of any of the Transaction Documents.
3. The execution, delivery and performance of each of the
Transaction Documents to which the Borrower is a party will not violate any
provision of any existing law
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or regulation applicable to the Borrower or of the certificate or limited
partnership or limited partnership agreement of the Borrower or of any Mortgage,
indenture, contract or other undertaking to which, to the best of my knowledge
(after due inquiry), the Borrower is a party or which is binding upon it or its
assets, and, to the best of my knowledge (after due inquiry), will not result in
the creation or imposition of any lien, charge or encumbrance on any of its
assets pursuant to the provisions of any of the foregoing.
4. Each of [the Endorsement] and the Notice of Extension has been
duly authorized, executed and delivered by the Borrower and, upon due
authorization, execution and delivery by the other parties thereto, will
constitute a valid, legal and binding agreement of the Borrower, enforceable
against the Borrower in accordance with its terms, except as enforceability may
be limited by (i) bankruptcy, insolvency, liquidation, receivership, moratorium,
reorganization or other similar laws affecting the rights of creditors and (ii)
general principles of equity, whether enforcement is sought in a proceeding in
equity or at law.
5. No material litigation or administrative proceeding of or
before any government body is presently pending, or, to the best of my knowledge
(after due inquiry), threatened against the Borrower or its respective assets.
6. No consent, approval, authorization or order of, registration
or filing with, or notice to, any governmental authority or court is required
under federal laws or the laws of the State of ____________ for the execution,
delivery and performance of the Transaction Documents to which the Borrower is a
party.
7. The execution, delivery and performance by the Borrower of the
Transaction Documents to which it is a party do not conflict with or result in a
breach of or constitutes a default under any law, rule or regulation of the
federal government or the State of _______________.
8. The delivery by the Borrower to the Custodian of the
promissory notes (the "Notes") evidencing the Mortgage Loans as and in the
manner contemplated by the Interim Loan and Security Agreement and the Custodial
Agreement, create a perfected first priority security interest in the Notes
securing the obligations of the Borrower to the Lender under the Interim Loan
and Security Agreement.
I am admitted to practice law in the State of _______________,
and the foregoing opinions are limited to the federal law of the United States
and the laws of the State of _______________.
Sincerely yours,
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Exhibit B-3
SECURED NOTE
ENDORSEMENT NO. ___
______________, 199__
The undersigned Borrowers hereby agree with National Westminster
Bank Plc (the "Lender") that the Secured Note of the Borrowers, dated February
28, 1996, as it may have been previously amended by endorsement, in the maximum
principal amount of $__________, to which this Secured Note Endorsement No. ___
is attached, is hereby amended by changing the maximum principal amount of the
Secured Note to $__________.
This Secured Note Endorsement No. ___ is given as a renewal,
rearrangement and extension of the obligations of the Borrowers to the Lender
under the Secured Note and is not given in substitution therefor or
extinguishment thereof. The Borrowers hereby authorize the Lender to attach this
Secured Note Endorsement No. ___ to the Secured Note.
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Borrower: INDUSTRY MORTGAGE COMPANY, L.P.
By: Industry Mortgage Corporation,
its General Partner
By:_________________________________________
Name:
Title:
IMC CORPORATION OF AMERICA
By:____________________________________________
Name:
Title:
Lender: NATIONAL WESTMINSTER BANK PLC
NEW YORK BRANCH
By:____________________________________________
Name:
Title:
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Exhibit C
[Letterhead of Counsel to Borrower]
_______________, 1996
[Custodian's Address]
National Westminster Bank Plc
175 Water Street
New York, New York 10038
Gentlemen:
This opinion is being delivered to you pursuant to subsection
2(d)(iii)(A) of the Interim Loan and Security Agreement.
[Opinion must be modified to reflect the inclusion of the
Subsidiary as a Borrower.]
Capitalized terms used herein and not defined herein shall have
the meanings assigned to them in the Interim Loan and Security Agreement.
[Assumptions and Qualifications Acceptable to Lender]
Based upon the foregoing, I am of the opinion that:
1. The Borrower is a [limited partnership] [corporation] duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and is qualified or licensed to do business in each state wherein it
owns property or is required to be so qualified or licensed.
2. The Borrower has the power and legal right to enter into each
of the Transaction Documents to which it is a party, to borrow under the Interim
Loan and Security Agreement and the Note and to grant liens under the Interim
Loan and Security Agreement and has taken all necessary action to authorize such
borrowing and such granting of liens upon the terms and conditions of the
Interim Loan and Security Agreement and to authorize the execution, delivery and
performance of the Transaction Documents to which it is a party. No consent of
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any other Person (including, without limitation, stockholders of the Borrower),
and no consent, license, permit, approval or authorization of, or registration
or declaration with, any governmental authority, bureau or agency is required in
connection with the execution and delivery or enforceability of each of the
Transaction Documents to which the Borrower is a party.
3. Each of the Transaction Documents has been duly authorized,
executed and delivered by the Borrower and, upon due authorization, execution
and delivery by the other parties thereto, will constitute a valid, legal and
binding agreement of the Borrower, enforceable against the Borrower in
accordance with its terms, except as enforceability may be limited by (i)
bankruptcy, insolvency, liquidation, receivership, moratorium, reorganization or
other similar laws affecting the rights of creditors and (ii) general principles
of equity, whether enforcement is sought in a proceeding in equity or at law.
4. The execution, delivery and performance of each of the
Transaction Documents to which the Borrower is a party will not violate any
provision of any existing law or regulation or of the certificate of limited
partnership or limited partnership agreement of the Borrower or of any Mortgage,
indenture, contract or other undertaking to which, to the best of my knowledge
(after due inquiry), the Borrower is a party or which is binding upon it or its
assets, and, to the best of my knowledge (after due inquiry), will not result in
the creation or imposition of any lien, charge or encumbrance on any of its
assets pursuant to the provisions of any of the foregoing.
5. No material litigation or administrative proceeding of or
before any government body is presently pending, or, to the best of my knowledge
(after due inquiry), threatened against the Borrower or its respective assets.
6. No consent, approval, authorization or order of, registration
or filing with, or notice to, any governmental authority or court is required
under federal laws or the laws of the State of _____________ for the execution,
delivery and performance of the Transaction Documents to which the Borrower is a
party.
7. The execution, delivery and performance by the Borrower of the
Transaction Documents to which it is a party do not conflict with or result in a
breach of or constitute a default under any law, rule or regulation of the
federal government or the State of _______________.
8. The delivery by the Borrower to the Custodian of the
promissory notes (the "Notes") evidencing the Mortgage Loans as and in the
manner contemplated by the Interim Loan and Security Agreement and the Custodial
Agreement, create a perfected first priority security interest in the Notes
securing the obligations of the Borrower to the Lender under the Interim Loan
and Security Agreement.
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I am admitted to practice law in the State of __________, and the
foregoing opinions are limited to the federal law of the United States and the
laws of the State of ______________.
Sincerely yours,
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Exhibit D
NOTICE OF BORROWING NO. __________
National Westminster Bank Plc
175 Water Street, 20th Floor
New York, New York 10038
Attention: Mortgage and Asset-Backed
Securities Group
Telecopy: 212-602-5726
Confirmation: 212-602-5470
Pursuant to the Interim Loan and Security Agreement, dated as of
February 28, 1996 (as amended from time to time, the "Agreement"), between you
and Industry Mortgage Company, L.P. and IMC Corporation of America (the
"Borrowers"), the undersigned Borrower hereby gives notice of its election to
request an Advance and, in connection therewith, sets forth below the following
information (all capitalized terms used herein shall have the meaning specified
therefor in the Agreement):
[1. The Advance is being made in respect of Mortgage Loans to be sold
[to [Name of Trust]] (the "Designated Trust")] [pursuant to a
Designated Sale].
2. The principal amount of the requested Advance is $_______________
[minimum amount of at least $500,000].
3. The Business Day on which this Advance is to be made is
_______________, 199__ (the "Funding Date") [in the case of a
LIBOR Advance, the Funding Date may be no earlier than the third
Business Day following the date hereof and, in the case of a
Federal Funds Rate Advance, the Funding Date may be the date
hereof] [in the case of a Federal Funds Rate Advance, the index
will convert to LIBOR on the third Business Day following the
date hereof].
4. The date on which this Advance shall mature is _______________,
199__ or, if earlier, the date of the related Securitization or
the related Designated Sale [the Maturity Date].
5. Attached hereto is a copy of the Mortgage Loan Schedule (as
defined in the Custodial Agreement) being submitted to the
Custodian in connection with the Advance requested hereby.
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6. In the event of a LIBOR Advance, the LIBOR fixture period shall
begin on the date of such Advance and shall end on the fifth
Business Day of the following month.
7. The Advance shall be wired to [specify Bank, location, account]
in immediately available funds.
The undersigned hereby certifies that the following statements
are true and correct on the date hereof and shall be true and correct on the
date of the Advance requested herein, before and after giving effect thereto:
A. Each of the representations and warranties of the Borrower
contained in the Agreement and the other Transaction Documents
are true and correct in all material respects; and
B. No Event of Termination has occurred and no Default or Event of
Default has occurred and is continuing and no Default or Event of
Default will occur as a result of the making of the Advance.
[INDUSTRY MORTGAGE COMPANY, L.P.
By: Industry Mortgage Corporation,
its General Partner
By:_________________________________________
Name:_______________________________________
Title:______________________________________
Date:______________________________ , 199__]
[IMC CORPORATION OF AMERICA
By:_________________________________________
Name:_______________________________________
Title:______________________________________
Date:______________________________ , 199__]
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[EXECUTION COPY]
MASTER REPURCHASE AGREEMENT
Among:
BEAR STEARNS HOME EQUITY TRUST 1996-1
and
INDUSTRY MORTGAGE COMPANY, L.P.
and
IMC CORPORATION OF AMERICA
Dated as of March 29, 1996
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1. APPLICABILITY
From time to time the parties hereto may enter into transactions in
which Industry Mortgage Company, L.P. ("IMCLP") and IMC Corporation of America
("IMCA"; IMCLP and IMCA are each referred to herein as an "Obligor" and
collectively as the "Obligors") each agrees to transfer to Bear Stearns Home
Equity Trust 1996-1 ("Buyer") HELs against the transfer of funds by Buyer, with
a simultaneous agreement by Buyer to transfer to the related Obligor such HELs
at a date certain or on demand, against the transfer of funds by an Obligor.
Each such transaction shall be referred to herein as a "Transaction" and shall
be governed by this Agreement, as the same shall be amended from time to time.
2. DEFINITIONS
(a) "Act of Insolvency", with respect to Buyer or an Obligor, (i) the
commencement by such party as debtor of any case or proceeding under any
bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law,
or such party seeking the appointment of a receiver, trustee, custodian or
similar official for such party or any substantial part of its property, or (ii)
the commencement of any such case or proceeding against such party, or another
seeking such an appointment, or the filing against a party of an application for
a protective decree under the provisions of the Securities Investor Protection
Act of 1970, which (A) is consented to or not timely contested by such party,
(B) results in the entry of an order for relief, such an appointment, the
issuance of such a protective decree or the entry of an order having a similar
effect, or (C) is not dismissed within 15 days, (iii) the making by a party of a
general assignment for the benefit of creditors, or (iv) the admission in
writing by a party of such party's inability to pay such party's debts as they
become due;
(b) "Additional Purchased HELs", HELs provided by an Obligor to Buyer
pursuant to Paragraph 4(a) hereof;
(c) "Business Day", any day other than a Saturday, Sunday and any day on
which banks located in the State of New York are authorized or required to close
for business;
(d) "Buyer's Margin Amount", with respect to any Transaction as of any
date, the amount obtained by application of a percentage, agreed to by Buyer and
an Obligor prior to entering into the Transaction and specified in the related
Request/Confirmation, to the Repurchase Price for such Transaction as of such
date;
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(e) "Custodian", the custodian named in the Custodial Agreement and any
permitted successor thereto;
(f) "Custodial Agreement", the Custodial Agreement among Buyer, the
Obligors and the Custodian providing for the custody of records relating to the
Purchased HELs;
(g) "Delayed Document HEL", the meaning specified in Paragraph 7(b)
hereof.
(h) "FNMA", the Federal National Mortgage Association;
(i) "HEL", a home equity loan consisting of a Note secured by Mortgage;
(j) "Income", with respect to any HEL at any time, any principal thereof
then payable and all payments of interest and principal together with other
distributions thereon or proceeds thereof;
(k) "LIBOR", the London Interbank Offered Rate for United States Dollar
deposits of a specified duration as set forth on page 4833 of Telerate as of
8:00 a.m., New York time, on the date of determination;
(l) "Loan Schedule", 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 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
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information as soon as practicable after the production of such Loan Schedule;
(m) "Margin Deficit", the meaning specified in Paragraph 4(a) hereof;
(n) "Market Value", with respect to any HELs as of any date, the fair
market value of such HELs on such date as determined by Buyer in its reasonable
business judgment from time to time and at such times as it may elect in its
sole discretion; provided, however, that a Market Value of zero shall be
assigned to (i) any HEL that has been delinquent for more than eighty-nine (89)
days, (ii) any HEL that has been subject to this Agreement for more than one
hundred and eighty (180) days in aggregate, (iii) any HEL with respect to which
there is a breach of a representation or warranty made by the Obligors in this
Agreement or the Custodial Agreement that materially adversely affects Buyer's
interests hereunder or (iv) any Delayed Document HEL with respect to which
documentation required to be delivered to the Custodian by the Custodial
Agreement has not been delivered to the Custodian within three (3) Business Days
after the related Purchase Date;
(o) "Mortgage", 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 a Note;
(p) "Mortgagor", the obligor on a Note;
(q) "Note", the Note or other evidence of indebtedness evidencing the
indebtedness of a Mortgagor under a HEL;
(r) "Price Differential", with respect to any Transaction hereunder as
of any date, the aggregate amount obtained by daily application of the Pricing
Rate for such Transaction to the Purchase Price for such Transaction on a 360
day per year basis for the actual number of days during the period commencing on
(and including) the Purchase Date for such Transaction and ending on (but
excluding) the date of determination (reduced by any amount of such Price
Differential previously paid by an Obligor to Buyer with respect to such
Transaction);
(s) "Pricing Rate", 87.5 basis points in excess of LIBOR of a mutually
agreed upon duration, which rate shall be specified in the related
Request/Confirmation;
(t) "Prime Rate", the prime rate of U.S. money center commercial banks
as published in The Wall Street Journal;
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(u) "Purchase Date", the date with respect to each Transaction on which
Purchased HELs are sold by an Obligor to Buyer hereunder;
(v) "Purchase Price", (i) on the Purchase Date, the price at which
Purchased HELs are sold by an Obligor to Buyer hereunder, and (ii) thereafter,
such price decreased by the amount of any cash transferred by an Obligor to
Buyer pursuant to Paragraph 4(a) hereof;
(w) "Purchased HELs", the HELs sold by an Obligor to Buyer in a
Transaction hereunder, and any HELs substituted therefor in accordance with
Paragraph 9 hereof. The term "Purchased HELs" with respect to any Transaction at
any time also shall include Additional Purchased HELs delivered pursuant to
Paragraph 4(a);
(x) "Replacement HELs", the meaning specified in Paragraph 11(e)(ii)
hereof;
(y) "Repurchase Date", the date on which an Obligor is to repurchase the
Purchased HELs from Buyer, including any date determined by application of the
provisions of Paragraphs 3(e) or 11 hereof;
(z) "Repurchase Price", the price at which Purchased HELs are to be
resold by Buyer to an Obligor upon termination of a Transaction, which will be
determined in each case as the sum of the Purchase Price and the Price
Differential as of the date of such determination, increased by any amount
determined by the application of the provisions of Paragraph 11 hereof;
(aa) "Request/Confirmation", the request and confirmation substantially
in the form of Exhibit A hereto delivered pursuant to Paragraph 3 hereof.
3. INITIATION; REQUEST/CONFIRMATION; TERMINATION; TRANSACTIONS OPTIONAL
(a) Any agreement to enter into a Transaction shall be made in writing
at the initiation of an Obligor. In the event that an Obligor desires to enter
into a Transaction hereunder, such Obligor shall deliver to Buyer prior to 5:00
p.m., New York City time, on the Business Day prior to the proposed Purchase
Date, a Request/Confirmation complete in every respect except for the signature
of an authorized representative of Buyer. Buyer shall, upon its receipt and
approval thereof, promptly execute and return the signed Request/Confirmation to
the Obligor.
(b) The Request/Confirmation shall describe the Purchased HELs in a
manner satisfactory to Buyer (which may
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be by attaching a Loan Schedule thereto), identify Buyer and the Obligor and set
forth (i) the Purchase Date, (ii) the Purchase Price, (iii) the Repurchase Date,
unless the Transaction is to be terminable on demand, (iv) the Pricing Rate or
Repurchase Price applicable to the Transaction, and (v) any additional terms or
conditions of the Transaction mutually agreeable to Buyer and an Obligor.
(c) Each Request/Confirmation shall be binding upon the Obligors
(jointly and severally) and Buyer unless written notice of objection is given by
the objecting party to the other party within one (1) Business Day after Buyer
has delivered the completed Request/Confirmation to an Obligor.
(d) In the event of any conflict between the terms of a
Request/Confirmation and this Agreement, such Request/Confirmation shall
prevail.
(e) In the case of Transactions terminable upon demand, such demand
shall be made by Buyer or the Obligor, no later than such time as is customary
in accordance with market practice, by telephone or otherwise on or prior to the
Business Day on which such termination will be effective. On the date specified
in such demand, or on the date fixed for termination in the case of Transactions
having a fixed term, termination of the Transaction will be effected by resale
by Buyer to an Obligor or its agent of the Purchased HELs and any Income in
respect thereof received by Buyer (and not previously credited or transferred
to, or applied to the obligations of, the related Obligor hereunder) against the
transfer of the Repurchase Price to an account of Buyer.
(f) The adjustment mechanism and the index for any adjustable rate HEL
must have been provided to Buyer in writing and Buyer shall not have objected to
the use by the Obligors of such adjustment mechanism and index.
(g) Notwithstanding any provision of this Agreement or the Custodial
Agreement to the contrary, the initiation of each Transaction is subject to the
approval of Buyer in its sole discretion. Buyer may, in its sole discretion,
reject any HEL from inclusion in a Transaction hereunder for any reason.
4. MARGIN MAINTENANCE
(a) If at any time the aggregate Market Value of all Purchased HELs
subject to all Transactions hereunder is less than the aggregate Buyer's Margin
Amount for all such Transactions (a "Margin Deficit"), then Buyer may by notice
to an Obligor require the Obligor in such Transactions, at
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Buyer's option, to transfer to Buyer cash or additional HELs reasonably
acceptable to Buyer ("Additional Purchased HELs"), so that the cash and
aggregate Market Value of the Purchased HELs, including any such Additional
Purchased HELs, will thereupon equal or exceed such aggregate Buyer's Margin
Amount.
(b) If the notice to be given by Buyer to an Obligor under subparagraph
(a) above is given at or prior to 10:00 a.m. New York City time on a Business
Day, the Obligor shall transfer cash or Additional Purchased HELs to Buyer prior
to the close of business in New York City on the date of such notice, and if
such notice is given after 10:00 a.m. New York City time, the Obligor shall
transfer cash or Additional Purchased HELs prior to the close of business in New
York City on the Business Day following the date of such notice.
(c) Any cash transferred pursuant to this Paragraph shall be attributed
to such Transactions as shall be agreed upon by Buyer and the Obligor.
5. INCOME PAYMENTS
Where a particular Transaction's term extends over an Income payment
date on the HELs subject to that Transaction, all payments and distributions,
whether in cash or in kind, made on or with respect to the Purchased HELs shall,
unless otherwise mutually agreed by Buyer and the related Obligor and so long as
an Event of Default on the part of an Obligor shall not have occurred and be
continuing, be paid directly to the related Obligor by the related Mortgagor.
Buyer shall not be obligated to take any action pursuant to the preceding
sentence to the extent that such action would result in the creation of a Margin
Deficit, unless prior thereto or simultaneously therewith the Obligor transfers
to Buyer, at Buyer's option, cash or Additional Purchased HELs sufficient to
eliminate such Margin Deficit.
6. SECURITY INTEREST
Although the parties intend that all Transactions hereunder be sales and
purchases and not loans, in the event any such Transactions are deemed to be
loans, the related Obligor shall be deemed to have pledged to Buyer as security
for the performance by the Obligors of their obligations under each such
Transaction, and shall be deemed to have granted to Buyer a security interest
in, all of the Purchased HELs with respect to all Transactions hereunder and all
proceeds thereof. The Obligors shall pay all fees and expenses associated with
perfecting such security interest including, without limitation, the cost of
filing financing statements under the Uniform Commercial Code and
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recording assignments of mortgage as and when required by Buyer in its sole
discretion.
7. PAYMENT AND TRANSFER
(a) Unless otherwise mutually agreed, all transfers of funds hereunder
shall be in immediately available funds. All HELs transferred by one party
hereto to the other party shall, except as provided in (b) below, be transferred
by notice to the Custodian to the effect that the Custodian is now holding for
the benefit of the transferee the related documents and assignment forms
delivered to it under the Custodial Agreement.
(b) The parties agree that, with respect to certain Purchased HELs (the
"Delayed Document HELs"), the delivery to the Custodian of documents and
assignment forms required by the Custodial Agreement may be delayed for a period
of not more than three (3) Business Days after the related
Purchase Date.
8. SEGREGATION OF DOCUMENTS RELATING TO PURCHASED HELS
All documents relating to Purchased HELs in the possession of an
Obligor, other than credit and servicing files, shall be segregated from other
documents and securities in its possession and shall be identified as being
subject to this Agreement. Ownership of all Purchased HELs shall pass to Buyer
and nothing in this Agreement shall preclude Buyer from engaging in repurchase
transactions with the Purchased HELs or otherwise pledging or hypothecating the
Purchased HELs, but no such transaction shall relieve Buyer of its obligations
to resell and transfer Purchased HELs to an Obligor pursuant to the terms
hereof.
9. SUBSTITUTION
An Obligor may, subject to agreement with and acceptance by Buyer,
substitute other HELs for any Purchased HELs. Such substitution shall be made by
transfer to Buyer of such other HELs and transfer to the Obligor of such
Purchased HELs. After substitution, the substituted HELs shall be deemed to be
Purchased HELs.
10. REPRESENTATIONS, WARRANTIES AND COVENANTS
(a) Buyer and the Obligors each represents and warrants, and shall on
and as of the Purchase Date of any Transaction be deemed to represent and
warrant, to the other that:
(i) it is duly authorized to execute and deliver this Agreement,
to enter into the Transactions
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contemplated hereunder and to perform its obligations hereunder and has
taken all necessary action to authorize such execution, delivery and
performance;
(ii) it will engage in such Transactions as principal (or, if
agreed in writing in advance of any Transaction by the other party
hereto, as agent for a disclosed principal);
(iii) the person signing this Agreement on its behalf is duly
authorized to do so on its behalf (or on behalf of any such disclosed
principal);
(iv) it has obtained all authorizations of any governmental body
required in connection with this Agreement and the Transactions
hereunder and such authorizations are in full force and effect; and
(v) the execution, delivery and performance of this Agreement
and the Transactions hereunder will not violate any law, ordinance,
governing document, by-law or rule applicable to it or any agreement by
which it is bound or by which any of its assets are affected.
(b) The Obligors jointly and severally represent and warrant to Buyer, and shall
on and as of the Purchase Date of any Transaction be deemed to represent and
warrant, as follows:
(i) The documents disclosed by an Obligor to Buyer pursuant to
this Agreement are either original documents or genuine and true copies
thereof;
(ii) Each Obligor is a separate and independent entity from the
Custodian, neither Obligor owns a controlling interest in the Custodian
either directly or through affiliates and no director or officer of an
Obligor is also a director or officer of the Custodian;
(iii) None of the Purchase Price for any HEL will be used either
directly or indirectly to acquire any security, as that term is defined
in Regulation T of the Regulations of the Board of Governors of the
Federal Reserve System, and neither Obligor has taken any action that
might cause any Transaction to violate any regulation of the Federal
Reserve Board;
(iv) Each HEL was underwritten in accordance with the written
underwriting standards of the Obligors furnished by an Obligor to Buyer,
and no change to such underwriting standards has occurred since the date
of the last written revision to such standards was furnished to Buyer by
an Obligor;
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(v) The related Obligor shall be at the time it transfers to
Buyer any HELs for any Transaction the legal and beneficial owner of
such HELs, free of any lien, security interest, option or encumbrance;
(vi) The related Obligor used no selection procedures that
identified the HELs relating to a Transaction as being less desirable or
valuable than other comparable assets in the Obligor's portfolio on the
related Purchase Date; and
(vi) Less than 5% (by aggregate Purchase Price) of the Purchased
HELs subject to this Agreement are delinquent by more than eighty-nine
(89) days.
(c) The Obligors make the representations and warranties set forth at
Exhibit B with respect to the HELs as of the related Purchase Date; provided,
however, that Buyer may, in its sole discretion, waive compliance with any such
representations and warranties.
(d) The Obligors covenant with Buyer, from and after the date hereof, as
follows:
(i) The Obligors shall immediately notify Buyer if an Event of
Default shall have occurred;
(ii) The Obligors shall deliver to Buyer a current Loan Schedule
with respect to all HELs subject to this Agreement with such frequency
as Buyer may require but in no event less frequently than monthly;
(iii) No HEL shall be subject to this Agreement for more than
one hundred and eighty (180) days in aggregate;
(iv) The documents required to be delivered to the Custodian for
each Purchased HEL under the Custodial Agreement shall, with respect to
any Delayed Document HEL, be so delivered not later than three (3)
Business Days after the related Purchase Date;
(v) The Obligors shall provide in writing or by electronic
transmission to Buyer each adjustment mechanism and the index for any
adjustable rate HELs prior to selling such HELs to Buyer hereunder; and
(vi) The aggregate Purchase Price paid for all Delayed Document
HELs subject to this Agreement for which the documents required to be
delivered to the Custodian under the Custodial Agreement have not been
so delivered shall not exceed the lesser of $20,000,000
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and 50% of the Purchase Price for all Purchased HELs subject to this
Agreement.
11. EVENTS OF DEFAULT; EVENT OF TERMINATION
(a) The following events shall constitute events of default (each an
"Event of Default") hereunder with respect to Buyer or an Obligor, as
applicable:
(i) An Obligor fails to repurchase or Buyer fails to transfer
Purchased HELs upon the applicable Repurchase Date pursuant to the terms
hereof;
(ii) An Obligor or Buyer fails, after one (1) Business Day's
notice, to comply with Paragraph 4 hereof;
(iii) An Act of Insolvency occurs with respect to an Obligor or
Buyer or any controlling entity thereof;
(iv) Any representation or warranty made by an Obligor or Buyer
shall have been incorrect or untrue in any material respect when made or
repeated or deemed to have been made or repeated; provided, however,
that in the case of representations and warranties made with respect to
the Purchased HELs, such circumstance shall not constitute an Event of
Default if, after determining the Market Value of the Purchased HELs
without taking into account the Purchased HELs with respect to which
such circumstance has occurred, no other Event of Default shall have
occurred and be continuing;
(v) Any covenant shall have been breached in any material
respect; provided, however, that in the case of covenants made with
respect to the Purchased HELs, such circumstance shall not constitute an
Event of Default if, after determining the Market Value of the Purchased
HELs without taking into account the Purchased HELs with respect to
which such circumstance has occurred, no other Event of Default shall
have occurred and be continuing;
(vi) Buyer shall have reasonably determined that an Obligor is
or will be unable to meet its commitments under this Agreement, shall
have notified the Obligor of such determination and the Obligor shall
not have responded with appropriate information to the contrary to the
satisfaction of Buyer within twenty-four (24) hours;
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(vii) This Agreement shall for any reason cease to create a
valid, first priority security interest in any of the Purchased HELs
purported to be covered hereby;
(viii) A final judgment by any competent court in the United
States of America for the payment of money in an amount of at least
$100,000 is rendered against an Obligor, and the same remains
undischarged for a period of sixty (60) days during which execution of
such judgment is not effectively stayed;
(ix) Any event of default or any event which with notice, the
passage of time or both shall constitute an event of default shall occur
and be continuing under any repurchase or other financing agreement for
borrowed funds or indenture for borrowed funds by which an Obligor is
bound or affected shall occur and be continuing;
(x) In the judgment of Buyer a material adverse change shall
have occurred in the business, operations, properties, prospects or
condition (financial or otherwise) of an Obligor;
(xi) An Obligor shall be in default with respect to any normal
and customary covenants under any debt contract or agreement, any
servicing agreement or any lease to which it is a party, which default
could materially adversely affect the financial condition of such
Obligor (which covenants include, but are not limited to, an Act of
Insolvency of an Obligor or the failure of an Obligor to make required
payments under such contract or agreement as they become due);
(xii) An Obligor shall fail to promptly notify Buyer of (i) the
acceleration of any debt obligation or the termination of any credit
facility of an Obligor; (ii) the amount and maturity of any such debt
assumed after the date hereof; (iii) any adverse developments with
respect to pending or future litigation involving an Obligor; and (iv)
any other developments which might materially and adversely affect the
financial condition of an Obligor; or
(xiii) An Obligor shall have failed to comply in any material
respect with its obligations under the Custodial Agreement.
(b) If an Event of Default shall have occurred and be continuing, then,
at the option of the nondefaulting party, exercised by written notice to the
defaulting party (which option shall be deemed to have been exercised, even if
no notice is given, immediately upon the occurrence of an Act
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of Insolvency), the Repurchase Date for each Transaction hereunder shall be
deemed immediately to occur.
(c) In all Transactions in which the defaulting party is an Obligor, if
Buyer is deemed to have exercised the option referred to in subparagraph (b) of
this Paragraph, (i) the Obligors' obligations hereunder to repurchase all
Purchased HELs in such Transactions shall thereupon become immediately due and
payable, (ii) to the extent permitted by applicable law, the Repurchase Price
with respect to each such Transaction shall be increased by the aggregate amount
obtained by daily application of (x) the greater of the Pricing Rate for such
Transaction and the Prime Rate to (y) the Repurchase Price for such Transaction
as of the Repurchase Date as determined pursuant to subparagraph (b) of this
Paragraph (decreased as of any day by (A) any amounts retained by Buyer with
respect to such Repurchase Price pursuant to clause (iii) of this subparagraph,
(B) any proceeds from the sale of Purchased HELs pursuant to subparagraph (e)(i)
of this Paragraph, and (C) any amounts credited to the account of an Obligor
pursuant to subparagraph (f) of this Paragraph) on a 360 day per year basis for
the actual number of days during the period from and including the date of the
Event of Default giving rise to such option to but excluding the date of payment
of the Repurchase Price as so increased, (iii) all Income paid after such
exercise or deemed exercise shall be payable to and retained by Buyer applied to
the aggregate unpaid Repurchase Prices owed by the Obligors, and (iv) the
Obligors shall immediately deliver or cause the Custodian to deliver to Buyer
any documents relating to Purchased HELs subject to such Transactions then in
the possession of either Obligor.
(d) In all Transactions in which the defaulting party is Buyer, upon
tender by the related Obligor of payment of the aggregate Repurchase Prices for
all such Transactions, Buyer's right, title and interest in all Purchased HELs
subject to such Transactions shall be deemed transferred to such Obligor, and
Buyer shall deliver or cause the Custodian to deliver all documents relating to
such Purchased HELs to the related Obligor.
(e) After one (1) Business Day's notice to the defaulting party (which
notice need not be given if an Act of Insolvency shall have occurred, and which
may be the notice given under subparagraph (b) of this Paragraph or the notice
referred to in clause (ii) of the first sentence of subparagraph (a) of this
Paragraph), the nondefaulting party may:
(i) as to Transactions in which the defaulting party is an
Obligor, (A) immediately sell on a
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servicing released or servicing retained basis as Buyer deems desirable,
in a recognized market at such price or prices as Buyer may in its sole
discretion deem satisfactory, any or all Purchased HELs subject to such
Transactions and apply the proceeds thereof to the aggregate unpaid
Repurchase Prices and any other amounts owing by either Obligor
hereunder or (B) in its sole discretion elect, in lieu of selling all or
a portion of such Purchased HELs, to give the Obligor credit for such
Purchased HELs in an amount equal to the Market Value therefor on such
date against the aggregate unpaid Repurchase Prices and any other
amounts owing jointly and severally by the Obligors hereunder; and
(ii) as to Transactions in which the defaulting party is Buyer,
(A) purchase home equity loans ("Replacement HELs") having substantially
the same outstanding principal amount, maturity and interest rate as any
Purchased HELs that are not transferred by Buyer to an Obligor as
required hereunder or (B) in its sole discretion elect, in lieu of
purchasing Replacement HELs, to be deemed to have purchased Replacement
HELs at the price therefor on such date, calculated as the average of
the prices obtained from three (3) nationally recognized registered
broker/dealers that buy and sell comparable home equity loans in the
secondary market.
(f) As to Transactions in which the defaulting party is Buyer, Buyer
shall be liable to the related Obligor (i) with respect to Purchased HELs (other
than Additional Purchased HELs), for any excess of the price paid (or deemed
paid) by such Obligor for Replacement HELs therefor over the Repurchase Price
for such Purchased HELs and (ii) with respect to Additional Purchased HELs, for
the price paid (or deemed paid) by the Obligor for the Replacement HELs
therefor. In addition, Buyer shall be liable to such Obligor for interest on
such remaining liability with respect to each such purchase (or deemed purchase)
of Replacement HELs from the date of such purchase (or deemed purchase) until
paid in full by Buyer. Such interest shall be at a rate equal to the greater of
the Pricing Rate for such Transaction or the Prime Rate.
(g) For purposes of this Paragraph 11, the Repurchase Price for each
Transaction hereunder in respect of which the defaulting party is Buyer shall
not increase above the amount of such Repurchase Price for such Transaction
determined as of the date of the exercise or deemed exercise by the related
Obligor of its option under subparagraph (b) of this Paragraph.
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(h) The defaulting party shall be liable to the nondefaulting party for
the amount of all reasonable legal or other expenses incurred by the
nondefaulting party in connection with or as a consequence of an Event of
Default, together with interest thereon at a rate equal to the greater of the
Pricing Rate for the relevant Transaction or the Prime Rate. Expenses incurred
in connection with an Event of Default shall include without limitation those
costs and expenses incurred by the nondefaulting party as a result of the early
termination of any repurchase agreement or reverse repurchase agreement entered
into by the nondefaulting party in connection with the Transaction then in
default.
(i) The nondefaulting party shall have, in addition to its rights
hereunder, any rights otherwise available to it under any other agreement or
applicable law.
(j) In the event that the senior debt obligations or short-term debt
obligations of Bear Stearns & Co. Inc. shall be rated below the four highest
generic grades (without regard to any pluses or minuses reflecting gradations
within such generic grades) by any nationally recognized statistical rating
organization then, at the option of Buyer exercised by written notice to an
Obligor, the Pricing Rate for all Transactions having a Purchase Date on or
after the date of such notice shall be adjusted in a mutually agreeable manner
to reflect Buyer's cost of funds.
(k) The exercise by any party of remedies after the occurrence of an
Event of Default shall be conducted in a commercially reasonable manner.
12. SERVICING OF THE PURCHASED HELS
(a) The parties hereto agree and acknowledge that, notwithstanding the
purchase and sale of the Purchased HELs contemplated hereby, the related Obligor
shall service the Purchased HELs for the benefit of Buyer and, if Buyer shall
exercise its rights to sell the Purchased HELs pursuant to this Agreement prior
to the related Repurchase Date, Buyer's assigns; provided, however, that the
obligation of the Obligor to service Purchased HELs for the benefit of Buyer as
aforesaid shall cease upon the payment to Buyer of the Repurchase Price
therefor.
(b) The related Obligor shall service and administer the Purchased HELs
and shall have full power and authority, acting alone, to do any and all things
in connection with such servicing which such Obligor may deem necessary or
desirable and consistent with the terms of this Agreement, and shall retain all
principal prepayments and Income received by such Obligor with respect to such
Purchased HELs
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pursuant to the terms hereof. The related Obligor, in administering and
servicing the Purchased HELs, shall employ procedures (including collection
procedures) and exercise the same care it customarily employs and exercises in
servicing and administering home equity loans for its own account, in accordance
with accepted home equity loan servicing practices of prudent lending
institutions and giving due consideration to Buyer's reliance on such Obligor.
The related Obligor will provide Buyer with monthly reports in a mutually
agreeable format.
(c) Buyer may, in its sole discretion if an Event of Default shall have
occurred and be continuing, without payment of any termination fee or any other
amount to an Obligor, (i) sell the HELs on a servicing released basis or (ii)
terminate the applicable Obligor as the servicer of the Purchased HELs with or
without cause.
13. SINGLE AGREEMENT
Buyer and the Obligors acknowledge that, and have entered hereinto and
will enter into each Transaction hereunder in consideration of and in reliance
upon the fact that, all Transactions hereunder constitute a single business and
contractual relationship and have been made in consideration of each other.
Accordingly, each of Buyer and IMCLP and IMCA agrees (i) to perform all of its
obligations in respect of each Transaction hereunder, and that a default in the
performance of any such obligations shall constitute a default by it in respect
of all Transactions hereunder, (ii) that each of them shall be entitled to set
off claims and apply property held by them in respect of any Transaction against
obligations owing to them in respect of any other Transactions hereunder and
(iii) that payments, deliveries and other transfers made by any of them in
respect of any Transaction shall be deemed to have been made in consideration of
payments, deliveries and other transfers in respect of any other Transactions
hereunder, and the obligations to make any such payments, deliveries and other
transfers may be applied against each other and netted.
14. NOTICES AND OTHER COMMUNICATIONS
Except as otherwise expressly provided herein, all such notices or
communications shall be in writing (including, without limitation, telegraphic,
facsimile or telex communication) or confirmed in writing and such notices and
other communications shall, when mailed, telegraphed, communicated by facsimile
transmission or telexed, be effective when received at the address for notices
for the party to whom such notice or communications is to be given as follows:
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if to IMCLP:
Industry Mortgage Company, L.P.
3450 Bushwood Park Drive
Suite 250
Tampa Bay, Florida 33618
Attention: George Freeman
Telephone: (813) 932-2211
Telecopy: (813) 931-4840
if to IMCA:
IMC Corporation of America
3450 Bushwood Park Drive, Suite 250
Tampa Bay, Florida 33618
Attention: George Freeman
Telephone: (813) 932-2211
Telecopy: (813) 931-4840
if to Buyer:
Bear Stearns Home Equity Trust 1996-1
c/o State Street Bank and Trust Company of
California, N.A., as Owner Trustee
Two International Place, Mail Stop IP5
Boston, Massachusetts 02110
Attention: David Ducloss
Telephone: (617) 664-5416
Telecopy: (617) 664-5367
Notwithstanding the foregoing, however, that a facsimile transmission shall be
deemed to be received when transmitted so long as the transmitting machine has
provided an electronic confirmation of such transmission, and provided further,
however, that all financial statements delivered shall be hand-delivered or sent
by first-class mail. Any party may revise any information relating to it by
notice in writing to the other party, which notice shall be effective on the
third Business Day following receipt thereof.
15. PAYMENT OF EXPENSES
The Obligors shall pay on demand all reasonable fees and expenses
(including, without limitation, the fees and expenses for legal services of any
kind whatsoever) incurred by Buyer or the Custodian in connection with this
Agreement and the Custodial Agreement and the transactions contemplated hereby
and thereby, whether or not any Transactions are entered into hereunder,
including, by way of illustration and not by way of limitation, the fees and
expenses incurred in connection with (i) the preparation, reproduction and
distribution of this Agreement and the Custodial Agreement and any opinions of
counsel, certificates of officers or other documents contemplated by the
aforementioned agreements and (ii) any Transaction under this Agreement;
provided, however, that the Obligors shall
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not be required to pay the fees and expenses of Buyer's counsel in excess of
$10,000; and provided further, however, that the Obligors shall not be required
to pay the fees and expenses of Buyer incurred as a result of Buyer's default
under this Agreement. The joint and several obligation of the Obligors to pay
such fees and expenses incurred prior to or in connection with the termination
of this Agreement shall survive the termination of this Agreement.
16. OPINIONS OF COUNSEL
The Obligors shall, on the Purchase Date of the first Transaction
hereunder and, upon the request of Buyer, on the Purchase Date of any subsequent
Transaction, cause to be delivered to Buyer, with reliance thereon permitted as
to any person or entity that purchases the HELs from Buyer in a repurchase
transaction, a favorable opinion of counsel with respect to the matters set
forth in Exhibit C hereto, in form and substance acceptable to Buyer and its
counsel.
17. FURTHER ASSURANCES; ADDITIONAL INFORMATION
(a) The Obligors shall promptly provide such further assurances or
agreements as Buyer may request in order to effect the purposes of this
Agreement.
(b) At any reasonable time, each Obligor shall permit Buyer, its agents
or attorneys, to inspect and copy any and all documents and data in its
possession pertaining to any Purchased HEL that is the subject of such
Transaction. Such inspection shall occur upon the request of Buyer at a mutually
agreeable location during regular business hours and on a date determined by
Buyer; Buyer may, at its option, require that the date of such inspection be not
more than two (2) Business Days after the date of such request.
(c) Each Obligor agrees to provide Buyer or its agents, from time to
time, with such information concerning such Obligor of a financial or
operational nature as Buyer may reasonably request.
(d) Each Obligor shall provide Buyer or its agents, with copies of all
filings made by or on behalf of an Obligor or any entity that controls an
Obligor, with the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934, as amended, promptly upon making such filings.
18. BUYER AS ATTORNEY-IN-FACT
Buyer is hereby appointed the attorney-in-fact of both Obligors for the
purpose of carrying out the provisions of this Agreement and taking any action
and executing any
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instruments that Buyer may deem necessary or advisable to accomplish the
purposes hereof, which appointment as attorney-in-fact is irrevocable and
coupled with an interest. Without limiting the generality of the foregoing,
Buyer shall have the right and power during the occurrence and continuation of
any Event of Default to receive, endorse and collect all checks made payable to
the order of an Obligor representing any payment on account of the principal of
or interest on any of the Purchased HELs and to give full discharge for the
same.
19. APPOINTMENT OF AGENT
Buyer hereby appoints Bear Stearns Mortgage Capital Corporation as its
agent for purposes of issuing Requests/Confirmations, determining Market Value,
exercising Buyer's rights under any margin maintenance provision of this
Agreement and such other purposes as Buyer may direct.
The appointment of such agent shall not relieve Buyer of its obligations
hereunder.
20. 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 the
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 Obligors further agree that, notwithstanding any
right of Buyer to investigate fully the affairs of the Obligors and
notwithstanding any knowledge of facts determined or determinable by Buyer,
Buyer has the right to rely fully on the representations, warranties, covenants
and agreements of either or both Obligors contained in the Agreement and upon
the accuracy of any document, instrument, certificate or exhibit given or
delivered hereunder. 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 to Buyer, 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 notice or communication contemplated hereby shall not relieve an
Obligor from its joint and several liability for the obligations of the other
Obligor hereunder.
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21. WIRE INSTRUCTIONS
(a) Any amounts to be transferred by Buyer to IMCLP hereunder shall be
sent by wire transfer in immediately available funds to the account of IMCLP at:
SunTrust Bank, Tampa Bay
ABA # 63-106-569
Attn.: D.J. Palyok (813) 932-2211, Ext. 202
Acct.: 0032020295202
(b) Any amounts to be transferred by Buyer to IMCA hereunder shall be
sent by wire transfer in immediately available funds to the account of IMCA at:
SunTrust Bank, Tampa Bay
ABA # 63-106-569
Attn.: D.J. Palyok (813) 932-2211, Ext. 202
Acct.: 0106020323329
(c) Any amounts to be transferred by an Obligor to Buyer hereunder shall
be sent by wire transfer in immediately available funds to the account of Buyer
at:
FNB Chicago/Bear Stearns MBS
ABA #: 071-000-013
Attn.: John Garzone
Acct.: 5801230
(d) Amounts received after 3:00 p.m., New York City time, on any
Business Day shall be deemed to have been paid and received on the next
succeeding Business Day.
22. ENTIRE AGREEMENT; SEVERABILITY
This Agreement shall supersede any existing agreements among the parties
containing general terms and conditions for repurchase transactions. Each
provision and agreement herein shall be treated as separate and independent from
any other provision or agreement herein and shall be enforceable notwithstanding
the unenforceability of any such other provision or agreement.
23. NON-ASSIGNABILITY; TERMINATION
(a) The rights and obligations of the parties under this Agreement and
under any Transaction shall not be assigned by any party without the prior
written consent of the other party. Subject to the foregoing, this Agreement and
any Transactions shall be binding upon and shall inure to the benefit of the
parties and their respective successors and assigns.
(b) This Agreement and all Transactions outstanding hereunder shall
terminate automatically without any requirement for notice on the date occurring
three hundred
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and sixty-four (364) days after the date as of which this Agreement is entered
into; provided, however, that this Agreement and any Transaction outstanding
hereunder may be extended by mutual agreement of Buyer and the Obligors; and
provided further, however, that no such party shall be obligated to agree to
such an extension.
24. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which counterparts shall be deemed to be an original, and such counterparts
shall constitute but one and the same instrument.
25. GOVERNING LAW
This Agreement shall be governed by the laws of the State of New York
without giving effect to the conflict of law principles thereof.
26. NO WAIVERS, ETC.
No express or implied waiver of any Event of Default by any party shall
constitute a waiver of any other Event of Default and no exercise of any remedy
hereunder by any party shall constitute a waiver of its right to exercise any
other remedy hereunder. No modification or waiver of any provision of this
Agreement and no consent by any party to a departure herefrom shall be effective
unless and until such shall be in writing and duly executed by both of the
parties hereto. Without limitation on any of the foregoing, the failure to give
a notice pursuant to subparagraph 4(a) hereof will not constitute a waiver of
any right to do so at a later date.
27. USE OF EMPLOYEE PLAN ASSETS
(a) If assets of an employee benefit plan subject to any provision of
the Employee Retirement Income Security Act of 1974 ("ERISA") are intended to be
used by any party hereto (the "Plan Party") in a Transaction, the Plan Party
shall so notify the other party prior to the Transaction. The Plan Party shall
represent in writing to the other party that the Transaction does not constitute
a prohibited transaction under ERISA or is otherwise exempt therefrom, and the
other party may proceed in reliance thereon but shall not be required so to
proceed.
(b) Subject to the last sentence of subparagraph (a) of this Paragraph,
any such Transaction shall proceed only if the Obligors have each furnished to
Buyer its most recent available audited statement of its financial condition and
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its most recent subsequent unaudited statement of its financial condition.
(c) By entering into a Transaction pursuant to this Paragraph, each
Obligor shall be deemed (i) to represent to Buyer that since the date of such
Obligor latest such financial statements, there has been no material adverse
change in such Obligor's financial condition which an Obligor has not disclosed
to Buyer, and (ii) to agree to provide Buyer with future audited and unaudited
statements of its financial condition as they are issued, so long as it is an
Obligor in any outstanding Transaction involving a Plan Party.
28. INTENT
(a) The parties intend and acknowledge that each Transaction is a
"repurchase agreement" as that term is defined in Section 101 of Title 11 of the
United States Code, as amended (except insofar as the type of HELs subject to
such Transaction or the term of such Transaction would render such definition
inapplicable), and a "securities contract" as that term is defined in Section
741 of Title 11 of the United States Code, as amended.
(b) It is understood that any party's right to liquidate HELs delivered
to it in connection with Transactions hereunder or to exercise any other
remedies pursuant to Paragraph 11 hereof, is a contractual right to liquidate
such Transaction as described in Sections 555 and 559 of Title 11 of the United
States Code, as amended.
29. 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 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 pursuant to the terms of the Trust Agreement.
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,
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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) With regard to Section 23(a) hereof, the Obligors each hereby
acknowledge and consent that any and all rights and remedies of the Buyer under
this Agreement shall automatically transfer to and vest in any successor trustee
under the Trust Agreement in the event of the removal or resignation of the
Trustee as trustee thereunder.
30. DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS
The parties acknowledge that they have been advised that:
(a) in the case of Transactions in which one of the parties is a broker
or dealer registered with the Securities and Exchange Commission ("SEC") under
Section 15 of the Securities Exchange Act of 1934 ("1934 Act"), the Securities
Investor Protection Corporation has taken the position that the provisions of
the Securities Investor Protection Act of 1970 ("SIPA") do not protect the other
party with respect to any Transaction hereunder;
(b) in the case of Transactions in which one of the parties is a
government securities broker or a government securities dealer registered with
the SEC under Section 15C of the 1934 Act, SIPA will not provide protection to
the other party with respect to any Transaction hereunder; and
(c) in the case of Transactions in which one of the parties is a
financial institution, funds held by the financial institution pursuant to a
Transaction hereunder are not a deposit and therefore are not insured by the
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Federal Deposit Insurance Corporation, the Federal Savings and Loan Insurance
Corporation or the National Credit Union Share Insurance Fund, as applicable.
BEAR STEARNS HOME EQUITY TRUST IMC CORPORATION OF
1996-1 AMERICA
/s/ THOMAS MIDDLETON
By: State Street Bank and Trust By:
Company of California, N.A., Title: Chief Operating Officer
as Trustee Date: 3-29-96
/s/ BARBARA BATEMAN
By: Barbara Bateman
Title:Vice President INDUSTRY MORTGAGE
Date: COMPANY, L.P.
By: Industry Mortgage
Corporation, its
General Partner
By: /s/ THOMAS MIDDLETON
Title: Chief Operating Officer
Date: 3-29-96
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EXHIBIT A
REQUEST/ CONFIRMATION
Date
TO: [OBLIGOR]
Attention: George Freeman
FROM: Bear Stearns Home Equity Trust 1996-1
RE: Request/Confirmation under Master Repurchase Agreement,
dated as of March 29, 1996, among Bear Stearns Home
Equity Trust 1996-1, Industry Mortgage Company, L.P.
and IMC Corporation of America
Bear Stearns Home Equity Trust 1996-1 ("Buyer") is pleased to confirm your sale
and its purchase of the HELs described below and listed on the attached Loan
Schedule pursuant to the above-referenced Master Repurchase Agreement under the
following terms and conditions:
<TABLE>
<S> <C>
Additional
ORIG. PRINCIPAL AMOUNT OF HELS: ----------
CURRENT PRINCIPAL AMOUNT OF HELS: ----------
PURCHASE DATE: ----------
REPURCHASE DATE: ----------
PURCHASE PRICE: ----------
PRICING RATE: ----------
MINIMUM REQUIRED MARGIN PERCENTAGE: ----------
PRICE DIFFERENTIAL DUE DATE: ----------
</TABLE>
A-1
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The Master Repurchase Agreement is incorporated by reference into this
Request/Confirmation and made a part hereof as if it were fully set forth
herein. All capitalized terms used herein but not otherwise defined shall have
the meanings specified in the Master Repurchase Agreement.
BEAR STEARNS HOME EQUITY TRUST 1996-1
By: Bear Stearns Mortgage Capital
Corporation, as agent
BY:
NAME:
TITLE:
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EXHIBIT B
REPRESENTATIONS AND WARRANTIES
RELATING TO THE PURCHASED HELS
(i) The information with respect to each HEL set forth in the
related Loan Schedule is true and correct in all material respects;
(ii) Except with respect to a Delayed Document HEL, all
documentation required to be delivered to the Custodian under the Custodial
Agreement has been so delivered;
(iii) Each Purchased HEL is a Mortgage;
(iv) Each mortgaged property is improved by a single (one-to-four)
family residential dwelling or, with respect to not more than 1% of the
aggregate original outstanding principal balance of the HELs, a mixed use
property;
(v) No more than 5% by original principal balance of the Purchased
HEL had loan-to-value ratios in excess of 85%;
(vi) Each Purchased HEL is being serviced by the related Obligor in
accordance with the terms of this Agreement;
(vii) The Note related to each Purchased HEL bears a fixed or
adjustable interest rate;
(viii) Each Mortgage is a valid and subsisting first or second lien
of record (or is in the process of being recorded) on the mortgaged property
subject in the case of any second-lien HEL only to a single senior lien on such
mortgaged property and subject in all cases to the exceptions to title set forth
in the title insurance policy or attorney's opinion of title, with respect to
the related HEL, which exceptions are generally acceptable to banking
institutions in connection with their regular mortgage lending activities, and
such other exceptions to which similar properties are commonly subject and which
do not individually, or in the aggregate, materially and adversely affect the
benefits of the security intended to be provided by such Mortgage;
(ix) Immediately prior to the transfer and assignment of the HELs by
the related Obligor to Buyer as contemplated by this Agreement, such Obligor
held good and indefeasible title to, and was the sole owner of, each HEL
(including the related Note) conveyed by such Obligor subject to no liens,
charges, mortgages, encumbrances or rights of others except as set forth in
clause (viii) or other liens which will be
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released simultaneously with such transfer and assignment; and immediately upon
the transfer of the Purchased HELs as contemplated in this Agreement, Buyer will
be the sole owner of each Purchased HEL subject to no liens, charges, mortgages,
encumbrances or rights of others except as set forth in paragraph (viii) or
other liens which will be released simultaneously with such transfer;
(x) No Purchased HEL is more than eighty-nine (89) days delinquent;
(xi) There is no delinquent tax or assessment lien on any mortgaged
property, and each mortgaged property is free of substantial damage and is in
average repair;
(xii) There is no valid and enforceable offset, defense or
counterclaim to any Note or Mortgage, including the obligation of the related
Mortgagor to pay the unpaid principal of or interest on such Note;
(xiii) There is no mechanics' lien or claim for work, labor or
material affecting any mortgaged property which is or may be a lien prior to, or
equal with, the lien of the related Mortgage except those which are insured
against by any title insurance policy referred to in paragraph (xvi) below;
(xiv) Each Purchased HEL at the time it was made complied in all
material respects with applicable state and federal laws and regulations,
including, without limitation, the federal Truth-in-Lending Act (including the
Riegle Community Development Act of 1994) and other consumer protection laws,
usury, equal credit opportunity, disclosure and recording laws;
(xv) With respect to each Purchased HEL either (a) an attorney's
opinion of title has been obtained but no title policy has been obtained or (b)
a lender's title insurance policy, issued in standard American Land Title
Association form by a title insurance company authorized to transact business in
the state in which the related mortgaged property is situated, in an amount at
least equal to the original balance of such Purchased HEL together, in the case
of a second-lien HEL, with the then-original principal amount of the mortgage
note relating to the senior lien, insuring the mortgagee's interest under the
related HEL as the holder of a valid first or second mortgage lien of record on
the real mortgaged property described in the related Mortgage, as the case may
be, subject only to exceptions of the character referred to in paragraph (viii)
above, was effective on the date of the origination of such HEL, and such policy
is valid and thereafter such policy shall continue in full force and effect;
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(xvi) The improvements upon each mortgaged property are covered by a
valid and existing hazard insurance policy with a carrier generally acceptable
to the related Obligor that provides for fire and extended coverage representing
coverage not less than the least of (A) the outstanding principal balance of the
related Purchased HEL (together, in the case of a second-lien HEL, with the
outstanding principal balance of the senior lien), (B) if replacement cost
insurance is available in the jurisdiction in which the mortgaged property is
located, the minimum amount required to compensate for damage or loss on a
replacement cost basis or (C) the full insurable value of the mortgaged
property;
(xvii) If any mortgaged property is in an area identified in the
Federal Register by the Federal Emergency Management Agency as having special
flood hazards, a flood insurance policy in a form meeting the requirements of
the current guidelines of the Flood Insurance Administration is in effect with
respect to such mortgaged property with a carrier generally acceptable to the
related Obligor in an amount representing coverage not less than the least of
(A) the outstanding principal balance of the related Purchased HEL (together, in
the case of a second-lien HEL, with the outstanding principal balance of the
senior lien), (B) if replacement cost insurance is available in the jurisdiction
in which the mortgaged property is located, the minimum amount required to
compensate for damage or loss on a replacement cost basis or (C) the maximum
amount of insurance that is available under the Flood Disaster Protection Act of
1973;
(xviii) Each Mortgage and Note is the legal, valid and binding
obligation of the maker thereof and is enforceable in accordance with its terms,
except only as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
considered in a proceeding or action in equity or at law), and all parties to
each Purchased HEL had full legal capacity to execute all documents relating to
such HEL and convey the estate therein purported to be conveyed;
(xix) The related Obligor has caused and will cause to be performed
any and all acts required to be performed to preserve the rights and remedies of
Buyer in any insurance policies applicable to any Purchased HELs transferred by
such Obligor including, without limitation, any necessary notifications of
insurers, assignments of policies or interests therein, and establishments of
co-insured, joint loss payee and mortgagee rights in favor of Buyer;
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(xx) No more than 2% of the aggregate original outstanding principal
balance will be secured by mortgaged properties located within any single zip
code area;
(xxi) Each original Mortgage was recorded or is in the process of
being recorded, and all subsequent assignments of the original Mortgage have
been delivered for recordation or have been recorded in the appropriate
jurisdictions wherein such recordation is necessary to perfect the lien thereof
as against creditors of or purchasers from an Obligor;
(xxii) The terms of each Note and each Mortgage have not been
impaired, altered or modified in any respect, except by a written instrument
which has been recorded, if necessary, to protect the interest of Buyer and
which has been delivered to the Custodian. The substance of any such alteration
or modification is reflected on the related Loan Schedule;
(xxiii) The proceeds of each Purchased HEL have been fully
disbursed, and there is no obligation on the part of the mortgagee to make
future advances thereunder; any and all requirements as to completion of any
on-site or off-site improvements and as to disbursements of any escrow funds
therefor will have been complied with within ninety (90) days of such HEL being
sold to Buyer under this Agreement; all costs, fees and expenses incurred in
making or closing or recording such HELs were paid;
(xxiv) The related Note is not and has not been secured by any
collateral, pledged account or other security except the lien of the
corresponding Mortgage;
(xxv) No Purchased HEL has a shared appreciation feature, or other
contingent interest feature;
(xxvi) Each mortgaged property is located in the state identified in
the respective Loan Schedule and consists of one or more parcels of real
mortgaged property;
(xxvii) Each Mortgage, to the extent permitted by applicable law,
contains a provision for the acceleration of the payment of the unpaid principal
balance of the related Purchased HEL in the event the related mortgaged property
is sold without the prior consent of the mortgagee thereunder;
(xxviii) Any advances made after the date of origination of a
Purchased HEL have been consolidated with the outstanding principal amount
secured by the related Mortgage, and the secured principal amount, as
consolidated, bears a single interest rate and single repayment term reflected
on the respective Loan Schedule; the consolidated principal amount does not
exceed the original principal
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amount of the related Purchased HEL; no Note permits or obligates the related
Obligor to make future advances to the related Mortgagor at the option of the
Mortgagor;
(xxix) There is no proceeding pending or threatened for the total or
partial condemnation of any mortgaged property, nor is such a proceeding
currently occurring, and each mortgaged property is undamaged by waste, fire,
water, flood, earthquake or earth movement;
(xxx) All of the improvements which were included for the purposes
of determining the appraised value of any mortgaged property lie wholly within
the boundaries and building restriction lines of such mortgaged property, and no
improvements on adjoining properties encroach upon such mortgaged property, and
are stated in the title insurance policy and affirmatively insured;
(xxxi) No improvement located on or being part of any mortgaged
property is in violation of any applicable zoning law or regulation; all
inspections, licenses and certificates required to be made or issued with
respect to all occupied portions of each mortgaged property and, with respect to
the use and occupancy of the same, including but not limited to certificates of
occupancy and fire underwriting certificates, have been made or obtained from
the appropriate authorities and such mortgaged property is lawfully occupied
under the applicable law;
(xxxii) With respect to each Mortgage constituting a deed of trust,
a trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such Mortgage, and
no fees or expenses are or will become payable by the owner of the HEL to the
trustee under the deed of trust, except in connection with a trustee's sale
after default by the related Mortgagor;
(xxxiii) Each Mortgage contains customary and enforceable provisions
which render the rights and remedies of the holder thereof adequate for the
realization against the related mortgaged property of the benefits of the
security, including (A) in the case of a Mortgage designated as a deed of trust,
by trustee's sale and (B) otherwise by judicial foreclosure. There is no
homestead or other exemption other than any applicable Mortgagor redemption
rights available to the related Mortgagor which would materially interfere with
the right to sell the related mortgaged property at a trustee's sale or the
right to foreclose the related Mortgage;
(xxxiv) Except to the extent permitted pursuant to the terms of this
Agreement, there is no default, breach,
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violation or event of acceleration existing under any Mortgage or the related
Note and no event which, with the passage of time or with notice and the
expiration of any grace or cure period, would constitute a default, breach,
violation or event of acceleration; and no Obligor has waived any default,
breach, violation or event of acceleration;
(xxxv) No instrument of release or waiver has been executed in
connection with any Purchased HEL, and no Mortgagor has been released, in whole
or in part, except in connection with an assumption agreement which has been
approved by the primary mortgage guaranty insurer, if any, and which has been
delivered to the Custodian;
(xxxvi) The maturity date of each Purchased HEL is at least twelve
months prior to the maturity date of the related first home equity loan if such
first home equity loan provides for a balloon payment;
(xxxvii) Each Purchased HEL was originated based upon a full
appraisal, which included an interior inspection of the subject mortgaged
property;
(xxxviii) No more than 10% of the aggregate original outstanding
principal balance is secured by mortgaged properties that are non-owner occupied
mortgaged properties (i.e., investor-owned and vacation);
(xxxix) There do not exist any hazardous substances, hazard wastes
or solid wastes, as such terms are defined in the Comprehensive Environmental
Response Compensation and Liability Act, the Resource Conservation and Recovery
Act of 1976, or other federal, state or local environmental legislation on any
mortgaged property;
(xl) The related Obligor was properly licensed or otherwise
authorized, to the extent required by applicable law, to originate or purchase
each Purchased HEL; and the consummation of the transactions herein
contemplated, including, without limitation, the ownership of the Purchased HELs
by Buyer will not involve the violation of such laws;
(xli) With respect to each mortgaged property subject to a ground
lease (i) the current ground lessor has been identified and all ground rents
which have previously become due and owing have been paid; (ii) the ground lease
term extends, or is automatically renewable, for at least five (5) years beyond
the maturity date of the related Purchased HEL; (iii) the ground lease has been
duly executed and recorded; (iv) the amount of the ground rent and any increases
therein are clearly identified in the lease and
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are for predetermined amounts at predetermined times; (v) the ground rent
payment is included in the mortgagor's monthly payment as an expense item in
determining the qualification of the mortgagor for such HEL; (vi) Buyer has the
right to cure defaults on the ground lease; and (vii) the terms and conditions
of the leasehold do not prevent the free and absolute marketability of the
mortgaged property. The outstanding principal balance of Purchased HELs with
related mortgaged properties subject to ground leases does not exceed 1% of the
aggregate original outstanding principal balance;
(xlii) Neither Obligor has received a notice of default of any
first-lien HEL secured by any mortgaged property which has not been cured by a
party other than an Obligor;
(xliii) No Purchased HEL is subject to a temporary rate reduction
pursuant to a buydown program;
(xliv) No more than 20% of the aggregate original outstanding
principal balance of the Purchased HELs was originated under an Obligor's
non-income verification program; and
(xlv) The interest rate on each Purchased HEL is calculated on the
basis of a year of 360 days with twelve 30-day months.
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EXHIBIT C
OPINION OF COUNSEL TO THE OBLIGORS
1. Each Obligor is duly organized and validly existing as a [DESCRIBE
FORM OF ORGANIZATION] in good standing under the laws of the State of and has
power and authority to enter into and perform its obligations under this
Agreement and the Custodial Agreement. Each Obligor is duly qualified to do
business and is in good standing in each jurisdiction in which the character of
the business transacted by it requires such qualification and in which the
failure so to qualify would have a material adverse effect on the business,
properties, assets or condition (financial or other) of such Obligor and its
subsidiaries, considered as a whole.
2. This Agreement and the Custodial Agreement have each been duly
authorized, executed and delivered by each Obligor, and each constitutes a valid
and legally binding obligation of each Obligor enforceable against each Obligor
in accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating to
or affecting creditors' rights generally and to general equity principles.
3. No consent, approval, authorization or order of any state or federal
court or government agency or body is required to be obtained by an Obligor for
the consummation of the transactions contemplated by this Agreement or the
Custodial Agreement.
4. The consummation of any of the transactions contemplated by this
Agreement and the Custodial Agreement will not conflict with, result in a breach
of, or constitute a default under the governing documents of either Obligor or
the terms of any indenture or other agreement or instrument known to us to which
an Obligor is party or bound, or any order known to such counsel to be
applicable to an Obligor or any regulations applicable to an Obligor, of any
state or federal court, regulatory body, administrative agency, governmental
body or arbitrator having jurisdiction over an Obligor.
5. There is no pending or threatened action, suit or proceeding before
any court or governmental agency, authority or body or any arbitrator involving
an Obligor or relating to the transaction contemplated by this Agreement or the
Custodial Agreement which, if adversely determined, would have a material
adverse effect on Buyer.
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6. Each Obligor is duly registered as a finance company in each state in
which HELs were originated, to the extent such registration is required by
applicable law.
7. Each HEL will have been endorsed in a manner which satisfies any
requirement of endorsement in order to transfer all right, title and interest in
and to that HEL from the related Obligor to Buyer. Each assignment of Mortgage
related to each such HEL is in recordable form and is sufficient under
applicable law to validly and effectively transfer all right, title and interest
of the related Obligor to Buyer. This Agreement together with (a) the delivery
of such related HELs to Custodian, (b) the endorsement of such HELs to Buyer and
(c) the delivery of the assignments of Mortgages related to the HELs to the
Custodian in recordable form assigning such Mortgages to Buyer, creates a valid,
perfected security interest in such HELs in favor of Buyer. Such security
interest will have the same priority and will be subject to the same security
interests and liens as apply to such HELs in the hands of the related Obligor.
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- --------------------------------------------------------------------------------
WAREHOUSING CREDIT AND SECURITY AGREEMENT
(SINGLE-FAMILY MORTGAGE LOANS)
BETWEEN
INDUSTRY MORTGAGE COMPANY, L.P.,
a Delaware limited partnership
AND
IMC CORPORATION OF AMERICA,
a Delaware corporation
AND
RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation
________________________________
Dated as of March 29, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
1. DEFINITIONS
1.1 Defined Terms ...................................................... 1
1.2 Other Definitional Provisions ...................................... 11
2. THE CREDIT ............................................................. 11
2.1 The Commitment .................................................... 11
2.2 Procedures for Obtaining Advances ................................. 14
2.3 Note .............................................................. 16
2.4 Principal Payments ................................................ 16
2.5 Expiration of Commitment .......................................... 20
2.6 Method of Making Payments ......................................... 20
3. COLLATERAL ............................................................ 20
3.1 Grant of Security Interest ........................................ 20
3.2 Release of Security Interest in Collateral ........................ 24
3.3 Mark-to-Market .................................................... 25
3 4 Release of Collateral ............................................. 26
3.5 Collection and Servicing Rights ................................... 27
3.6 Return of Collateral at End of Commitment ......................... 27
4. CONDITIONS PRECEDENT .................................................. 27
4.1 Initial Advance ................................................... 27
4.2 Each Advance ...................................................... 31
5. REPRESENTATIONS AND WARRANTIES ........................................ 32
5.1 Organization; Good Standing; Subsidiaries ......................... 32
5.2 Authorization and Enforceability .................................. 32
5.3 Approvals ......................................................... 33
</TABLE>
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5.4 Financial Condition .............................................. 33
5.5 Litigation ....................................................... 34
5.6 Compliance with Laws ............................................. 34
5.7 Regulations G and U .............................................. 34
5.8 Investment Company Act ........................................... 34
5.9 Payment of Taxes ................................................. 34
5.10 Agreements ....................................................... 35
5.11 Title to Properties .............................................. 35
5.12 ERISA ............................................................ 35
5.13 Eligibility ...................................................... 36
5.14 Place of Business ................................................ 36
5.15 Special Representations Concerning Collateral .................... 36
5.16 Servicing ........................................................ 38
5.17 Special Representations Concerning Pledged Servicing
Contracts ........................................................ 38
5.18 Special Representations Concerning Subwarehousing
Collateral ....................................................... 39
6. AFFIRMATIVE COVENANTS ................................................. 41
6.1 Payment of Note ................................................... 41
6.2 Financial Statements and Other Reports ............................ 42
6.3 Maintenance of Existence; Conduct of Business ..................... 44
6.4 Compliance with Applicable Laws ................................... 44
6.5 Inspection of Properties and Books ................................ 44
6.6 Notice ............................................................ 45
6.7 Payment of Debt, Taxes, etc ........................................ 46
6.8 Insurance ......................................................... 46
6.9 Closing Instructions .............................................. 46
</TABLE>
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6.10 Other Loan Obligations ........................................... 46
6.11 Use of Proceeds of Advances ...................................... 47
6.12 Special Affirmative Covenants Concerning
Collateral ....................................................... 47
7. NEGATIVE COVENANTS ..................................................... 48
7.1 Contingent Liabilities ........................................... 48
7.2 Sale or Pledge of Servicing Contracts ............................ 48
7.3 Merger; Sale of Assets; Acquisitions ............................. 49
7.4 Loss of Eligibility .............................................. 49
7.5 Debt to Adjusted Tangible Net Worth Ratio ........................ 49
7.6 Minimum Net Worth ................................................ 49
7.7 Minimum Adjusted Tangible Net Worth .............................. 49
7.8 Minimum Pledged Servicing Portfolio .............................. 49
7.9 Transactions with Affiliates ..................................... 49
7.10 Acquisition of Recourse Servicing Contracts ..................... 50
7.11 Distributions, Withdrawals of Capital and Other
Actions ......................................................... 50
7.12 Special Negative Covenants Concerning Collateral ................ 50
7.13 Deferral of Subordinated Debt ................................... 51
8. DEFAULTS; REMEDIES ..................................................... 51
8.1 Events of Default ................................................ 51
8.2 Remedies ......................................................... 55
8.3 Application of Proceeds .......................................... 59
8.4 Lender Appointed Attorney-in-Fact ................................ 60
8.5 Right of Set-Off ................................................. 60
9. NOTICES ................................................................ 61
10. REIMBURSEMENT OF EXPENSES; INDEMNITY .................................. 62
</TABLE>
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11. FINANCIAL INFORMATION ................................................. 63
12. MISCELLANEOUS ......................................................... 64
12.1 Terms Binding Upon Successors; Survival of
Representations .................................................. 64
12.2 Assignment ....................................................... 64
12.3 Amendments ....................................................... 64
12.4 Governing Law .................................................... 64
12.5 Participations ................................................... 64
12.6 Relationship of the Parties ...................................... 65
12.7 Severability ..................................................... 65
12.8 Operational Reviews .............................................. 65
12.9 Consent to Jurisdiction .......................................... 65
12.10 Counterparts .................................................... 66
12.11 Entire Agreement ................................................ 66
12.12 Waiver of Jury Trial ............................................ 66
</TABLE>
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EXHIBITS
Exhibit A Promissory Note
Exhibit B (Intentionally Omitted)
Exhibit C-SF Request for Advance Against Single
Family Mortgage Loans
Exhibit C-SUBW Subwarehousing Advance Request
Exhibit D-SF Procedures and Documentation for
Warehousing Single Family Mortgage
Loans
Exhibit D-SUBW Procedures and Documentation for
Warehousing Subwarehousing Mortgage
Loans
Exhibit E-1 Schedule of Servicing Contracts
Exhibit E-2 Schedule of Pledged Servicing
Contracts
Exhibit F-1 Subordination of Debt Agreement
(Industry)
Exhibit F-2 Subordination of Debt Agreement
(IMC)
Exhibit G Subsidiaries
Exhibit H Legal Opinion
Exhibit I-SF Officer's Certificate
Exhibit J Schedule of Existing Warehouse Lines
Exhibit K-1 Funding Bank Agreement (Wire)
Exhibit K-2 Funding Bank Agreement (Checks)
Exhibit L (Intentionally Omitted)
Exhibit M Bailee Pledge Agreement
Exhibit N Terms of Guaranteed Obligations
Exhibit O Supplemental Pledge Agreement
Exhibit P Contingent Liabilities
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THIS WAREHOUSING CREDIT AND SECURITY AGREEMENT, dated as of March 29, 1996,
between INDUSTRY MORTGAGE COMPANY, L.P., a Delaware limited partnership
("Industry"), and IMC CORPORATION OF AMERICA, a Delaware corporation ("IMC,"
Industry and IMC are hereinafter collectively referred to as the "Borrowers"),
having their principal office at 3450 Buschwood Park Drive, Suite 250, Tampa,
Florida 33618 and RESIDENTIAL FUNDING CORPORATION, a Delaware corporation (the
"Lender"), having its principal office at 8400 Normandale Lake Blvd., Suite 600,
Minneapolis, Minnesota 55437.
WHEREAS, the Borrowers and the Lender desire to set forth herein the terms
and conditions upon which the Lender shall provide warehouse financing to the
Borrowers;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. DEFINITIONS.
1.1 Defined Terms. Capitalized terms defined below or elsewhere
in this Agreement (including the Exhibits hereto) shall have the
following meanings:
"Acknowledgment Agreement" has the meaning set forth in Section
8.2(i) hereof.
"Acquisition Cost" means, for a Mortgage Loan purchased by the
Borrowers from another Person, the amount paid in cash by the
Borrowers for such Mortgage Loan, and for a Mortgage Loan originated
by the Borrowers, the Mortgage Note Amount.
"Adjustable Rate Mortgage Loan" means a Single-family Mortgage
Loan that bears interest at a fluctuating rate and that is eligible
for purchase by an Investor.
"Adjusted Servicing Portfolio" means, for any Person, the
Servicing Portfolio of such Person, but excluding the principal
balance of Mortgage Loans included in the Servicing Portfolio at
such date (a) on which more than one payment of principal or
interest is past due, (b) which constitute Recourse Servicing
Contracts, or (c) for which the Servicing Contracts are not owned by
such Person free and clear of all Liens (other than in favor of the
Lender), or (d) which are serviced by the Borrowers for others under
subservicing arrangements.
"Adjusted Tangible Net Worth" means with respect to any Person
at any date, the Tangible Net Worth of such Person at such date,
excluding capitalized excess servicing fees and capitalized
servicing rights (provided, that Company Securities consisting of
interest-only strips or residual interests in Securitization Pools
shall not be considered capitalized excess servicing fees or
capitalized servicing
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rights), plus one percent (1%) of the Adjusted Servicing Portfolio,
and plus deferred taxes arising from capitalized excess servicing
fees.
"Advance" means a disbursement by the Lender under the
Commitment pursuant to Article 2 of this Agreement, including,
without limitation, Warehousing Advances, Premium Advances,
Subwarehousing Advances, Wet Settlement Advances and readvances of
funds previously advanced to the Borrowers and repaid to the Lender.
"Advance Request" has the meaning set forth in Section 2.2(a)
hereof.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.
"Agreement" means this Warehousing Credit and Security
Agreement (Single Family Mortgage Loans), either as originally
executed or as it may from time to time be supplemented, modified or
amended.
"Approved Custodian" means a pool custodian or other Person
which is deemed acceptable to the Lender from time to time in its
sole discretion to hold a Mortgage Loan for inclusion in a Mortgage
Pool or a Securitization Pool, or for an Investor that has agreed to
purchase such Mortgage Loan.
"Approved Subwarehousing Agreement" means a loan and security
agreement acceptable to Lender between either of the Borrowers and a
Person (other than an Affiliate) acceptable to the Lender, pursuant
to which such Borrower makes loans to such Person against the pledge
to such Borrower of Mortgage Loans to secure such loans, which
provides for such loans to be evidenced by a promissory note payable
to such Borrower, and pursuant to which the loans made by such
Borrower thereunder and the related rights and remedies (including,
without limitation, security interests) are assignable to the
Lender. The Lender may at any time, by written notice to the
Borrowers, reject any loan and security agreement or the borrower
thereunder submitted by the borrowers, or require the written
consent of the borrower thereunder to the Lender's security interest
therein, or designate any Approved Subwarehousing Agreement or
Subwarehousing Borrower as no longer acceptable. Upon receipt of
such written notice, the security agreement and Person named in such
notice shall no longer be considered an Approved Subwarehousing
Agreement or Subwarehousing Borrower hereunder for purposes of
subsequent Subwarehousing Advances. Without limiting the generality
of the Lender's approval rights as described above, no loan and
security agreement shall be an Approved Subwarehousing Agreement
unless the Subwarehousing Borrower has been
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irrevocably directed to, and has agreed to, make all payments of
principal on Subwarehousing Loans thereunder to or for the account
of the Lender, and a copy of the Subwarehousing Borrower's agreement
has been delivered to the Lender.
"Bailee Pledge Agreement" has the meaning set forth in Section
2.2(b) hereof.
"Borrowers" has the meaning set forth in the first paragraph of
this Agreement.
"Business Day" means any day excluding Saturday or Sunday and
excluding any day on which national banking associations are closed
for business.
"Cash Collateral Account" means a demand deposit account
maintained at the Funding Bank in the name of the Lender and
designated for receipt of the proceeds of the sale or other
disposition of the Collateral.
"Closing Date" means March , 1996.
"Collateral" has the meaning set forth in Section 3.1 hereof.
"Collateral Documents" has the meaning set forth in Section
2.2(a) hereof.
"Commitment" has the meaning set forth in Section 2.1(a)
hereof.
"Commitment Amount" means Seventy-Five Million Dollars
($75,000,000).
"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.
"Debt" means, with respect to any Person, at any date (a) all
indebtedness or other obligations of such Person which, in
accordance with GAAP, would be included in determining total
liabilities as shown on the liabilities side of a balance sheet of
such Person at such date; and (b) all indebtedness or other
obligations of such Person for borrowed money or for the deferred
purchase price of property or services; provided that for purposes
of this Agreement, there shall be excluded from Debt at any date
loan loss reserves and deferred taxes arising from capitalized
excess servicing fees.
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"Default" means the occurrence of any event or existence of any
condition which, but for the giving of Notice, the lapse of time, or
both, would constitute an Event of Default.
"Eligible Mortgage Loan" means a First Mortgage Loan or a
Second Mortgage Loan, including, without limitation, a Home Equity
Loan.
"ERISA" means the Employee Retirement Income Security Act of
1974 and all rules and regulations promulgated thereunder, as
amended from time to time and any successor statute.
"Event of Default" means any of the conditions or events
set forth in Section 8.1 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute.
"Fair Market Value" means at any time for a Mortgage Loan or
the related Mortgage-backed Security or Company Security (if such
Mortgage Loan is to be used to back a Mortgage-backed Security or
Company Security), the market price for such Mortgage Loan,
Mortgage-backed Security or Company Security, determined by the
Lender, based on market data for similar Mortgage Loans,
Mortgage-backed Securities or asset-backed Securities and such
other criteria as the Lender deems appropriate.
"FHA" means the Federal Housing Administration and any
successor thereto.
"FHLMC" means the Federal Home Loan Mortgage Corporation
and any successor thereto.
"FICA" means the Federal Insurance Contributions Act.
"FIRREA" means the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, as amended from time to time, and the
regulations promulgated and rulings issued thereunder.
"First Mortgage" means a Mortgage which constitutes a first
Lien on the property covered thereby.
"First Mortgage Loan" means a Mortgage Loan secured by a
First Mortgage.
"FNMA" means the Federal National Mortgage Association
and any successor thereto.
"Funding Bank" means The First National Bank of Chicago or any
other bank designated from time to time by the Lender.
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"Funding Bank Agreement" means the letter agreement
substantially in the form of Exhibit K hereto.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the
accounting profession, which are applicable to the circumstances as
of the date of determination.
"General Partner" means a general partner of Industry. The
General Partner of Industry as of the date hereof is INDUSTRY
MORTGAGE CORPORATION, a Delaware corporation.
"GNMA" means the Government National Mortgage Association
and any successor thereto.
"Hedging Arrangements" means, with respect to any Person, any
agreements or other arrangement (including, without limitation,
interest rate swap agreements, interest rate cap agreements and
forward sale agreements) entered into by such Person to protect
itself against changes in interest rates.
"Home Equity Loan" means an open-ended revolving line of
credit that is a Mortgage Loan secured by a Mortgage.
"HUD" means the Department of Housing and Urban
Development and any successor thereto.
"HUD 203(K) Escrow Amount" means, with respect to any HUD
203(K) Mortgage Loan, the portion of such HUD 203(K) Mortgage Loan
that was disbursed into an escrow account to finance the
rehabilitation or repair of the related single family property.
"HUD 203(K) Mortgage Loan" means an FHA insured Mortgage Loan
secured by a First Mortgage, of which the HUD 203(K) Escrow Amount
will be used for the purpose of rehabilitating and/or repairing the
related single family property, and which satisfies the definition
of "rehabilitation loan" under 24 C.F.R. Section 203.50(a).
"Indemnified Liabilities" has the meaning set forth in
Article 10 hereof.
"Internal Revenue Code" means the Internal Revenue Code of
1986, or any subsequent federal income tax law or laws, as any of
the foregoing have been or may from time to time be amended.
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"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.
"Lender" has the meaning set forth in the first paragraph of
this Agreement.
"Lien" means any lien, mortgage, deed of trust, pledge,
security interest, charge or encumbrance of any kind (including any
conditional sale or other title retention agreement, any lease in
the nature thereof, and any agreement to give any security
interest).
"Loan Documents" means this Agreement, the Note, a separate
agreement between the Borrowers and the Lender concerning interest,
fees and other charges, any agreement of the Borrowers relating to
Subordinated Debt, and each other document, instrument or agreement
executed by the Borrowers in connection herewith or therewith, as
any of the same may be amended, restated, renewed or replaced from
time to time.
"Margin Stock" has the meaning assigned to that term in
Regulations G and U of the Board of Governors of the Federal
Reserve System as in effect from time to time.
"Maturity Date" means the earlier of: (a) the close of
business on August 31, 1996, as such date may be extended from time
to time in writing by the Lender, in its sole discretion, on which
date the Commitment shall expire of its own term, and without the
necessity of action by the Lender, and (b) the date the obligation
of the Lender to make further Advances hereunder is terminated
pursuant to Section 8.2 below.
"Mixed Use Property" means any improved real property
containing both (a) one- to four-family residences and (b) a
commercial establishment.
"Mixed Use Property Mortgage Loan" means a Mortgage Loan
secured by a Mortgage covering a Mixed Use Property.
"Mortgage" means a mortgage or deed of trust on improved real
property. A Mortgage may be a First Mortgage or a Second Mortgage.
"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. The term "Mortgage Loan" shall include
First Mortgage Loans and Second Mortgage Loans unless the context
otherwise requires.
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"Mortgage Note" means a promissory note secured by a Mortgage.
"Mortgage Note Amount" means, as of the date of determination,
the then outstanding unpaid principal amount of a Mortgage Note.
"Mortgage Pool" means a pool of one or more Pledged Mortgages
on the basis of which there is to be issued a Mortgage-backed
Security.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA which is maintained for employees of
the Borrowers or any General Partner.
"Multifamily Mortgage Loan" means a Mortgage Loan secured by a
Mortgage on improved Multifamily Property.
"Multifamily Property" means containing or which will contain
more than four (4) dwelling units.
"Net Worth" means with respect to any Person at any date, the
excess of total assets over total liabilities of such Person on
such date, each to be determined in accordance with GAAP consistent
with those applied in the preparation of the financial statements
referred to in Section 4.1(a)(5) hereof.
"Nonrecourse Servicing Contract" means a Servicing Contract
under which the Borrowers are not obligated to repurchase or
indemnify the holder of Mortgage Loans as a result of a default on
the Mortgage Loans occurring more than six months after the date of
such Mortgage Loan; provided, that the Borrowers may be obligated
to repurchase or indemnify the holder as a result of a breach of
any customary representation or warranty made by the Borrowers, as
seller or servicer, in respect of such Mortgage Loans.
"Note" has the meaning set forth in Section 2.3 hereof.
"Notices" has the meaning set forth in Article 9 hereof.
"Obligations" means any and all indebtedness, obligations and
liabilities of the Borrowers to the Lender (whether now existing or
hereafter arising, voluntary or involuntary, whether or not jointly
owed with others, direct or indirect, absolute or contingent,
liquidated or unliquidated, and whether or not from time to time
decreased or extinguished and later increased, created or
incurred), arising out of or related to the Loan Documents.
"Officer's Certificate" means a certificate executed on
behalf of the Borrowers by the General Partner's chief
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financial officer or its treasurer or by such other officer as may
be designated by the General Partner herein and substantially in
the form of Exhibit I-SF attached hereto.
"Operating Account" means a demand deposit account maintained
at the Funding Bank in the name of the Borrowers and designated for
funding the portion of any Mortgage Loan in excess of the Advance
with respect thereto, and for returning any excess payment from an
Investor for a Pledged Mortgage or Pledged Security.
"Participant" has the meaning set forth in Section 12.5
hereof.
"Partner" shall mean any Person holding a general or limited
partnership interest in Industry.
"Partnership Agreement" means that certain Third Amended and
Restated Agreement of Limited Partnership for Industry dated as of
November 1, 1995, as the same may be amended or supplemented from
time to time.
"Person" means and includes natural persons, corporations,
limited partnerships, general partnerships, joint stock companies,
joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations,
whether or not legal entities, and governments and agencies and
political subdivisions thereof.
"Plans" has the meaning set forth in Section 5.12 hereof.
"Pledged Mortgages" has the meaning set forth in Section
3.1(a) hereof.
"Pledged Securities" has the meaning set forth in Section
3.1(c) hereof.
"Pledged Subwarehousing Mortgages" has the meaning set forth
in Section 3.1(b) hereof.
"Premium Advance" has the meaning set forth in Section
2.1(c)(2) hereof.
"Purchase Commitment" means a commitment issued in favor of
the owner of any Mortgage Loans pursuant to which a Person commits
to purchase Mortgage Loans, Mortgage-backed Securities or Company
Securities.
"Recourse Servicing Contract" means a Servicing Contract other
than a Nonrecourse Servicing Contract.
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"Release Amount" has the meaning set forth in Section 3.2(f)
hereof.
"RFC" means Residential Funding Corporation, a Delaware
corporation, and any successor thereto.
"Second Mortgage" means a Mortgage which constitutes a second
Lien on the property covered thereby.
"Second Mortgage Loan" means a Mortgage Loan secured by a
Second Mortgage.
"Securitization Pool" means a pool of one or more Pledged
Mortgages on the basis of which there is to be issued a Company
Security.
"Servicing Contract" means, with respect to any Person, the
arrangement, whether or not in writing, pursuant to which such
Person has the right to service Mortgage Loans.
"Servicing Portfolio" means, as to any Person, the unpaid
principal balance of Mortgage Loans whose Servicing Contracts are
owned by such Person.
"Single-family Mortgage Loan" means a Mortgage Loan secured by
a Mortgage covering improved real property containing one to four
family residences.
"Statement Date" means the date of the most recent financial
statements of the Borrowers (and, if applicable, its Subsidiaries,
on a consolidated basis) delivered to the Lender under the terms of
this Agreement.
"Subordinated Debt" means all indebtedness of the Borrowers
for borrowed money which is, by its terms (which terms shall have
been approved by the Lender), effectively subordinated in right of
payment to all other present and future Obligations on terms
satisfactory to the Lender, in its sole discretion.
"Subsidiary" means any corporation, association or other
business entity in which more than fifty percent (50%) of the total
voting power or shares of stock entitled to vote in the election of
directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more of
the other Subsidiaries of that Person or a combination thereof.
"Subwarehousing Advance" has the meaning set forth in
Subsection 2.1(d) hereof.
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"Subwarehousing Borrower" means the Person to which the
Borrowers make Subwarehousing Loans pursuant to any Approved
Subwarehousing Agreement.
"Subwarehousing Default" means any failure by any
Subwarehousing Borrower to repay any Subwarehousing Loan or any
other amount payable under any Approved Subwarehousing Agreement
when due.
"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 Lender, 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.
"Supplemental Pledge Agreement" has the meaning set forth in
Section 3.1(d) hereof.
"Tangible Net Worth" means with respect to any Person at any
date, the excess of the total assets over total liabilities of such
Person on such date, each to be determined in accordance with GAAP
consistent with those applied in the preparation of the financial
statements referred to in Section 4.1(a)(7), 4.1(a)(8) hereof, plus
loan loss reserves and that portion of Subordinated Debt not due
within one year of such date, provided that, for purposes of this
Agreement, there shall be excluded from total assets advances or
loans to shareholders, officers or Affiliates and investments in
Affiliates (provided, that the foregoing exclusion shall not apply
to amounts payable from Affiliates resulting from sales of Mortgage
Loans in the ordinary course of the Borrowers' business, to the
extent such amounts are payable on ordinary business terms and are
not past due, or to Industry's investments in Preferred Mortgages,
Ltd.), assets pledged to secure any liabilities not included in the
Debt of such Person, intangible assets, those other assets which
would be deemed by HUD to be non-acceptable in calculating adjusted
net worth in accordance with its requirements in effect as of such
date, as such requirements appear in the "Audit Guide for Audit of
Approved Non-Supervised Mortgagees" and other assets deemed
unacceptable by the Lender in its sole discretion.
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"Trust Receipt" means a trust receipt in a form approved by
and pursuant to which the Lender may deliver any document relating
to the Collateral to the Borrowers for correction or completion.
"Underwriting Guidelines" means the Borrowers' policies and
procedures for underwriting Mortgage Loans as in effect on the date
hereof, a copy of which has been provided to and approved by the
Lender, as the same may be modified from time to time in accordance
with this Agreement.
"VA" means the U.S. Department of Veterans Affairs and any
successor thereto.
"Warehousing Advance" has the meaning set forth in Section
2.1(c)(1) hereof.
"Wet Settlement Advance" means a Advance pursuant to Section
2.2(b) of this Agreement, in respect of the closing or settlement
of a Mortgage Loan, based upon delivery to the Lender of the Bailee
Pledge Agreement, pending subsequent delivery of the Collateral
Documents as provided in such Section.
1.2 Other Definitional Provisions.
1.2(a) Accounting terms not otherwise defined herein shall
have the meanings given the terms under GAAP
1.2(b) Defined terms may be used in the singular or the
plural, as the context requires.
1.2(c) All references to time of day shall mean the then
applicable time in Chicago, Illinois, unless expressly provided to
the contrary.
2. THE CREDIT.
2.1 The Commitment.
2.1(a) Subject to the terms and conditions of this Agreement
and provided no Default or Event of Default has occurred and is
continuing, the Lender agrees from time to time during the period
from the Closing Date, to, but not including, the Maturity Date, to
make Advances to the Borrowers, provided the total aggregate
principal amount outstanding at any one time of all such Advances
shall not exceed the Commitment Amount. The obligation of the
Lender to make Advances hereunder up to the Commitment Amount, is
hereinafter referred to as the "Commitment." Within the Commitment,
the Borrowers may
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borrow, repay and reborrow. All Advances under this Agreement shall
constitute a single indebtedness, and all of the Collateral shall
be security for the Note and for the performance of all the
Obligations. Advances shall be made either to Industry or to IMC,
as shall be requested by Industry or IMC, but each Advance, whether
made to Industry or IMC, shall be deemed made to or for the benefit
of Industry and IMC, and Industry and IMC, jointly and severally,
shall be obligated to repay any Advances made to Industry or to IMC
under the Commitment. With respect to its obligation to repay
Advances made to the other Borrower, each Borrower agrees to the
terms set forth on Exhibit N attached hereto and made a part
hereof.
2.1(b) Advances shall be used by the Borrowers solely for the
purpose of (i) in the case of Subwarehousing Advances, funding
Subwarehousing Loans made by either Borrower to a Subwarehousing
Borrower, and (ii) in the case of all other Advances, funding the
acquisition or origination of Mortgage Loans and shall be made at
the request of the Borrowers. Advances shall be made in the manner
provided in Section 2.2 hereof, against the pledge of (y) in the
case of Subwarehousing Advances, such Subwarehousing Loans and the
underlying Subwarehousing Mortgage Loans as Collateral therefor,
and (z) in the case of all other Advances, such Mortgage Loans as
Collateral therefor. The following limitations on the use of
Advances shall be applicable:
(1) No Advance shall be made against a Mortgage Loan
other than a Single-family Mortgage Loan or a Mixed Use
Property Mortgage Loan that is an Eligible Mortgage Loan.
(2) The aggregate amount of Wet Settlement Advances
outstanding at any one time shall not exceed thirty-three
percent (33%) of the Commitment Amount.
(3) The aggregate amount of Premium Advances
outstanding at any one time shall not exceed [certain
confidential information has been omitted and filed
separately with the Commission pursuant to a Request for
Confidential Treatment].
(4) No Subwarehousing Advance shall be made against a
Subwarehousing Loan if that Subwarehousing Loan was made
against a Subwarehousing Mortgage Loan other than a Single-
family Mortgage Loan.
(5) No Subwarehousing Advance shall be made
prior to the Lender's approval of the
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Subwarehousing Borrower and Approved Subwarehousing
Agreement and the Lender's receipt of the Subwarehousing
Note evidencing the related Subwarehousing Loan and the
Collateral Documents with respect to the related
Subwarehousing Mortgage Loan.
(6) The aggregate amount of Subwarehousing Advances
outstanding at any one time, excluding Subwarehousing
Advances in an amount not to exceed Eight Million Dollars
($8,000,000) outstanding against Subwarehousing Loans from
Industry to Mortgage Central, Inc. during the period from
the Closing Date until August 31, 1996, shall not exceed
Three Million Dollars ($3,000,000).
(7) No Subwarehousing Advance shall be made against a
Subwarehousing Loan unless such Subwarehousing Loan is
payable in full under the related Approved Subwarehousing
Agreement (after giving effect to any applicable grace or
cure periods) on or prior to the date set forth in clause
(a) of the definition of "Maturity Date."
(8) No Wet Settlement Advance shall be made against any
Subwarehousing Mortgage Loans or any Mortgage Loans
purchased by the Borrowers in bulk.
2.1(c) The Advances against any Mortgage Loan shall not
exceed the following amounts:
(1) On the terms and subject to the conditions set
forth in this Agreement, the Lender will make an Advance (a
"Warehousing Advance") against a Mortgage Loan pledged
hereunder in an amount equal to the lesser of (i) in the
case of a HUD 203(K) Mortgage Loan, the lesser of the amount
set forth on the HUD 203(K) Maximum Mortgage Worksheet for
the "Contract Sales Price" or "As Is Value" or the
Acquisition Cost, and (ii) in the case of any other Mortgage
Loan, the lesser of the Mortgage Note Amount, or (iii) the
Acquisition Cost.
(2) On the terms and subject to the conditions set
forth in this Agreement, the Lender will make an additional
Advance, (a "Premium Advance") against a Mortgage Loan other
than a HUD 203(K) Mortgage Loan pledged hereunder in an
amount equal to the lesser of [certain confidential
information has been omitted and filed separately with the
Commission pursuant to a Request for Confidential Treatment]
of (i) the Mortgage Note Amount or (ii) the Acquisition
Cost.
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2.1(d) The Advances against any Subwarehousing Loan (a
"Subwarehousing Advance") shall not exceed the lesser of (i)
the amount of the related Subwarehousing Loan or (ii)
ninety-five percent (95%) of the Mortgage Note Amount of the
related Subwarehousing Mortgage Loan.
2.2 Procedures for Obtaining Advances.
2.2(a) The Borrowers may obtain Advances hereunder,
subject to the satisfaction of the conditions set forth in
Sections 4.1 and 4.2 hereof, upon compliance with the
procedures set forth in this Section 2.2 and in Exhibit D-SUBW,
with respect to Subwarehousing Advances, and Exhibit D-SF, with
respect to Warehousing Advances and Premium Advances, attached
hereto and made a part hereof including the delivery of all
documents listed in Exhibit D-SUBW or Exhibit D-SF, as
applicable (the "Collateral Documents"), to the Lender.
Requests for Advances shall be initiated by the Borrowers by
delivering to the Lender, no later than 10:30 a.m. Eastern time
on the Business Day that the Borrowers desire to borrow
hereunder, a completed and signed request for an Advance (an
"Advance Request") on the then current form approved by the
Lender. The current forms in use by the Lender are Exhibit
C-SUBW for Subwarehousing Advances, and Exhibit C-SF for
Warehousing Advances and Premium Advances, attached hereto and
made a part hereof. The Lender shall have the right, on not
less than three (3) Business Days' prior Notice to the
Borrowers, to modify any of said Exhibits to conform to current
legal requirements or Lender practices, and, as so modified.
said Exhibits shall be deemed a part hereof.
2.2(b) In the case of a Wet Settlement Advances, the
Borrowers shall follow the procedures and, at or prior to the
Lender's making of such Wet Settlement Advance, shall deliver
to the Lender the documents set forth in Exhibit D-SF hereto
together with a completed and executed Bailee Pledge Agreement
in the form of Exhibit M hereto. In the case of a Mortgage Loan
financed through a Wet Settlement Advance, the Borrowers shall
cause all Collateral Documents required to be delivered to the
Lender pursuant to Exhibit D-SF within five (5) Business Days
after the date of the Wet Settlement Advance relating thereto.
2.2(c) Before funding, the Lender shall have a reasonable
time (consistent with the time frames provided for in Section
2.2(a) and Exhibit D-SF or Exhibit D-SUBW, as applicable) to
examine such Advance Request and the Collateral Documents to be
delivered prior to such requested Advance, as set forth in the
applicable Exhibit
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hereto, and may reject such of them as do not meet the
requirements of this Agreement or of the related Purchase
Commitment.
2.2(d) The Borrowers shall hold in trust for the Lender,
and the Borrowers shall deliver to the Lender promptly upon
request, or within one hundred twenty (120) days from the date
an Advance was made against such Pledged Mortgage and the
Pledged Mortgage is not being held by an Investor for purchase
or has not been redeemed from pledge, and shall hold in trust
or cause the Subwarehousing Borrower to hold in trust, and
shall deliver or cause the Subwarehousing Borrower to deliver
to the Lender upon request, or within one-hundred twenty (120)
days from the date a Subwarehousing Advance was made against
such Pledged Subwarehousing Mortgage and the Pledged
Subwarehousing Mortgage is not being held by an Investor for
purchase or has not been redeemed from pledge, the following:
(1) the originals of the Collateral Documents for which copies
are required to be delivered to the Lender pursuant to Exhibit
D-SF, (2) the original lender's ALTA Policy of Title Insurance
or an equivalent thereto, and (3) any other documents relating
to a Pledged Mortgage or Pledged Subwarehousing Mortgage which
the Lender may reasonably request, including, without
limitation, documentation evidencing the FHA Commitment to
Insure or the VA Guaranty of any Pledged Mortgage or Pledged
Subwarehousing Mortgage which is either FHA insured or VA
guaranteed, the appraisal, Private Mortgage Insurance
Certificate, if applicable, the Regulation Z Statement,
certificates of casualty or hazard insurance, credit
information on the maker of each such Mortgage Note, a copy of
a HUD-1 or corresponding purchase advice and other documents of
all kinds which are customarily desired for inspection or
transfer incidental to the purchase of any Mortgage Note by an
Investor and any additional documents which are customarily
executed by the seller of a Mortgage Note to an Investor.
2.2(e) To make an Advance, the Lender shall cause the
Funding Bank to credit an account of the Borrowers with the
Funding Bank, which account shall be under the exclusive
control of the Lender, upon compliance by the Borrowers with
the terms of this Agreement. The Lender shall determine in its
sole discretion the method by which an Advance is made.
2.2(f) If, pursuant to the authorization given by the
Borrowers in the Funding Bank Agreement, for the purpose of
financing a Mortgage Loan against which the Lender has made an
Advance in accordance with a Request
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for Advance (i) the Lender debits the Borrowers' Operating
Account at the Funding Bank to the extent necessary to cover a
wire to be initiated by the Lender, or (ii) the Lender directs
the Funding Bank to honor a check drawn by the Borrowers on its
Check Disbursement Account at the Funding Bank, and such debit
or direction results in an overdraft, the Lender may make an
additional Advance to fund such overdraft.
2.3 Note. The Borrowers' Obligations shall be evidenced by the
promissory note (the "Note") of the Borrowers dated as of the date
hereof substantially in the form of Exhibit A attached hereto. The
term "Note" shall include all extensions, renewals and
modifications of the Note and all substitutions therefor. All terms
and provisions of the Note are hereby incorporated herein.
2.4 Principal Payments.
2.4(a) The outstanding principal amount of all Advances
shall be payable in full on the Maturity Date.
2.4(b) The Borrowers shall have the right to prepay the
outstanding Advances in whole or in part, from time to time,
without premium or penalty.
2.4(c) All payments of outstanding Advances from the
proceeds of the sale or other disposition of Pledged Mortgages,
Pledged Subwarehousing Mortgages and Pledged Securities shall
be paid directly by the Investor to the Cash Collateral Account
to be applied against the Obligations.
2.4(d) The Borrowers shall be obligated to pay to the
Lender, without the necessity of prior demand or notice from
the Lender, and the Borrowers authorize the Lender to cause the
Funding Bank to charge the Borrowers' account for, the amount
of the outstanding Warehousing Advance and the outstanding
Premium Advance, if any, against a specific Pledged Mortgage,
upon the earliest occurrence of any of the following events:
(1) One hundred eighty (180) days elapse from the date
of the initial Advance made by the Lender against such
Pledged Mortgage (or, if such Pledged Mortgage was a
Pledged Subwarehousing Mortgage prior to the Borrowers'
purchase thereof, the related Subwarehousing Loan).
(2) Forty-five (45) days elapse from the date the
Pledged Mortgage was delivered to an Investor or an
Approved Custodian for examination and
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purchase, without the purchase being made, or upon
rejection of the Pledged Mortgage as unsatisfactory by an
Investor or for inclusion in a Mortgage Pool or
Securitization Pool.
(3) One (1) Business Day elapses from the date an
Advance was made and the Pledged Mortgage which was to have
been funded by such Advance is not closed and funded.
(4) Seven (7) Business Days elapse from the date a Wet
Settlement Advance was made without receipt by the Lender
of all Collateral Documents relating to such Pledged
Mortgage, or such Collateral Documents, upon examination by
the Lender, are found not to be in compliance with the
requirements of this Agreement or the related Purchase
Commitment.
(5) Ten (10) Business Days elapse from the date a
Collateral Document was delivered to the Borrowers for
correction or completion under a Trust Receipt, without
being returned to the Lender.
(6) On the date on which a Pledged Mortgage is
determined to have been originated based on untrue,
incomplete or inaccurate information, whether or not the
Borrowers had knowledge of such misrepresentation or
incorrect information, or two (2) scheduled payments under
the Pledged Mortgage are past due.
(7) One hundred twenty (120) days elapse from the date
an Advance was made against a Pledged Mortgage without
receipt of the items required in Sections 2.2(d) hereof, or
such items, upon examination by the Lender, are found not
to be in compliance with the requirements of this Agreement
or the related Purchase Commitment.
(8) For a Second Mortgage Loan, the Borrowers do not
have notice or knowledge that (i) payment of any Lien prior
to a Second Mortgage Loan is delinquent and remains
delinquent for a period of sixty (60) days or more, or (ii)
foreclosure has been commenced with respect to any Lien
prior to a Second Mortgage Loan.
(9) Upon sale, maturity or other disposition
of the Pledged Mortgage or upon issuance of the
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related Mortgage-backed Security or Company Security.
(10) If the Pledged Mortgage is included in a Mortgage
Pool or a Securitization Pool, unless the pool custodian is
an Approved Custodian, within two (2) Business Days after
delivery of the Pledged Mortgage to the pool custodian.
2.4(e) The Borrowers shall be obligated to pay to the
Lender, without the necessity of prior demand or notice from
the Lender, and the Borrowers authorize the Lender to cause the
Funding Bank to charge the Borrowers' account for, the amount
of the outstanding Subwarehousing Advance against a specific
Subwarehousing Loan upon the earliest occurrence of any of the
following events:
(1) Sixty (60) days elapse from the date of the
initial Advance made by the Lender against such
Subwarehousing Loan.
(2) Such Subwarehousing Loan becomes due and payable
under the terms of the related Approved Subwarehousing
Agreement, whether or not payment thereof is extended by
the Borrower and whether or not such Subwarehousing Loan is
paid, or a Subwarehousing Default occurs under the related
Approved Subwarehousing Agreement or Subwarehousing Note.
(3) Forty-five (45) days elapse from the date the
related Pledged Subwarehousing Mortgage was delivered to an
Investor or an Approved Custodian for examination and
purchase, without purchase being made, or upon rejection of
the Pledged Subwarehousing Mortgage as unsatisfactory by an
Investor, or for inclusion in a Mortgage Pool or
Securitization Pool.
(4) Ten (10) Business Days elapse from the date a
Collateral Document for the related Pledged Subwarehousing
Mortgage was delivered to the Borrowers or a Subwarehousing
Borrower for correction or completion under a Trust
Receipt, without being returned to the Lender.
(5) On the date on which a Pledged Subwarehousing
Mortgage is determined to have been originated based on
untrue, incomplete or inaccurate information, whether or
not the Borrowers had knowledge of such misrepresentation
or incorrect information, or two scheduled payments
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under the Pledged Subwarehousing Mortgage are defaulted.
(6) For a Pledged Subwarehousing Mortgage that is a
Second Mortgage Loan, payment of any Lien prior to such
Pledged Subwarehousing Mortgage is delinquent and remains
delinquent for a period of sixty (60) days or more.
(7) Upon sale, maturity or other disposition of the
related Pledged Subwarehousing Mortgage or the issuance of
the related Mortgage-backed Security or Company Security.
(8) If the Pledged Subwarehousing Mortgage is
included in a Mortgage Pool or a Securitization Pool,
unless the pool custodian is an Approved Custodian, within
two (2) Business Days after delivery of the Pledged
Subwarehousing Mortgage to the pool custodian.
2.4(f) The outstanding amount of any Advance made
pursuant to Section 2.2(f) shall be payable in full within one
(1) Business Day after the date of such Advance.
2.4(g) In addition to the payments required pursuant to
Section 2.5(d), the Borrowers shall be obligated to pay to the
Lender, without the necessity of prior demand or notice from
the Lender, and the Borrowers authorize the Lender to cause
the Funding Bank to charge the Borrowers' accounts, if the
principal amount of any Pledged Mortgage is prepaid or the
principal amount of any Subwarehousing Loan is paid or
prepaid, in whole or in part, while a Warehousing Advance or
Subwarehousing Advance is outstanding against such Pledged
Mortgage or Subwarehousing Loan, the amount of such payment or
prepayment, within two (2) Business Days after receipt thereof
by the Borrowers, to be applied to such Warehousing Advance or
Subwarehousing Advance.
2.4(h) The Borrowers shall give Notice to the Lender
(telephonically, to be followed by written notice) of the
Pledged Mortgages, Pledged Subwarehousing Mortgages or Pledged
Securities for which proceeds have been received. Upon receipt
of such Notice the Advances against such Pledged Mortgages or
Pledged Securities, or against the related Subwarehousing
Loan, shall be repaid and such Pledged Mortgages or Pledged
Securities shall be considered to have been redeemed from
pledge. The Lender is entitled to rely upon the Borrowers'
affirmation that deposits in the Cash Collateral Account
represent payment
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from Investors for the purchase of Pledged Mortgages, Pledged
Subwarehousing Mortgages or Pledged Securities as specified by
the Borrowers. In the event that the payment from an Investor
for the purchase of Pledged Mortgages, Pledged Subwarehousing
Mortgages or Pledged Securities is less than the outstanding
Advances against such Pledged Mortgages or the Mortgage Loans
backing Pledged Securities, or against the related
Subwarehousing Loan, the Lender is authorized to cause the
Funding Bank to charge the Borrowers' account for an amount
equal to such deficiency. Provided no Default or Event of
Default exists, the Lender shall return any excess payment from
an Investor for Pledged Mortgages, Pledged Subwarehousing
Mortgages or Pledged Securities to the Borrowers.
2.5 Expiration of Commitment. The Commitment shall
expire on the Maturity Date.
2.6 Method of Making Payments.
2.6(a) Except as otherwise specifically provided herein,
all payments hereunder shall be made to the Lender not later
than the close of business on the date when due unless such
date is a non-Business Day, in which case, such payment shall
be due on the first Business Day thereafter, and shall be made
in lawful money of the United States of America in immediately
available funds transferred via wire to accounts designated by
the Lender from time to time.
2.6(b) Upon an Event of Default, and without the necessity
of prior demand or notice from the Lender, the Borrowers
authorize the Lender to cause the Funding Bank to charge the
Borrowers' account for any Obligations due and owing the
Lender.
3. COLLATERAL.
3.1 Grant of Security Interest. As security for the payment of
the Note and for the performance of all of the Borrowers'
Obligations, the Borrowers hereby assign and transfer to the Lender
all right, title and interest in and to and grant a security
interest to the Lender in the following described property (the
"Collateral"):
3.1(a) All 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 Lender (including
delivery to a third party on behalf of the Lender), come into
the possession, custody or control of the Lender for the
purpose of assignment or
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pledge or in respect of which an Advance has been made by the
Lender hereunder, including without limitation all Mortgage
Loans in respect of which Wet Settlement Advances have been
made by the Lender (the "Pledged Mortgages").
3.1(b) All Subwarehousing Loans in respect of which an
Advance has been made by the Lender, or 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' 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 (the "Pledged
Subwarehousing Mortgages").
3.1(c) All Mortgage-backed Securities and Company
Securities which are from time to time created in whole or in
part on the basis of the Pledged Mortgages or Pledged
Subwarehousing Mortgages or are delivered or caused to be
delivered to, or are otherwise in the possession of the
Lender, or its agent, bailee or custodian as assignee, or
pledged to the Lender, or for such purpose are registered by
book-entry in the name of the Lender (including delivery to or
registration in the name of a third party on behalf of the
Lender) hereunder or in respect of which from time to time an
Advance has been made by the Lender hereunder (the "Pledged
Securities").
3.1(d) All mortgage insurance policies or guaranties
related to, and all commitments to insure or guarantee, any
Mortgage Loans included in the Pledged Mortgages; all Purchase
Commitments held by the Borrowers covering the Pledged
Mortgages or the Pledged Securities and all proceeds resulting
from the sale thereof; all personal property, contract rights,
servicing and servicing fees and income or other proceeds,
amounts and payments payable to the Borrowers as compensation
or reimbursement, accounts and general intangibles of
whatsoever kind relating to the Pledged Mortgages, the Pledged
Securities, said insurance policies, guaranties, commitments
and Purchase Commitments, and all other documents or
instruments relating to the Pledged Mortgages and the Pledged
Securities, including, without limitation, any interest of the
Borrowers in any fire, casualty or hazard insurance policies
and any awards made by any public body or decreed by any court
of competent
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jurisdiction for a taking or for degradation of value in any
eminent domain proceeding as the same relate to the Pledged
Mortgages; and all of the Borrowers' right, title and interest
in and to any of the foregoing types of property relating to
any Pledged Subwarehousing Mortgage or any Pledged Security
created in whole or in part on the basis of any Pledged
Subwarehousing Mortgage.
3.1(e) The Servicing Contracts listed on Exhibit E-2
attached hereto, and all Nonrecourse Servicing Contracts with
respect to Single-Family Mortgage Loans and Mixed Use Property
Mortgage Loans hereafter pledged to the Lender pursuant to a
Security Agreement in the form of Exhibit O hereto (a
"Supplemental Pledge Agreement"); provided, however, that such
assignment and security interest with respect to any pledged
Servicing Contracts with FNMA or FHLMC shall not take effect
until the date on which an Acknowledgment Agreement covering
such Servicing Contracts has been executed and delivered by
the Borrowers, the Lender and FNMA or FHLMC, as appropriate.
3.1(f) All rights of the Borrowers to receive payments
under or by virtue of the Servicing Contracts described in
Section 3.1(e) (without giving effect to the proviso at the
end thereof) and the Acknowledgment Agreements, whether as
servicing fees, servicing income, damages, amounts payable
upon the cancellation or termination of any such Servicing
Contract, interests on the foregoing, or otherwise.
3.1(g) Any agreement pursuant to which any Servicing
Contract described in Section 3.1(e) (without giving effect to
the proviso at the end thereof) was acquired or is sold by the
Borrowers, and all documents and instruments executed or
delivered in connection with any such acquisition or sale.
3.1(h) All rights of the Borrowers to receive payment or
to retain payments received by it under any guaranty of,
mortgage insurance policy insuring payment of, or other
agreement (including a Servicing Contract) relating to,
Pledged Mortgages, Mortgage Loans backing Pledged Securities
and Mortgage Loans serviced by the Borrowers under Servicing
Contracts pledged to the Lender hereunder, relating to (i) any
Mortgage Loan being serviced by the Borrowers for the
reimbursement of real estate taxes or assessments, or casualty
or liability insurance premiums, paid by the Borrowers in
connection with such Mortgage Loan, and (ii) any Mortgage
Loans serviced by the Borrowers for repayment of advances made
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by the Borrowers to cover shortages in principal and interest
payments on such Mortgage Loans.
3.1(i) All right, title and interest of the borrowers, if
any, in and to all escrow accounts, documents, instruments,
files, surveys, certificates, correspondence, appraisals,
computer programs, tapes, discs, cards, accounting records
(including all information, records, tapes, data, programs,
discs and cards necessary or helpful in the administration or
servicing of the Collateral) and other information and data of
the Borrowers relating to the Collateral.
3.1(j) All right, title and interest of the Borrowers in
and to any Hedging Arrangements entered into to protect either
Borrower or any Subwarehousing Borrower against changes in the
value of Pledged Mortgages, Pledged Subwarehousing Mortgages
or Pledged Securities resulting from changes in interest
rates, including, without limitation, all rights to payment
arising under such Hedging Arrangements.
3.1(k) All now existing or hereafter acquired cash
delivered to or otherwise in the possession of the Lender or
its agent, bailee or custodian or designated on the books and
records of the Borrowers as assigned and pledged to the
Lender.
3.1(1) All cash and non-cash proceeds of the Collateral,
including all dividends, distributions and other rights in
connection with, and all additions to, modifications of and
replacements for, the Collateral, and all products and
proceeds of the Collateral, together with whatever is
receivable or received when the Collateral or proceeds thereof
are sold, collected, exchanged or otherwise disposed of,
whether such disposition is voluntary or involuntary,
including, without limitation, all rights to payment with
respect to any cause of action affecting or relating to the
Collateral or proceeds thereof, but excluding any
Mortgage-backed Securities, Company Securities, Servicing
Contracts or residual interests arising in connection with the
creation of Mortgage-backed Securities or Company Securities
created in whole or in part on the basis of Pledged Mortgages
or Pledged Subwarehousing Mortgages, to the extent no Event of
Default has occurred and is continuing and the Lender has
received the Release Amount for such Pledged Mortgages or
Pledged Subwarehousing Mortgages in connection with the
creation or sale of such Mortgage-backed Securities or Company
Securities.
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3.2 Release of Security Interest in Collateral.
3.2(a) Pledged Mortgages shall be released from the
Lender's security interest only against payment to the Lender of
the Release Amount in connection with such Pledged Mortgages.
Subwarehousing Loans and the related Pledged Subwarehousing
Mortgages shall be released from the Lender's security interest
only against payment to the Lender of the Release Amount in
connection with such Pledged Subwarehousing Mortgages, provided,
that Pledged Subwarehousing Mortgages shall be released to the
Subwarehousing Borrower to the extent required in the related
Approved Subwarehousing Agreement.
3.2(b) If Pledged Mortgages or Pledged Subwarehousing
Mortgages are to be transferred to a pool custodian for
inclusion in a Mortgage Pool or a Securitization Pool or to
FHLMC, FNMA or another Investor, the Lender's security interest
in such Pledged Mortgages or Pledged Subwarehousing Mortgages
shall be released only against payment to the Lender of the
Release Amount in connection with such Pledged Mortgages or
Pledged Subwarehousing Mortgages. If the Lender's security
interest in the Pledged Mortgages or Pledged Subwarehousing
Mortgages comprising the Mortgage Pool is not released prior to
or simultaneously with the issuance of the Mortgage-backed
Security or Company Security, then the Mortgage-backed Security
or Company Security, when issued, shall be a Pledged Security.
The Lender's security interest shall continue in such Pledged
Mortgages or Pledged Subwarehousing Mortgages and the Pledged
Security. The Lender shall be entitled to possession of such
Pledged Security in the manner provided below.
3.2(c) The Lender shall have the exclusive right to the
possession of the Pledged Securities or, if the Pledged
Securities are not to be issued in certificated form or are to
be issued in certificated form and registered exclusively in the
name of, and held by, a clearing agency or its nominee, shall
have the right to have the book entries for the Pledged
Securities issued in the Lender's name or the name or names of
its designees, and the Lender shall have the right to cause
delivery of the Pledged Securities to be made to the Investor
or the book entries registered in the name of the Investor or
the Investors designee only against payment therefor. The
Borrowers acknowledge that the Lender may enter into one or more
standing arrangements with other financial institutions for the
issuance of Pledged Securities in book entry form in the name
of such other financial institutions, as agent or financial
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intermediary for the Lender, and the Borrowers agree, upon
request of the Lender, to execute and deliver to such other
financial institutions the Borrowers' written concurrence in
any such standing arrangements, provided such standing
arrangements do not authorize the Lender to pledge such Pledged
Securities (as opposed to the Lender's security interest
therein) to such financial institution.
3.2(d) Prior to the occurrence of an Event of Default, the
Borrowers may redeem a Pledged Mortgage, Pledged Subwarehousing
Mortgage or Pledged Security from the Lender's security
interest by notifying the Lender of its intention to redeem
such Pledged Mortgage, Pledged Subwarehousing Mortgage or
Pledged Security from pledge and either (a) paying, or causing
an Investor to pay, to the Lender, for application to
prepayment of the principal balance of the Note, the Release
Amount in connection with such Pledged Mortgage, Pledged
Subwarehousing Mortgage or Pledged Security, or (b) delivering
substitute Collateral which, in addition to being acceptable to
the Lender in its sole discretion has a Fair Market Value not
less than the Fair Market Value of the Collateral being
released.
3.2(e) Following the occurrence of a Default or Event of
Default, the Lender may, with no liability to the Borrowers or
any Person, continue to release its security interest in any
Pledged Mortgage, Pledged Subwarehousing Mortgage or Pledged
Security against payment of the Release Amount in connection
with such Pledged Mortgage or Pledged Security.
3.2(f) The Release Amount in connection with any Pledged
Mortgage or Pledged Subwarehousing Mortgage shall be (i) prior
to the occurrence of an Event of Default, the principal amount
of the Warehousing Advance and the Premium Advance, if any,
made against such Pledged Mortgage, or of the Subwarehousing
Advance made against 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.
3.3 Mark-to-Market. If at any time the aggregate outstanding
principal balance of the Warehousing Advances and premium Advances
exceeds ninety-nine percent (99%) of the Fair Market Value of the
Pledged Mortgages and Pledged Securities (excluding Pledged
Securities to the extent backed by Pledged
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Subwarehousing Mortgages), then pledged hereunder, the Borrowers
shall within one (1) Business Day after Notice by the Lender either
(a) repay the Warehousing Advances and Premium Advances in an
amount sufficient to reduce the aggregate outstanding principal
balance thereof to or below ninety-nine percent of the Fair Market
Value of such Pledged Mortgages and Pledged Securities or (b)
pledge to the Lender additional Mortgage Loans owned by the
Borrower's, or other property of a type and with a value
satisfactory to the Lender in its sole discretion, with a Fair
Market Value sufficient to increase the Fair Market Value of the
Pledged Mortgages, the Pledged Securities (excluding Pledged
Securities to the extent backed by Pledged Subwarehousing Loans)
and such other assets to any amount such that ninety-nine percent
(99%) of the aggregate outstanding principal balance of the
Warehousing Advances and the Premium Advances does not exceed such
Fair Market Value. The Borrowers authorize the Lender, without the
requirement of prior demand or notice from the Lender, to cause the
Funding Bank to charge the Borrowers' accounts for the amount of
any prepayment required under this Section 3.3. Such prepayments
shall be applied first, to the Premium Advances, ratably in
accordance with the outstanding principal balance of each Premium
Advances, and second, to the Warehousing Advances, ratably in
accordance with the outstanding principal balance of each
Warehousing Advance. The Lender may at any time, and shall no less
frequently than once each month, calculate the Fair Market Value of
the Pledged Mortgages and the Pledged Securities (excluding Pledged
Securities to the extent backed by Pledged Subwarehousing
Mortgages), and the Borrowers shall provide to the Lender such
information concerning the Pledged Mortgages and the Pledged
Securities as the Lender may request in connection with such
calculation.
3.4 Release of Collateral.
3.4(a) The Lender may deliver documents relating to the
Collateral to the Borrowers or, at the written direction of the
Borrowers with respect to any Subwarehousing Mortgage Loan, a
Subwarehousing Borrower for correction or completion pursuant to
a Trust Receipt.
3.4(b) Prior to the occurrence of a Default or Event of
Default, upon delivery by the Borrowers to the Lender of
shipping instructions pursuant to Exhibit D-SF, the Lender will
transmit Pledged Mortgages, Pledged Subwarehousing Mortgages or
Pledged Securities and all related loan documents or pool
documents to the applicable Investor, Approved Custodian or
other party.
3.4(c) Upon receipt of Notice from the Borrowers
under Section 2.4(h) hereof, and repayment of the Release
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Amount with respect to a Pledged Mortgage or Pledged
Subwarehousing Mortgage identified by the Borrowers, any
Collateral Documents relating to the redeemed Pledged
Mortgage, Pledged Subwarehousing Mortgage or Mortgage Loan
backing a Pledged Security which have not been delivered to an
Investor or Approved Custodian shall be released by the Lender
to the Borrowers.
3.5 Collection and Servicing Rights. So long as no Event of
Default shall have occurred and be continuing, the Borrowers shall
be entitled to service and receive and collect directly all sums
payable to the Borrowers in respect of the Collateral other than
proceeds of any Purchase Commitment or proceeds of the sale of any
Collateral. Following the occurrence of any Event of Default, the
Lender or its designee shall thereafter be entitled to service and
receive and collect all sums payable to the Borrowers in respect of
the Collateral, and in such case (a) the Lender or its designee in
its discretion may, in its own name, in the name of the Borrowers
or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in
exchange for any of the Collateral, but shall be under no
obligation to do so, (b) the Borrowers shall, if the Lender so
requests, hold in trust for the benefit of the Lender and forthwith
pay to the Lender at its office designated by Notice hereunder, all
amounts thereafter received by the Borrowers upon or in respect of
any of the Collateral, advising the Lender as to the source of such
funds, and (c) all amounts so received and collected by the Lender
shall be held by it as part of the Collateral.
3.6 Return of Collateral at End of Commitment. If (a) the
Commitment shall have expired or been terminated, and (b) no
Advances, interest or other Obligations shall be outstanding and
unpaid, the Lender shall deliver or release its security interest
and shall deliver all Collateral in its possession to the Borrowers
at the Borrowers' expense. The receipt of the Borrowers for any
Collateral released or delivered to the Borrowers pursuant to any
provision of this Agreement shall be a complete and full
acquittance for the Collateral so returned, and the Lender shall
thereafter be discharged from any liability or responsibility
therefor.
4. CONDITIONS PRECEDENT.
4.1 Initial Advance. The obligation of the Lender to make the
initial Advance under this Agreement is subject to the
satisfaction, in the sole discretion of the Lender, on or before
the date thereof of the following conditions precedent:
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4.1(a) The Lender shall have received the following, all
of which must be satisfactory in form and content to the
Lender, in its sole discretion:
(1) The Note and a separate agreement between the
Borrowers and the Lender concerning interest, fees and
other charges, this Agreement duly executed by the
Borrowers.
(2) A copy of Industry's Certificate of Limited
Partnership and all amendments thereto as filed with and
certified by the Secretary of the State of Delaware, a
copy of Industry's Partnership Agreement and all
amendments thereto, certified to be true and correct by
the secretary or an assistant secretary of the General
Partner and a Certificate of Good Standing for Industry,
certified no less recently than ninety (90) days prior to
the date of this Agreement by the Secretary of the State
of Delaware.
(3) A resolution, consent or approval of Industry,
adopted by the General Partner and any limited partners of
Industry entitled to vote thereon, authorizing the
execution, delivery and performance of this Agreement and
the other Loan Documents, and all other instruments or
documents to be delivered by Industry pursuant to this
Agreement.
(4) A resolution of the board of directors of the
General Partner, certified as of the date of this
Agreement by its corporate secretary, authorizing the
execution, delivery and performance by the General Partner
on behalf of Industry of this Agreement and the other Loan
Documents, and of all other instruments or documents to be
delivered by Industry pursuant to this Agreement.
(5) A copy of the General Partner's articles of
incorporation and all amendments thereto as filed with and
certified by the Secretary of the State of Delaware, a
copy of the General Partner's bylaws certified by its
secretary or an assistant secretary and a Certificate of
Good Standing for the General Partner dated no less
recently than ninety (90) days prior to the date of this
Agreement by the Secretary of the State of Delaware.
(6) A certificate of the General Partner's
corporate secretary as to the incumbency and
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authenticity of the signatures of the officers of the
General Partner executing, on behalf of Industry, this
Agreement and the other Loan Documents, each Advance
Request and all other instruments or documents to be
delivered pursuant hereto (the Lender being entitled to
rely thereon until a new such certificate has been
furnished to the Lender).
(7) Financial statements of the General Partner
containing a balance sheet dated December 31, 1994, and
related statements of income, cash flow and changes in
stockholders' equity for the fiscal year ended on such
date, all prepared in accordance with GAAP applied on a
basis consistent with prior periods and certified by the
chief financial officer of the General Partner as fairly
presenting the financial condition of the General Partner.
(8) Financial statements of Industry and its
Subsidiaries, on a consolidated and consolidating basis,
containing a balance sheet as of December 31, 1994, and
related statements of income, changes in partners' equity
and cash flow for the period ended on such date, all
prepared in accordance with GAAP applied on a basis
consistent with prior periods and audited by independent
certified public accountants of recognized standing
acceptable to the Lender.
(9) Financial statements of Industry and its
Subsidiaries, on a consolidated and consolidating basis
containing a balance sheet as of September 30, 1995, and a
related statement of income for the period ended on such
date, prepared in accordance with GAAP applied on a basis
consistent with Industry's most recent audited financial
statements and certified by the chief financial officer of
the General Partner as fairly presenting the financial
condition of Industry.
(10) A resolution of the board of directors of IMC,
certified as of the date of this Agreement by its
secretary or any assistant secretary, authorizing the
execution, delivery and performance of this Agreement
and the other Loan Documents, and all other instruments or
documents to be delivered by IMC pursuant to this
Agreement.
(11) A copy of IMC's articles of incorporation
and all amendments thereto as filed with and
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certified by the Secretary of the State of Delaware, a copy
of IMC's bylaws certified by the secretary or any assistant
secretary and a Certificate of Good Standing dated no less
recently than ninety (90) days prior to the date of this
Agreement by the Secretary of the State of Delaware.
(12) A certificate of IMC's corporate secretary as to
the incumbency and authenticity of the signatures of the
officers of IMC executing this Agreement and the other Loan
Documents, each Advance Request and all other instruments
or documents to be delivered pursuant hereto (the Lender
being entitled to rely thereon until a new such certificate
has been furnished to the Lender).
(13) A favorable written opinion of counsel to the
Borrowers and the General Partner, dated as of the date of
this Agreement substantially in the form of Exhibit H
attached hereto, addressed to the Lender.
(14) Uniform Commercial Code, tax lien and judgment
searches of the appropriate public records for the
Borrowers, which searches shall not have disclosed the
existence of any prior Lien on the Collateral other than in
favor of the Lender or as permitted hereunder.
(15) Copies of the certificates, documents or other
written instruments which evidence the Borrowers'
eligibility described in Section 5.13 hereof, all in form
and substance satisfactory to the Lender.
(16) Copies of the Borrowers' errors and omissions
insurance policy or mortgage impairment insurance policy
and blanket bond coverage policy, or certificates in lieu
of policies, all in form and content satisfactory to the
Lender, showing compliance by the Borrowers as of the date
of this Agreement with the related provisions of Section
6.8 hereof.
(17) Executed financing statements in recordable form
covering the Collateral and ready for filing in all
jurisdictions required by the Lender.
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(18) Receipt by the Lender of any fees due on the
date hereof, including, but not limited to, Commitment
Fees and document production fees.
(19) Evidence that all accounts necessary into which
Advances will be funded have been established at the
Funding Bank and receipt of a fully executed Funding Bank
Agreement.
4.2 Each Advance. The obligation of the Lender to make the
initial and each subsequent Advance under this Agreement is subject
to the satisfaction, in the sole discretion of the Lender, as of
the date of each such Advance, of the following additional
conditions precedent:
4.2(a) The Borrowers shall have delivered to the Lender
the Advance Request, Collateral Documents, documents relating
to Wet Settlement Advances and Subwarehousing Note (if
applicable), called for under, and shall have satisfied the
procedures set forth in, Section 2.2 hereof and the applicable
Exhibits hereto described in that Section, according to the
type of the requested Advance. All items delivered to the
Lender shall be satisfactory to the Lender in form and
content, and the Lender may reject such of them as do not meet
the requirements of this Agreement or of the related Purchase
Commitment.
4.2(b) The Lender shall have received evidence
satisfactory to it as to the making and/or continuation of any
book entry or the due filing and recording in all appropriate
offices of all financing statements and other instruments as
may be necessary to perfect the security interest of the
Lender in the Collateral under the Uniform Commercial Code of
Minnesota or other applicable law.
4.2(c) The representations and warranties of the Borrowers
contained in Article 5 hereof shall be accurate and complete in
all material respects as if made on and as of the date of each
Advance.
4.2(d) The Borrowers shall have performed all agreements
to be performed by it hereunder, and after giving effect to the
requested Advance, there shall exist no Default or Event of
Default hereunder.
4.2(e) The Borrowers shall not have incurred any material
liabilities, direct or contingent, other than in the ordinary
course of its business, since the Statement Date.
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4.2(f) The Lender shall have received from counsel for
the Borrowers and the General Partner, if requested by the
Lender in its sole discretion, an updated opinion, in form and
substance satisfactory to the Lender, addressed to the Lender
and dated as of the date of such Advance, covering such of the
matters as the Lender may reasonably request.
Delivery of an Advance Request by the Borrowers shall be
deemed a representation by the Borrowers that all conditions set
forth in this Section 4.2 shall have been satisfied as of the date
of such Advance.
5. REPRESENTATIONS AND WARRANTIES.
The Borrowers hereby represent and warrant to the Lender, as
of the date of this Agreement and as of the date of each Advance
Request and the making of each Advance, that:
5.1 Organization; Good Standing: Subsidiaries. Industry is a
limited partnership and each of IMC and the General Partner is a
corporation, in each case duly organized, validly existing and in
good standing under the laws of the jurisdiction of its formation,
has the full legal power and authority to own its property and to
carry on its business as currently conducted and is duly qualified
to do business and in good standing in each jurisdiction in which
the transaction of its business makes such qualification necessary,
except in jurisdictions, if any, where a failure to be in good
standing has no material adverse effect on the business,
operations, assets or financial condition of Industry, IMC or the
General Partner, as applicable. For the purposes hereof, good
standing shall include qualification for any and all licenses and
payment of any and all taxes required in the jurisdiction of its
formation and in each jurisdiction in which Industry, IMC or the
General Partner, as applicable, transacts business. Each Partner
has made all capital contributions required to be made by it under
the Partnership Agreement, and no default by any Partner thereunder
has occurred and is continuing. None of the Partners has withdrawn
from Industry, except in connection with a substitution or
reorganization of the partnership interests in Industry that did
not result in any net withdrawal of any partnership capital.
Neither Borrower has any Subsidiaries except as set forth on
Exhibit G hereto. Exhibit G sets forth with respect to each such
Subsidiary, its name, address, place of incorporation, each state
in which it is qualified as a foreign corporation, and the
percentage ownership of its capital stock by the Borrowers.
5.2 Authorization and Enforceability. The Borrowers have the
power and authority to execute, deliver and perform this Agreement,
the Note and all other Loan Documents to which
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the Borrowers are party and to make the borrowings hereunder. The
execution, delivery and performance by the Borrowers of this
Agreement, the Note and all other Loan Documents to which the
Borrowers are party and the making of the borrowings hereunder and
thereunder, have been duly and validly authorized by all necessary
partnership or corporate action on the part of the Borrowers (none
of which actions have been modified or rescinded, and all of which
actions are in full force and effect) and do not and will not
conflict with or violate any provision of law or of the Partnership
Agreement of Industry or the Articles of Incorporation or bylaws of
IMC, conflict with or result in a breach of or constitute a default
or require any consent under, or result in the creation of any Lien
upon any property or assets of, Borrower other than the Lien on the
Collateral granted hereunder, or result in or require the
acceleration of any indebtedness of either Borrower pursuant to any
agreement, instrument or indenture to which either Borrower is a
party or by which either Borrower or their respective properties may
be bound or affected. This Agreement, the Note and all other Loan
Documents contemplated hereby or thereby constitute legal, valid,
and binding obligations of the Borrowers, enforceable in accordance
with their respective terms, except as limited by bankruptcy,
insolvency or other such laws affecting the enforcement of
creditors' rights.
5.3 Approvals. The execution and delivery of this Agreement,
the Note and all other Loan Documents and the performance of the
Borrowers' obligations hereunder and thereunder and the validity and
enforceability hereof and thereof do not require any license,
consent, approval or other action of any state or federal agency or
governmental or regulatory authority other than those which have
been obtained and remain in full force and effect.
5.4 Financial Condition. The balance sheet of Industry and its
Subsidiaries, on a consolidated and consolidating basis, as at the
Statement Date, and the related statements of income and changes in
partners' equity and cash flow for the periods ended on the
Statement Date, heretofore furnished to the Lender, fairly present
the financial condition of the Borrowers as at the Statement Date
and the results of their operations for the period ended on the
Statement Date. The Borrowers had, on the Statement Date, no known
material liabilities, direct or indirect, fixed or contingent,
matured or unmatured, or liabilities for taxes, long-term leases or
unusual forward or long-term commitments not disclosed by, or
reserved against in, said balance sheet and related statements, and
at the present time there are no material unrealized or anticipated
losses from any loans, advances or other commitments of the
Borrowers except as heretofore disclosed to the Lender in writing.
Said financial statements
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were prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except, with respect to interim
financial statements, for the absence of footnotes, and subject, in
the case of interim financial statements, to normal year-end
adjustments). Since the Statement Date, there has been no material
adverse change in the business, operations, assets or financial
condition of the Borrowers (and their Subsidiaries), nor are the
Borrowers aware of any state of facts which (with or without notice
or lapse of time or both) would or could result in any such
material adverse change.
5.5 Litigation. There are no actions, claims, suits or
proceedings pending or, to the knowledge of the Borrowers,
threatened or reasonably anticipated against or affecting the
Borrowers or any Subsidiary of the Borrowers in any court or before
any arbitrator or before any government commission, board, bureau
or other administrative agency which, if adversely determined, may
reasonably be expected to result in any material and adverse change
in the business, operations, assets or financial condition of the
Borrowers as a whole, or which would affect the validity or
enforceability of this Agreement, the Note or any other Loan
Document.
5.6 Compliance with Laws. Neither the Borrowers nor any
Subsidiary of the Borrowers are in violation of any provision of
any law, or of any judgment, award, rule, regulation, order,
decree, writ or injunction of any court or public regulatory body
or authority which might have a material adverse effect on the
business, operations, assets or financial condition of the
Borrowers as a whole or which would affect the validity or
enforceability of this Agreement, the Note or any other Loan
Document.
5.7 Regulations G and U. The Borrowers are not engaged
principally, or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying
Margin Stock, and no part of the proceeds of any Advances made
hereunder will be used to purchase or carry any Margin Stock or to
extend credit to others for the purpose of purchasing or carrying
any Margin Stock.
5.8 Investment Company Act. Neither Borrower is an "investment
company" or controlled by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
5.9 Payment of Taxes. The Borrowers and each of their
Subsidiaries have filed or caused to be filed all federal, state
and local income, excise, property and other tax returns with
respect to the operations of the Borrowers and their Subsidiaries
which are required to be filed all such returns
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are true and correct, and the Borrowers and each of its
Subsidiaries has paid or caused to be paid all taxes as shown on
such returns or on any assessment, to the extent that such taxes
have become due, including, but not limited to, all FICA payments
and withholding taxes, if appropriate. The amounts reserved, as a
liability for income and other taxes payable, in the financial
statements described in Section 5.4 hereof are sufficient for
payment of all unpaid federal, state and local income, excise,
property and other taxes, whether or not disputed, of the Borrowers
and their Subsidiaries accrued for or applicable to the period and
on the dates of such financial statements and all years and periods
prior thereto and for which the Borrowers and their Subsidiaries
may be liable in its own right or as transferee of the assets of,
or as successor to, any other Person.
5.10 Agreements. Neither the Borrowers nor any Subsidiary of
the Borrowers are a party to any agreement, instrument or indenture
or subject to any restriction materially and adversely affecting
its business, operations, assets or financial condition, except as
disclosed in the financial statements described in Section 5.4
hereof. Neither the Borrowers nor any Subsidiary of the Borrowers
are in default in the performance, observance or fulfillment of any
of the obligations, covenants or conditions contained in any
agreement, instrument, or indenture which default could have a
material adverse effect on the business, operations, properties or
financial condition of the Borrowers as a whole. No holder of any
indebtedness of the Borrowers or of any of its Subsidiaries has
given notice of any asserted default thereunder, and no liquidation
or dissolution of the Borrowers or of any of their Subsidiaries and
no receivership, insolvency, bankruptcy, reorganization or other
similar proceedings relative to the Borrowers or of any of their
Subsidiaries or any of its properties is pending, or to the
knowledge of the Borrowers, threatened.
5.11 Title to Properties. The Borrowers and each Subsidiary of
the Borrowers have good, valid, insurable (in the case of real
property) and marketable title to all of its properties and assets
(whether real or personal, tangible or intangible) reflected on the
financial statements described in Section 5.4 hereof, except for
such properties and assets as have been disposed of since the date
of such financial statements as no longer used or useful in the
conduct of its business or as have been disposed of in the ordinary
course of business, and all such properties and assets are free and
clear of all Liens except as disclosed in such financial
statements.
5.12 ERISA. All plans ("Plans") of a type described in Section
3(3) of ERISA in respect of which the Borrowers or any
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Subsidiary of the Borrowers are an "Employer," as defined in
Section 3(5) of ERISA, are in substantial compliance with ERISA,
and none of such Plans is insolvent or in reorganization, has an
accumulated or waived funding deficiency within the meaning of
Section 412 of the Internal Revenue Code, and neither the Borrowers
nor any Subsidiary of the Borrowers have incurred any material
liability (including any material contingent liability) to or on
account of any such Plan pursuant to Sections 4062, 4063, 4064,
4201 or 4204 of ERISA; and no proceedings have been instituted to
terminate any such Plan, and no condition exists which presents a
material risk to the Borrowers or a Subsidiary of the Borrowers of
incurring a liability to or on account of any such Plan pursuant to
any of the foregoing Sections of ERISA. No Plan or trust forming a
part thereof has been terminated since September 1, 1974.
5.13 Eligibility. The Borrowers are approved and qualified and
in good standing as a lender or seller/servicer, as set forth
below, and meets all requirements applicable to its status as such:
5.13(a) If either Borrower pledges any VA Mortgage Loan
hereunder, Lender in good standing under the VA loan guarantee
program eligible to originate, purchase, hold, sell and
service VA-guaranteed Mortgage Loans.
5.13(b) If either Borrower pledges any FHA or other HUD
Mortgage Loan hereunder, HUD approved mortgagee, eligible to
originate, purchase, hold, sell and service FHA fully insured
Mortgage Loans.
5.14 Place of Business. The principal place of business of
both Borrowers is 3450 Buschwood Park Drive, Suite 250, Tampa,
Florida 33618.
5.15 Special Representations Concerning Collateral. The
Borrowers hereby represent and warrant to the Lender, as of the
date of this Agreement and as of the date of each Advance Request
and the making of each Advance, that:
5.15(a) The Borrowers are the legal and equitable owners
and holder, free and clear of all Liens (other than Liens
granted hereunder), of the Pledged Mortgages and the Pledged
Securities. All Pledged Mortgages, Pledged Securities and
Purchase Commitments have been duly authorized and validly
issued to the Borrowers, and all of the foregoing items of
Collateral comply with all of the requirements of this
Agreement, and have been and will continue to be validly
pledged or assigned to the Lender, subject to no other Liens.
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5.15(b) The Borrowers have, and will continue to have,
the full right, power and authority to pledge the Collateral
Pledged and to be pledged by it hereunder.
5.15(c) Any Mortgage Loan and any related document
included in the Pledged Mortgages (1) has been duly executed
and delivered by the parties thereto, (2) has been made in
compliance with all requirements of the Real Estate Settlement
Procedures Act, Equal Credit Opportunity Act, the federal
Truth-In-Lending Act and all other applicable laws and
regulations, (3) is and will continue to be valid and
enforceable in accordance with its terms, without defense or
offset, (4) has not been modified or amended except in
writing, which writing is part of the Collateral Documents,
nor any requirements thereof waived, (5) except in the case of
Mortgage Loans made before August 1989, has been evaluated or
appraised in accordance with Title XI of FIRREA, and (6)
complies and will continue to comply with the terms of this
Agreement. Each Mortgage Loan other than a Home Equity Loan
has been fully advanced in the face amount thereof, each First
Mortgage is a first Lien on the premises described therein and
each Second Mortgage is secured by a second Lien on the
premises described therein, and has or will have a title
insurance policy, in American Land Title Association form or
equivalent thereof, from a recognized title insurance company,
insuring the priority of the Lien of the Mortgage and meeting
the usual requirements of Investors purchasing such Mortgage
Loans.
5.15(d) Not more than one payment is past due under any
Mortgage Loan included in the Pledged Mortgages without the
Advances against such Pledged Mortgage having been repaid in
accordance with Section 2.5(d)(6) hereof, provided, however,
that with respect to Pledged Mortgages which have already been
pledged as Collateral hereunder, if any default has occurred,
the borrowers will promptly notify the Lender.
5.15(e) The Borrowers have complied and will continue to
comply with all laws, rules and regulations in respect of the
mortgage insurance policy or guaranty related to each Mortgage
Loan included in the Pledged Mortgages, and such insurance or
guarantee is and will continue to be in full force and effect.
5.15(f) All fire and casualty policies covering the
premises encumbered by each Mortgage included in the Pledged
Mortgages (1) name and will continue to name the Borrowers and
their successors and assigns as the insured under a standard
mortgagee clause, (2) are and will continue to be in full
force and effect, and (3) afford
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and will continue to afford insurance against fire and such
other risks as are usually insured against in the broad form
of extended coverage insurance from time to time available.
5.15(g) Pledged Mortgages secured by premises located in
a special flood hazard area designated as such by the Director
of the Federal Emergency Management Agency are and shall
continue to be covered by special flood insurance under the
National Flood Insurance Program.
5.15(h) Each Pledged Mortgage has been underwritten
under, substantially complies with, and has been assigned a
risk rating in accordance with, the Underwriting Guidelines.
5.16 Servicing. Attached hereto as Exhibit E-1 is a true and
complete list of the Borrowers' Servicing Portfolio. All of the
Borrowers' Servicing Contracts are in full force and effect and,
except as otherwise indicated, are unencumbered by Liens. No
default or event which, with notice or lapse of time or both, would
become a default, exists under any such Servicing Contract.
5.17 Special Representations Concerning Pledged Servicing
Contracts. The Borrowers hereby represent and warrant to the
Lender, as of the date of this Agreement and as of the date of
Advance Request and the making of each Advance, that:
5.17(a) The Borrowers are the legal and equitable owners
and holders, free and clear of all Liens (other than Liens
granted hereunder), of the Servicing Contracts pledged
hereunder and, subject to the limitations set forth in Section
3.1(e), such Servicing Contracts will be validly pledged or
assigned to the Lender, subject to no other Liens.
5.17(b) Subject to the limitations set forth in Section
3.1(d), the Borrowers have, and will continue to have, the
full right, power and authority to pledge the Servicing
Contracts pledged and to be pledged by them hereunder.
5.17(c) All of the servicing rights under the Servicing
Contracts pledged hereunder constitute direct servicing
rights.
5.17(d) Each Servicing Contract pledged hereunder is in
full force and effect, each Servicing Contract pledged
hereunder is legal, valid and enforceable in accordance with
its terms and no default or event which,
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with notice or lapse of time or both, would become a default,
exists under any such Servicing Contract.
5.17(e) Each right to the payment of money under the
Servicing Contracts pledged hereunder is genuine and
enforceable in accordance with its terms against the parties
obligated to pay the same ("Obligor"), except as limited by
bankruptcy, insolvency, moratorium or other similar laws
affecting the enforcement of creditors' rights-generally,
which terms have not been modified or waived in any material
respect or to any material extent.
5.17(f) To the best of the Borrowers' knowledge, the
amount represented by the Borrowers to the Lender as owing by
an Obligor under each Mortgage Loan being serviced under a
Servicing Contract pledged hereunder is the correct amount
actually and unconditionally owing by such Obligor.
5.17(g) To the best of the Borrowers' knowledge, no
Obligor has any defense, set off, claim or counterclaim
against the Borrowers which can be asserted against the
Lender, whether in any proceeding to enforce the Lender's
rights in the related Mortgage Loan or otherwise.
5.17(h) The Borrowers have not sold, assigned or
otherwise transferred any servicing rights associated with the
Mortgage Loans being serviced under a Servicing Contract
pledged hereunder, including, without limitation, any rights
to place escrow deposits with respect thereto.
5.17(i) Except for the Acknowledgement Agreements, if
any, referred to in Section 3.1(d), no consent of any Obligor,
Investor, holder of any Mortgage-backed Security or Company
Security, trustee for such holders or other Person is required
for the grant of the security interest provided herein by the
Borrowers in any of the Servicing Collateral including,
without limitation, the Servicing Contracts pledged hereunder,
or any computer software being utilized by the Borrowers
pursuant to license, lease or otherwise, other than consents
which have been obtained, nor will any consent need to be
obtained upon the occurrence of an Event of Default for the
Lender to exercise its rights with respect to any of the
Servicing Collateral except as set forth in the Acknowledgment
Agreements.
5.18 Special Representations Concerning Subwarehousing
Collateral. The Borrowers hereby represent and warrant to the
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Lender, as of the date of this Agreement and as of the date of each
Advance Request and the making of each Advance, that:
5.18(a) The Borrowers are the legal and equitable owners
and holders, free and clear of all Liens (other than Liens
granted hereunder), of the Subwarehousing Loans against which
any Subwarehousing Advance is requested hereunder. All Pledged
Subwarehousing Mortgages have been duly authorized and validly
issued to the Subwarehousing Borrower, and duly pledged by the
Subwarehousing Borrower to the Borrowers, free and clear of
such Liens (other than the Liens granted to the Borrowers).
All of the foregoing items of Collateral comply with all of
the requirements of this Agreement, and have been and will
continue to be validly pledged or assigned to the Lender,
subject to no other Liens.
5.18(b) The Borrowers have, and will continue to have,
the full right, power and authority to pledge the
Subwarehousing Loans and related Subwarehousing Mortgage Loans
pledged and to be pledged by it hereunder.
5.18(c) Any Mortgage Loan and any related document
included in the Pledged Subwarehousing Mortgages (1) has been
duly executed and delivered by the parties thereto, (2) has
been made in compliance with all requirements of the Real
Estate Settlement Procedures Act, Equal Credit Opportunity
Act, the federal Truth-In-Lending Act and all other applicable
laws and regulations, (3) is and will continue to be valid and
enforceable in accordance with its terms, without defense or
offset, (4) has not been modified or amended except in
writing, which writing is part of the Collateral Documents,
nor any requirements thereof waived, (5) except in the case of
Mortgage Loans made before August 1989, has been evaluated or
appraised in accordance with Title XI of FIRREA, and (6)
complies and will continue to comply with the terms of this
Agreement. Each Mortgage Loan other than a Home Equity Loan
has been fully advanced in the face amount thereof, each First
Mortgage is a first Lien on the premises described therein and
each Second Mortgage is secured by a second Lien on the
premises described therein, and has or will have a title
insurance policy, in American Land Title Association form or
equivalent thereof, from a recognized title insurance company,
insuring the priority of the Lien of the Mortgage and meeting
the usual requirements of Investors purchasing such Mortgage
Loans.
5.18(d) No payment is past due, and no Subwarehousing
Default has occurred and is continuing under any Approved
Subwarehousing Agreement as of the date any Subwarehousing
Advance is requested against a
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Subwarehousing Loan made thereunder. Not more than one payment
is past due under any Mortgage Loan included in the Pledged
Subwarehousing Mortgages without the Advances against the
related Subwarehousing Loan having been repaid in accordance
with Section 2.5(d)(5) hereof, provided, however, that with
respect to Pledged Subwarehousing Mortgages which have already
been pledged as Collateral hereunder, if any default has
occurred, the Borrowers will promptly notify the Lender.
5.18(e) The applicable Subwarehousing Borrower has
complied and will continue to comply with all laws, rules and
regulations in respect of the mortgage insurance policy or
guaranty related to each Mortgage Loan included in the Pledged
Subwarehousing Mortgages, and such insurance or guarantee is
and will continue to be in full force and effect.
5.18(f) All fire and casualty policies covering the
premises encumbered by each Mortgage included in the Pledged
Subwarehousing Mortgages (1) name and will continue to name
the applicable Subwarehousing Borrower and its successors and
assigns as the insured under a standard mortgagee clause, (2)
are and will continue to be in full force and effect, and (3)
afford and will continue to afford insurance against fire and
such other risks as are usually insured against in the broad
form of extended coverage insurance from time to time
available.
5.18(g) Pledged Subwarehousing Mortgages secured by
premises located in a special flood hazard area designated as
such by the Director of the Federal Emergency Management
Agency are and shall continue to be covered by special flood
insurance under the National Flood Insurance Program.
5.18(h) Each Pledged Subwarehousing Mortgage has been
underwritten under, substantially complies with, and has been
assigned a risk rating in accordance with, the Underwriting
Guidelines.
6. AFFIRMATIVE COVENANTS.
The Borrowers hereby covenant and agree that, so long as the
Commitment is outstanding or there remain any Obligations to be
paid or performed under this Agreement or under any other Loan
Document, the Borrowers shall:
6.1 Payment of Note. Punctually pay or cause to be paid all
Obligations payable hereunder and under the Note in accordance with
the terms thereof and thereof.
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6.2 Financial Statements and Other Reports. Deliver to the
Lender:
6.2(a) As soon as available and in any event within
forty-five (45) days after the end of each calendar month,
statements of income and changes in Partners' equity of
Industry and its Subsidiaries, on a consolidated and
consolidating basis, for the immediately preceding month and
for the period from the beginning of the fiscal year to the
end of such calendar month, and the related balance sheet as
at the end of the immediately preceding month, all in
reasonable detail (but without footnotes) and certified as to
the fairness of presentation by the chief financial officer of
the General Partner, subject, however, to normal year-end
adjustments.
6.2(b) As soon as available and in any event within
ninety (90) days after the close of each fiscal year,
statements of income, changes in Partners' equity and cash
flows of Industry and its Subsidiaries, on a consolidated and
consolidating basis, for such year, and the related balance
sheet as at the end of such year (setting forth in comparative
form the corresponding figures for the preceding fiscal year),
accompanied by an unqualified opinion from an accounting firm
of recognized national standing selected by Industry, as to
said financial statements and a certificate signed by the
chief financial officer of the General Partner stating that
said financial statements fairly present the financial
condition and results of operations of Industry and its
Subsidiaries as at the end of, and for, such year.
6.2(c) As soon as available and in any event within
ninety (90) days after the close of each fiscal year of the
General Partner, statements of income, changes in
stockholders' equity and cash flows of the General Partner
(and, if applicable, its Subsidiaries, on a consolidated
basis) for such year, the related balance sheet as at the end
of such year (setting forth in comparative form the
corresponding figures for the preceding fiscal year),
accompanied by an unqualified opinion from an accounting firm
of recognized national standing selected by the General
Partner, as to said financial statements and a certificate
signed by the chief financial officer of the General Partner
stating that said financial statements fairly present the
financial condition and results of operations of the General
Partner (and, if applicable, its Subsidiaries) as at the end
of, and for, such year.
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6.2(d) Together with each delivery of financial
statements required in this Section 6.2, an Officer's
Certificate substantially in the form of Exhibit I-SF hereto:
(1) setting forth in reasonable detail all calculations
necessary to show that the Borrowers are in compliance with
the requirements of Sections 7.5, 7.6, 7.7, 7.8, 7.9 and 7.11
hereof as of the end of such month or year (or, if the
Borrowers are not in compliance, showing the extent of
non-compliance and specifying the period of non-compliance and
what actions the Borrowers have taken, are taking or propose
to take with respect thereto); (2) certifying that the
Borrowers were, as of the end of the period, in compliance and
in good standing with applicable HUD, GNMA, or Investor net
worth requirements; and (3) stating that the signers have
knowledge of the terms of this Agreement and have made, or
caused to be made under their supervision, a review in
reasonable detail of the transactions and conditions of the
Borrowers (and, if applicable, its Subsidiaries) during the
accounting period covered by such financial statements and
that such review has not disclosed the existence during or at
the end of such accounting period, and that the signers do not
have knowledge of the existence as of the date of the
Officer's Certificate, of any Default or Event of Default, or
if any Default or Event of Default existed or exists,
specifying the nature and period of the existence thereof and
what action the Borrowers have taken, are taking and propose
to take with respect thereto.
6.2(e) As soon as available and in any event within
forty-five (45) days after the end of each calendar month, a
consolidated report (the "Servicing Portfolio Report") as of
the end of the calendar month detailing, as to all Mortgage
Loans the servicing rights to which are owned by the Borrowers
(specified by investor type, recourse and non-recourse)
regardless of whether such Mortgage Loans are Pledged
Mortgages and which report shall indicate Mortgage Loans which
(A) are current and in good standing, (B) are more than one,
two or three payments past due, respectively, (C) are, for
Mortgage Loans serviced with recourse, more than three hundred
sixty (360) days past due, (D) are the subject of pending
bankruptcy or foreclosure proceedings, or (E) have been
converted (through foreclosure or other proceedings in lieu
thereof) by the Borrowers into real estate owned by the
Borrowers.
6.2(f) Reports in respect of the Pledged Mortgages and
Pledged Securities, in such detail and at such times as the
Lender in its discretion may reasonably request at any time or
from time to time.
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6.2(g) Copies of all regular or periodic financial and
other reports, if any, which the Borrowers shall file with the
Securities and Exchange Commission or any governmental agency
successor thereto, copies of any audits completed by GNMA,
FNMA or FHLMC and copies of Mortgage Bankers' Financial
Reporting Form (FHLMC Form 1055/FNMA Form 1002) which the
Borrowers have filed.
6.2(h) Together with its financial statements required to
be delivered under Section 6.2(a) for each month, a copy of
the Underwriting Guidelines as in effect at the end of such
month, highlighted to show any changes made during such month.
6.2(i) Not fewer than three (3) Business Days prior to
the effective date of any material change to the Underwriting
Guidelines, a copy of such change.
6.2(j) From time to time, with reasonable promptness,
such further information regarding the business, operations,
properties or financial condition of the Borrowers as the
Lender may reasonably request.
6.3 Maintenance of Existence; Conduct of Business. Preserve
and maintain its limited partnership existence in good standing and
all of its rights, privileges, licenses and franchises necessary or
desirable in the normal conduct of its business, including, without
limitation, its eligibility as lender, seller/servicer and issuer
described under Section 5.13 hereof; conduct its business in an
orderly and efficient manner; and make no change in the nature or
character of its business or engage in any business in which it was
not engaged on the date of this Agreement.
6.4 Compliance with Applicable Laws. Comply with the
requirements of all applicable laws, rules, regulations and orders
of any governmental authority, a breach of which could materially
adversely affect its business, operations, assets, or financial
condition, except where contested in good faith and by appropriate
proceedings.
6.5 Inspection of Properties and Books. Permit authorized
representatives of the Lender to discuss the business, operations,
assets and financial condition of the Borrowers and their
Subsidiaries, with their officers and employees and to examine its
books of account and make copies or extracts thereof, all at such
reasonable times as the Lender or any Participant may request;
provided, that except when an Event of Default has occurred and is
continuing, discussions concerning matters other than normal
operational matters shall be conducted only with vice presidents or
more senior officers of the Borrowers and their Subsidiaries and
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with employees designated by such officers. The Borrowers will
provide its accountants with a copy of this Agreement promptly
after the execution hereof and will instruct its accountants to
answer candidly any and all questions that the officers of the
Lender or any authorized representatives of the Lender may address
to them in reference to the financial condition or affairs of the
Borrowers, the General Partners and any Subsidiaries of the General
Partners; provided, that the Lender will provide the Borrowers with
not less than one (1) Business Day's prior written notice before
making any inquiry of the Borrowers' accountants. The Borrowers may
have their representatives in attendance at any meetings between
the officers or other representatives of the Lender and the
Borrowers' accountants held in accordance with this authorization.
6.6 Notice. Give prompt written notice to the Lender of (a)
any action, suit or proceeding instituted by or against the
Borrowers or any Partner in any federal or state court or before
any commission or other regulatory body (federal, state or local,
domestic or foreign) which action, suit or proceeding has at issue
in excess of Two Hundred Fifty Thousand Dollars ($250,000), or any
such proceedings threatened against the Borrowers or any Partner in
a writing containing the details thereof, (b) either Borrower
obtaining knowledge of the filing, recording or assessment of any
federal, state or local tax Lien against the Borrowers, or any of
their assets, (c) the occurrence of any Event of Default hereunder
or the occurrence of any Default and continuation thereof for five
(5) days, (d) the suspension, revocation or termination of the
Borrowers' eligibility, in any respect, as approved lender,
seller/servicer or issuer as described under Section 5.13 hereof,
(e) the transfer, loss or termination during any fiscal year of the
Borrowers of Servicing Contracts to which the Borrowers are a
party, or which is held for the benefit of the Borrowers, pursuant
to which Mortgage Loans constituting ten percent (10%) or more of
the Servicing Portfolio are serviced, and the reason for such
transfer, loss or termination, if known to the Borrowers, (f) the
occurrence of any Subwarehousing Default, (g) the selection by the
Borrowers of the underwriter(s) or placement agent(s) for the
issuance of any Company Securities, and (h) any other action, event
or condition of any nature which may lead to or result in a
material adverse effect upon the business, operations; assets, or
financial condition of the Borrowers and their Subsidiaries or
which, with or without notice or lapse of time or both, would
constitute a default under any other agreement instrument or
indenture to which the Borrowers or any of their Subsidiaries is a
party or to which the Borrowers or any of their Subsidiaries, their
properties, or assets may be subject.
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6.7 Payment of Debt, Taxes, etc. Pay and perform all
obligations and indebtedness of the Borrowers, and cause to be paid
and performed all obligations and indebtedness of their
Subsidiaries, promptly and in accordance with the terms thereof and
pay and discharge or cause to be paid and discharged promptly all
taxes, assessments and governmental charges or levies imposed upon
the Borrowers or their Subsidiaries or upon their respective
income, receipts or properties before the same shall become past
due, as well as all lawful claims for labor, materials and supplies
or otherwise which, if unpaid, might become a Lien or charge upon
such properties or any part thereof; provided, however, that the
Borrowers and its Subsidiaries shall not be required to pay taxes,
assessments or governmental charges or levies or claims for labor,
materials or supplies for which the Borrowers or their Subsidiaries
shall have obtained an adequate bond or adequate insurance or which
are being contested in good faith and by proper proceedings which
are being reasonably and diligently pursued and for which proper
reserves have been created.
6.8 Insurance. Maintain (a) errors and omissions insurance or
mortgage impairment insurance and blanket bond coverage, with such
companies and in such amounts as satisfy prevailing FNMA, FHLMC and
GNMA requirements applicable to a qualified mortgage originating
institution, and (b) liability insurance and fire and other hazard
insurance on its properties, with responsible insurance companies
satisfying the applicable FNMA requirements, in such amounts and
against such risks as is customarily carried by similar businesses
operating in the same vicinity; and (c) within thirty (30) days
after Notice from the Lender, obtain such additional insurance as
the Lender shall reasonably require, all at the sole expense of the
Borrowers. Copies of such policies shall be furnished to the Lender
without charge upon request of the Lender.
6.9 Closing Instructions. Indemnify and hold the Lender
harmless from and against any loss, including reasonable attorneys'
fees and costs, attributable to the failure of a title insurance
company, agent or approved attorney to comply with the disbursement
or instruction letter or letters of the Borrowers relating to any
Mortgage Loan. The Lender shall have the right from time to time,
at the request of the Lender, to pre-approve the standard closing
instructions of the Borrowers to the title insurance company, agent
or attorney in cases where the Mortgage Loan to be created at
settlement is intended to be warehoused by the Borrowers to be
included as Collateral pursuant hereto.
6.10 Other Loan obligations. Perform all material obligations
under the terms of each loan agreement, note,
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mortgage, security agreement or debt instrument by which the
Borrowers are bound or to which any of its property is subject, and
promptly notify the Lender in writing of a declared default under
or the termination, cancellation, reduction or nonrenewal of any of
its other lines of credit or agreements with any other lender.
Exhibit J hereto is a true and complete list of all such lines of
credit or agreements as of the date hereof and the Borrowers hereby
agree to give the Lender Notice within thirty (30) days after
entering into any additional lines of credit or agreements.
6.11 Use of Proceeds of Advances. Use the proceeds of each
Advance solely for the purpose set forth in Section 2.1(b) for
Advances of that type.
6.12 Special Affirmative Covenants Concerning Collateral.
6.12(a) Warrant and defend the right, title and interest
of the Lender in and to the Collateral against the claims and
demands of all Persons whomsoever.
6.12(b) Service or cause to be serviced all Mortgage
Loans in accordance with the standard requirements of the
issuers of asset-backed securities similar to the Company
Securities or, if applicable, Purchase Commitments covering
the same, including without limitation taking all actions
necessary to enforce the obligations of the obligors under
such Mortgage Loans. The Borrowers shall service or cause to
be serviced all Mortgage Loans backing Pledged Securities in
accordance with applicable requirements of issuers of
asset-backed securities similar to the Company Securities or,
if applicable, Purchase Commitments covering the same. The
Borrowers shall hold all escrow funds collected in respect of
Pledged Mortgages and Mortgage Loans backing Pledged
Securities in trust, without commingling the same with
non-custodial funds, and apply the same for the purposes for
which such funds were collected.
6.12(c) Execute and deliver to the Lender such Uniform
Commercial Code financing statements with respect to the
Collateral as the Lender may request. The Borrowers shall also
execute and deliver to the Lender such fur.her instruments of
sale, pledge or assignment or transfer, and such powers of
attorney, as required by the Lender, and shall co and perform
all matters and things necessary or desirable to be done or
observed, for the purpose of effectively creating, maintaining
and preserving the security and benefits intended to be
afforded the Lender under this Agreement. The Lender shall
have all the rights and remedies of a secured party
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under the Uniform Commercial Code of Minnesota, or any other
applicable law, in addition to all rights provided for herein.
6.12(d) Maintain, at its principal office, in a regional
office with respect to which Notice has been provided to the
Lender, or in the office of a computer service bureau engaged
by the Borrowers with respect to which Notice has been
provided to the Lender, and, upon request, make available to
the Lender the originals, or copies in any case where the
originals have been delivered to the Lender or to an Investor,
of the Mortgage Notes and Mortgages included in Pledged
Mortgages, Mortgage-backed Securities and Company Securities
delivered to the Lender as Pledged Securities, Purchase
Commitments, and all related Mortgage Loan documents and
instruments, and all files, surveys, certificates,
correspondence, appraisals, computer programs, tapes, discs,
cards, accounting records and other information and data
relating to the Collateral.
6.12(e) Cause each Subwarehousing Borrower to comply, in
all applicable respects, with the requirements of Sections
6.12(a), 6.12(b) and 6.12(d) hereof, as if such Subwarehousing
Borrower were the "Borrowers," and maintain at all times a
perfected security interest in the Subwarehousing Mortgage
Loans, any Purchase Commitments related thereto and any other
related rights or interests of the type described in Sections
3.1(a), 3.1(d), 3.1(i), 3.1(j), 3.1(k) and 3.1(1) hereof.
7. NEGATIVE COVENANTS.
The Borrowers hereby covenant and agree that, so long as the
Commitment is outstanding or there remain any Obligations to be
paid or performed, the Borrowers shall not, either directly or
indirectly, without the prior written consent of the Lender:
7.1 Contingent Liabilities. Assume, guarantee, endorse, or
otherwise become contingently liable for the obligation of any
Person, except (a) as described on Exhibit P hereto, (b) guarantees
by Industry of the obligations of IMC, and (c) by endorsement of
negotiable instruments for deposit or collection in the ordinary
course of business.
7.2 Sale or Pledge of Servicing Contracts. Sell, pledge or
grant a security interest in any existing or future Servicing
Contracts of the Borrowers other than to the Lender, except as
otherwise expressly permitted in this Agreement, or omit to take
any action required to keep all such Servicing Contracts in full
force and effect; provided, however, that if
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no Default or Event of Default has occurred and is continuing,
Servicing Contracts not included in the Servicing Collateral may be
sold in the ordinary course of the Borrowers' business, and
Servicing Contracts not included in the Servicing Collateral may be
pledged to secure Debt (provided, that such Servicing Contracts
shall thereafter be excluded in calculating the Adjusted Servicing
Portfolio).
7.3 Merger; Sale of Assets; Acquisitions. Liquidate, dissolve,
consolidate or merge or sell any substantial part of its assets, or
acquire any substantial part of the assets of another; provided,
however, that (a) Servicing Contracts may be sold as provided in
Section 7.2 hereof and (b) as long as no Default or Event of
Default has occurred and is continuing, or would occur as a result
thereof, the Borrowers may acquire the assets of any other Person
engaged in the mortgage banking business.
7.4 Loss of Eligibility. Take any action that would cause the
Borrowers to lose all or any part of their status as eligible
lenders, seller/servicers and issuers as described under Section
5.13 hereof.
7.5 Debt to Adjusted Tangible Net Worth Ratio. Permit the
ratio of Debt (excluding, for this purpose only, Debt arising under
the Hedging Arrangements, to the extent of assets arising under the
same Hedging Arrangements) to Adjusted Tangible Net Worth of
Industry and its Subsidiaries, on a consolidated basis, at any time
to exceed 25 to 1.
7.6 Minimum Net Worth. Permit the Net Worth of Industry and
its Subsidiaries, on a consolidated basis, at any time to be less
than Seven Million Dollars ($7,000,000).
7.7 Minimum Adjusted Tangible Net Worth. Permit the Adjusted
Tangible Net Worth of Industry and its Subsidiaries, on a
consolidated basis, at any time to be less than Ten Million Dollars
($10,000,000).
7.8 Minimum Pledged Servicing Portfolio. Permit the
outstanding principal balance of the Mortgage Loans serviced
pursuant to Servicing Contracts pledged to the Lender hereunder,
excluding any such Mortgage Loans excluded in calculating the
Adjusted Servicing Portfolio, to be less than One Hundred Fifty
Million Dollars ($150,000,000).
7.9 Transactions with Affiliates. Directly or indirectly (a)
make any loan, advance, extension of credit or capital contribution
to any of its Affiliates, except capital contributions made to
wholly-owned Subsidiaries that will issue, or create a trust to
issue, Company Securities, (b) transfer, sell, pledge, assign or
otherwise dispose of any of
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its assets to or on behalf of such Affiliates, except (i) in the
ordinary course of business on terms no less favorable to the
Borrowers than those that could be obtained in an arms-length
transaction and (ii) distributions permitted by Section 7.11
hereof, (c) merge or consolidate with or purchase or acquire assets
from such Affiliates, or (d) pay management fees to or on behalf of
such Affiliates, except in the ordinary course of business on terms
no less favorable to the Borrowers than those that could be
obtained in an arms-length transaction.
7.10 Acquisition of Recourse Servicing Contracts. Acquire
Servicing Contracts other than Nonrecourse Servicing Contracts.
7.11 Distributions, Withdrawals of Capital and Other Actions.
Make any payment or other distribution to any Partner of Industry
in excess of the greater of (a) the amount required to enable its
Partners to pay income taxes payable by them in respect of
Industry's net income or (b) Industry's net income earned in any
fiscal year as determined on a fiscal year-to-date basis, less in
each case distributions previously made in such fiscal year; or
permit any Partner, directly or indirectly, to withdraw any capital
from Industry, except in connection with a substitution or
reorganization of the partnership interests in Industry that did
not result in a net withdrawal of any partnership capital, or
permit any violation of the terms of Industry's Partnership
Agreement, or any amendment or modification to Industry's
Partnership Agreement that would result in any withdrawal of
partnership capital from Industry or otherwise result in the
occurrence of a Default or Event of Default. Any distribution based
on Industry's net income earned in any fiscal year or to enable its
Partners to pay income taxes in respect of such net income must be
paid by the end of the second quarter of the next succeeding fiscal
year.
7.12 Special Negative Covenants Concerning Collateral.
7.12(a) The Borrowers shall not amend or modify, or waive
any of the terms and conditions of, or settle or compromise
any claim in respect of, any Pledged Mortgages or Pledged
Securities, except for deferrals of payments in the ordinary
course of servicing Pledged Mortgages that do not materially
affect the salability or market value thereof.
7.12(b) The Borrowers shall not sell, assign, transfer or
otherwise dispose of, or grant any option with respect to, or
pledge or otherwise encumber (except pursuant to this
Agreement or as permitted herein) any of the Collateral or any
interest therein, except after
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payment of the Release Amount in respect thereof to the
Lender; provided, that the Borrowers may enter into agreements
to sell Mortgage Loans to Investors as long as provision is
made for the payment of the Release Amount with respect
thereto upon any sale thereof.
7.12(c) The Borrowers shall not make any compromise,
adjustment or settlement in respect of any of the Collateral
or accept other than cash in payment or liquidation of the
Collateral, except after payment of the Release Amount in
respect thereof to the Lender.
7.12(d) The Borrowers shall not make any material change
in the Underwriting Guidelines and procedures, and shall
review the Underwriting Guidelines periodically to confirm
that such policies and procedures are being complied with in
all material respects and are adequate to meet the Borrowers'
business objectives.
7.12(e) The Borrowers shall not permit any Subwarehousing
Borrowers to, take any action of the types described in
Section 7.12(a), 7.12(b) or 7.12(c) hereof with respect to
Pledges Subwarehousing Mortgages. The Borrowers shall not
amend or modify, or waive any of the terms and conditions of,
any Approved Subwarehousing Agreement without either (i) the
prior written consent of the Lender or (ii) paying the Release
Amount in respect of all Pledged Subwarehousing Mortgages
servicing Subwarehousing Loans made under such Approved
Subwarehousing Agreement.
7.13 Deferral of Subordinated Debt. Pay in advance of the
stated maturity thereof any Subordinated Debt of the Borrowers or,
if a Default or Event of Default hereunder shall have occurred,
make any payment of any kind thereafter on such Subordinated Debt
until all Obligations have been paid and performed in full and any
applicable preference period has expired.
8. DEFAULTS; REMEDIES.
8.1 Events of Default. The occurrence of any of the following
conditions or events shall be an event of default ("Event of
Default"):
8.1(a) Failure to pay the principal of any Advance when
due, whether at stated maturity, by acceleration, or
otherwise; or failure to pay any installment or interest on
any Advance or any other amount due under this Agreement
within ten (10) days after the due data; or failure to pay,
within any
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applicable grace period, the principal or interest on any
other indebtedness of the Borrowers due the Lender; or
8.1(b) Failure of the Borrowers or any General Partner to
pay, or any default in the payment of any principal or
interest on, any other indebtedness or in the payment of any
contingent obligation within any period of grace provided;
breach or default with respect to any other material term of
any other indebtedness or of any loan agreement, mortgage,
indenture or other agreement relating thereto, if the effect
of such breach or default is to cause, or to permit the holder
or holders thereof (or a trustee on behalf of such holder or
holders) to cause, indebtedness of the Borrowers or any
General Partner in the aggregate amount of Fifty Thousand
Dollars ($50,000) or more to become or be declared due prior
to its stated maturity (upon the giving or receiving of
notice, lapse of time, both, or otherwise);
8.1(c) Failure of the Borrowers to perform or comply with
any term or condition applicable to it contained in Sections
6.3, 6.11 and 6.12 or in any Section of Article 7 of this
Agreement; or
8.1(d) Any of the Borrowers' or the General Partner's
representations or warranties made or deemed made herein or in
any other Loan Document, or in any statement or certificate at
any time given by the Borrowers or any General Partner in
writing pursuant hereto or thereto shall be inaccurate or
incomplete in any material respect on the date as of which
made or deemed made; provided, however, that in the event of
any breach of a representation or warranty contained in
Section 5.15 or Section 5.18 of this Agreement with respect to
particular Mortgage Loans, no Event of Default shall occur if
the Borrowers repay the outstanding Advances against such
Mortgage Loans within one (1) Business Day after the earliest
to occur of (i) receipt by the Borrowers of Notice from the
Lender of such default, (ii) receipt by the Lender of Notice
from the Borrowers of such breach, or (iii) the date the
Borrowers should have notified the Lender of such breach
pursuant to Section 6.6(c); and provided, further, that the
sole remedy applicable in the case of a breach of a
representation or warranty continued in Section 5.17 of this
Agreement with respect to particular Pledged Servicing
Contracts shall be the disallowance of such Pledged Servicing
Contracts in determining the Borrowers' compliance with
Section 7.8 of this Agreement unless, as a result of such
disallowance, a breach would occur under Section 7.8 of this
Agreement; or
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8.1(e) The borrowers shall default in the performance of
or compliance with any term contained in this Agreement or any
other Loan Document other than those referred to above in
Subsections 8.1(a), 8.1(c) or 8.1(d) and such default shall
not have been remedied or waived within thirty (30) days after
the earliest of (i) receipt by the Borrowers of Notice from
the Lender of such default, (ii) receipt by the Lender of
Notice from the Borrowers of such default, or (iii) the date
the Borrowers should have notified the Lender of such default
pursuant to Section 6.6(c); or
8.1(f) (1) A court having jurisdiction shall enter a
decree or order for relief in respect of the Borrowers, any
Subsidiary of the Borrowers or the General Partner in an
involuntary case under any applicable bankruptcy, insolvency
or other similar law in respect of the Borrowers, any
Subsidiary of the Borrowers or the General Partner now or
hereafter in effect, which decree or order is not stayed; the
Borrowers, any Subsidiary of the Borrowers or the General
Partner shall consent to the entry of any such decree or
order; or a filing of a voluntary case under any applicable
bankruptcy, insolvency or other similar law in respect of the
Borrowers, any Subsidiary of the Borrowers or the General
Partner have occurred; or any other similar relief shall be
granted under any applicable federal or state law; or (2) the
filing of an involuntary case in respect of the Borrowers, any
Subsidiary of the Borrowers or the General Partner under any
applicable bankruptcy, insolvency or other similar law; or a
decree or order of a court having jurisdiction for the
appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over the
Borrowers, any Subsidiary of the Borrowers or the General
Partner, or over all or a substantial part of their respective
property, shall have been entered; or the involuntary
appointment of an interim or permanent receiver, trustee or
other custodian of the Borrowers, any Subsidiary of the
Borrowers or the General Partner for all or a substantial part
of their respective property; or the issuance of a warrant of
attachment, execution or similar process against any
substantial part of the property of the Borrowers, any
Subsidiary of the Borrowers or the General Partner, and the
continuance of any such events in Subsection (2) above for
sixty (60) days unless dismissed, bonded off or discharged; or
8.1(g) The Borrowers, any Subsidiary of the Borrowers or
the General Partner shall consent to the entry of an order for
relief in an involuntary case under any such law, or shall
consent to the appointment of or
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taking possession by a receiver, trustee or other custodian
for all or a substantial part of its property; the making by
the Borrowers, any Subsidiary of the Borrowers or the General
Partner of any assignment for the benefit of creditors; or the
inability or failure of the Borrowers, any Subsidiary of the
Borrowers or the General Partner, or the admission by the
Borrowers, any Subsidiary of the Borrowers or the General
Partner in writing of its inability, to pay its debts as such
debts become due; or
8.1(h) Failure of the Borrowers to perform any
contractual obligations which it may have to repurchase
Mortgage Loans, if such obligations in the aggregate exceed
One Million Dollars ($1,000,000); or
8.1(i) Any money judgment, writ or warrant of attachment,
or similar process involving in any case an amount in excess
of Two Hundred Fifty Thousand Dollars ($250,000) shall be
entered or filed against the Borrowers or any of their
Subsidiaries or any of their respective assets and shall
remain undischarged, unvacated, unbonded or unstayed for a
period of thirty (30) days or in any event later than five (5)
days prior to the date of any proposed sale thereunder; or
8.1(j) Any order, judgment or decree shall be entered
against the Borrowers decreeing the dissolution or split up of
the Borrowers and such order shall remain undischarged or
unstayed for a period in excess of twenty (20) days; or
8.1(k) Any Plan maintained by the Borrowers or any
General Partner shall be terminated within the meaning of
Title IV of ERISA or a trustee shall be appointed by an
appropriate United States district court to administer any
Plan, or the Pension Benefit Guaranty Corporation (or any
successor thereto) shall institute proceedings to terminate
any Plan or to appoint a trustee to administer any Plan if as
of the date thereof the Borrowers' liability or any General
Partner's liability (after giving effect to the tax
consequences thereof) to the Pension Benefit Guaranty
Corporation (or any successor thereto) for unfunded guaranteed
vested benefits under the Plan exceeds the then current value
of assets accumulated in such Plan by more than Twenty-Five
Thousand Dollars ($25,000) (or in the case of a termination
involving the Borrowers or any General Partner as a
"substantial employer" (as defined in Section 4001(a)(2) of
ERISA) the withdrawing employer's proportionate share of such
excess shall exceed such amount); or
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8.1(1) The Borrowers or any General Partner as employer
under a Multiemployer Plan shall have made a complete or
partial withdrawal from such Multiemployer Plan and the plan
sponsor of such Multiemployer Plan shall have notified such
withdrawing employer that such employer has incurred a
withdrawal liability in an annual amount exceeding Twenty-Five
Thousand Dollars ($25,000); or
8.1(m) The Borrowers shall purport to disavow their
obligations hereunder, or shall contest the validity or
enforceability hereof; or the Lender's security interest on
any portion of the Collateral shall become unenforceable or
otherwise impaired; provided that, subject to the Lender's
approval, no Event of Default shall occur as a result of such
impairment if all Advances made against any such Collateral
shall be paid in full within ten (10) days of the date of such
impairment; or
8.1(n) The General Partner shall cease to be the sole
general partner of Industry, or Industry shall cease to own
one hundred percent (100%) of the issued and outstanding
capital stock of IMC; or
8.1(o) George Nicholas shall cease to be the chief
executive officer of the General Partner or IMC unless the
same results from unsolicited resignation, death, disability,
unsolicited retirement or termination for cause and the
General Partner and IMC have, within ninety (90) days,
selected a replacement officer reasonably acceptable to the
Lender; or
8.1(p) Thomas Middleton shall cease to be the chief
operating officer of the General Partner or IMC unless the
same results from unsolicited resignation, death, disability,
unsolicited retirement or termination for cause and the
General Partner and IMC have, within ninety (90) days,
selected a replacement officer reasonably acceptable to the
Lender; or
8.1(q) There shall be a material adverse change in the
financial condition, business or operations of the Borrowers.
8.2 Remedies.
8.2(a) Upon the occurrence of any Event of Default
described in Sections 8.1(f) or 8.1(g), the Commitment shall
be terminated and the unpaid principal amount of and accrued
interest on the Note and all other Obligations shall
automatically become due and payable,
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without presentment, demand or other requirements of any kind,
all of which are hereby expressly waived by the Borrowers.
8.2(b) Upon the occurrence of any Event of Default, other
than those described in Sections 8.1(f) and 8.1(g), the Lender
may, by Notice to the Borrowers, terminate the Commitment
and/or declare all Obligations to be immediately due and
payable, whereupon the same shall forthwith become due and
payable, together with all accrued interest thereon, and the
obligation of the Lender to make any Advances shall thereupon
terminate.
8.2(c) Upon the occurrence of any Event of Default, the
Lender may also do any of the following:
(1) Foreclose upon or otherwise enforce its security
interest in and Lien on the Collateral to secure all
payments and performance of the Obligations in any manner
permitted by law or provided for hereunder.
(2) Notify all obligors in respect of Collateral that
the Collateral has been assigned to the Lender and that
all payments thereon are to be made directly to the Lender
or such other party as may be designated by the Lender;
settle, compromise, or release, in whole or in part, any
amounts owing on the Collateral, any such obligor or any
Investor or any portion of the Collateral, on terms
acceptable to the Lender; enforce payment and prosecute
any action or proceeding with respect to any and all
Collateral; and where any such Collateral is in default,
foreclose on and enforce security interests included in
such Collateral by any available judicial procedure or
without judicial process and sell property acquired as a
result of any such foreclosure.
(3) Act, or contract with a third party to act, as
servicer or subservicer of each item of Collateral
requiring servicing and perform all obligations require.
in connection with Servicing Contracts and Purchase
Commitments, such third party's fees to be paid by the
Borrowers.
(4) Require the Borrowers to assemble the Collateral
and/or books and records relating thereto and make such
available to the Lender at a place to be designated by the
Lender.
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(5) Enter onto property where any Collateral or books
and records relating thereto are located and take
possession thereof with or without judicial process.
(6) Prior to the disposition of the Collateral,
prepare it for disposition in any manner and to the
extent the Lender deems appropriate.
(7) Exercise all rights and remedies of a secured
creditor under the Uniform Commercial Code of Minnesota
or other applicable law, including, but not limited to,
selling or otherwise disposing of the Collateral, or any
part thereof, at one or more public or private sales,
whether or not such Collateral is present at the place of
sale, for cash or credit or future delivery, on such
terms and in such manner as the Lender may determine,
including, without limitation, sale pursuant to any
applicable Purchase Commitment. If notice is required
under such applicable law, the Lender will give the
Borrowers not less than ten (10) days' notice of any such
public sale or of the date after which any private sale
may be held. The Borrowers agree that ten (10) days'
notice shall be reasonable notice. The Lender may,
without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for
the sale, and such sale may be made at any time or place
to which the same may be so adjourned. In case of any
sale of all or any part of the Collateral on credit or
for future delivery, the Collateral so sold may be
retailed by the Lender until the selling price is paid by
the purchaser thereof, but the Lender shall not incur any
liability in case of the failure of such purchaser to
take up and pay for the Collateral so sold and, in case
of any such failure, such Collateral may again be sold
upon like notice. The Lender may, however, instead of
exercising the power of sale herein conferred upon it,
proceed by a suit or suits at law or in equity to collect
all amounts due upon the Collateral or to foreclose the
pledge of and sell the Collateral or any portion thereof
under a judgment or decree of a court or courts of
competent jurisdiction, or both.
(8) Proceed against the Borrowers on the Note.
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8.2(d) The Lender shall incur no liability as a result of
the sale or other disposition of the Collateral, or any part
thereof, at any public or private sale or disposition. The
Borrowers hereby waive (to the extent permitted by law) any
claims it may have against the Lender arising by reason of the
fact that the price at which the Collateral may have been sold
at such private sale was less than the price which might have
been obtained at a public sale or was less than the aggregate
amount of the outstanding Advances and the unpaid interest
accrued thereon, even if the Lender accepts the first offer
received and does not offer the Collateral to more than one
offeree. Any sale of Collateral pursuant to the terms of a
Purchase Commitment, or any other disposition of Collateral
arranged by the Borrowers, whether before or after the
occurrence of an Event of Default, shall be deemed to have
been made in a commercially reasonable manner.
8.2(e) The Borrowers acknowledge that Mortgage Loans,
Mortgage-backed Securities and Company Securities are
collateral of a type which is customarily sold on a recognized
market. The Borrowers waive any right they may have to prior
notice of the sale of any Pledged Mortgage or Pledged
Security, and agrees that the Lender may purchase any Mortgage
Loans, Mortgage-backed Securities or Company Securities at a
private sale of such Collateral conducted in a commercially
reasonable manner.
8.2(f) The Borrowers specifically waive and releases (to
the extent permitted by law) any equity or right of
redemption, all rights of redemption, stay or appraisal which
the Borrowers have or may have under any rule of law or
statute now existing or hereafter adopted, and any right to
require the Lender to (1) proceed against any Person, (2)
proceed against or exhaust any of the Collateral or pursue its
rights and remedies as against the Collateral in any
particular order, or (3) pursue any other remedy in its power.
The Lender shall not be required to take any steps necessary
to preserve any rights of the Borrowers against holders of
mortgages prior in lien to the Lien of any Mortgage included
in the Collateral or to preserve rights against prior parties.
8.2(g) The Lender may, but shall not be obligated to,
advance any sums or do any act or thing necessary to uphold
and enforce the Lien and priority of, or the security intended
to be afforded by, any Mortgage included in: the Collateral,
including, without limitation, payment of delinquent taxes or
assessments and insurance premiums. All advances, charges,
costs and
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expenses, including reasonable attorneys' fees and
disbursements, incurred or paid by the Lender in exercising
any right, power or remedy conferred by this Agreement, or in
the enforcement hereof, together with interest thereon, at the
Default Rate, from the time of payment until repaid, shall
become a part of the principal balance outstanding hereunder
and under the Note.
8.2(h) No failure on the part of the Lender to exercise,
and no delay in exercising, any right, power or remedy
provided hereunder, at law or in equity shall operate as a
waiver thereof; nor shall any single or partial exercise by
the Lender of any right, power or remedy provided hereunder,
at law or in equity preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
Without intending to limit the foregoing, all defenses based
on the statute of limitations are hereby waived by the
Borrowers to the extent permitted by law. The remedies herein
provided are cumulative and are not exclusive of any remedies
provided at law or in equity.
8.2(i) The Borrowers acknowledge that the Borrowers and
the Lender may from time to time hereafter enter into
agreements ("Acknowledgment Agreements") with FNMA, FHLMC or
any other Investor in order to obtain the consent of FNMA,
FHLMC or any other Investor to the assignment of and security
interest granted in the Servicing Contracts pursuant to
Section 3 hereof, as the same may be amended from time to
time. The Borrowers further acknowledge that the
Acknowledgment Agreements may contain certain provisions
concerning the enforcement by the Lender of the security
interest of the secured parties in the Servicing Contracts
subject thereto. The Borrowers agree that the disposition of
its rights in any Servicing Contract pursuant to the terms of
the applicable Acknowledgment Agreement shall be deemed
commercially reasonable within the meaning of Section 9-
504(3) of the Uniform Commercial Code of Minnesota. The
Borrowers hereby waives any claims it might otherwise have
against the Lender as a result of the Lender's compliance with
the terms of any Acknowledgment Agreement.
8.3 Application of Proceeds. The proceeds of any sale,
disposition or other enforcement of the Lender's security interest
in all or any part of the Collateral shall be applied by the
Lender:
First, to the payment of the costs and expenses of such sale
or enforcement, including reasonable compensation to the
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Lender's agents and counsel, and all expenses, liabilities and
advances made or incurred by or on behalf of the Lender in
connection therewith;
Second, to the payment of interest accrued and unpaid on the
Note;
Third, to the payment of any other Obligations due (other than
principal and interest) under the this Agreement and the Loan
Documents;
Fourth, to the payment of the outstanding principal balance of
the Note; and
Finally, to the payment to the Borrowers, or to their
successors or assigns, or as a court of competent jurisdiction may
direct, of any surplus then remaining from such proceeds.
If the proceeds of any such sale, disposition or other
enforcement are insufficient to cover the costs and expenses of
such sale, as aforesaid, and the payment in full of all
Obligations, the Borrowers shall remain liable for any deficiency.
8.4 Lender Appointed Attorney-in-Fact. The Lender is hereby
appointed the attorney-in-fact of the Borrowers, with full power of
substitution, for the purpose of carrying out the provisions hereof
and taking any action and executing any instruments which the
Lender may deem necessary or advisable to accomplish the purposes
hereof, which appointment as attorney-in-fact is irrevocable and
coupled with an interest. Without limiting the generality of the
foregoing, the Lender shall have the right and power to give
notices of its security interest in the Collateral to any Person,
either in the name of the Borrowers or in its own name, to endorse
all Pledged Mortgages or Pledged Securities payable to the order of
the Borrowers, to change or cause to be changed the book-entry
registration or name of subscriber or Investor on any Pledged
Security, or to receive, endorse and collect all checks made
payable to the order of the Borrowers representing any payment on
account of the principal of or interest on, or the proceeds of sale
of, any of the Pledged Mortgages or Pledged Securities and to give
full discharge for the same. Except as set forth in the preceding
sentence, the Lender agrees not to exercise the foregoing power of
attorney except after the occurrence and during the continuance of
an Event of Default.
8.5 Right of Set-Off. If the Borrowers shall default in the
payment of the Note, any interest accrued thereon, or any other
sums which may become payable hereunder when due, or in the
performance of any of its other obligations or liabilities under
this Agreement, the Lender shall have the right, at any
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time and from time to time, without notice, to set-off and to
appropriate or apply any and all property or indebtedness of any
kind at any time held or owing by the Lender to or for the credit
or the account of the Borrowers against and on account of the
Obligations of the Borrowers under the Note and this Agreement,
irrespective of whether or not the Lender shall have made any
demand hereunder and whether or not said Obligations shall have
matured.
9. NOTICES.
All notices, demands, consents, requests and other
communications required or permitted to be given or made hereunder
(collectively, "Notices") shall, except as otherwise expressly
provided hereunder, be in writing and shall be delivered in person
or telecopied or mailed, first class or delivered by overnight
courier, return receipt requested, postage prepaid, addressed to
the respective parties hereto at their respective addresses
hereinafter set forth or, as to any such party, at such other
address as may be designated by it in a Notice to the other. All
Notices 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 date of receipt as noted on the
return receipt, addressed as follows:
if to the Industry Mortgage Company, L.P.
Borrowers: IMC Corporation of America
3450 Buschwood Park Drive
Suite 250
Tampa, Florida 33618
Attention: George Freeman, CFO
Telecopier No.: (813) 931-4840
with a copy to: Gayle Petrie, Esq.
One Independent Drive, Suite 3104
Jacksonville, FL 32202
Telecopier No.: (904) 791-9333
if to the Lender: Residential Funding Corporation
440 Sawgrass Corp. Parkway
Suite 212
Sunrise, Florida 33325
Attention: Donna West, Director
Telecopier No.: (305) 846-8352
with a copy to: Residential Funding Corporation
8400 Normandale Lake Boulevard
Suite 600
Minneapolis, Minnesota 55437
Attention: Sandra L. Oakes, Esa
Telecopier No.: (612) 832-7190
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Copies of Notices need only be provided to the respective attorneys
of the Lender and the Borrowers if such Notices relate to a Default
or Event of Default, to the exercise by the Lender of its remedies
under Section 8 of this Agreement, or to pending legal proceeding.
No Notice provided to any party to this Agreement as required
hereunder shall be ineffective because of any failure to provide a
copy of such Notice to the attorney of such party.
10. REIMBURSEMENT OF EXPENSES; INDEMNITY.
The Borrowers shall: (a) pay a documentation production fee of Five
Thousand Dollars ($5,000) in connection with the preparation and
negotiation of this Agreement; (b) pay such additional documentation
production fees, as the Lender may require and all out-of-pocket costs
and expenses of the Lender, including, without limitation, reasonable
fees and disbursements of counsel (including allocated costs of
internal counsel), in connection with the amendment, enforcement and
administration of this Agreement, the Note, and other Loan Documents
and the making and repayment of the Advances and the payment of
interest thereon; (c) indemnify, pay, and hold harmless the Lender from
and against, any and all present and future stamp, documentary and
other similar taxes with respect to the foregoing matters and save the
Lender harmless from and against any and all liabilities with respect
to or resulting from any delay or omission to pay such taxes; and (d)
indemnify, pay and hold harmless the Lender and any of its officers,
directors, employees or agents (collectively called the "Indemnitees")
from and against any and all liabilities, obligations, losses, damages,
penalties, judgments, suits, costs, expenses and disbursements of any
kind or nature whatsoever (including without limitation, the reasonable
fees and disbursements of counsel of the Indemnitees (including
allocated costs of internal counsel) in connection with any
investigative, administrative or judicial proceeding, whether or not
such Indemnitees shall be designated a party thereto) which may be
imposed upon, incurred by or asserted against such Indemnitees in any
manner relating to or arising out of this Agreement, the Note, or any
other Loan Document or any of the transactions contemplated hereby or
thereby (the "Indemnified Liabilities"); provided, however, that the
Borrowers shall have no obligation hereunder with respect to
Indemnified Liabilities arising from the gross negligence or willful
misconduct of any such Indemnitees. To the extent that the undertaking
to indemnify, pay and hold harmless as set forth in the preceding
sentence may be unenforceable because it is violative of any law or
public policy, the Borrowers shall contribute the maximum portion which
it is permitted to pay and satisfy under applicable law, to the payment
and satisfaction of all Indemnified Liabilities incurred by the
Indemnitees or any of them. The agreement of the Borrowers contained
in this Subsection (d) shall survive the expiration or termination of
this Agreement and the payment in full of the Note Attorneys' fees and
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disbursements incurred in enforcing, or on appeal from, a judgment
pursuant hereto shall be recoverable separately from and in addition to
any other amount included in such judgment, and this clause is intended
to be severable from the other provisions of this Agreement and to
survive and not be merged into such judgment.
The Borrowers shall be entitled to appoint counsel of the
Borrowers' choice at the Borrowers' expense to represent any of the
Indemnitees in any action for which indemnification is sought (in which
case the Borrowers shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the Indemnitees except as
set forth below); provided, however, that such counsel shall be
satisfactory to the Indemnitees. Notwithstanding the Borrowers election
to appoint counsel for the Indemnitees in any action, the Indemnitees
shall have the right to employ separate counsel (including local
counsel), and the Borrowers shall bear the reasonable fees, costs and
expenses of such separate counsel if (i) the use of counsel chosen by
the Borrowers to represent the Indemnitees would present such counsel
with a conflict of interest, (ii) the actual or potential defendants
in, or targets of, any such action include both an Indemnitee and the
Borrowers and the Indemnitee shall have reasonably concluded that there
may be defenses available to it that are different from or additional
to those available to the Borrowers, (iii) the Borrowers shall not have
employed counsel satisfactory to the Indemnitees within a reasonable
time after the notice of the institution of such action, (iv) the
Indemnitees shall have reasonably concluded that, due to the financial
condition of the Borrowers, not employing separate counsel could have a
material adverse effect on the outcome of such action as its relates to
the Indemnitees, or (v) the Borrowers shall authorize Lender and/or
other Indemnitees to employ separate counsel at the expense of the
Borrowers. The Borrowers will not, without the prior written consent of
the Lender and all other Indemnitees involved in the related action,
settle or compromise or consent to the entry of any judgment with
respect to any pending or threatened claim, action, suit or proceeding
in respect of which indemnification may be sought hereunder (whether or
not the Borrowers are actual or potential parties to such claim or
action) unless such settlement, compromise or consent involves no
remedy other than the payment of money, has been fully satisfied (or
provision satisfactory to the Lender for the satisfaction thereof has
been made) by the Borrowers, and includes an unconditional release of
each Indemnitee from all liability arising out of such claim, action,
suit or proceeding.
11. FINANCIAL INFORMATION.
All financial statements and reports furnished to the Lender
hereunder shall be prepared in accordance with GAAP, applied on a basis
consistent with that applied in preparing the financial statements as
at the end of and for the last fiscal year ended
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(except to the extent otherwise required to conform to good accounting
practice).
12. MISCELLANEOUS.
12.1 Terms Binding Upon Successors: Survival of
Representations. The terms and provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns. All representations,
warranties, covenants and agreements herein contained on the part
of the Borrowers shall survive the making of any Advance and the
execution of the Note, and shall be effective so long as the
Commitment is outstanding hereunder or there remain any Obligations
to be paid or performed.
12.2 Assignment. This Agreement may not be assigned by the
Borrowers. This Agreement and the Note, along with the Lender's
security interest in any or all of the Collateral, may, at any
time, be transferred or assigned, in whole or in part, by the
Lender, provided that no such assignee may enforce this Agreement,
the Note or such security interest, that the Borrowers may continue
to deal exclusively with the Lender notwithstanding such
assignment.
12.3 Amendments. Except as otherwise provided in this
Agreement, this Agreement may not be amended, modified or
supplemented unless such amendment, modification or supplement is
set forth in a writing signed by the parties hereto.
12.4 Governing Law. This Agreement and the other Loan
Documents shall be governed by the laws of the State of Minnesota,
without reference to its principles of conflicts of laws.
12.5 Participations. The Lender may at any time sell, assign
or grant participations in, or otherwise transfer to any other
Person (a "Participant"), all or part of the Obligations, provided
that no Participant may enforce this Agreement or the Obligations
and that the Borrowers may continue to deal exclusively with the
Lender with respect to this Agreement and the Obligations. Without
limitation of the exclusive right of the Lender to collect and
enforce such Obligations, the Borrowers authorize each Participant,
upon the occurrence of an Event of Default, to proceed directly by
right of setoff, banker's lien, or otherwise, against any assets of
the Borrowers which may be in the hands of such Participant. The
Borrowers authorize the Lender to disclose to any prospective
Participant and any Participant any and all information in the
Lender's possession concerning the Borrowers, this Agreement and
the Collateral.
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12.6 Relationship of the Parties. This Agreement provides for
the making of Advances by the Lender, in its capacity as a lender,
to the Borrowers, in their capacity as borrowers, and for the
payment of interest, repayment of principal by the Borrowers to the
Lender, and for the payment of certain fees by the Borrowers to the
Lender. The relationship between the Lender and the Borrowers are
limited to that of creditor/secured party, on the one hand, and
debtor, on the other hand. The provisions herein for compliance
with financial covenants and delivery of financial statements are
intended solely for the benefit of the Lender to protect its
interests as lender in assuring payments of interest and repayment
of principal and payment of certain fees, and nothing contained in
this Agreement shall be construed as permitting or obligating the
Lender to act as a financial or business advisor or consultant to
the Borrowers, as permitting or obligating the Lender to control
the Borrowers or to conduct the Borrowers' operations, as creating
any fiduciary obligation on the part of the Lender to the
Borrowers, or as creating any joint venture, agency, or other
relationship between the parties hereto other than as explicitly
and specifically stated in this Agreement. The Borrowers
acknowledge that it has had the opportunity to obtain the advice of
experienced counsel of its own choosing in connection with the
negotiation and execution of this Agreement and to obtain the
advice of such counsel with respect to all matters contained
herein. The Borrowers further acknowledge that it is experienced
with respect to financial and credit matters and has made its own
independent decisions to apply to the Lender for credit and to
execute and deliver this Agreement.
12.7 Severability. If any provision of this Agreement shall be
declared to be illegal or unenforceable in any respect, such
illegal or unenforceable provision shall be and become absolutely
null and void and of no force and effect as though such provision
were not in fact set forth herein, but all other covenants, terms,
conditions and provisions hereof shall nevertheless continue to be
valid and enforceable.
12.8 Operational Reviews. From time to time upon request, the
Borrowers shall permit the Lender or its representative access to
its premises and records, for the purpose of conducting a review of
the Borrowers' general mortgage business methods, policies, and
procedures, auditing loan files and reviewing financial and
operational aspects of the Borrowers' business.
12.9 Consent to Jurisdiction. The Borrowers hereby agrees that
any action or proceeding under the Loan Documents, the Note or any
document delivered pursuant hereto may be commenced against it in
any court of competent jurisdiction
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within the State of Minnesota, by service of process upon the
Borrowers by first class registered or certified mail, return
receipt requested, addressed to the Borrowers at their address last
known to the Lender. The Borrowers agree 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 the
Borrowers hereby waive 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 in any other
jurisdiction or court, to the extent provided by law.
12.10 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.
12.11 Entire Agreement. This Agreement, the Note and the other
Loan Documents represent the final agreement among the parties
hereto and thereto with respect to the subject matter hereof and
thereof, and may not be contradicted by evidence of prior or
contemporaneous oral agreements among such parties. There are no
oral agreements among the parties with respect to the subject
matter hereof and thereof.
12.12 WAIVER OF JURY TRIAL. THE BORROWERS 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 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 AND THE BORROWERS 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 AND THE
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.
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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: _________________________________________
RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation
By: __________________________________________
Its: Director
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:________________________
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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:________________________
STATE OF ____________________ )
) ss
COUNTY OF ___________________ )
On ______________, 1996, before me, a Notary Public, personally appeared
_______________________, the Director of RESIDENTIAL FUNDING CORPORATION, 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 entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
______________________________________________
Notary Public
(SEAL) My Commission Expires:________________________
68
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<PAGE>
EXHIBIT A
PROMISSORY NOTE
$75,000,000 Date: March 1, 1996
FOR VALUE RECEIVED, the undersigned, INDUSTRY MORTGAGE COMPANY, L.P., a
Delaware limited partnership, and IMC CORPORATION OF AMERICA, a Pennsylvania
corporation (hereinafter collectively referred to as the "Borrowers" and
individually as "Co-Borrower"), hereby promise to pay to the order of
RESIDENTIAL FUNDING CORPORATION, a Delaware corporation (the "Lender" or,
together with its successors and assigns, the "Holder"), whose principal place
of business is 8400 Normandale Lake Blvd., Suite 600, Minneapolis, Minnesota
55437, or at such other place as the Holder may designate from time to time, the
principal sum of Seventy-Five Million Dollars ($75,000,000) or so much thereof
as may be outstanding from time to time pursuant to the Warehousing Credit and
Security Agreement described below, and to pay interest on said principal sum or
such part thereof as shall remain unpaid from time to time, from the date of
each Advance until repaid in full, and all other fees and charges due under the
Agreement, at the rates and at the times set forth in the Agreement. All
payments hereunder shall be made in lawful money of the United States and in
immediately available funds.
This Note is given to evidence an actual warehouse line of credit in the
above amount and is the Note referred to in that certain Warehousing Credit and
Security Agreement (the "Agreement") dated the date hereof between the Borrowers
and the Lender, as the same may be amended or supplemented from time to time,
and is entitled to the benefits thereof. Reference is hereby made to the
Agreement (which is incorporated herein by reference as fully and with the same
effect as if set forth herein at length) for a description of the Collateral, a
statement of the covenants and agreements, a statement of the rights and
remedies and securities afforded thereby and other matters contained therein.
Capitalized terms used herein, unless otherwise defined herein, shall have the
meanings given them in the Agreement.
This Note may be prepaid in whole or in part at any time without premium or
penalty.
Should this Note be placed in the hands of attorneys for collection, the
Borrowers agree to pay, in addition to principal and interest, fees and charges
due under the Agreement, any and all costs of collecting this Note, including
reasonable attorneys' fees and expenses.
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The Borrowers hereby waive demand, notice, protest and presentment.
The promises and agreements herein shall be construed to be and are hereby
declared to be the joint and several promises and agreements of each Co-Borrower
and shall constitute the joint and several obligation of each Co-Borrower and
shall be fully binding upon and enforceable against each Co-Borrower. The
release of any party to this Note shall not affect or release the joint and
several liability of any other party. The Lender may at its option enforce this
Note against one or all of the Co-Borrower, and the Lender shall not be required
to resort to enforcement against each Co-Borrower and the failure to proceed
against or join each Co- Borrower shall not affect the joint and several
liability of each Co-Borrower.
This Note shall be construed and enforced in accordance with the laws of
the State of Minnesota, without reference to its principles of conflicts of law.
IN WITNESS WHEREOF, the Borrowers have executed this Note as of the day and
year 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 Pennsylvania corporation
By: ________________________________________
Its: _______________________________________
2
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<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
Pennsylvania 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 entity upon behalf of which the person acted, executed this
instrument.
WITNESS my hand and official seal.
______________________________________________
Notary Public
(SEAL) My Commission Expires:________________________
3
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EXHIBIT B
(INTENTIONALLY OMITTED)
<PAGE>
<PAGE>
EXHIBIT C-SF
REQUEST FOR ADVANCE SINGLE FAMILY MORTGAGE LOAN
Mortgage Company: INDUSTRY MORTGAGE COMPANY, L.P. and IMC CORPORATION OF AMERICA
Mortgagor: ______________________ Loan Number: _______________________
______________________ Reviewed By: _______________________
Address: ______________________ Warehouse Date: _______________________
______________________ Effective Date: _______________________
Status: Loan Type:
Wet Settlement _______
Received _____________ Fixed _________ Term _______
3rd Party ARM ___________ Type _______
Originated_________ Balloon _______ Type _______
Section 32____________ Second ________
Home Equity ___
Mixed Use Property _________
Mortgage Note Amount: ___________ Interest Rate: ________________________
Mortgage Note Date: _____________ Requested Warehouse Amt: ______________
Investor: _______________________ Requested Premium Advance: ____________
Acquisition Price: ______________ Expiration Date: ______________________
Loan Grade: _____________________ Title Company: ________________________
METHOD OF ADVANCE
( ) Check Funding/Disbursement
Check No: _________________________ Amount: __________________________
Checking Account No: ______________
( ) Wire Transfer
Amount of Wire: ___________________ Date of Wire: ____________________
Credit Acct. No.: _________________ Credit Acct. Name: _______________
ABA No.: __________________________ Bank Name: _______________________
Account to Debit: _________________ City & State: ____________________
Ref: _____________ Advise:____________________ Phone: _______________
REQUIRED DOCUMENTATION
Attached please find the following documents in connection with the above
request (Please check attached documents below):
Right
( ) Original and one copy of Mortgage Note
( ) Certified copy of Mortgage
( ) Section 32 Compliance Documents (if applicable)
Left
( ) *Request for Advance (original and one (1) copy)
( ) *Copy of settlement or funding check (if applicable)
( ) Recordable assignment of Mortgage
( ) Certified copies of interim assignments of Mortgage (if applicable)
( ) *Bailee Pledge Agreement (only required for Wet Settlement Advance)
Please Note: Items designated with the "*" are required prior to a Wet
Settlement Advance
Authorized Signature: ___________________________________
FOR RFC INTERNAL USE ONLY
Repetitive Code: ______________________________ Date: ________________________
Wire Initiator's Initials: ____________________ Wire Verifier's Initials:_____
<PAGE>
<PAGE>
EXHIBIT C-SUBW
REQUEST FOR ADVANCE SUBWAREHOUSING MORTGAGE LOAN
Mortgage Company: INDUSTRY MORTGAGE COMPANY, L.P. and IMC CORPORATION OF AMERICA
Subwarehousing Borrower: ______________________________________________________
Mortgagor: ______________________ Loan Number: _______________________
______________________ Reviewed By: _______________________
Address: ______________________ Warehouse Date: _______________________
______________________ Effective Date: _______________________
Status: Loan Type:
Received _____________ Fixed _________ Term _______
3rd Party ARM ___________ Type _______
Originated ________ Balloon _______ Type _______
Section 32 ___________ Second ________
Home Equity ___
Mixed Use Property _________
Mortgage Note Amount:____________ Interest Rate:_________________________
Borrower's Warehouse Loan Amount: ____________________________________________
Mortgage Note Date: _____________ Requested Warehouse Amt: ______________
Investor: _______________________ Expiration Date: ______________________
Acquisition Price: ______________ Title Company: ________________________
Loan Grade: _____________________
METHOD OF ADVANCE
( ) Wire Transfer
Amount of Wire: ___________________ Date of Wire: ____________________
Credit Acct. No.: _________________ Credit Acct. Name: _______________
ABA No.: __________________________ Bank Name: _______________________
Account to Debit: _________________ City & State: ____________________
Ref: _____________ Advise:____________________ Phone: _______________
REQUIRED DOCUMENTATION
Attached please find the following documents in connection with the above
request (Please check attached documents below):
Right
( ) Copy of Subwarehousing Note (previously delivered)
( ) Original and one copy of Mortgage Note (endorsed in blank by
Subwarehousing Borrower)
( ) Certified copy of Mortgage
( ) Section 32 Compliance Documents (if applicable)
Left
( ) *Request for Advance (original and one (1) copy)
( ) Recordable assignments of Mortgage (Subwarehousing Borrower to Borrower;
Borrower to Lender)
( ) Certified copies of interim assignments of Mortgage (if applicable)
Authorized Signature: ___________________________
FOR RFC INTERNAL USE ONLY
Repetitive Code: ______________________________ Date: ________________________
Wire Initiator's Intitials: ___________________ Wire Verifier's Initials:_____
<PAGE>
<PAGE>
EXHIBIT D-SF
PROCEDURES AND DOCUMENTATION FOR WAREHOUSING
SINGLE FAMILY MORTGAGE LOANS
The following procedures and documentation requirements must be observed in
all respects by the Borrowers. All documents must be satisfactory to the Lender
in its sole discretion. Terms used below, which are not otherwise defined, shall
have the meanings given them in the Warehousing Credit and Security Agreement
dated as of February 1, 1996 (the "Agreement"). The HUD, FNMA and FHLMC form
numbers referred to herein are for convenience only and the Borrowers shall use
the equivalent forms required at the time of delivery of the Mortgage Loans or
Mortgage-backed Securities. All Requests for Advance and Collateral Documents,
should be submitted to the Lender in a top tabbed, legal size manila file
folder, hole-punched and acco-fastened in the order specified in the Request
for Advance. Each folder should be labelled with the mortgagor name(s), Borrower
loan number and Borrower name. If a Wet Settlement Advance is being requested,
the Request for Advance and required Collateral Documents should be submitted in
accordance with the above instructions. The remaining Collateral Documents
should be submitted with a cover letter identifying the mortgagor name(s) and
Borrower loan number.
I. Prior to making a Wet Settlement Advance, the Lender must receive the
following:
(l) Estimate of the amount of the requested Advance not later than 9:00
a.m. (Eastern time) on the date of such Advance.
(2) Copy of settlement or funding check issued to the escrow/title
company, if applicable.
(3) Original Request for Advance against Single Family Mortgage Loans
(Exhibit C-SF) and one (1) copy of same.
(4) Bailee Pledge Agreement (only required for Wet Settlement Advance)
(Exhibit M).
The following must be received by the Lender within five (5) Business
Days of the date of the Wet Settlement Advance:
(5) Original signed Mortgage Note, endorsed by the Borrowers in blank
with corresponding interim endorsements, if applicable, and one
copy of same.
(6) Copy of the Mortgage certified true by the escrow/title company.
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(7) Copies of all interim assignments of the Mortgage certified true by
the escrow/title company (recorded or sent for recordation).
Mortgage Note must bear corresponding endorsements.
(8) An assignment of the Mortgage to the Lender in recordable form but
unrecorded.
(9) Completed Company Worksheet Concerning Applicability of Section 32
of Regulation Z (12 CFR Section 226.32) and, if Section 32 applies,
copies of the disclosure and other related documentation delivered
to the mortgagor, or executed by the mortgagor, evidencing
compliance with Section 32.
II. Prior to the making of an Advance (other than a Wet Settlement
Advance), the Lender must receive all of the Collateral Documents
listed in Section I above.
III. The Lender exclusively shall deliver the Mortgage Notes and other
original Collateral Documents evidencing Pledged Mortgages or Pledged
Securities and related pool documents to the Investor or pool
custodian, unless otherwise agreed in writing.
The following procedures are to be followed for deliveries of
Pledged Mortgages:
No later than one (1) Business Day prior to the requested shipment
date, the Lender must receive the following:
(1) Signed shipping instructions for the delivery of the Pledged
Mortgages including the following:
(a) Name and address of the office of the Approved Custodian (or
Investor) to which the loan documents are to be shipped, the
desired shipping date and the preferred method of delivery;
(b) Instructions for endorsement of the Mortgage Note;
(c) Names of mortgagor(s), Mortgage Note Amounts of Pledged
Mortgages to be shipped and the Borrowers' loan number.
(2) For deliveries of Pledged Mortgages to FNMA for cash purchase, the
following additional documents are required:
(a) Copy of Loan Schedule (FNMA Form 1068 or 1069) showing the
Lender's designated FNMA payee code as recipient of the loan
purchase proceeds.
(3) For deliveries of Pledged Mortgages to FHLMC for cash purchase, the
following additional documents are required:
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(a) Original completed Warehouse Lender Release of Security
Interest (FHLMC Form 996) to be executed by the Lender,
designating the Lender as the Warehouse Lender and showing the
Cash Collateral Account designated by the Lender as the
receiving account for loan purchase proceeds.
(b) Copy of Wire Transfer Authorization for a Cash Warehouse
Delivery (FHLMC Form 987), designating the Lender as the
Warehouse Lender and showing the Cash Collateral Account
designated by the Lender as the receiving account for loan
purchase proceeds.
In the event Pledged Mortgages are delivered to a pool custodian, other
than an Approved Custodian, payment of the related Advance is required
within two (2) Business Days of shipment.
(4) For deliveries of Pledged Mortgages to a pool custodian for
inclusion in a Securitization Pool, the following additional
documents are required:
(a) Original executed custodial agreement or other written
confirmation that the pool custodian will hold the Pledged
Mortgages as agent for Lender pending Lender's receipt of the
Release Amount with respect thereto or, if authorized in
writing by the Lender, issuance of the related Company
Securities to the Lender's custody account at Chemical Bank NY
(CHEMICAL NYC/GEOCUST/MR9229490) and bearing the following
instructions: "These instructions may not be changed without
the prior written consent of Residential Funding Corporation,
Preston A. Lyvers, Director or Patti Erfan, Director."
(b) Identification (name, address, telecopier number and contact
person) of the underwriter or underwriters (or, if the Company
Securities are to be privately placed, the placement agent or
agents) for the related Company Securities, or written
confirmation from the pool custodian that it will notify such
underwriter or underwriters (or placement agent or placement
agents) of the Lender's security interest in the Pledged
Mortgages.
(5) For FNMA Mortgage-backed Securities issuance, the following
additional documents are required:
(a) Copy of Schedule of Mortgages (FNMA Form 2005 or 2025).
(b) Copy of Delivery Schedule (FNMA Form 2014), instructing FNMA
to issue the Mortgage-backed Securities in the name of the
Borrowers with the Lender as pledgee and to deliver the
Mortgage-backed Securities to the Lender's custody account
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at Chemical Bank NY (CHEMICAL NYC/GEOCUST/MR9229490) and
bearing the following instructions: "These instructions may
not be changed without the prior written consent of
Residential Funding Corporation, Preston A. Lyvers, Director
or Patti Erfan, Director."
(6) For FHLMC Mortgage-backed Securities issuance, the following
additional documents are required:
(a) Copy of Settlement Information and Delivery Authorization
(FHLMC Form 939), designating the Lender as the Warehouse
Lender and instructing FHLMC to deliver the Mortgage-backed
Securities to the Lender's custody account at Chemical Bank NY
(CHEMICAL NYC/GEOCUST/MR9229490).
(b) Original Warehouse Lender Release of Security Interest (FHLMC
Form 996) to be executed by the Lender, designating the Lender
as the Warehouse Lender and instructing FHLMC to deliver the
Mortgage-backed Securities to the Lender's custody account at
Chemical Bank NY (CHEMICAL NYC/GEOCUST/MR9229490).
(7) For GNMA Mortgage-backed Securities issuance, the following
additional documents are required:
(a) Signed original Schedule of Mortgages (HUD Form 11706).
(b) Signed original Schedule of Subscribers (HUD Form 11705)
instructing GNMA to issue the Mortgage-backed Securities in
the name of the Borrowers and designating Chemical Bank as
Agent for the Lender as the subscriber, using the following
language: CHEMICAL BANK AS AGENT FOR RESIDENTIAL FUNDING
CORPORATION SEG ACCT MANUF/CUST/MR9229490). The following
instructions must also be included on the form: "These
instructions may not be changed without the prior written
consent of Residential Funding Corporation, Preston A. Lyvers,
Director or Patti Erfan, Director."
(c) Completed original Release of Security Interest (HUD Form
11711A) to be executed by the Lender.
(8) No later than two (2) Business Days prior to the Settlement Date for
the Mortgage-backed Securities, the Lender must receive signed
Securities Delivery Instructions form attached hereto as Schedule I.
Upon instruction by the Borrowers, the Lender will complete the
endorsement of the Mortgage Note and make arrangements for the delivery
of the original Collateral Documents evidencing Pledged Mortgages or
Pledged Securities and related original pool documents with the
appropriate bailee letter to the Investor, Approved Custodian, or other
pool custodian. Upon receipt of Pledged Securities, the Lender will
cause such Pledged Securities to be
4
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delivered to the Investor which issued the Purchase Commitment. Pledged
Securities will be released to the Investor only upon payment of the
purchase proceeds to the Lender. Pledged Mortgages delivered to the
pool custodian for a Securitization Pool shall be released only against
payment of the Release Amount therefor (unless the Lender, in its
discretion, agrees in writing to release such Pledged Mortgages against
delivery of the related Company Securities to the Lender's account).
Cash proceeds of sales of Pledged Mortgages and Pledged Securities
shall be applied to the Advances outstanding against such Pledged
Mortgages, other Mortgage Loans backing such Pledged Securities, or
otherwise as provided in the Agreement. Provided no Event of Default
has occurred and is continuing, the Lender shall return any excess
proceeds of the sale of Mortgage Loans or Mortgage-backed Securities to
the Borrowers, unless otherwise instructed in writing.
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SCHEDULE I
RESIDENTIAL FUNDING CORPORATION
WAREHOUSING LENDING DIVISION
Security Delivery Instructions
INSTRUCTIONS MUST BE RECEIVED TWO (2) BUSINESS DAYS IN ADVANCE OF
PICK-UP/DELIVERY
BOOK-ENTRY DATE: ______________________ SETTLEMENT DATE: _________________
ISSUER: _______________________________ SECURITY: $_______________________
NO. OF CERTIFICATES:___________________ 1) __________
2) __________
3) __________
CUSIP # _______________
Pool # ______________ MI# _____________ Coupon Rate: ______________________
Issue Date:(M/D/Y)______________________ Maturity Date:(M/D/Y) _____________
POOL TYPE (circle one):
GNMA: GNMA I GNMA II
FHLMC: FIXED ARM DISCOUNT NOTE
FNMA: FIXED ARM DISCOUNT NOTE DEBENTURES REMIC
________________________________________________________________________________
DELIVER TO: _______________________________ ( ) Versus Payment
_______________________________ DVP AMT. $_______________________
_______________________________ ( ) Free Delivery
DELIVER TO: _______________________________ ( ) Versus Payment
_______________________________ DVP AMT. $_______________________
_______________________________ ( ) Free Delivery
DELIVER TO: _______________________________ ( ) Versus Payment
_______________________________ DVP AMT. $_______________________
_______________________________ ( ) Free Delivery
________________________________________________________________________________
AUTHORIZED SIGNATURE: __________________________________________________________
TITLE: _________________________________________________________________________
<PAGE>
<PAGE>
EXHIBIT D-SUBW
PROCEDURES AND DOCUMENTATION FOR WAREHOUSING
SUBWAREHOUSING MORTGAGE LOANS
The following procedures and documentation requirements must be observed in
all respects by the Borrowers. All documents must be satisfactory to the Lender
in its sole discretion. Terms used below, which are not otherwise defined, shall
have the meanings given them in the Warehousing Credit and Security Agreement
dated as of February 1, 1996 (the "Agreement"). The HUD, FNMA and FHLMC form
numbers referred to herein are for convenience only and the Borrowers shall use
the equivalent forms required at the time of delivery of the Mortgage Loans or
Mortgage-backed Securities. All Requests for Advance and Collateral Documents,
should be submitted to the Lender in a top tabbed, legal size manila file
folder, hole-punched and acco-fastened in the order specified in the Request
for Advance. Each folder should be labelled with the mortgagor name(s), the
Subwarehousing Borrower name, Borrower loan number and Borrower name.
I. Prior to making a Subwarehousing Advance, the Lender must receive the
following:
(1) Estimate of the amount of the requested Advance one (1) Business Day
prior to such Advance.
(2) Original Request for Advance against Single Family Mortgage Loans
(Exhibit C-SUBW) and one (1) copy of same.
(3) Original signed Mortgage Note, endorsed by the Subwarehousing Borrower
in blank with corresponding interim endorsements, if applicable, and one
copy of same.
(4) Copy of the Mortgage certified true by the escrow/title company.
(5) Copies of all interim assignments of the Mortgage certified true by the
escrow/title company (recorded or sent for recordation). Mortgage Note
must bear corresponding endorsements.
(6) Assignments of the Mortgage from the Subwarehousing Borrower to the
Borrowers, and from the Borrowers to the Lender, in recordable form but
unrecorded.
(7) Completed Company Worksheet Concerning Applicability of Section 32 of
Regulation 2 (12 CFR Section 226.32) and, if Section 32 applies, copies
of the disclosure and other related documentation delivered to the
mortgagor, or
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executed by the mortgagor, evidencing compliance with Section 32.
II. The Lender exclusively shall deliver the Mortgage Notes and other
original Collateral Documents evidencing Pledged Mortgages or Pledged
Securities and related pool documents to the Investor or pool custodian,
unless otherwise agreed in writing.
The following procedures are to be followed for deliveries of Pledged
Mortgages:
No later than one (1) Business Day prior to the requested shipment date,
the Lender must receive the following:
(1) Signed shipping instructions for the delivery of the Pledged
Mortgages including the following:
(a) Name and address of the office of the Approved Custodian (or
Investor) to which the loan documents are to be shipped, the
desired shipping date and the preferred method of delivery;
(b) Instructions for endorsement of the Mortgage Note;
(c) Names of mortgagor(s), Mortgage Note Amounts of Pledged
Mortgages to be shipped and the Borrowers' loan number.
(2) For deliveries of Pledged Mortgages to FNMA for cash purchase, the
following additional documents are required:
(a) Copy of Loan Schedule (FNMA Form 1068 or 1069) showing the
Lender's designated FNMA payee code as recipient of the loan
purchase proceeds.
(3) For deliveries of Pledged Mortgages to FHLMC for cash purchase, the
following additional documents are required:
(a) Original completed Warehouse Lender Release of Security
Interest (FHLMC Form 996) to be executed by the Lender,
designating the Lender as the Warehouse Lender and showing the
Cash Collateral Account designated by the Lender as the
receiving account for loan purchase proceeds.
(b) Copy of Wire Transfer Authorization for a Cash Warehouse
Delivery (FHLMC Form 987), designating the Lender as the
Warehouse Lender and showing the Cash Collateral Account
designated by the Lender as the receiving account for loan
purchase proceeds.
In the event Pledged Mortgages are delivered to a pool custodian,
other than an Approved Custodian, payment of the related Advance is
required within two (2) Business Days of shipment.
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(4) For deliveries of Pledged Mortgages to a pool custodian for
inclusion in a Securitization Pool, the following additional
documents are required:
(a) Original executed custodial agreement or other written
confirmation that the pool custodian will hold the Pledged
Mortgages as agent for Lender pending Lender's receipt of the
Release Amount with respect thereto or, if authorized in
writing by the Lender, issuance of the related Company
Securities to the Lender's custody account at Chemical Bank NY
(CHEMICAL NYC/GEOCUST/MR9229490) and bearing the following
instructions: "These instructions may not be changed without
the prior written consent of Residential Funding Corporation,
Preston A. Lyvers, Director or Patti Erfan, Director."
(b) Identification (name, address, telecopier number and contact
person) of the underwriter or underwriters (or, if the Company
Securities are to be privately placed, the placement agent or
agents) for the related Company Securities, or written
confirmation from the pool custodian that it will notify such
underwriter or underwriters (or placement agent or placement
agents) of the Lender's security interest in the Pledged
Mortgages.
(5) For FNMA Mortgage-backed Securities issuance, the following
additional documents are required:
(a) Copy of Schedule of Mortgages (FNMA Form 2005 or 2025).
(b) Copy of Delivery Schedule (FNMA Form 2014), instructing FNMA to
issue the Mortgage-backed Securities in the name of the
Borrowers with the Lender as pledgee and to deliver the
Mortgage-backed Securities to the Lender's custody account at
Chemical Bank NY (CHEMICAL NYC/GEOCUST/MR9229490) and bearing
the following instructions: "These instructions may not be
changed without the prior written consent of Residential
Funding Corporation, Preston A. Lvers, Director or Patti Erfan,
Director."
(6) For FHLMC Mortgage-backed Securities issuance,
the following additional documents are required:
(a) Copy of Settlement Information and Delivery Authorization
(FHLMC Form 939), designating the Lender as the Warehouse
Lender and instructing FHLMC to deliver the Mortgage-backed
Securities to the Lender's custody account at Chemical Bank NY
(CHEMICAL NYC/GEOCUST/MR9229490).
(b) Original Warehouse Lender Release of Security Interest (FHLMC
Form 996) to be executed by the Lender, designating the Lender
as the Warehouse
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Lender and instructing FHLMC to deliver the Mortgage-backed
Securities to the Lender's custody account at Chemical Bank NY
(CHEMICAL NYC/GEOCUST/MR9229490).
(7) For GNMA Mortgage-backed Securities issuance, the following
additional documents are required:
(a) Signed original Schedule of Mortgages (HUD Form 11706).
(b) Signed original Schedule of Subscribers (HUD Form 11705)
instructing GNMA to issue the Mortgage-backed Securities in the
name of the Borrowers and designating Chemical Bank as Agent
for the Lender as the subscriber, using the following language:
CHEMICAL BANK AS AGENT FOR RESIDENTIAL FUNDING CORPORATION SEG
ACCT MANUF/CUST/MR9229490). The following instructions must
also be included on the form: "These instructions may not be
changed without the prior written consent of Residential
Funding Corporation, Preston A. Lyvers, Director or Patti
Erfan, Director."
(c) Completed original Release of Security Interest (HUD Form
11711A) to be executed by the Lender.
(8) No later than two (2) Business Days prior to the Settlement Date for
the Mortgage-backed Securities, the Lender must receive signed
Securities Delivery Instructions form attached hereto as Schedule I.
Upon instruction by the Borrowers, the Lender will complete the
endorsement of the Mortgage Note and make arrangements for the delivery
of the original Collateral Documents evidencing Pledged Mortgages or
Pledged Securities and related original pool documents with the
appropriate bailee letter to the Investor, Approved Custodian, or other
pool custodian. Upon receipt of Pledged Securities, the Lender will
cause such Pledged Securities to be delivered to the Investor which
issued the Purchase Commitment. Pledged Securities will be released to
the Investor only upon payment of the purchase proceeds to the Lender.
Pledged Mortgages delivered to the pool custodian for a Securitization
Pool shall be released only against payment of the Release Amount
therefor (unless the Lender, in its discretion, agrees in writing to
release such Pledged Mortgages against delivery of the related Company
Securities to the Lender's account). Cash proceeds of sales of Pledged
Mortgages and Pledged Securities shall be applied to the Advances
outstanding against such Pledged Mortgages, other Mortgage Loans
backing such Pledged Securities, or otherwise as provided in the
Agreement. Provided no Event of Default has occurred and is continuing,
the Lender shall return any excess proceeds of the sale of Mortgage
Loans or Mortgaged-backed Securities to the Borrowers, unless otherwise
instructed in writing. If an Event of Default has occurred and is
continuing but no Subwarehousing Default has occurred and is
continuing, the Lender shall return any proceeds of
4
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<PAGE>
the sale of Mortgage Loans or Mortgage-backed Securities in excess of
the amount of the related Subwarehousing Loan directly to the
Subwarehousing Borrower.
5
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<PAGE>
SCHEDULE I
RESIDENTIAL FUNDING CORPORATION
WAREHOUSING LENDING DIVISION
Security Delivery Instructions
INSTRUCTIONS MUST BE RECEIVED TWO (2) BUSINESS DAYS IN ADVANCE OF
PICK-UP/DELIVERY
BOOK-ENTRY DATE: ______________________ SETTLEMENT DATE:___________________
ISSUER: _______________________________ SECURITY: $________________________
NO. OF CERTIFICATES: __________________ 1)__________
2)__________
3)__________
CUSIP #______________
Pool #______________ MI#_______________ Coupon Rate:_____________________
Issue Date:(M/D/Y) ________________________ Maturity Date:(M/D/Y)____________
POOL TYPE (circle one):
GNMA: GNMA I GNMA II
FHLMC: FIXED ARM DISCOUNT NOTE
FNMA: FIXED ARM DISCOUNT NOTE DEBENTURES REMIC
________________________________________________________________________________
DELIVER TO: _______________________________ ( ) Versus Payment
_______________________________ DVP AMT. $_______________________
_______________________________ ( ) Free Delivery
DELIVER TO: _______________________________ ( ) Versus Payment
_______________________________ DVP AMT. $_______________________
_______________________________ ( ) Free Delivery
DELIVER TO: _______________________________ ( ) Versus Payment
_______________________________ DVP AMT. $_______________________
_______________________________ ( ) Free Delivery
________________________________________________________________________________
AUTHORIZED SIGNATURE: __________________________________________________________
TITLE: _________________________________________________________________________
<PAGE>
<PAGE>
EXHIBIT E-1
SCHEDULE OF SERVICING PORTFOLIO
UNPAID PRINCIPAL BALANCE
OF LOANS SERVICED AS OF
INVESTOR NAME DATE OF THIS AGREEMENT
- ------------- ------------------------
(to be completed by Company)
<PAGE>
<PAGE>
EXHIBIT E-2
SCHEDULE OF PLEDGED SERVICING CONTRACTS
UNPAID PRINCIPAL BALANCE
OF LOANS SERVICED AS OF
INVESTOR NAME DATE OF THIS AGREEMENT
- ------------- ------------------------
(to be completed by Company)
<PAGE>
<PAGE>
EXHIBIT F-1
RESIDENTIAL FUNDING CORPORATION
SUBORDINATION OF DEBT AGREEMENT
___________________, 19__
To: Residential Funding Corporation
8400 Normandale Lake Blvd., Suite 600
Minneapolis, Minnesota 55437
(hereinafter referred to as the "Lender")
The undersigned (hereinafter referred to as the "Creditor"), creditor of
INDUSTRY MORTGAGE COMPANY, L.P., a Delaware limited partnership (hereinafter
referred to as the "Company"), desires that the Lender extend or continue to
extend such financial accommodations to the Company as the Company may require
and as the Lender may deem proper. For the purpose of inducing the Lender to
grant, continue or renew such financial accommodations, and in consideration
thereof, the Creditor agrees as follows:
1. That at the present time the Company is indebted to the Creditor in the
principal amounts set forth below:
PRINCIPAL AMOUNT
TYPE OF FACILITY OF DEBT FROM THE
OR LOAN COMPANY
__________________________ __________________________
__________________________ __________________________
__________________________ __________________________
__________________________ __________________________
__________________________ __________________________
(Notes, if any, are to be delivered to the Lender)
2. That all claims of the Creditor against the Company now or hereafter
existing are and shall be at all times subject and subordinate to any and
all claims now or hereafter which the Lender may have against the Company
(and all extensions, renewals, modifications, replacements and
substitutions of or for the same), for so long as any such claim or claims
or the Lender shall exist.
3. That the Creditor shall not (a) except to the extent expressly permitted
in Section 4 hereof, receive payment of or collect, in whole or in part, or
sue upon, any claim or claims now or hereafter existing which the Creditor
may hold against the
1
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<PAGE>
Company; (b) sell, assign, transfer, pledge, hypothecate or encumber such
claim or claims except subject expressly to this Agreement; (c) enforce any
lien the Creditor may now or in the future have on any debt owing by the
Company to the Creditor; and/or (d) join in any petition in bankruptcy,
assignment for the benefit of creditors or creditors' agreement, except as
directed by the Lender, so long as any claim of the Lender against the
Company, or commitment of the Lender to extend credit to the Company, is in
existence.
4. So long as no event described in clauses (a) through (d) of Section 6 below
(a "Liquidation Event") shall have occurred and no default shall have
occurred in payment or performance of any obligation of the Company to the
Lender, regularly scheduled payments of interest and principal on the
claims of the Creditor may be made as and when the same become due and
payable (it being understood that no prepayment shall be made of such
claims and no modification or acceleration, for default or otherwise, of
such maturity dates shall be permitted). After the occurrence of a
Liquidation Event or of default in payment or performance of any obligation
of the Company to the Lender, no interest and no principal payments on the
claims of the Creditor shall be made without the prior written consent of
the Lender. The subordination of claims of the Creditor hereunder shall
remain in effect so long as there shall be outstanding any obligation of
the Company to the Lender (for this purpose, the Company shall be deemed
obligated to the Lender so long as the Lender shall have outstanding any
commitment to make any loan to the Company, whether or not any such loan
shall have been made or advanced).
5. In the event that any Creditor receives a payment from the Company in
violation of the terms of this Agreement, such Creditor (a) shall hold such
money in trust for the benefit of Lender, (b) shall segregate such payment
from (and shall not commingle such payment with any of) the other funds of
such Creditor, and (c) shall forthwith remit such payment to Lender in the
exact form received (but with any necessary endorsement).
6. In case of (a) any assignment by the Company for the benefit of creditors,
(b) any bankruptcy proceedings instituted by or against the Company, (c)
the appointment of any receiver for the Company's business or assets, or
(d) any dissolution or winding up of the affairs of the Company, the
Company and any assignee, trustee in bankruptcy, receiver, or other person
or persons in charge, are hereby directed to pay to the Lender the full
amount of the Lender's claim against the Company before making any payment
of principal or interest to the Creditor and the Creditor hereby sells,
transfers, sets over and assigns to the Lender all claims the Creditor may
now or
2
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<PAGE>
hereafter have against the Company and in any security therefor, and the
proceeds thereof, and all rights to any payments, dividends or other
distributions arising therefrom. If the Creditor does not file a proper
claim or proof of debt in the form required in such proceeding prior to
thirty (30) days before the expiration of the time to file such claim in
such proceedings, then the Lender has the right (but no obligation) to do
so and is hereby authorized to file an appropriate claim or claims for and
on behalf of the Creditor.
7. For violation of this Agreement, the Creditor shall be liable to the Lender
for all loss and damage sustained by reason of such breach, and upon any
such violation, the Lender may accelerate the maturity of its claims
against the Company, at the Lender's option.
8. The Creditor will, at any time and from time to time, promptly execute and
deliver all further instruments and documents, and take all further action,
that may be reasonably necessary in order to protect any right or interest
granted hereby or to enable the Lender to exercise and enforce its rights
and remedies hereunder.
9. The Creditor will not amend, extend or in any way modify the terms of its
claims against the Company, as such terms exist as of the date of this
Agreement, without the prior written consent of the Lender. The Creditor
agrees to provide to the Lender, upon the occurrence thereof, notice of the
existence of any event of default (however defined or described) under any
document or agreement relating to its claims against the Company, or any
condition, act or event, which with the giving of notice or the passage of
time or both would constitute an event of default (however defined or
described) thereunder.
10. All rights and interest of the Lender hereunder, and all agreements and
obligations of the Creditor hereunder, shall remain in full force and
effect irrespective of:
(a) any sale, assignment, pledge, encumbrance or other disposition of
the claims of the Lender against the Company (the "Senior Claims") and/or
any document or instrument executed in connection therewith;
(b) any change in the time, manner or place of payment of, or in any
other terms of, all or any of the Senior Claims, or any refinancing
thereof, or any other amendment, modification, extension or renewal of or
waiver of or any consent to departure from any document or instrument
relating thereto, including, without limitation, changes in the terms of
the repayment of loan proceeds, modifications, extensions or renewals of
payment dates, changes in interest rate or the
3
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<PAGE>
advancement of additional funds by the Lender in its discretion: or
(c) any exchange, release or nonperfection of any collateral, or any
release or amendment or waiver of or consent to departure from any
guaranty, for all or any of the Senior Claims.
11. This Agreement shall continue to be effective or be reinstated, as the case
may be, if at any time any payment or performance of all or any portion of
the Senior Claims is rescinded or must otherwise be returned by the Lender
or any other party to the documents relating thereto upon the insolvency,
bankruptcy or reorganization of any such party or otherwise, all as though
such payment had not been made.
12. The Creditor hereby waives promptness, diligence, notice of acceptance and
any other notice with respect to this Agreement and any requirement that
the Lender protect, secure, perfect or insure any security interest or lien
or any property subject thereto or exhaust any right or take any action
against the Creditor or any other person or entity or any collateral.
13. No failure on the part of the Lender to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
14. No amendment or waiver of any provision of this Agreement nor consent to
any departure by the Creditor therefrom shall in any event be effective
unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
15. The Creditor agrees to pay upon demand, to the Lender the amount of any and
all expenses, including the reasonable fees and expenses of its counsel and
all court costs and other reasonable litigation expenses, including but not
limited to expert witness fees, document copying expenses, exhibit
preparation costs, and courier, postage and communication expenses, which
the Lender may incur in connection with the exercise or enforcement of any
of its rights or interest hereunder.
16. All notices, request and demands that may be required or otherwise provided
for or contemplated under the terms of this Agreement shall, whether or not
so stated, be in writing, and
4
<PAGE>
<PAGE>
shall be given by any of the following means: (a) personal delivery; (b)
reputable overnight courier service; or (c) registered or certified first
class mail, return receipt requested. Any notice, request or demand sent
pursuant to clause (a) above shall be deemed received upon personal
delivery, and if sent pursuant to clause (b) shall be deemed received on
the next business day following delivery to the courier service, and if
sent pursuant to clause (c) shall be deemed received three (3) days
following deposit in the mail.
The addresses for notices are as follows:
If to the Creditor. addressed to:
___________________
___________________
___________________
If to the Lender, addressed to :
Residential Funding Corporation
440 Sawgrass Corp. Parkway
Suite 212
Sunrise, Florida 33325
Attention: Donna West, Director
Telecopier No.: (305) 846-8352
Such addresses may be changed by written notice to the other parties given
in the manner provided above.
17. This Agreement shall be governed in all respects by the laws of the State
of Minnesota and shall be binding upon and shall inure to the benefit of
the Creditor, the Lender and the Company, and their respective heirs,
executors, administrators, personal representatives, successors and
assigns. This Agreement and any claim or claims of the Lender pursuant
hereto may be assigned by the Lender, in whole or in part, at any time,
without notice to the Creditor or the Company.
_________________________________________
( Creditor )
5
<PAGE>
<PAGE>
[THE FOLLOWING ACKNOWLEDGEMENT IS TO BE USED FOR A CORPORATION.]
STATE OF ______________ )
) ss
COUNTY OF ______________ )
On _______________, 19_, before me, a Notary Public, personally appeared
____________________________, the ______________of _______________________,
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 entity upon
behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
_________________________________________
Notary Public
(SEAL) My Commission Expires: __________________
[THE FOLLOWING ACKNOWLEDGEMENT IS TO BE USED FOR AN INDIVIDUAL.]
STATE OF ______________ )
) ss
COUNTY OF ______________ )
The foregoing instrument was acknowledged before me this day of
_______________ , 19__, by ____________________________________________________.
_________________________________________
Notary Public
My Commission Expires: __________________
6
<PAGE>
<PAGE>
ACCEPTANCE OF SUBORDINATION OF DEBT
AGREEMENT BY THE COMPANY
The Company named in the Subordination of Debt Agreement set forth
hereinbefore, hereby (i) represents and warrants to the Lender that it is
presently indebted to the Creditor executing said Subordination of Debt
Agreement in the aggregate principal amount of ______________________ Dollars
($_______________); and (ii) accepts and consents to the Subordination of Debt
Agreement, and agrees to be bound by all of the provisions thereof and to
recognize all priorities and other rights granted thereby to RESIDENTIAL FUNDING
CORPORATION, a Delaware corporation, its successors and assigns, and to Perform
in accordance therewith.
INDUSTRY MORTGAGE COMPANY, L.P.,
a Delaware limited partnership
By: __________________________________________
Its: _________________________________________
Dated: ______________________
7
<PAGE>
<PAGE>
EXHIBIT F-2
RESIDENTIAL FUNDING CORPORATION
SUBORDINATION OF DEBT AGREEMENT
____________________ , 19__
To: Residential Funding Corporation
8400 Normandale Lake Blvd., Suite 600
Minneapolis, Minnesota 55437
(hereinafter referred to as the "Lender")
The undersigned (hereinafter referred to as the "Creditor"), creditor of
IMC CORPORATION OF AMERICA, a Pennsylvania corporation (hereinafter referred to
as the "Company"), desires that the Lender extend or continue to extend such
financial accommodations to the Company as the Company may require and as the
Lender may deem proper. For the purpose of inducing the Lender to grant,
continue or renew such financial accommodations, and in consideration thereof,
the Creditor agrees as follows:
1. That at the present time the Company is indebted to the Creditor in the
principal amounts set forth below:
PRINCIPAL AMOUNT
TYPE OF FACILITY OF DEBT FROM THE
OR LOAN COMPANY
_________________________ __________________________
_________________________ __________________________
_________________________ __________________________
_________________________ __________________________
_________________________ __________________________
(Notes, if any, are to be delivered to the Lender)
2. That all claims of the Creditor against the Company now or hereafter
existing are and shall be at all times subject and subordinate to any and
all claims now or hereafter which the Lender may have against the Company
(and all extensions, renewals, modifications, replacements and
substitutions of or for the same), for so long as any such claim or claims
of the Lender shall exist.
3. That the Creditor shall not (a) except to the extent expressly permitted in
Section 4 hereof, receive payment of or collect, in whole or in part, or
sue upon, any claim or claims now or hereafter existing which the Creditor
may hold against the
1
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<PAGE>
Company; (b) sell, assign, transfer, pledge, hypothecate or encumber such
claim or claims except subject expressly to this Agreement; (c) enforce any
lien the Creditor may now or in the future have on any debt owing by the
Company to the Creditor; and/or (d) join in any petition in bankruptcy,
assignment for the benefit of creditors or creditors' agreement, except as
directed by the Lender, so long as any claim of the Lender against the
Company, or commitment of the Lender to extend credit to the Company, is in
existence.
4. So long as no event described in clauses (a) through (d) of Section 6 below
(a "Liquidation Event") shall have occurred and no default shall have
occurred in payment or performance of any obligation of the Company to the
Lender, regularly scheduled payments of interest and principal on the
claims of the Creditor may be made as and when the same become due and
payable (it being understood that no prepayment shall be made of such
claims and no modification or acceleration, for default or otherwise, of
such maturity dates shall be permitted). After the occurrence of a
Liquidation Event or of default in payment or performance of any obligation
of the Company to the Lender, no interest and no principal payments on the
claims of the Creditor shall be made without the prior written consent of
the Lender. The subordination of claims of the Creditor hereunder shall
remain in effect so long as there shall be outstanding any obligation of
the Company to the Lender (for this purpose, the Company shall be deemed
obligated to the Lender so long as the Lender shall have outstanding any
commitment to make any loan to the Company, whether or not any such loan
shall have been made or advanced).
5. In the event that any Creditor receives a payment from the Company in
violation of the terms of this Agreement, such Creditor (a) shall hold such
money in trust for the benefit of Lender, (b) shall segregate such payment
from (and shall not commingle such payment with any of) the other funds of
such Creditor, and (c) shall forthwith remit such payment to Lender in the
exact form received (but with any necessary endorsement).
6. In case of (a) any assignment by the Company for the benefit of creditors,
(b) any bankruptcy proceedings instituted by or against the Company, (c)
the appointment of any receiver for the Company's business or assets, or
(d) any dissolution or winding up of the affairs of the Company, the
Company and any assignee, trustee in bankruptcy, receiver, or other person
or persons in charge, are hereby directed to pay to the Lender the full
amount of the Lender's claim against the Company before making any payment
of principal or interest to the Creditor and the Creditor hereby sells,
transfers, sets over and assigns to the Lender all claims the Creditor may
now or
2
<PAGE>
<PAGE>
hereafter have against the Company and in any security therefor, and the
proceeds thereof, and all rights to any payments, dividends or other
distributions arising therefrom. If the Creditor does not file a proper
claim or proof of debt in the form required in such proceeding prior to
thirty (30) days before the expiration of the time to file such claim in
such proceedings, then the Lender has the right (but no obligation) to do
so and is hereby authorized to file an appropriate claim or claims for and
on behalf of the Creditor.
7. For violation of this Agreement, the Creditor shall be liable to the Lender
for all loss and damage sustained by reason of such breach, and upon any
such violation, the Lender may accelerate the maturity of its claims
against the Company, at the Lender's option.
8. The Creditor will, at any time and from time to time, promptly execute and
deliver all further instruments and documents, and take all further action,
that may be reasonably necessary in order to protect any right or interest
granted hereby or to enable the Lender to exercise and enforce its rights
and remedies hereunder.
9. The Creditor will not amend, extend or in any way modify the terms of its
claims against the Company, as such terms exist as of the date of this
Agreement, without the prior written consent of the Lender. The Creditor
agrees to provide to the Lender, upon the occurrence thereof, notice of the
existence of any event of default (however defined or described) under any
document or agreement relating to its claims against the Company, or any
condition, act or event, which with the giving of notice or the passage of
time or both would constitute an event of default (however defined or
described) thereunder.
10. All rights and interest of the Lender hereunder, and all agreements and
obligations of the Creditor hereunder, shall remain in full force and
effect irrespective of:
(a) any sale, assignment, pledge, encumbrance or other disposition of
the claims of the Lender against the Company (the "Senior Claims") and/or
any document or instrument executed in connection therewith;
(b) any change in the time, manner or place of payment of, or in any
other terms of, all or any of the Senior Claims, or any refinancing
thereof, or any other amendment, modification, extension or renewal of or
waiver of or any consent to departure from any document or instrument
relating thereto, including, without limitation, changes in the terms of
the repayment of loan proceeds, modifications, extensions or renewals of
payment dates, changes in interest rate or the
3
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<PAGE>
advancement of additional funds by the Lender in its discretion; or
(c) any exchange, release or nonperfection of any collateral, or any
release or amendment or waiver of or consent to departure from any
guaranty, for all or any of the Senior Claims.
11. This Agreement shall continue to be effective or be reinstated, as the case
may be, if at any time any payment or performance of all or any portion of
the Senior Claims is rescinded or must otherwise be returned by the Lender
or any other party to the documents relating thereto upon the insolvency,
bankruptcy or reorganization of any such party or otherwise, all as though
such payment had not been made.
12. The Creditor hereby waives promptness, diligence, notice of acceptance and
any other notice with respect to this Agreement and any requirement that
the Lender protect, secure, perfect or insure any security interest or lien
or any property subject thereto or exhaust any right or take any action
against the Creditor or any other person or entity or any collateral.
13. No failure on the part of the Lender to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
14. No amendment or waiver of any provision of this Agreement nor consent to
any departure by the Creditor therefrom shall in any event be effective
unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
15. The Creditor agrees to pay upon demand, to the Lender the amount of any and
all expenses, including the reasonable fees and expenses of its counsel and
all court costs and other reasonable litigation expenses, including but not
limited to expert witness fees, document copying expenses, exhibit
preparation costs, and courier, postage and communication expenses, which
the Lender may incur in connection with the exercise or enforcement of any
of its rights or interest hereunder.
16. All notices, request and demands that may be required or otherwise provided
for or contemplated under the terms of this Agreement shall, whether or not
so stated, be in writing, and
4
<PAGE>
<PAGE>
shall be given by any of the following means: (a) personal delivery; (b)
reputable overnight courier service; or (c) registered or certified first
class mail, return receipt requested. Any notice, request or demand sent
pursuant to clause (a) above shall be deemed received upon personal
delivery, and if sent pursuant to clause (b) shall be deemed received on
the next business day following delivery to the courier service, and if
sent pursuant to clause (c) shall be deemed received three (3) days
following deposit in the mail.
The addresses for notices are as follows:
If to the Creditor, addressed to:
___________________
___________________
___________________
If to the Lender, addressed to :
Residential Funding Corporation
440 Sawgrass Corp. Parkway
Suite 212
Sunrise, Florida 33325
Attention: Donna West, Director
Telecopier No.: (305) 846-8352
Such addresses may be changed by written notice to the other parties given
in the manner provided above.
17. This Agreement shall be governed in all respects by the laws of the State
of Minnesota and shall be binding upon and shall inure to the benefit of
the Creditor, the Lender and the Company, and their respective heirs,
executors, administrators, personal representatives, successors and
assigns. This Agreement and any claim or claims of the Lender pursuant
hereto may be assigned by the Lender, in whole or in part, at any time,
without notice to the Creditor or the Company.
_________________________________________
( Creditor )
5
<PAGE>
<PAGE>
[THE FOLLOWING ACKNOWLEDGEMENT IS TO BE USED FOR A CORPORATION.]
STATE OF _____________________ )
) ss
COUNTY OF _____________________ )
On __________________, 19__, before me, a Notary Public, personally
appeared _________________________________, the _____________________________ of
___________________________, 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 entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
_________________________________________
Notary Public
(SEAL) My Commission Expires:
[THE FOLLOWING ACKNOWLEDGEMENT IS TO BE USED FOR AN INDIVIDUAL.]
STATE OF ____________________ )
) ss
COUNTY OF ____________________ )
The foregoing instrument was acknowledged before me this _______day of
_______________, 19__, by ______________________________.
_________________________________________
Notary Public
My Commission Expires:
6
<PAGE>
<PAGE>
ACCEPTANCE OF SUBORDINATION OF DEBT
AGREEMENT BY THE COMPANY
The Company named in the Subordination of Debt Agreement set forth
hereinbefore, hereby (i) represents and warrants to the Lender that it is
presently indebted to the Creditor executing said Subordination of Debt
Agreement in the aggregate principal amount of ________________________ Dollars
($______________); and (ii) accepts and consents to the Subordination of Debt
Agreement, and agrees to be bound by all of the provisions thereof and to
recognize all priorities and other rights granted thereby to RESIDENTIAL FUNDING
CORPORATION, a Delaware corporation, its successors and assigns, and to perform
in accordance therewith.
IMC CORPORATION OF AMERICA,
a Pennsylvania corporation
By: __________________________________________
Its: _________________________________________
Dated: ______________________
7
<PAGE>
<PAGE>
EXHIBIT G
SUBSIDIARIES
States
Qualified
to do
Name Incorporated Business Owned (%)
---- ------------ -------- ---------
(to be completed by Company)
<PAGE>
<PAGE>
EXHIBIT H
FORM OF OPINION OF COUNSEL
Residential Funding Corporation
Attention: Sandra L. Oakes
8400 Normandale Lake Blvd., Suite 600
Minneapolis, Minnesota 55437
Re: $75,000,000 Loan (the "Loan") under Warehousing Credit and Security
Agreement (the "Agreement") by and between RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation (the "Lender") and INDUSTRY MORTGAGE COMPANY, L.P.,
a Delaware limited partnership ("Industry"), and IMC CORPORATION OF
AMERICA, a Pennsylvania corporation ("IMC," Industry and IMC are
hereinafter collectively referred to as the "Borrowers"), and secured by
the "Collateral" (as defined in the Agreement).
Gentlemen:
We are special counsel to the Borrowers and INDUSTRY MORTGAGE CORPORATION,
a Delaware corporation, which is the General Partner of Industry (the "General
Partner"), in connection with the Loan. As counsel, we have prepared and/or
examined the following documents:
1. Executed copy of the Promissory Note, dated March 1, 1996, made by the
Borrowers payable to the order of the Lender, in the principal amount of
Seventy-Five Million Dollars ($75,000,000).
2. Executed copy of the Warehousing Credit and Security Agreement by and
between the Borrowers and the Lender, dated March 1, 1996 (the
"Agreement").
3. Undated UCC Financing Statements perfecting a security interest in
collateral, tangible and intangible.
4. The Agreement of Limited Partnership (the "Partnership Agreement") of
Industry dated as of __________________________, together with amendments
thereto, as certified on _________________, by the General Partner as then
being complete, accurate and in effect.
5. The Certificate of Limited Partnership as certified by the Secretary of
State of the State of Delaware.
6. Authorization approved by all of the partners of Industry entitled to vote
thereof, dated as of ___________________, as
1
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<PAGE>
certified by the General Partner of the Industry on _____________, as then
being complete, accurate and in effect, authorizing the borrowing of the
Loan and the execution and delivery of and performance under the Agreement.
7. The Articles of Incorporation of the General Partner, together with
amendments thereto, as certified by the Secretary of State of the State of
Delaware.
8. The By-laws of the General Partner, as certified on ________________
_____________________, 19___ by the Secretary of the General Partner as
then being complete, accurate and in effect.
9. Resolutions of the Board of Directors of the General Partner, adopted at a
meeting held on _____________________, 19___, as certified by the Secretary
of the General Partner on _________________, 19__ as then being complete,
accurate and in effect, authorizing the borrowing of the Loan and the
execution and delivery of and performance under the Agreement.
10. Certificate of Good Standing for the General Partner, dated
_________________________, 19___, issued by the Secretary of State of the
State of Delaware.(l)
11. Certificate of Good Standing for Industry, dated ________________________,
19___, issued by the Secretary of State of the State of Delaware.(2)
12. The Articles of Incorporation of IMC, together with amendments thereto, as
certified by the Secretary of State of the State of Pennsylvania.
13. The By-laws of IMC, as certified on _____________________, 19____ by the
Secretary of IMC as then being complete, accurate and in effect.
14. Resolutions of the Board of Directors of IMC, adopted at a meeting held on
______________________, 19___, as certified by the Secretary of IMC on
_______________________, 19____ as then being complete, accurate and in
effect, authorizing the
- ----------
(1) A certificate of good standing, dated as of a date within ninety (90) days
of the date of the Agreement, for the state where the Company is
incorporated and for each state where the Company is transacting business as
a foreign corporation should be listed.
(2) A certificate of good standing, dated as of a date within ninety (90) days
of the date of the Agreement, for the state where the Company is
incorporated and for each state where the Company is transacting business as
a foreign corporation should be listed
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borrowing of the Loan and the execution and delivery of and performance
under the Agreement.
15. Certificate of Good Standing for IMC, dated _________________, 19___,
issued by the Secretary of State of the State of Pennsylvania.(3)
The above enumerated items, numbered 1, 2 and 3 are collectively referred
to as the "Loan Documents."
The opinions which follow are subject to the following assumptions,
limitations and qualifications:
A. We have assumed the genuineness of all signatures, other than of the
Borrowers and the General Partner, the authenticity of all documents
submitted to us as originals, and the conformity with the original
documents of all documents submitted to us as reproduced copies, and the
authenticity of all such latter documents.
B. We have assumed the organization, existence, good standing and capacity of
all persons and entities other than the Borrowers and the General Partner,
and that such parties, other than the Borrowers and the General Partner,
have the right, power and authority to execute and deliver the Loan
Documents and to perform thereunder.
C. We have assumed that the Lender's obligations under the Agreement are
within the powers of the Lender and have been duly and validly authorized
and that the Agreement has been duly executed and validly delivered by the
Lender.
D. As to various questions of fact material to this opinion, we have made such
factual inquiries of the Borrowers and the General Partner, and have
examined such other documents and made such examinations of applicable
laws, as we have deemed necessary for purposes of the opinions expressed
herein. However, where we state that a matter is to the best of our
knowledge, we have relied upon the written statements of the officers of
the Borrowers, with no inquiry as to the facts other than as necessary to
establish that such reliance was reasonable on our part.
Based upon such examinations and investigations, and such other
investigations and examinations as we have deemed necessary for the purposes of
the opinions expressed herein, and subject to
- ----------
(3) A certificate of good standing, dated as of a date within ninety (90) days
of the date of the Agreement, for the state where the Company is
incorporated and for each stare where the Company is transacting business
as a foreign corporation should be listed.
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the assumptions stated above in paragraphs A through D, inclusive, and in our
capacity as special counsel for the Borrowers, we are of the opinion that:
1. Industry is a limited partnership duly organized, validly existing and in
good standing under the laws of the jurisdiction of its formation and has
the full legal power and authority to own its property and to carry on its
business as currently conducted.
2. Industry is duly qualified to do business and is in good standing in all
jurisdictions where the ownership of its property or the conduct of its
business makes such qualification necessary.
3. Industry has the power and authority to execute, deliver and perform the
Loan Documents. The execution, delivery and performance of the Loan
Documents by the Industry, including without limitation, the borrowings
under the Agreement and the pledge of the Collateral, have been duly and
validly authorized by all necessary partnership actions on the part of
Industry.
4. The Loan Documents have been duly executed and delivered by Industry. The
Loan Documents constitute the legal, valid and binding obligations of
Industry and are enforceable in accordance with their respective terms
against Industry, except that enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting the
rights of creditors, and general principles of equity.
5. IMC is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is incorporated and has the
full legal power and authority to own its property and to carry on its
business as currently conducted.
6. IMC is duly qualified to do business as a foreign corporation and is in
good standing in all jurisdictions where the ownership of its property or
the conduct of its business makes such qualification necessary.
7. IMC has the power and authority to execute, deliver and perform the Loan
Documents. The execution, delivery and performance of the Loan Documents by
IMC, including without limitation, the borrowings under the Agreement and
the pledge of the Collateral, have been duly and validly authorized by all
necessary actions on the part of IMC.
8. The Loan Documents have been duly executed and delivered by IMC. The Loan
Documents constitute the legal, valid and
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binding obligations of IMC and are enforceable in accordance with their
respective terms against IMC, except that enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws
affecting the rights of creditors, and general principles of equity.
9. Upon delivery to the Lender of those items of Collateral, consisting of
promissory notes secured by mortgages or deeds of trust ("Pledged
Mortgages") or mortgage-backed securities ("Pledged Securities"), or in the
case of Pledged Securities issued in book-entry form or issued in
certificated form and delivered to a clearing corporation (as such term is
defined in the Uniform Commercial Code) or its nominee, upon (a)
registration of such Pledged Securities in the name of a financial
intermediary (as such term is defined in the Uniform Commercial Code) in an
account containing only customer securities, (b) the notation of Lender's
security interest in such Pledged Securities on the records of such
financial intermediary, by book entry or otherwise, and (c) the sending by
such financial intermediary to the Lender of confirmation of such notation,
the Lender will have a valid and perfected first security interest therein.
We assume, in giving this opinion, that such items of Collateral will be
owned by the Borrowers and that, at the time the Lender's security interest
is noted on the records of any financial intermediary, such Pledged
Securities will be free of any interest created through the Federal Reserve
Bank, clearing corporation and/or financial intermediary. With respect to
Pledged Mortgages, the laws of certain jurisdictions may require the
recordation of an assignment of such deeds of trust or mortgages in order
to perfect a security interest in the deed of trust or mortgage (as opposed
to the notes secured thereby). If the Lender does not record its assignment
of deeds of trust or mortgages in such jurisdictions, we express no opinion
as to the Lender's perfected security interest in such deeds of trust and
mortgages (as opposed to the notes secured thereby) constituting part of
the Collateral.
10. The execution, delivery and performance by Industry of the Loan Documents,
will not (i) conflict with or violate any provision of the Agreement of
Limited Partnership of Industry; (ii) require any license, approval or
other action by any governmental authority that has not been obtained;
(iii) to the best of our knowledge, result in the creation of any lien,
charge or encumbrance upon any property or assets of Industry other than in
favor of the Lender; (iv) to the best of our knowledge, result in a
violation or breach of any term or provision, constitute a default under,
or result in or require the acceleration of any indebtedness of Industry
pursuant to, any agreement or other instrument to which Industry may be
bound or to which Industry or any of its property may be subject; or (v)
result in any violation of the provisions of
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any law or, to the best of our knowledge, any order of any court or any
governmental agency, to which Industry may be bound or to which Industry or
any of its property may be subject.
11. The execution, delivery and performance by IMC of the Loan Documents, will
not (i) conflict with or violate any provision of the Articles of
Incorporation or By-laws of IMC; (ii) require any license, approval or
other action by any governmental authority that has not been obtained;
(iii) to the best of our knowledge, result in the creation of any lien,
charge or encumbrance upon any property or assets of IMC other than in
favor of the Lender; (iv) to the best of our knowledge, result in a
violation or breach of any term or provision, constitute a default under,
or result in or require the acceleration of any indebtedness of IMC
pursuant to, any agreement or other instrument to which IMC may be bound or
to which IMC or any of its property may be subject; or (v) result in any
violation of the provisions of any law or any order of any court or, to the
best of our knowledge, any governmental agency, to which IMC may be bound
or to which IMC or any of its property may be subject.
12. To the best of our knowledge, there are no actions, suits, or proceedings
pending or threatened against or affecting either Borrower, in any court or
before any arbitrator or governmental authority which, if adversely
determined, may reasonably be expected to result in any material and
adverse change in the business, operations, assets or financial condition
of the Borrowers as a whole.
13. The making of the Advances as contemplated by the Agreement will not
violate Regulation G of the Board of Governors of the Federal Reserve
System.
14. Neither Borrower is an "investment company" or "controlled" by an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.
15. The General Partner is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is
incorporated; and has the full legal power and authority to own its
property and to carry on its business as currently conducted.
16. The General Partner has the power and authority to execute and deliver the
Loan Documents, as the general partner of Industry. The execution and
delivery of the Loan Documents by the General Partner, on behalf of
Industry, have been duly and validly authorized by all necessary actions on
the part of the General Partner and will not conflict with or violate any
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provision of the Articles of Incorporation or Bylaws of the General
Partner.
This opinion may be relied upon by you and your successors and assigns and
by any participant in the Loan.
All capitalized terms used herein, not otherwise defined herein, shall have
the meanings given such terms in the Agreement.
Very truly yours,
_________________________________________
By: ______________________________________
7
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<PAGE>
EXHIBIT I-SF
OFFICER'S CERTIFICATE
Reference is made to that certain Warehousing Credit and Security Agreement
(Single-Family Mortgage Loans) between INDUSTRY MORTGAGE COMPANY, L.P., a
Delaware limited partnership, and IMC CORPORATION OF AMERICA, a Delaware
corporation (the "Borrowers") and RESIDENTIAL FUNDING CORPORATION, a Delaware
corporation (the "Lender"), dated as of March 29, 1996 (as the same may be
amended, modified, supplemented, renewed or restated from time to time, the
"Agreement"). All capitalized terms used herein and all Section numbers given
herein refer to those terms and Sections set forth in the Agreement. This
Officer's Certificate is submitted to the Lender pursuant to Section 6.2(d) of
the Agreement.
The undersigned hereby certifies to the Lender that as of the close of
business on _________________________, 19___ ("Statement Date",) and with
respect to the Borrowers and their Subsidiaries on a consolidated basis:
1. As illustrated in the attached calculations supporting this Officer's
Certificate, the Borrowers met the covenants set forth in Sections 7.5,
7.6, 7.7, 7.8, 7.9 and 7.11, or if the Borrowers did not meet any of such
covenants, a detailed explanation is attached setting forth the nature and
period of the existence of the Default and the action the Company has
taken, is taking, and proposes to take with respect thereto.
2. No Servicing Contracts have been sold or pledged by the Borrowers except as
permitted under the terms of the Agreement.
3. No recourse Servicing Contracts have been acquired by the Borrowers.
4. The Borrowers were in compliance with the applicable HUD, GNMA or Investor
net worth requirements, and in good standing with VA, HUD, GNMA and each
Investor.
5. I have reviewed the terms of the Agreement and have made, or caused to be
made under my supervision, a review in reasonable detail of the
transactions and conditions of the Borrowers (and, if applicable, its
Subsidiaries) and such review has not disclosed the existence, and I have
no knowledge of the existence, of any Default or Event of Default, or if
any Default or Event of Default existed or exists, a detailed explanation
is attached specifying the nature and period of the existence of the
Default and the action the Borrowers have taken, is taking and proposes to
take with respect thereto.
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6. Pursuant to Section 6.2 of the Agreement, enclosed are the financial
statements of the Borrowers as of the Statement Date. The financial
statements for the period ending on the Statement Date fairly present the
financial condition and results of operations of the Borrowers (and, if
applicable, its Subsidiaries) as at the Statement Date.
Dated: ___________________________
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
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<PAGE>
CALCULATIONS SUPPORTING OFFICER'S CERTIFICATE
Borrowers Names: INDUSTRY MORTGAGE COMPANY, L.P. and IMC
CORPORATION OF AMERICA and their Subsidiaries
Statement Date: _________________________________
All financial calculations set forth herein are as of the Statement Date.
I. NET WORTH
A. Net Worth of the Borrowers is:
Plus: Total assets: $ _________________
Minus: Total liabilities: $ _________________
NET WORTH: $ ________________________
B. Requirements of Section 7.6 of the Agreement:
MINIMUM NET WORTH OF $7,000,000.
C. Covenant Satisfied: ____ Covenant Not Satisfied: ____
II. TANGIBLE NET WORTH
Net Worth: $___________________
Plus: Loan loss reserves: $___________________
Minus: Advances to owners, officers or
Affiliates: $___________________
Minus: Investments in Affiliates: $___________________
Minus: Assets pledged to secure liabilities
not included in Debt: $___________________
Minus: Intangible assets: $___________________
Minus: Any other HUD nonacceptable assets: $___________________
Minus: Other assets unacceptable to the
Lender: $___________________
TANGIBLE NET WORTH $___________________________
III. ADJUSTED TANGIBLE NET WORTH
A. Adjusted Tangible Net Worth of the Borrowers is
Tangible Net Worth (from II above) $___________________
Minus: Capitalized excess servicing fees $___________________
Minus: Capitalized servicing rights $___________________
Plus: 1% of Adjusted Servicing Portfolio
(from IV below): $___________________
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Plus: Deferred taxes arising from capitalized
excess servicing fees: $___________________
ADJUSTED TANGIBLE NET WORTH $_________________________
B. Requirements of Section 7.7 of the Agreement:
MINIMUM ADJUSTED TANGIBLE NET WORTH OF $10,000,000.
C. Covenant Satisfied: ____ Covenant Not Satisfied: ____
IV. ADJUSTED SERVICING PORTFOLIO
Adjusted Servicing Portfolio of the Borrowers is:
Servicing Portfolio owned by the Borrowers is: $___________________
Minus: The unpaid principal balance of
Mortgage Loans:
Past due 60 days or more: $___________________
Sold with recourse: $___________________
For which the Servicing Contracts
are pledged to others: $___________________
Serviced by Borrowers for others under
subservicing arrangements: $___________________
ADJUSTED SERVICING PORTFOLIO $___________________________
V. PLEDGED SERVICING PORTFOLIO
A. Outstanding principal balance of Mortgage
Loan's serviced pursuant to pledged Servicing
Contracts: $___________________
Minus: The unpaid principal balance of
Mortgage Loans:
Past due 60 days or more: $___________________
Sold with recourse: $___________________
For which the Servicing Contracts
are pledged to others: $___________________
Serviced by Borrowers for others under
subservicing arrangements: $___________________
PLEDGED SERVICING PORTFOLIO $___________________
B. Requirements of Section 7.8 of the Agreement:
ADJUSTED SERVICING PORTFOLIO OF $150,000,000.
C. Covenant Satisfied: _____ Covenant Not Satisfied: _____
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VI. DEBT OF THE BORROWERS
Total liabilities $___________________
Minus: Loan loss reserves: $___________________
Minus: Deferred taxes arising from capitalized
excess servicing fees: $___________________
Minus: Debt arising under Hedging Arrangements
(to the extent of offsetting assets) $___________________
DEBT $__________________________________
VII. RATIO OF DEBT TO ADJUSTED TANGIBLE NET WORTH
A. The ratio of Debt to Adjusted Tangible Net Worth (VI to
III.A) is: ______________ to 1
B. Requirements of Section 7.5 of the Agreement:
The ratio of Debt to Adjusted Tangible Net Worth shall not
exceed 25 to 1.
C. Covenant Satisfied: ___ Covenant Not Satisfied: ____
VIII. DISTRIBUTIONS
A. The actual aggregate distributions to Partners declared
or paid by Industry during the current fiscal year
was: $___________________
B. The net income of Industry on a fiscal year-to-date basis
was: $___________________
C. The amount of taxes payable by Industry's Partners ln
respect of Industry's net income on a fiscal year-to-date
basis was: $___________________
D. Requirements of Section 7.11 of the Agreement:
Declare or pay distributions in excess of the greater of (i) the
amount required to enable its Partners to pay income taxes payable by
them in respect of Industry's net income or (b) Industry's net income
earned in any fiscal year as determined on a fiscal year-to-date
basis.
E. Covenant Satisfied: ____ Covenant Not Satisfied: ____
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EXHIBIT J
SCHEDULE OF EXISTING LINES OF CREDIT
LENDER NAME COMMITMENT AMOUNT EXPIRATION DATE
- ----------- ----------------- ---------------
(to be completed by Company)
<PAGE>
<PAGE>
EXHIBIT K-l
FORM FOR FUNDING BANK
LETTER AGREEMENT
(Letterhead of the Company)
March 1, 1996
The First National Bank of Chicago
One North State Street
Chicago, IL 60602
Gentlemen:
The undersigned, _______________________________ (the "Company"), hereby
authorizes The First National Bank of Chicago (the "Funding Bank") to permit
Residential Funding Corporation (the "Lender") to debit and access information
on the Company's accounts held by the Funding Bank as outlined below. The
Company hereby directs and authorizes the Funding Bank to follow the directions
of the Lender in debiting such accounts.
The Company authorizes the Lender to access account information from time
to time for the Company's operating account no. _____________________________
(the "Operating Account") for the purpose of verifying balance information. In
addition, the Company requests that the Lender, and the Company hereby
authorizes the Lender, to debit the Operating Account to the extent necessary to
cover (a) wires to be initiated by the Lender in accordance with the Company's
instructions as set forth in the Request for Advance for the purposes permitted
in the Warehousing Credit and Security Agreement (the "Agreement") by and
between the Company and the Lender; and (b) for amounts due and owing to the
Lender, including but not limited to principal, interest and fees.
Upon the termination or expiration of the Agreement, the Company hereby
authorizes the Lender to close the Operating Account and any other accounts
which have been established by the Company and the Lender to facilitate
transactions under the Agreement, and the Company directs the Funding Bank to
follow the directions of the Lender in closing such accounts. The Company hereby
directs and authorizes the Funding Bank to follow all of the foregoing
instructions of the Lender.
Very truly yours,
________________________________________,
a _______________________corporation
By: _____________________________________
Its: ____________________________________
ACKNOWLEDGED AND AGREED THIS
______ DAY OF ____________________, 19___.
THE FIRST NATIONAL BANK OF CHICAGO
By: ___________________________________
Its: __________________________________
<PAGE>
<PAGE>
EXHIBIT K-2
FORM FOR FUNDING BANK
LETTER AGREEMENT
(Letterhead of the Company)
March 1, 1996
_____________________________
_____________________________
_____________________________
Gentlemen:
The undersigned, ________________________________(the "Company"), hereby
authorizes ________________________________________ (the "Funding Bank") to
permit Residential Funding Corporation (the "Lender") to debit and access
information on the Company's accounts held by the Funding Bank as outlined
below. The Company hereby directs and authorizes the Funding Bank to follow the
directions of the Lender in debiting such accounts.
The Company authorizes the Lender to access account information from time
to time for the Company's account no. _______________________ (the "Check
Disbursement Account") for the purpose of reviewing account activity and to
debit and/or credit such account for transactions relating to the financing of
Mortgage Loans against which the Lender has made Advances under the terms of a
Warehousing Credit and Security Agreement (the "Agreement") by and between the
Lender and the Company. In addition, the Company requests that the Lender (i)
instruct the Funding Bank as to which checks drawn by the Company on the Check
Disbursement Account relate to the financing of Mortgage Loans against which the
Lender has made Advances and (ii) cause the Funding Bank to apply the proceeds
of those Advances on deposit in the Check Disbursement Account toward the
payment of such checks.
Upon the termination or expiration of the Agreement, the Company hereby
authorizes the Lender to close the Check Disbursement Account and any other
accounts which have been established by the Company and the Lender to facilitate
transactions under the Agreement, and the Company directs the Funding Bank to
follow the directions of the Lender in closing such accounts. The Company hereby
directs and authorizes the Funding Bank to follow all of the foregoing
instructions of the Lender.
Very truly yours,
________________________________________,
a ________________________corporation
By: _____________________________________
Its: ____________________________________
ACKNOWLEDGED AND AGREED THIS
______ DAY OF _______________, 19__.
_______________________________________
(Funding Bank)
By: ___________________________________
Its: __________________________________
<PAGE>
<PAGE>
EXHIBIT L
[INTENTIONALLY OMITTED]
<PAGE>
<PAGE>
EXHIBIT M
SECURITY AGREEMENT AS PROVIDED FOR
BY THE UNIFORM COMMERCIAL CODE OF MINNESOTA
(Form of Bailee Pledge Agreement)
For new value this day received, and as collateral security for the payment
of any and all indebtedness and liability of INDUSTRY MORTGAGE COMPANY, L.P., a
Delaware limited partnership, and IMC CORPORATION OF AMERICA, a Pennsylvania
corporation (the "Borrowers") under that certain Warehousing Credit and Security
Agreement dated as of March 1, 1996, as may be amended from time to time, by and
between the Borrowers and RESIDENTIAL FUNDING CORPORATION (the "Lender"), the
Borrowers create and grant in favor and for the benefit of the Lender a security
interest in and to the instruments and documents described in Exhibit C-SF
attached to this Agreement.
(LIST OF MORTGAGE LOANS)
[for each Mortgage Loan identified herein, attach
a completed Exhibit C-SF]
The Borrowers have given to _______________________________ (escrow or
title company), who has possession of such instruments and documents, notice of
the foregoing described security interest in favor of the Lender or the
Borrowers have possession of such instruments and documents and acknowledge the
foregoing described security interest in favor of the Lender.
The Borrowers further agree to deliver the documents described in the
attached Exhibits C-SF to the Lender, immediately upon the request of the Lender
(whether written or oral), but in any event, on or before five (5) days from the
date hereof unless otherwise requested by the Lender.
The Borrowers further agree that this Agreement shall be binding upon and
inure to the benefit of the legal representatives, successors or assigns of the
Lender.
The Borrowers further agree that all rights, interests, duties and
liabilities arising hereunder shall be determined according to the laws of the
State of Minnesota.
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IN WITNESS WHEREOF, the Borrowers have caused this Bailee Pledge Agreement
to be executed by the respective officers or agents thereunto duly authorized,
as of this ____ day of _____________, 19___.
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 Pennsylvania corporation
By: ___________________________________________
Its: __________________________________________
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EXHIBIT N
TERMS OF GUARANTEED OBLIGATIONS
Each Borrower hereby agrees to the following terms with respect to Advances
made by the Lender to the other Borrower:
1. Each Borrower irrevocably, unconditionally and absolutely guarantees to
the Lender the due and prompt payment, and not just the collectibility, of the
principal of, and interest, fees and late charges and all other indebtedness, if
any, on the Advances made to the other Borrower when due, whether at maturity,
by acceleration or otherwise all at the times and places and at the rates
described in, and otherwise according to the terms of the Note and the
Agreement, whether now existing or hereafter created or arising.
2. Each Borrower further hereby irrevocably, unconditionally and absolutely
guarantees to the Lender the due and prompt performance by the other Borrower of
all duties, agreements and obligations of the other Borrower contained in the
Note and the Agreement, and the due and prompt payment of all costs and expenses
incurred, including, without limitation, attorneys' fees, court costs and all
other litigation expenses (including but not limited to expert witness fees,
exhibit preparation, and courier, postage, communication and document copying
expenses), in enforcing the payment and performance of the Note and the
Agreement from the other Borrower (the payment and performance of the items set
forth in Paragraphs 1 and 2 of this Exhibit N are collectively referred to as
the ("Other Borrower Debt").
3. In the event the other Borrower shall at any time fail to pay the Lender
any Other Borrower Debt when due, whether by acceleration or otherwise, each
Borrower promises to pay such amount to the Lender forthwith, together with all
collection costs and expenses, including, without limitation, attorneys' fees,
court costs and all other litigation expenses (including but not limited to
expert witness fees, exhibit preparation, and courier, postage, communication
and document copying expenses).
4. Each Borrower does hereby (a) agree to any modifications of any terms or
conditions of any Other Borrower Debt and/or to any extensions or renewals of
time of payment or performance by the other Borrower; (b) agree that it shall
not be necessary for the Lender to resort to legal remedies against the other
Borrower, nor to take any action against any other Person obligated (an
"Obligor") on or against any collateral for payment or performance of the Other
Borrower Debt before proceedings against such Borrower; (c) agree that no
release of the other Borrower or any other guarantor or Obligor, or of any
collateral, for the Other Borrower
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Debt, whether by operation of law or by any act of the Lender, with or without
notice to such Borrower, shall release such Borrower; and (d) waive notice of
demand, dishonor, notice of dishonor, protest, and notice of protest and waive,
to the extent permitted by law, all benefit of valuation, appraisement, and
exemptions under the laws of the State of Minnesota or any other state or
territory of the United States.
5. The obligations of each Borrower for the Other Borrower Debt shall be
primary, absolute and unconditional, and shall remain in full force and effect
without regard to, and shall not be impaired or affected by: (a) the
genuineness, validity, regularity or enforceability of, or any amendment or
change in the Agreement or the Note, or any change in or extension of the
manner, place or terms of payment of, all or any portion of the Other Borrower
Debt; (b) the taking or failure to take any action to enforce the Agreement or
the Note, or the exercise or failure to exercise any remedy, power or privilege
contained therein or available at law or otherwise, or the waiver by the Lender
of any provisions of the Agreement or the Note; (c) any impairment,
modification, change, release or limitation in any manner of the liability of
the other Borrower or its estate in bankruptcy, or of any remedy for the
enforcement of the other Borrower's liability, resulting from the operation of
any present or future provision of the bankruptcy laws or any other statute or
regulation, or the dissolution, bankruptcy, insolvency, or reorganization of the
other Borrower; (d) the merger or consolidation of the other Borrower, or any
sale or transfer by the other Borrower of all or part of its assets or property;
(e) any claim such Borrower may have against the other Borrower or any other
Obligor, including any claim of contribution; (f) the release, in whole or in
part, of any other guarantor (if more than one), the other Borrower or any other
Obligor; (g) any other action or circumstance which (with or without notice to
or knowledge of such Borrower) might in any manner or to any extent vary the
risks of such Borrower or otherwise constitute a legal or equitable discharge or
defense, it being understood and agreed by each Borrower that its obligations
for the Other Borrower Debt shall not be discharged except by the full payment
and performance of the Other Borrower Debt.
6. The Lender shall have the right to determine how, when and what
application of payments and credits, if any, whether derived from either
Borrower or from any other source, shall be made on the Obligations and any
other indebtedness owed by either Borrower and/or any other Obligor to the
Lender.
7. The obligations of each Borrower hereunder shall continue to be
effective, or be automatically reinstated, as the case may be, if at any time
the performance or the payment, as the case may be, in whole or in part, of any
of the Other Borrower Debt is rescinded or must otherwise be restored or
returned by the Lender
-2-
<PAGE>
<PAGE>
(as a preference, fraudulent conveyance or otherwise) upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of either Borrower or any
other person or upon or as a result of the appointment of a custodian, receiver,
trustee or other officer with similar powers with respect to either Borrower or
any other Person, or any substantial part of its property, or otherwise, all as
though such payments had not been made. If an Event of Default shall at any time
have occurred and be continuing or shall exist and declaration of default or
acceleration under or with respect to the Other Borrower Debt shall at such time
be prevented by reason of the pendency against either Borrower or any other
Person of a case or proceeding under a bankruptcy or insolvency law, each
Borrower agrees that its obligations for the Other Borrower Debt shall be deemed
to have been declared in default or accelerated with the same effect as if such
obligations had been declared in default and accelerated in accordance with
their respective terms and each Borrower shall forthwith perform or pay, as the
case may be, as required hereunder in accordance with the terms hereunder
without further notice or demand.
8. Each Borrower hereby irrevocably waives any claim or other rights that
he may now or hereafter acquire against other Borrower that arises from the
existence, payment, performance or enforcement of such Borrower's obligations
for the Other Borrower Debt, including any right of subrogation, reimbursement,
exoneration or indemnification, any right to participate in any claim or remedy
of the Lender against the other Borrower or any collateral that the Lender now
has or hereafter acquires, whether or not such claim, remedy or right arises in
equity or under contract, statute or common law, including the right to take or
receive from the other Borrower directly or indirectly, in cash or other
property or by set-off or in any manner, payment or security on account of such
claim or other rights. If any amount shall be paid to either Borrower in
violation of the preceding sentence and the Other Borrower Debt shall not have
been paid and performed in full, such amount shall be deemed to have been paid
to such Borrower for the benefit of, and held in trust for, the Lender and shall
forthwith be paid to the Lender to be credited and applied to the Other Borrower
Debt, whether matured or unmatured. Notwithstanding the blanket waiver of
subrogation rights as set forth above, each Borrower hereby specifically
acknowledges that any subrogation rights which it may have against the other
Borrower or any collateral that the Lender now has or hereafter acquires may be
destroyed by a nonjudicial foreclosure of the collateral. This may give such
Borrower a defense to a deficiency judgment against it. Such Borrower hereby
irrevocably waives such defense. Each Borrower acknowledges that it will receive
direct and indirect benefits from the arrangements contemplated by the Agreement
and the Note and that the waivers set forth in this Section are knowingly made
in contemplation of such benefits.
-3-
<PAGE>
<PAGE>
9. No postponement or delay on the part of the Lender in the enforcement of
any right with respect to the Obligations of either Borrower, including, without
limitation, the Other Borrower Debt, shall constitute a waiver of such right and
all rights of the Lender hereunder shall be cumulative and not alternative and
shall be in addition to any other rights granted to the Lender in any other
agreement or by law.
10. Any indebtedness of either Borrower now or hereafter held by the other
Borrower is hereby subordinated to the indebtedness of the Borrowers to the
Lender, and such indebtedness of either Borrower to the other Borrower shall, if
the Lender so requests, be collected, enforced and received by the Borrower to
which it is owed as trustee for the Lender and be paid over to the Lender on
account of the indebtedness of the other Borrower to the Lender.
-4-
<PAGE>
<PAGE>
EXHIBIT O
SECURITY AGREEMENT
(Form of Supplemental Pledge Agreement)
For value received, as collateral security for the payment of any and all
indebtedness and liability of INDUSTRY MORTGAGE COMPANY, L.P. and IMC
CORPORATION OF AMERICA (the "Borrowers") under that certain Warehousing Credit
and Security Agreement dated as of March 1, 1996, as the same has been and may
hereafter be amended from time to time (the "Warehouse Agreement"), by and
between the Borrowers and RESIDENTIAL FUNDING CORPORATION (the "Lender"), the
Borrowers create and grant in favor and for the benefit of the Lender a security
interest in and to the Nonrecourse Servicing Contracts with respect to Single
Family Mortgage Loans described on Exhibit A attached hereto, and the related
Collateral described in Sections 3.1(e), 3.1(f), 3.1(g), 3.1(i), 3.1(j) and
3.1(k) of each Agreement (collectively, the "Supplemental Collateral").
The Borrowers further agree to deliver to the Lender such documents as the
Lender may reasonably request with respect to the Supplemental Collateral,
immediately upon the request of the Lender (whether written or oral), and
thereof the Lender may exclude any Supplemental Collateral from the Servicing
Portfolio if such information is not delivered or is not satisfactory in all
respects to the Lender.
The Borrowers further agree that this Agreement shall be binding upon and
inure to the benefit of the legal representatives, successors or assigns of the
Lender.
The Borrowers further agree that all rights, interests, duties and
liabilities arising hereunder shall be determined according to the laws of the
State of Minnesota.
-1-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Borrowers have caused this Security Pledge
Agreement to be executed by the respective officers or agents thereunto duly
authorized, as of this ___________ day of _____________________, 19___.
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 Pennsylvania corporation
By: __________________________________________
Its: _________________________________________
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: __________________
2
<PAGE>
<PAGE>
STATE OF _________________ )
) ss
COUNTY OF _________________ )
On _________________________, 1996, before me, a Notary Public, personally
appeared ___________________________, the ___________________________ of IMC
CORPORATION OF AMERICA, a Pennsylvania 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 entity 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>
EXHIBIT P
PERMITTED CONTINGENT LIABILITIES
(to be completed by the Company)
1
<PAGE>
<PAGE>
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: THOMAS G. MIDDLETON
Chief Operating Officer
Its: ____________________________________
Its: General Partner
IMC CORPORATION OF AMERICA,
a Pennsylvania corporation
By: THOMAS G. MIDDLETON
Chief Operating Officer
Its: _________________________________________
RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation
By: DONNA A.WEST
Director
Its: _________________________________________
STATE OF FLORIDA )
) ss
COUNTY OF HILLSBOROUGH )
On March 28, 1996, before me, a Notary Public, personally appeared THOMAS
G. MIDDLETON, the C.O.O. 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.
SUSAN M. SEMPLE
_________________________________________
Notary Public
(SEAL) My Commission Expires: __________________
<PAGE>
<PAGE>
STATE OF FLORIDA )
) ss
COUNTY OF HILLSBOROUGH )
On March 28, 1996, before me, a Notary Public, personally appeared THOMAS
G. MIDDLETON, the C.O.O. of IMC CORPORATION OF AMERICA, a Pennsylvania
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.
SUSAN M. SEMPLE
_________________________________________
Notary Public
(SEAL) My Commission Expires: __________________
STATE OF FLORIDA )
) ss
COUNTY OF BROWARD )
On March 29, 1996, before me, a Notary Public, personally appeared DONNA A.
WEST, the Director of RESIDENTIAL FUNDING CORPORATION, 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 entity upon
behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
MARSHA S. GRABIN
Notary Public
(SEAL) My Commission Expires: 9/15/98
68
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
Residential Funding Corporation
8400 Normandale Lake Boulevard
Suite 600
Minneapolis, MN 55437
612-832-7000
March 29, 1996
Industry Mortgage Company, L.P.
IMC Corporation of America
3450 Buschwood Park Drive
Suite 250
Tampa, Florida 33618
Attention: Mr. George Freeman
RE: Warehouse Credit and Security Agreement (Single Family
Mortgage Loans) dated as of March 1, 1996 (the
"Agreement") between INDUSTRY MORTGAGE COMPANY, L.P. and
IMC CORPORATION OF AMERICA, as Borrowers, and RESIDENTIAL
FUNDING CORPORATION, as Lender.
Ladies and Gentlemen:
Reference is made to the Agreement. Terms capitalized and used herein
without being defined shall have the meanings given them in the Agreement.
For purposes hereof, the following terms shall have the following meanings:
"Depository Benefit" shall mean the compensation received by the Lender,
directly or indirectly, as a result of the Borrowers' maintenance of
Eligible Balances with a Designated Bank.
"Designated Bank" means any bank(s) designated from time to time by the
Lender to be a Designated Bank with whom the Lender has an agreement under
which the Lender can receive a Depository Benefit.
"Eligible Balances" means all funds of or maintained by the Borrowers
and their Subsidiaries in non-interest bearing accounts at a Designated
Bank, less balances used to support fees, interest or other amounts that
would otherwise be payable to the Designated Bank, float, reserve
requirements, Federal Deposit Insurance Corporation insurance premiums and
such other reductions as may be imposed by governmental authorities from
time to time.
<PAGE>
<PAGE>
March 29, 1996
Page 2
"Floating Rate" means a floating rate of interest which is equal to
one and one-half percent (1.50%) per annum over LIBOR. The Floating Rate
will be adjusted as of the effective date of each change in LIBOR. The
Lender's determination of the Floating Rate as of any date of
determination shall be conclusive and binding, absent manifest error.
"LIBOR" means, for each calendar week, 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 Day of each week on which the London Interbank market is
open, as published by Knight-Ridder, Inc. on its MoneyCenter system. LIBOR
shall be rounded, if necessary, to the next higher one sixteenth of one
percent (1/16%). If such U.S. dollar LIBOR rates are not so offered or
published for any period, then during such period LIBOR shall mean the
London Interbank Offered Rate for one (1) month periods published on the
first Business Day of each week on which the London Interbank market is
open, in the Wall Street Journal in its regular column entitled "Money
Rates."
"Premium Advance Rate" means a floating rate of interest which is equal
to [certain confidential information has been omitted and filed
separately with the Commission pursuant to a Request for Confidential
Treatment] per annum over LIBOR. The Premium Advance Rate will be adjusted
as of the effective date of each weekly change in LIBOR. The Lender's
determination of the Premium Advance Rate as of any date of determination
shall be conclusive and binding, absent manifest error.
Prior to the occurrence of an Event of Default, the unpaid amount of each
Warehousing Advance and Subwarehousing Advance shall bear interest, from the
date of such Advance until paid in full, at the Floating Rate. Prior to the
occurrence of an Event of Default, the unpaid amount of each Premium Advance
shall bear interest, from the date of such Advance until paid in full, at the
Premium Advance Rate.
The Borrowers shall be entitled to receive certain benefits based on the
average monthly Eligible Balances of the Borrowers maintained at a Designated
Bank. After the end of each calendar month, the Lender will calculate the
interest due for the applicable month, by electing a portion ("Balance Funded
Portion") of the Advances which is equal to the lesser of (a) the Advances
outstanding during such month or (b) the average amount of Eligible Balances on
deposit with a Designated Bank during such month. The Balance Funded Portion of
the Advances shall bear interest at
<PAGE>
<PAGE>
March 29, 1996
Page 3
balance funded rates of (a) one and one-half percent (1.50%) per annum for the
Balance Funded Portion of Warehousing Advances, and (b) [certain confidential
information has been omitted and filed separately with the Commission pursuant
to a Request for Confidential Treatment] per annum for the Balance Funded
Portion of Premium Advances.
The Balance Funded Portion of the Advances outstanding for a month shall be
determined by (a) first, deducting the average amount of Warehousing Advances
and Subwarehousing Advances outstanding for a month from the average amount of
Eligible Balances during such month, but only to the extent of the average
amount of Eligible Balances, and (b) second, to the extent Eligible Balances
remain for such month, deducting the average amount of Premium Advances
outstanding for a month from the remaining average amount of Eligible Balances
during such month, but only to the extent of the remaining average amount of
Eligible Balances.
If, for any month, a portion of the average amount of Eligible Balances
remains ("Remainder") after the Balance Funded Portion has been deducted, the
Lender shall provide a benefit in the form of an "Earnings Credit" on the
Remainder portion of the Eligible Balances maintained in time deposit accounts
with the Designated Bank, and the Lender shall provide a benefit in the form of
an "Earnings Allowance" on the Remainder portion of the Eligible Balances
maintained in demand deposit accounts with the Designated Bank. Any Earnings
Allowance shall be used first and any Earnings Credit shall be used second as a
credit against accrued Miscellaneous Charges and fees, including, but not
limited to Non-Usage Fees, and may be used, at the Lender's option, to reduce
accrued interest. Any Earnings Allowance not used during the month in which the
benefit was received shall be accumulated for use and must be used during the
calendar year in which the benefit was received. Any Earnings Credit not used
during the month in which the benefit was received shall be used to provided a
cash benefit to the Borrowers.
The Lender's determination of the Balance Funded Portion, the Earnings
Credit and the Earnings Allowance for any month shall be determined by the
Lender in its sole discretion and shall be conclusive and binding absent
manifest error. In no event shall the benefit received by the Borrowers exceed
the Depository Benefit.
Either party hereto may terminate the benefits provided for in the four
preceding paragraphs, effective immediately upon Notice to the other party, if
the terminating party shall have determined (which determination shall be
conclusive and binding absent manifest error) at any time that any applicable
law, rule, regulation, order or decree or any interpretation or administration
thereof by any governmental authority charged with the interpretation or
administration thereof, or compliance by such
<PAGE>
<PAGE>
March 29, 1996
Page 4
party with any request or directive (whether or not having the force of law) of
any such authority, shall make it unlawful or impossible for such party to
continue to offer or receive the benefits provided for in this Section.
Interest shall be computed on the basis of a 360-day year and applied to
the actual number of days elapsed in each interest calculation period and shall
be payable monthly in arrears, on the tenth day of each month, commencing with
the first month following the Closing Date, and on the Maturity Date. Except
with respect to interest due on the Maturity Date, the Lender shall provide the
Borrowers with a statement of interest due no later than five (5) days before
the date such interest is due. Failure of the Lender to deliver the statement of
interest to the Borrowers does not negate the Borrowers' obligation to pay.
If, for any reason, no interest is due on an Advance, the Borrowers agree
to pay to the Lender an administrative fee equal to one day of interest on such
Advance at the rate applicable to such Advances under the applicable section
hereof, as in effect on the date of such Advance. Administrative and other fees
shall be due and payable in the same manner as interest is due and payable
hereunder.
Upon and after the occurrence and during the continuation of an Event of
Default hereunder, the Lender may give Notice to the Borrowers that the unpaid
amount of each Advance shall bear interest, until paid in full, at a rate of
interest (the "Default Rate") equal to four percent (4%) per annum over the
applicable rate provided in the applicable subsection of this Section 2.4 or, if
no rate is applicable, the highest rate then applicable to any outstanding
Advance.
The Borrowers may, from time to time, prepay a portion of the Advances
pursuant to this Section 2.4(g) (any such prepayment is hereafter referred to as
a "Buydown"). A Buydown shall not entitle the Borrowers to the release of any
Collateral. All or any portion of a Buydown may be reborrowed hereunder,
provided no Default or Event of Default has occurred and is continuing, upon
written notice to the Lender no later than 9:30 a.m. on the Business Day that
the Borrowers desire to reborrow such amount. The Lender shall use its best
efforts to apply the Buydown to reduce interest on the Advances as follows:
first, Premium Advances; and second, other Advances. In the event the Lender
receives a payment of Advances that would, as a result of the Buydown, reduce
the outstanding principal balance of the Advances to an amount less than zero,
unless an Event of Default shall have occurred and be continuing, the Buydown,
or a portion thereof equal to such excess, shall be re-advanced to the
Borrowers.
<PAGE>
<PAGE>
March 29, 1996
Page 5
At the end of each calendar quarter during the term hereof commencing with
the calendar quarter ending on June 30, 1996, the Lender shall determine the
average usage of the Commitment by calculating the arithmetic daily average of
the Advances outstanding during such calendar quarter (or, in the case of the
period ending June 30, 1996, from the Closing Date through June 30, 1996). The
Lender shall then subtract such quarter average usage (the 'Used Portion') from
the Commitment (and the result thereof shall be known as the 'Unused Portion'),
and the Borrowers shall pay in arrears, within thirty (30) days after the end of
each calendar quarter, a Non-Usage Fee (the 'Non-Usage Fee') equal to [certain
confidential information has been omitted and filed separately with the
Commission pursuant to a Request for Confidential Treatment] per annum on the
total amount of the Unused Portion of the Commitment during esuch calendar
quarter; provided, however, that no Non-Usage Fee shall be payable for any
Calendar Quarter in which the Used Portion equals or exceeds fifty percent (50%)
of the average Commitment Amount in effect during such calendar quarter. If the
expiration date of the Commitment is other than the last day of a calendar
quarter, the Borrowers shall pay the prorated protion of the quarterly Non-Usage
Fee due from the beginning of the then current quarter to and including the
expiration date. For the purposes hereof, quarters shall be defined as beginning
April 1, July 1, October 1 and January 1. In the absence of manifest error, the
calculation by the Lender of the amount of any Non-Usage Fee shall be
conclusive.
The Borrowers agree to reimburse the Lender for miscellaneous charges and
expenses (collectively, "Miscellaneous Charges") incurred by or on behalf of the
Lender in connection with the handling and administration of Advances, and to
reimburse the Lender for Miscellaneous Charges incurred by or on behalf of the
Lender in connection with the handling and administration of the Collateral. For
the purposes hereof, Miscellaneous Charges shall include, but not be limited to,
charges for wire transfers, charges for security delivery fees, charges for
overnight delivery of Collateral to Investors, Funding Bank's service charges
and Designated Bank's service charges. Miscellaneous Charges are due when
incurred, but shall not be delinquent if paid within fifteen (15) days after
receipt of an invoice or an account analysis statement from the Lender.
All agreements between the Borrowers and the Lender are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the Agreement or the Note or otherwise, shall the
amount paid or agreed to be paid to the Lender for the use, forbearance, loaning
or retention of the Advances securea by this Agreement exceed the maximum
permissible under applicable law. If from any circumstances whatsoever,
fulfillment of any provisions hereof or of the Note, or any other document
securing this Agreement at any time given shall involve
<PAGE>
<PAGE>
March 29, 1996
Page 6
transcending the limit of validity prescribed by law, then, the obligation to be
fulfilled shall automatically be reduced to the limit of such validity, and if
from any circumstances the Lender should ever receive as interest an amount
which would exceed the highest lawful rate of interest, such amount which would
be in excess of interest shall be applied to the reduction of the principal
balance secured by the Note and not to the payment of interest thereunder. This
provision shall control every other provision of all agreements between the
Borrowers and Lender and shall also be binding upon and available to any
subsequent holder of the Note.
In the event any applicable law, order, regulation or directive issued by
any governmental or monetary authority, or any change therein or in the
governmental or judicial interpretation or application thereof, or compliance by
the Lender with any request or directive (whether or not having the force of
law) by any governmental or monetary authority:
Does or shall subject the Lender to any tax of any kind
whatsoever with respect to the Agreement or any Advances
made hereunder, or change the basis of taxation on payments
to the Lender of principal, fees, interest or any other
amount payable hereunder (except for change in the rate of
tax on the overall gross or net income of the Lender by the
jurisdictions in which the Lender's principal office is
located);
Does or shall impose, modify or hold applicable any
reserve, capital requirement, special deposit, compulsory
loan or similar requirement against assets held by, or
deposits or other liabilities in or for the account of,
advances or loans by, or other credit extended by, or any
other acquisition of funds by, any office of the Lender
which are not otherwise included in the determination of the
interest rate as calculated hereunder;
and the result of any of the foregoing is to increase the cost to the Lender of
making, renewing or maintaining any Advance or to reduce any amount receivable
in respect thereof or to reduce the rate of return on the capital of the Lender
or any person controlling the Lender as it relates to credit facilities in the
nature of that evidenced by the Agreement, then, in any such case, the Borrowers
shall promptly pay any additional amounts necessary to compensate the Lender for
such additional cost or reduced amounts receivable or reduced rate of return as
determined by the Lender with respect to the Agreement or Advances made
thereunder, provided, that the Borrowers shall not be obligated to pay any such
additional amount (i) unless the Lender shall first have notified
<PAGE>
<PAGE>
March 29, 1996
Page 7
the Borrowers in writing that it intends to seek such compensation pursuant to
this Section, or (ii) to the extent such additional amounts or any portion
thereof are attributable to the period ending 91 days prior to the date of the
first such notice with respect to the applicable legal or regulatory change (the
"Excluded Period"), except to the extent any amount is attributable to the
Excluded Period as a result of the retroactive application of the applicable
legal or regulatory change. If the Lender notifies the Borrowers in writing that
it is entitled to claim any additional amounts pursuant to this paragraph, the
Borrowers shall pay such amount within fifteen (15) days thereafter. A
certificate as to any additional amount payable pursuant to the foregoing
sentence containing the calculation thereof in reasonable detail submitted by
the Lender to the Borrowers shall be conclusive in the absence of manifest
error. The obligations of the Borrowers under this paragraph shall survive the
payment of all other Obligations and the termination of the Agreement.
Your acknowledgement of this letter is a condition to the willingness of
the Lender to make Advances under the Agreement. Please acknowledge this letter
in the space provided below to indicate your agreement to the terms set forth in
this letter.
Very truly yours,
RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation
DONNA A. WEST
By: _____________________________________
Its: Director
ACKNOWLEDGED AND AGREED TO
THIS 28TH DAY OF MARCH 1996.
INDUSTRY MORTGAGE COMPANY, L.P.,
a Delaware limited partnership
By: INDUSTRY MORTGAGE CORPORATION,
a Delaware corporation
[NAME]
By:____________________________
CHIEF OPERATING OFFICER
Its:___________________________
Its: General Partner
IMC CORPORATION OF AMERICA,
a Delaware corporation
[NAME]
By:__________________________________
CHIEF OPERATING OFFICER
Its:_________________________________
<PAGE>
<PAGE>
March 29, 1996
Page 8
FLORIDA
STATE OF ______________)
) ss
BROWARD
COUNTY OF _____________)
MARCH 29
On _____________________, 1996, before me, a Notary Public, personally
DONNA A. WEST
appeared ____________________________, the Director of RESIDENTIAL FUNDING
CORPORATION, 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 entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
MARSHA S. GRABIN
______________________________________________
[SEAL] Notary Public
9/15/98
My Commission Expires: _______________________
FLORIDA
STATE OF ______________)
) ss
HILLSBOROUGH
COUNTY OF _____________)
MARCH 28
On ______________, 1996, before me, a Notary Public, personally appeared
THOMAS G. MIDDDLETON C.O.O.
______________________, 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.
SUSAN M. SEMPLE
______________________________________________
Notary Public
[SEAL] MAR 30 1998
My Commission Expires: _______________________
<PAGE>
<PAGE>
March 29, 1996
Page 9
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: _______________________
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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.'
/s/ COOPERS & LYBRAND L.L.P.
Jacksonville, Florida
June 20, 1996
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